New DeFi Magic is Like Venmo, But Global, Via Twitter, and Gains Interest
Also, Ganesh Swami writes about how Ethereum is becoming a fintech platform, dYdX launches decentralized perpetual futures, on-chain analysis on Kyber, and more.
Hello Defiers, lots going on in decentralized finance:
- Rising number of Ethereum tokens’ market cap shows Ethereum is becoming a platform for fintech innovation, Covalent’s Ganesh Swami writes
- Growth for Kyber’s KNC token is booming, but the token is still highly concentrated, on-chain data from IntoTheBlock shows
- dYdX launched perpetual futures contracts on its decentralized trading platform, starting with BTC/USD, with up to 10x leverage
- Dharma released feature allowing users to send money to any Twitter handle in the world
and more :)
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The Flippening Finale – Part 5
Ethereum is a True Platform for Fintech Innovation
By Ganesh Swami, Co-founder of Covalent, exclusive for The Defiant
In previous op-eds of my series “The Flippening” – we used data to study unique blockchain use-cases that are only possible because of Ethereum’s smart contract functionality. We studied smart contract gas consumption, stablecoins, and smart contract wallets – proof that Ethereum is fast diverging from Bitcoin from a use-case and traction perspective.
Ethereum’s market capitalization has been sliding sideways for the last couple of years at around 20 billion dollars. That’s a grim picture, but in reality, innovation on Ethereum is at all time high. Of course, we have data to substantiate this claim.
Bill Gates once said, “A platform is when the economic value of everybody that uses it exceeds the value of the company that creates it.”
I believe Ethereum is starting to prove itself as a platform for fintech innovation.
Our data analysis is straightforward – we compiled a list of interesting projects atop Ethereum: Uniswap, Aave, TokenSets, Compound, and Synthetix that have tokens representing economic value. We then calculate the available supply of these tokens times the price (if available) to get the market capitalization.
Our analysis method always starts with the most granular data possible and then aggregate it daily or weekly for visualization. Covalent has token supply and prices on a transaction granularity. Our timeframe under consideration is Dec 1, 2019 to April 22, 2020. For visualization purposes, if the market cap of a token crosses 15 million dollars, we hide it from the visuals. This excludes big tokens like MKR, ZRX, etc.
In total, we analyzed about 3,500 tokens and 500 million rows of data.
It is undeniable that each new project is able to hold their own. Right now, total market capitalization for DeFi tokens is just over $1 billion, or 20 times smaller than Ethereum’s market cap, but as a community, we are inching closer to Gates’ definition of a platform. It’s an exciting time to be building on Ethereum.
This concludes the Flippening series – but there’s a lot more to analyze and discuss. We have only scratched the surface of what’s possible. Feel free to reach out to me at any time on Twitter at @gane5h, my DMs are open! Thanks to Camila for the opportunity to write for the Defiant. I’ll be forever grateful. 🙏
On-Chain Markets Update by IntoTheBlock
This Week: Kyber Network
Kyber Network has proven to be an increasingly important protocol within decentralized exchanges, and possibly within exchanges broadly.
KNC Token — Kyber’s native token is used to manage incentives and align them with the network’s overall health. Having reserves pay a fee in KNC makes it costly for them to act against the networks best interest.
KNC also plays an important role as the network’s governance token. As such, KNC is used to vote for decisions in the KyberDAO (Kyber’s decentralized autonomous organization).
While these on-chain metrics are not direct predictors of KNC price action, they do shed light into the value being created by the underlying Kyber network.
1. As Kyber Network continues to strengthen fundamentally, more investors are believing in the long-term potential of this project
The number of new addresses entering the network has increased by 438% YTD, and there’s now 60.4k addresses with a balance in KNC, a record high. This number is 11% higher than 54.2k addresses with a balance on Jan. 1. The number of active addresses using KNC on a given day has also more than doubled throughout the last year. The peak of this year was on March 1 with 2.5k active addresses, this was the same day that the price reached a peak of $0.80415
2 New Money Flowing Into Kyber
Kyber Network is gaining momentum ahead of major protocol upgrade "Katalyst" scheduled for Q2 2020.
It may come as no surprise that more people become interested in trading a token as prices rise. In Kyber’s case, the 142% year-to-date return has attracted significant amounts of new money into the market. As seen in the graph above, addresses with a holding period of less than a month, doubled from February to March as their volume increased by almost 40%.
