🦄 Recap: DeFi Week of May 10

Hello Defiers! Happy weekend!

Well… that happened. Someday we’ll look back on this week, the week Terra pulled a Chernobyl and radiated a crypto market already reeling from its maddening correlation with the stock market and Federal Reserve interest rate policy. The bears were willing to pounce at the first spill of blood, and when LUNA cratered and UST slipped its peg the market’s ursine instincts took over and a $40B project was devoured in the blink of an eye.

When we do look back, it will be with wisdom and the distance of history. Lessons will be learned, and out of the ashes newness will rise. That’s the plan, right? In the meantime, what the hell happened?

Our team fanned out across the broken ground to find an answer and returned with a series of reports. Robin Schmidt asked what do you do when life gives you an onion and took a bit bite. “You chow down, and you do the work.” Robin and his video team in Amsterdam produced segments on LUNA and UST, and a broader piece on three causes of the crash.

Jason Levin wrote about the hubris of Do Kwon, Terra’s outspoken co-founder, and how his boldness morphed into what many called recklessness. Jason also reported on Terra’s efforts to salvage what it can from the fallen ecosystem. Owen Fernau covered the fallout in Washington, where Treasury Secretary Janet Yellen called for legislation to regulate stablecoins and reported on Kwon’s revival plan. Sam Haig and yyctrader provided market insights, including the impact on Ethereum Layer 1s, which have flared with so much promise DeFi but are falling victim to the bear market.

Looking beyond the market’s travails was a most welcome respite. Camila Russo spoke to Diego Fernandez, Buenos Aires’ innovation honcho, about the South American city’s push to implement crypto payments for municipal taxes. Sam Haig’s story on MakerDAO’s groundbreaking deal to use DAI to finance shipments of Aussie beef should not be lost in the shuffle. It’s a vivid example of how DeFi can provide valuable applications in the real world.

So take a breath, exhale, and enjoy…

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This week:

Avoiding IL With Bancor V3 + StarkNet Testnet Guide

Podcast

🎙 Buenos Aires City Innovation Chief Talks Crypto Tax Payments and How Web3 Will Revolutionize Democracy:

This week we speak to Diego Fernandez, the secretary of innovation and digital transformation for the city of Buenos Aires. Recently, news broke that Buenos Aires will be taking tax payments via crypto, an initiative that Diego helped shape. We talk about what this means for residents of the city and how it works in practice. Diego also addressed critics’ response to the measure, who questioned why Argentines would spend crypto instead of holding it as a store of value. Diego dives into the city’s broader plans with crypto, including how it wants to leverage the tools and data at its disposal to build a blockchain-based identity system.

Crypto and government have been somewhat at odds with each other. We discuss the tension of how governments, which are centralized entities by definition, can use decentralized technology. Diego outlines the long-term vision of how these two worlds can interact. The interview was recorded before Argentina’s central bank effectively banned banks from offering crypto in response to pressure from the IMF. While we did not discuss this issue, we did get into how a pro-crypto city can deal with a less friendly environment for the industry on a national level.

The Tube

📺 Hot Stuff: UPDATE: UST & LUNA crash harder, 8000 ETH moved by Azuki?

📺 Quick Take: The UST depeg and LUNA crash + Azuki founder confession

📺 Quick Take: Is it over? 3 reasons why markets are crashing and what you can do

Terra Collapse: Do Kwon’s Rise and Fall

🌪 Do Kwon Humbled as LUNA Spirals and UST Suffers ‘Lehman Moment’

Terra Struggling to Stabilize Crisis as Investors Flee

In which Jason Levin chronicles an entrepreneur’s Icarus-like trajectory.

“I understand the last 72 hours have been extremely tough on all of you,” Do Kwon tweeted Wednesday morning. “Extremely tough” will be an understatement for users who trusted their savings on a stablecoin – emphasis on the word “stable” – to now own only a small fraction of their initial holdings. Rarely has such a high-flying crypto project fallen so far, so fast, even in this volatile asset class.

