Defi special: Meme coins, liquidity migration & the future of crypto
This week’s blockchain insights include valuable blockchain stories, perspectives on the future of crypto and especially a deep look into the emergence of Defi governance, MEME coins & “Uniswap killers”.
If you come across great insights or an interesting crypto tweet in the future, please reach out or tag us on Twitter: @BCComparison. Don’t forget to join our Telegram group where we collect insights from all blockchain ecosystems: @BCinsights.
Kickoff: Showcasing Blockchain Solutions
This week, we’ve also started showcasing blockchain projects and solution providers. We shared an in-depth introduction to Blockchain-Comparison.com and our value proposition to kick this off. The first companies we showcased on Blockchain-Comparison were Kairon Labs and Nyctale.
Kairon Labs is a market maker that is specialized on cryptocurrencies and utility tokens and integrated with 120+ exchanges. Nyctale is a Business Intelligence SaaS startup that provides advancing modelling tools to monitor investment and usage-behaviour around crypto assets.
Crypto projects: If you need market-making, check out Kairon Labs or get in touch per email.
Crypto investors: Try Nyctale with a free trial or get in touch per email.
Blockchains & decentralized applications cannot be censored and will remain available to people all over the globe when they are truly decentralized. (Note: Currently, blockchains do not yet scale for global usage.)
Crypto is now the only platform that can host a global application
— Fred Ehrsam (@FEhrsam) August 27, 2020
Bitcoin is becoming part of many professional investment portfolios because Bitcoin can be used as a hedge against the US Dollar. While many crypto investors engage in technical analyses, short-lived pumps and dumps & the Defi craze, Bitcoin remains the safe alternative in that field as well.
I put my savings into Bitcoin because I am risk adverse.
Few understand this.
— Dan Held (@danheld) August 30, 2020
Arthur Hayes, CEO of BitMex, shared his view on the cryptocurrency market and touches on various important crypto developments in perspective to the macroeconomy. He explains the demand for crypto credit, borrowing & lending of crypto & FIAT stablecoins, intermediaries such as exchanges & lending platforms as well as the Defi-protobank & shitcoin-farming.
Dreams of a Peasant – an essay on #DeFi and the crypto fixed income markets. https://t.co/vgK2YSUqix
— Arthur Hayes (@CryptoHayes) August 27, 2020
Here’s a very interesting (technical) insight mixed with a dramatic story of recovering potentially lost funds from a smart contract when knowing that attackers may wait in the dark to exploit any mistake.
Someone accidentally locked up some tokens in an Ethereum smart contract. @gakonst and I thought we'd found a way to recover them.
We learned that the mempool is a very creepy place.https://t.co/8rC0jOCPn3
— Dan Robinson (@danrobinson) August 28, 2020
Tokens can be used to coordinate the distribution of cash flows. This is now very popular since on-chain protocols make real revenues. 2 years ago this was unimaginable and people focused on bringing securities on the blockchain. Some people are still excited about regulated tokenized securities and this may play out in the coming years due to certain efficiency gains but the current frontier is in internet-native businesses such as digital finance, digital collectibles, online gaming & gambling.
The idea that tokens can be used to coordinate the distribution of cash flows was unpopular 2y ago but is now the consensus (~$0 -> $100M+ in on-chain revenue).
Some people are still excited about regulated tokenized securities but the frontier is in internet-native businesses. https://t.co/ihV447tT9o
— Arjun Balaji (@arjunblj) August 25, 2020
JP Morgan invested in Consensys. The JP Morgan Quorum open-source codebase will now be maintained by ConsenSys and will be made compatible with other enterprise products. This is a big step for Consensys and the industry towards enterprise & bank adoption.
We’re proud to share the news today that @ConsenSys has acquired Quorum from J.P. Morgan and will merge the enterprise protocol engineering roadmaps and technology. JPM has also made a strategic investment in ConsenSys. #WelcomeQuorumhttps://t.co/JuAN7xQiZC
— Joseph Lubin (@ethereumJoseph) August 25, 2020
Defi, governance & fair token launches
Aave received an e-money license in the UK after working for more than 2 years on it. Their full electronic money institution license was granted by the U.K. Financial Conduct Authority in July. This will enable Aave to create FIAT-Crypto gateways and onboard more users to Defi.
JUST IN: Aave has been granted an Electronic Money Institution license by the U.K. Financial Conduct Authority (via @mpmcsweeney) https://t.co/0a3TatZkNC
— The Block (@TheBlock__) August 24, 2020
Aave is also pioneering cross-protocol governance and integrations. Aave founder Stani Kulechov made a proposal to yearn finance and the YFI community.
My first yProposal for @iearnfinance 😍
Adding new aToken yVaults with Credit Delegation to optimise ROI https://t.co/SQ6LkNbE94
Thanks @AndreCronjeTech for building the smart contracts for Credit Delegation and experimenting strategies! 🥰
— stani.eth 👻 (@StaniKulechov) August 23, 2020
Defi protocol governance is in general rapidly evolving with experiments and exploits by short-term incentivized, yield focused investors. Especially on-chain governance is prone to attacks:
On-chain governance dumpster fires are going to get way worse soon. I had hoped Tezos would have proven this by now, but the stakes were simply too low for anyone to bother. DeFi TVL is going to drive all kinds of governance attacks and most protocols are woefully unprepared.
— kain.eth (@kaiynne) August 23, 2020
One example is Curve’s governance which was taken over by a Compound whale. A Curve founder delegated his stake to fight this off and reached more than 70% of the voting power. This contradicts decentralization and shows that a lot of the processes are just developing.