3 Potential Risk of Collusion as KNC is Highly Concentrated
The fact that 18 addresses hold a majority of the KNC tokens could lead to collusion once the KyberDAO goes live and these holders can exercise their governance rights. Additionally, there is a potential downside price risk of having a whale or large investor sell their positions. While token concentration within a few addresses can be seen as worrisome by many in crypto, it is important to consider that several of these addresses belong to exchanges and the protocol itself.
— The Defiant and IntoTheBlock are planning to have periodic on-chain markets analysis pieces like the following. Let us know what you think! —
dYdX Launches First Decentralized Perpetual Contract
Perpetual contracts, the most widely traded product in crypto, will now be tradable in a decentralized, non-custodial platform. dYdX this week launched perpetual bitcoin contracts and plans to later roll out ether and Dai contracts. The contract’s price is tethered to BTC, which opens the door to other synthetic, non-Ethereum assets to be traded on the platform.
Why decentralized perpetuals?
Traders have flocked to perpetual crypto contracts to access the price movement of the underlying asset, with the added benefit of being able to take on leverage to maximize their profits (if the market moves their way). Not having to worry about expiry dates makes the process easier.
But so far, investors have had to use centralized exchanges to trade these instruments. BitMEX was the first to offer the product, and others like Huobi and Binance followed. The problem with that is users have to trust these exchanges with the custody of their funds and how those funds are managed. In dYdX, users are in control of their funds, so there’s less risk of losing their money to hackers, and trading, liquidations and dYdX’s insurance fund are all on-chain, and therefore transparent and can be audited in real-time.
To get these advantages though, traders will have to settle with up to 10x leverage, instead of the 100x available on BitMEX.
Delphi Digital’s Anil Lulla wrote in a report yesterday,
“As centralized exchanges continue to run into issues which end up causing their users to second-guess their trustworthiness, I believe decentralized alternatives will slowly start taking market share for these similar products.”
The product, which is in “private alpha,'“ or being tested by a reduced number of users, is not totally open as it won’t be available for US users so presumably it will need some degree of KYC.
You Can Now Send Money to Any Twitter Handle
Crypto lender Dharma launched a feature that enables users to send the dollar-pegged stablecoin Dai to anyone in the world using their Twitter handle. The ability to send Dai globally is already possible between Ethereum wallets, of course. But instead of jumbled up addresses, or even human-readable ENS names, Twitter handles is Dharma’s way of removing as much crypto jargon from the process as possible.
The Dharma app can be funded directly from the users’ debit card, Apple Pay, or from another Ethereum wallet. Once the wallet is funded deposits instantly start earning interest, which right now is almost 3% —Dharma is built over the Compound Finance protocol, so deposits go to Compound’s lending pool. The user then connects the account to Twitter, searches for a Twitter handle to send money to, and presses send.
A link for the receiving user is generated, which can be Tweeted out or sent directly. The receiving user follows the link to download the app if they don’t have it.
At this point, both users will have downloaded the Dharma app, which is a non-custodial wallet. Dharma takes control of the funds being sent via the social transfers feature, until the receiver claims the payment.
“In the brief period where a payment to a Twitter handle has not been claimed, the funds are in a custodial state,” Dharma co-founder and CEO Nadav Hollander said. “As soon as they're claimed, the funds go to the recipient’s non-custodial wallet.” The sender can cancel the payment and have the funds returned to their non-custodial wallet before the payment has been claimed.
The receiving party will see money in their wallet right away. Without knowing anything about Ethereum or blockchain, they’ll have Dai earning interest on Compound Finance under the hood. Applications like these are the best chance DeFi has at going mainstream.
Zerion Launches a Tool to Connect DeFi Apps
The money legos meme has gained popularity, but the truth is, it’s not always easy to snap the DeFi pieces together. The team at portfolio tracker Zerion wants to fix this with an open source SDK, or software development kit, that will make it easier for developers to integrate DeFi protocols.
PoolTogether Allows Users to Group Their Lottery Tickets
PoolTogether, the “no-loss” lottery, now allows users to link their tickets, increasing their chances at winning. If any ticket in the group wins, the prize is split proportionally. PoolTogether deposits users’ funds into DeFi lending pools so that the lottery prize is the interest generated from those pools. Players can withdraw the same money they put in at any time.
Messari’s Ryan Watkins analyzes the rise of USDT on Ethereum.
Ryan Watkins @RyanWatkins_USDT has invaded the Ethereum blockchain. It’s now Ethereum’s largest stablecoin by far. Is this good for ETH? 1/
2:33 PM ∙ Apr 22, 2020115Likes32Retweets
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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.