Investors woke Wednesday morning to see that Terra’s native token, LUNA, is trading at $1.55. That’s down 97.5% from its all-time high of $119.18. Moreover, UST, Terra’s flagship stablecoin, which slipped its peg on Monday, has continued its slide after briefly rebounding Tuesday, to touch as low as $0.29 in early trading New York time on Wednesday.

LUNA, which stormed out of nowhere last year to notch a $41B market value and foment an entire crypto ecosystem, is now worth $1.8B, according to CoinMarketCap. Even worse, Terra’s meltdown may have repercussions outside of its ecosystem, impacting the entire blockchain industry. UST’s faceplant has triggered a regulatory crackdown in Washington, and delivered a heavy blow to the credibility of algorithmic stablecoins.

While Do Kwon and his team are scrambling to shore up their stricken tokens, investors are bailing en masse. It’s hard to see how Terra and its system can recover. “I understand the last 72 hours have been extremely tough on all of you,” Do Kwon tweeted Wednesday morning. “Extremely tough” will be an understatement for users who trusted their savings on a stablecoin – emphasis on the word “stable” – to now own only a small fraction of their initial holdings. Rarely has such a high-flying crypto project fallen so far, so fast, even in this volatile asset class.

Terra Collapse: Regulatory Fallout

🏛 UST’s ‘Reckless’ Run Triggers Crackdown on Stablecoins

Terra Draws the Ire of Crypto Community as Regulators Circle

In which Owen Fernau looks ahead at the regulations to come.

If the crypto industry was looking to prove the merits of stablecoins, May 9 did it no favors. Janet Yellen, the U.S. secretary of the treasury, said new legislation to regulate stablecoins the day after the meltdown of UST, the algorithmic stablecoin supported by Terra.

“[Stablecoins] run risks which could threaten financial stability,” Yellen testified in a Senate Banking Committee hearing. “Risks associated with the payment system and its integrity, and risks associated with increased concentration if stablecoins are issued by firms that already have substantial market power.”

Terra certainly had market clout going into this week. Its flagship token, LUNA, boasted a $40B market capitalization in April. And Do Kwon, Terra’s leader and self-styled “Master of Stablecoin,” had emerged as a DeFi superstar as LUNA skyrocketed.

But Terra’s pledge to redeem 1 UST for $1 worth of LUNA was a thin reed to support such a weighty proposition. And when LUNA cratered amid the crypto selloff, well, all bets were off for UST and it slipped its peg by an astonishing 40% on Monday.

Opinion

🧐 Web3 DEVs Must Heed the Lessons of Past Tech Bustups

The Dotcom Crash Looms Large Again

Guest writer Alex Shipp finds an opportune time to address key takeaways from the past.

Thirteen years out from its conception, cryptocurrency stands in a peculiar place — several iterations of creativity and sophistication beyond its original form, and many more removed from its most valuable promise: a decentralized, permissionless online universe owned and governed by its users.

Not unlike the dotcom boom in the late ’90s, crypto has a lot going for it. DeFi, NFTs, and DAOs continue to inspire the imaginations of leading developer teams and enthusiastic communities alike. And the tap of innovation shows no signs of drying up: powerful and disruptive decentralized applications are rarely more than a year of development away. On the human side, technical know-how and efficient fundraising methods are well-established.

But there remains one major obstacle that separates development teams and their platforms from adoption: critical infrastructures like Ethereum and other Layer 1 blockchains to serve the computational demands of DeFi.

🖼 How NFTs Will Revolutionize Intellectual Property

Crypto's Killer App Fuels the 'Passion Economy'

Guest writer Jake Fraser lays out the utility of NFTs for artists and entrepreneurs.

In January 2022, Prada, the Italian luxury fashion brand Prada and Adidas, the giant sportswear manufacturer, teamed up to create a groundbreaking NFT project. By bringing in credibility and authenticity, NFTs are poised to redefine collaborations and create a safe space where all the collaborators can equally benefit from the partnership.

