DeFi Heavy-Weights Synthetix and Kyber Join DAO Wave
Also, Synthetix announces first Chainlink-sourced price feeds, OKEx to offer Dai Savings Rate
Hello defiers! This is what’s happening in decentralized finance,
- Synthetix and Kyber are planning DAO migrations
- Synthetix now sourcing seven price feeds from Chainlink
- OKEx will start offering MakerDAO’s Dai Savings Rate
Synthetix and Kyber Are Latest to Join DAO Wave
Decentralized finance is meant to be global and unstoppable with assets whooshing though the globe. Organizations running those platforms and protocols should be as radically open and uncensorable as possible. They should be decentralized too.
That’s the thinking behind the latest trend, where DeFi projects are increasingly migrating to decentralized autonomous organizations, or DAOs, (like companies, but funds are held in smart contracts, rules are pre-scribed in code as much as possible and decisions are voted on with tokens).
The latest to plan this shift are synthetic asset platform Synthetix, and decentralized exchange Kyber Network.
Synthetix wants to gradually decentralize management of the platform. It’s proposing to its community to move control of the treasury from the foundation to a DAO in early 2020. The team also expects to establish a grantsDAO, separate from treasury management, which will accept grant submissions from the community and disburse funding.
Governance of the DAO “is far more challenging than the simple operational movement of funds,” founder and CEO Kain Warwick wrote. He believes pure on-chain governance is flawed and susceptible to capture and so proposes that the initial organization have a small number of members with equal voting rights to act as custodians. Members will be initially sourced from the core team, but will later include token holders or their representatives.
One governance mechanism being considered would be similar to representative democracy, where token holders can vote using their token holdings for a specific DAO member.
Instead of one, central organization, there will be multiple, independent entities providing services to the protocol. None of them will have unilateral control over how its governed.
It will be key for the protocol to move to decentralized price feeds, as centralized oracles can add become single points of failure, Warwick said. To achieve this, Synthetix is planning to move all its price feeds to Chainlink. The first wave, which moved seven currencies and commodities, was announced today. Chainlink transfers prices on-chain through a pool of independent nodes backed by economic incentives.
Once the project has reached the point where it improves with each new attack we will no longer fear attempts at censorship but welcome them, as each attempt will ensure the protocol is more resistant to capture. Ultimately this is the dimension on which every decentralised protocol must be measured: is it unstoppable?
Kyber, the second-largest decentralized exchange by volume, on Monday announced it’s launching a major protocol upgrade called Katalyst. These are the main changes:
- New staking mechanism, which will allow KNC holders to receive network fees. The more KNC staked, the bigger the share of fees. Kyber may be taking a cue from Synthetix’s staking model, which has enabled its SNX token to soared by 30 times this year.
- Launch of KyberDAO, which will give KNC holders the ability to decide how the fees for the network will be distributed between burning, staking rewards and market maker incentives. Token holders will be rewarded for participating in governance decisions.
- On top of the staking and governance rewards, Kyber will continue burning KNC, which has been the main way the current model attempts to drive long-term value to token holders. Kyber charges a small fee in KNC to transact in the network, then burns KNC collected as transaction fees, reducing the token supply over time.
- Market makers will no longer need to maintain a KNC balance to pay transaction fees. Instead, Kyber plans to have fees automatically collected and burned or used for rewards and incentives. Part of the total fees collected will go towards incentivizing market makers based on how much trades and volume they facilitate, similar to rebates used in traditional finance. The goal is to drive greater volume, value, and network fees.
- Kyber is also removing the previous set fee-sharing program (30 percent of the 0.25 percent fee) for DApps using the platform to source liquidity, and is allowing each project to set its own spread.
Most of the changes are geared towards improving the KNC token price, as while activity on Kyber has done this:
Image source: dex.watch
KNC has lagged:
Image source: CoinMarketCap.
Granted, KNC is up more than 20 percent this year, but it’s at about half the price of its September 2017 ICO. News about its token model didn’t get much of a market reaction yesterday. While KNC volume on Dexes jumped more than 200 percent, its price dropped almost 13 percent amid a broad crypto market slump.
It’s debatable whether crypto projects should be making such changes to explicitly drive the price of their token. An argument in favor of doing that is if actual use of the platform isn’t being reflected in the price, that might signal token economics are faulty and should be fixed. Others will say, if a platform can grow even as its token isn’t, maybe it didn’t need a token in the first place.
Uniswap is the example often used as a project that was able to take the lead without ever doing an ICO or having a token. Synthetix is an example of the opposite; it’s had spectacular growth, and so has its token.
It’s too early to say what the right or best model is. All these projects are making their way in a new ecosystem, with untested business models using DAOs and tokens. It was highly unlikely that they would get it right at the first try and we’ll see how they continue to experiment until something like a new normal emerges.
OKEx Integrates Dai Savings Rate
Centralized finance will increasingly want to offer DeFi products. The latest example is OKEx becoming the first exchange to offer MakerDAO’s Dai Savings Rate.
OKEx said yesterday, users will be able to deposit Dai and stake it in Maker’s DSR contract to earn interest (now at 4 percent) plus an additional reward offered by the China-based exchange, directly on the OKEx platform.
OKEx has about 20 million customers, according to BitcoinWiki, who soon will be a few clicks away from owning Dai. If this prompts a surge of Dai demand, resulting on a deviation from the $1 peg, that would likely prompt lower interest rates.
Last month, Coinbase’s custody arm started offering staking to customers globally, and Binance, the biggest exchange by volume, said it will support Bancor's Jan. 1st airdrop of ETHBNT, which collects fees from ETH-based trades on Bancor.
Centralized exchanges are paying increasingly more attention to the space and we’ll see more integrate DeFi products and/or launch their own versions of open finance.
Tweet of the Day: All Green TokenSets During Market Sell-Off
Anthony Sassano | sassal.eth @sassal0xEvery single Set on @tokensets is in profit vs ETH since inception - such a beautiful sight! 📈 I'm really proud of what we have been able to achieve for Set holders @SetProtocol and we can't wait to keep releasing more Sets! tokensets.com/exploreR
9:39 PM ∙ Dec 17, 2019130Likes30Retweets
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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.