😨 DeFi Trembles Post Hack: DeFi Week of July 31

Happy weekend Defiers!The news cycle was dominated by the fallout from an exploit to the Vyper programming language this week. The exploit allowed hackers to siphon $70M worth of assets from Curve Finance Alchemix, Metronome, and JPEG’d. After the affected protocols put up a bounty, the attacker started returning the funds.

The attack sent CRV price plunging, which increased liquidation risk for Curve founder Michael Egorov's $90M worth of loans backed by CRV across various DeFi protocols. A further sharp decline in CRVs price down to $0.31 could liquidate Egorov's position. Curve’s founder frantically started to pay down his debts, including by selling claims to his CRV over-the-counter at a 40% discount compared to market value.

Elsewhere, it was a big week for Base, the hyped Layer 2 network from top U.S. centralized exchange, Coinbase. Base announced its “general access” mainnet launch will go live on August 9, following the network opening its doors to developers in mid-July. Base will launch front-end interfaces for bridges allowing lay users to migrate assets from Ethereum to the network, and kick off its promotional campaign, OnChain Summer.

Savvy degens had already piled onto the network last week, igniting a brief surge in memecoin trading on Base. However, the party was quickly disrupted when the network’s top-traded token, BALD, turned out to be a rug-pull. Activity further slowed after LeetSwap, a bubbling DEX on Base, also paused trading after suffering an exploit.

The Internal Revenue Service published a ruling determining that stakers must report rewards based on the “fair market value” of the assets received. Web3 advocates criticized the determination, arguing that staking rewards should be treated as income at the time they are sold.

Institutional assets managers raced to apply for Ethereum ETFs, with the SEC receiving seven applications from six firms since July 28. The news follows a recent spate of applications for Bitcoin ETFs, with some analysts inferring the SEC may be softening its stance towards crypto ETFs.

And in this week’s podcast, Aya Kantorovich, the co-CEO and co-founder of Fractal, shares her thesis for why it will be commonplace for legacy institutions to hold crypto on their balance sheets within the next decade.

Enjoy!