This, combined with the inherent rarity of NFTs, could give rise to an era of meaningful collaborations where the contributions of each collaborator are recognized, stored, and accounted for on the blockchain.

They asked people to submit unique artwork and photographs and selected 3,000 of them. They were compiled and featured in digital artist Zach Lieberman’s larger NFT and went up for auction on SuperRare. About 80% of the proceeds from the auction went to a non-profit organization Slow Factory. This project shows how NFTs unite brands, artists, creators, and social organizations around the world.

Friday

News

• Do Kwon Wants to Save Terra by Creating a New Chain With 1B of Tokens for LUNA and UST Holders: The Terra ecosystem’s notorious leader is trying to salvage the resources and talent left behind in the wreckage that is UST’s depegging.
• Trader May Have Lost $9M in Exit from USDTOpportunistic bots may have made off with millions of dollars worth of profits after one trader hastily tried to exit an enormous USDT position.
• Terra Network Shuts Down Again; Binance Delists LUNA and UST PairsThe Terra blockchain shut down for a second time on May 13 after its validators, users who tend its blockchain, pulled the plug.
• Lido Increases Liquidity Incentives as stETH Trades at Discount to ETHUST’s collapse continues to reverberate around crypto markets. Curve’s largest pool is out of whack — the stETH pool, which pairs ETH with stETH, a staking derivative of ETH, shows stETH trading at a 2% discount to ETH.
• USDT Briefly Slips Below $1 Peg as Terra Contagion SpreadsAs Terra’s UST stablecoin continues to unravel, Tether, the crypto market’s largest stablecoin is also showing signs of stress.
• Terra Temporarily Halts Blockchain To Prevent Governance AttackThe Terra blockchain has resumed block production after being halted for around 2 hours.

Elsewhere

• David Marcus unveils new startup focused on Bitcoin and Lightning backed by a16z and Paradigm: the Block
• The Merge - with Danny Ryan, Tim Beiko, and Hasu (Part 1)
• SEC's Hester Peirce says new stablecoin regs need to allow room for failure: CoinTelegraph
• Terra blockchain has officially halted at the block height of 7607789: Terra Daily

Thursday

News

• 📉 Alt Layer 1 Trade Unravels as Ethereum Killers Sink Below ETHThe would-be Ethereum killers are getting killed. Fantom, Solana, Avalanche, Cardano… These Layer 1 networks are getting walloped.
• 👺 Shapeshifting Azuki Founder Outfoxes Himself with Strange Confession“I fucked up,” said Azuki founder @Zagabond. The market agreed. On Monday, Azuki, an Anime-themed NFT collection of avatars, was at 23 ETH, ($58,558). Now it sits at a floor of 8 ETH, a 68% fall.

Elsewhere

• UST’s Do Kwon Was Behind Earlier Failed Stablecoin, Ex-Terra Colleagues Say: CoinDesk
• Cathie Wood's Ark Invest Grabs More Than Half a Million Coinbase Shares as Exchange's Stock Plummets: CoinDesk
• BlackRock And Citadel Deny Trading Cratering Stablecoin: Forbes
• In few minutes Tether will coordinate with a 3rd party to perform a chain swap: Tether

Wednesday

Terra Crisis

• 📉 Terra’s LUNA Crashes 95% As Investors Mull Recovery PlanYesterday was a bad day for the Terra ecosystem. Today is worse. Heavy selling ensued as LUNA crashed 97% to a low of $0.69 before bouncing to $2.50 in midday trading New York time.

News

• 💰 Coinbase Will Keep Customer Balances in Event of BankruptcyCoinbase will take your coins if it goes bankrupt. That was the rather jarring message in the first quarter earnings release for the leading U.S.based centralized exchange.
• 🐄 MakerDAO’s Real World Push Gains Moo-mentum with Aussie Beef Play It ain’t crypto, but MakeDAO is making strides in its push to finance off-chain business activities. On May 9, one of the project’s vaults was used to finance a shipment of Australian beef to Hong Kong.
• 🪄 Abracadabra Enables Leveraged Yield Farming On StargateDeFi lender Abracadabra has launched a new Degenbox strategy that will allow users to leverage up their yields on Stargate, an omni-chain liquidity protocol.