So… @CurveFinance founder just took over 71% of the voting power;
And since founder rewards are significantly higher than LPs and other voters, pretty much locked everyone else out.
So guess voting is pointless now.
Have fun everyone. pic.twitter.com/xgkxNpbjUz
— Andre Cronje (@AndreCronjeTech) August 23, 2020
Here’s a good overview of on-chain voting power distribution for major Defi protocols. Due to partially low-participation rates, this can change quickly:
Doing analytics for different governance protocols. I consider @compoundfinance as one of the gold standards, pleasantly surprised that 32.83% of tokens are participating in governance. And respect to @rleshner for giving up as much control as he did.
Voting power distribution; pic.twitter.com/PuDzox8Qoi
— Andre Cronje (@AndreCronjeTech) August 24, 2020
The launch of blockchain protocols and inherent (un)fair distribution of tokens is a major issue. After the fair launch of Bitcoin and various experiments and ICO variants, we’ve seen new “fair launches” emerge in Defi where all participants are able to get into projects at the same prices and stake with existing tokens. In practice, there are no security audits before public launch due to lack of funds & large whales still get a majority of tokens/power from staking. Here’s an interesting concept to enable more secure “fair launches”.
1/ Today we’re announcing fair launch capital 💸🔁💸
We’re not a new VC fund; we’re not “Fair Launch Capital”.
We *provide* fair launch capital.
We're a community resource providing free access to capital for new Fair Launch networks and projects.
— fair launch capital (@fairlaunchcap) August 26, 2020
Uniswaps, forks & liquidity migration
Uniswap launched a great new feature called “lists”. This improves the discoverability of tokens and provides more security for DEX users without gatekeeping.
🦄We are excited to announce Token Lists, a new standard for creating lists of ERC20 tokens. This is a community initiative to improve discoverability and trust in ERC20 token lists in a manner that is inclusive, transparent, and decentralized.
— Uniswap Protocol 🦄 (@UniswapProtocol) August 26, 2020
Larry Cermak asked one week ago what could Uniswap do if a competitor forked the project and added a token.
What could Uniswap do if some talented dev (let’s assume someone like @AndreCronjeTech) forks everything, slightly changes branding and releases a token that eventually distributes ~90% of supply to LPs? Uniswap is an absolute beast and has a great team but what could they do?
— Larry Cermak (@lawmaster) August 23, 2020
Martina Krung wrote about this in more depth in “Vampire Attack” & “Migration Mining”. Defi protocols that don’t have a token yet might be replaced by new protocols with a token & liquidity mining incentives.
My latest writing:
Long term liquidity > short term liquidityhttps://t.co/59mZgDZfNO
Soon: Cell – an autonomous evolutionary primitive for a new finance
— Martin(a) Krung (@martinkrung) August 28, 2020
One week earlier, 1inch, a DEX aggregator, had announced the 1inch Token, a liquidity mining campaign and the launch of a direct Uniswap fork called Mooniswap as well as simple ways to migrate from Uniswap to Mooniswap. It attracted a lot of liquidity instantly without sharing detailed tokenomics yet.
We are thrilled to announce the next generation AMM protocol #Mooniswap powered by @1inchExchange! 🦄🚀🌈🥳https://t.co/n2soc00F8k #DeFi #1inch
— Mooniswap (@mooniswap) August 10, 2020
This weekend, another Uniswap fork “Sushiswap” launched its stake farming campaign. Sushiswap is very similar to Uniswap but instead of giving 0.3% to liquidity providers, only 0.25% are given to liquidity providers and the rest to Sushi token holders (& the developer). Sushiswap is going one step further than Mooniswap with an actual liquidity migration smart contract. By now, only 3 days after launch, more than 70% (700M USD) of all Uniswap liquidity (1B USD) is farming Sushi.
1/ Introducing #SushiSwap🍣, an evolution of #Uniswap with $SUSHI tokenomics. SushiSwap protocol better aligns incentives for network participants by introducing revenue-sharing & network effects to the popular AMM model.https://t.co/v94Yklot0b
— 🍣 SushiSwap | sushiswap.eth (@SushiSwap) August 26, 2020
Uniswap increased its liquidity provider pools from 300M USD to 1B USD (See Uniswap.info) and passed centralized exchanges. In the short-term Sushiswap attracted a lot of liquidity to Uniswap and it will be very interesting to see how much investors will dump Sushi before the migration and how much of the liquidity will move to Sushiswap. Uniswap had already announced a version 3 of their protocol and they are likely to announce a token soon but it’s not easy to compete with a fair-launched community-owned protocol when you have obligations with existing investors.
🤯 Wow, @UniswapProtocol 24hr trading volume is higher than @coinbase for the first time ever
🦄 Uniswap: $426M
🏦 Coinbase: $348M
Hard to express with how crazy this is. pic.twitter.com/48o0xRkiUo
— Hayden Adams 🦄 (@haydenzadams) August 30, 2020
Below, we’ve curated new “Meme”-coins. All of them fork parts from existing projects and add or change just a few components that may (or may not) create real value in the long-term. Most of the value-creation depends on the community that is attracted, well-incentivized and starts contributing to the project. We hope you enjoyed this weekly update. Make sure to sign up for the newsletter below and join us on Twitter (@BCComparison) and Telegram (@BCinsights) for the most recent insights from all blockchain ecosystems.