+20% Yields for Ether Deposits Drawing Users Back to bZx
Also, dYdX introduces trading fees, PieDAO launches decentralized ETFs, Instadapp creates DeFi specific user accounts.
Hello Defiers, here’s what’s going on in decentralized finance,
- Ether deposits in bZx, the platform at the center of recent financial exploits, are surging
- dYdX introduces tried and tested exchange monetization model: trading fees
- Instadapp created DeFi Smart Account to provide a single point of entry for open finance
- PieDAO wants to allow anyone to create and trade passive funds
and more :)
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Confidence in bZx Coming Back After Exploits
Users are coming back to bZx, the DeFi platform that was at the center of two exploits about three weeks ago, even as trading hasn’t resumed.
Ether deposits in bZx shot up by more than 20% yesterday to 21.3K ETH, from 17.5K, according to DeFi Pulse. The amount of ether in the platform is still about 22% lower than pre-exploits level. Increased liquidity slashed ether rates by about half, to 27.5% from 41% on the previous day, and from as high as 99% on the day of the first exploit.
Image source: DeFi Pulse
Users are likely coming back to bZx to take advantage of the higher rates. The +20% annual yield for ether lending on the platform compares with 0.06% on Aave and 0.01% on Compound, according to ConsenSys’s Codefi Data. Rates are so much higher on bZx because users rushed for the exits after the exploits, draining liquidity and causing ETH utilization rates (total assets borrowed out of total assets supplied) to shoot to 100%, which prevented some users from taking their money out.
Image source: ConsenSys Codefi Data
Two traders exploited bZx and other DeFi platforms last month, using flash loans to borrow capital without putting up collateral, and use that capital to artificially inflate the price of an asset to benefit their leveraged positions. In the first attack, bZx code logic that should have prevented the trader to take out a loan which would immediately become undercollateralized, failed. In the second exploit the problem was that bZx relied on spot market prices from a single decentralized exchange.
The platform yesterday started liquidating the first attacker’s underwater loan and adding it to assets that will pay interest to bZx lenders. The move is intended to prevent the platform’s users to incur losses from exploits.
For now, the high yield offered is enticing enough for some users to outweigh concerns of further exploits to the platform.
dYdX Introduces Trading Fees
DeFi trading platform dYdX is introducing trading fees starting March 10. Taker fees will range between 0.05% and 0.5% of trade volume, depending on trading pair and order size. Market makers will pay no fees, as the platform aims to incentivize liquidity and create a deeper order book.
“Our goal is to earn consistent revenue as a company,” dYdX founder Antonio Juliano wrote in a post. “We have decided initially to earn fees based on trade volume. This is a tried and tested path for many exchanges and ensures that we earn fees in line with actual usage of the product.”
Image source: dYdX
DeFi projects have tried different ways to monetize applications built on top of open protocols, with tokens being at the center of major ones, such as 0x and MakerDAO. dYdX is instead going down the “tried and tested path” of traditional exchanges, the post said.
dYdX has been paying transaction fees for all trades since September, with over $40,000 paid in February alone, when trading volume spiked to over $150 million.
Image source: dYdX
Many DeFi platforms have been free for users, as teams have prioritized finding the right product/market fit, and increasing their user base, before charging fees. The fact that one of DeFi’s major projects is taking the step to monetize is a sign the space is maturing and becoming more sustainable. It will be interesting to see what impact this has on volume, and if anyone decides to build a cheaper exchange over the same open protocol.
Instadapp Wants to Provide a Single Point of Entry for DeFi
Instadapp, which built a bridge connecting major DeFi lending protocols, is launching a platform aimed at providing users and developers with a single point of access to all of decentralized finance. Most users interact with DeFi through wallets, which were mainly designed for tokens. Instadapp wants to improve the experience and make it more seamless.
The platform, called DeFi Smart Accounts, will enable developers to create cross-protocol transactions by writing simple code —no smart contracts required— and give users different attributions depending on the use case, from owner, to delegate in a governance vote, to guardian in a key recovery system. Users will be able to create multiple accounts for different use cases, similar to traditional finance, where someone might have different accounts for savings and investing.
PieDAO Wants to Become DeFi’s ETF Issuer
Another passive investing solution is coming to DeFi. PieDAO wants to enable anyone to trade and create investment portfolios, which can include digital and traditional assets via synthetic assets. These portfolios, called PIEs, will be tokenized and available for trading 24/7 by anyone, globally, and with no minimums.
“Passively managed funds are eating the world of finance and we have none in crypto and no decentralized option for traditional assets. Until now,” PieDAO’s Alessio Delmonti wrote in a post.
Members of PieDAO must own DOUGH tokens, which will allow them to vote on portfolio weight, risk assessment, and what are the right and fair fees. PIE trading accrues fees, which are redeemable by the group’s members.
Top DeFi Apps Reached Almost 6K Daily Active Unique Wallets in Past Week: DappRadar
Top five decentralized finance apps running on Ethereum —MakerDAO, Compound Finance, dYdX, Aave, bZx— have reached almost 6,000 daily active unique wallets in the last 7 days.
DeFi: Dependency Hell Meets Finance: Daniel Que
Coinbase Engineer Daniel Que writes about the risk of decentralized finance composability. “We hear a lot about the magic of composability in DeFi, or “Money Legos.” I want you to remember that it could become “Money House of Cards” in a flash.”
Richard Burton compares ICO days with DeFi days.
$RIC 🐚 @ricburtonIn 2017 I watched founders launch stupid tokens with valuations over $100,000,000 and proceed to incinerate their investors’ capital 🔥 In 2020 I am watching founders craft sensible tokens with valuations under $10,000,000 and carefully deploying their seed capital 🌱5:10 PM ∙ Mar 3, 2020147Likes13Retweets
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The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money.
About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.