Elsewhere

• Luna Foundation Guard seeks more than $1 billion to shore up UST stablecoin: sources: The Block
• Terra ‘rescue plan’ still at large as LUNA falls below $5, Bitcoin spikes to ‘$138K’ in UST: CoinTelegraph
• Will Optimism’s OP Token Draw People Back to Layer 2s on Ethereum?: Unchained
• Somebody sold $285M UST on Curve Finance on 8th May 2022 which led to the depeg of UST decreasing to $0.985: Terra Daily

Tuesday

Terra’s Travails

• Terra’s Stablecoin Structure Unravels on a Wild DayThe vulnerability in UST was plain to see from the outset. It was staring the market in the face. The stablecoin’s promise to redeem 1 UST for $1 worth of LUNA invited trouble.
• Terra’s UST Rebounds to Around $0.90 After Depegging by 40%Terra’s stablecoin UST, the poster child for decentralized assets tied to the US dollar, rebounded sharply on Tuesday as it climbed to $0.92 after plunging 40% below its dollar peg, to $0.60, on Monday.

News

• Compound Treasury Draws a Rating From S&P in Groundbreaking MoveThe capital markets, including crypto, may be a train wreck at the moment. That hasn’t stopped DeFi protocols from seeking deeper integration with the financial world, and vice versa.
• Meta’s Instagram Partners With Polygon In NFT PushInstagram users will be able to post and share NFTs as soon as this week. Meta’s NFT move will be powered by Ethereum Layer 2 scaling solution, Polygon, and available to select creators, the company revealed in a video posted by CEO Mark Zuckerberg.

Markets

• LUNA Loses Half its Value in 24 Hours as DeFi Tokens CraterDeFi assets are taking a beating. The combined capitalization of DeFi tokens has fallen below $100B for the first time since last August as cryptocurrencies crater.

DeFi Primers

• How to Use DeFi Wallets Centralized wallets store your crypto assets on your behalf. To open an account using a centralized wallet, first verify your identity and fulfill know-your-customer requests.

Elsewhere

• Crypto Market Crash Leads to $1B in Liquidations, Majors Lose Pivotal Support: CoinDesk
• Binance suspends LUNA and UST withdrawals amid market turbulence: The Block
• Raoul Pal explains the UST (Terra) MELTDOWN: Bankless
• Attention devs looking to do something: Catch a 'Developers Guide to the Aave Protocol' by @DeFiSpartan this Wedns May 11th: Aave

💜Community Love💜

Thanking all the amazing Defiers for the support and love this week (and always)!

The DeFi Edge 🗡️ @thedefiedge🚩 Warning 🚩 @coinbase will KEEP your coins if they go bankrupt. Take your coins OFF of CEX's and send them to a hardware wallet like @Ledger @DefiantNews

6:05 PM ∙ May 11, 2022793Likes250Retweets

Mogul Productions @mogulofficial_📖 MUST READ 📖 Fantastic article from our Head of BD - @jakefraser29 👏 How NFTs will revolutionize intellectual property - as featured in @DefiantNews thedefiant.io/nfts-intellect…

thedefiant.ioHow NFTs Will Revolutionize Intellectual Property - The DefiantIn January 2022, Prada, the Italian luxury fashion brand Prada and Adidas, the giant sportswear manufacturer, teamed up to create a groundbreakingNFT project.2:54 PM ∙ May 11, 2022564Likes95Retweets

GoodDollar @gooddollarorg“The rich are getting richer, & the poor are getting poorer…There is this thing called magic internet money” GoodDollar is using #DeFi to bridge the wealth gap! @DefiantNews talks to @eToro’s CEO @yoniassia Watch it now👇 youtu.be/O-tIOeeJyXw #CryptoUBI is happening now!

youtu.beCould Good Dollar be crypto’s answer to UBI? With Yoni Assia (eToro’s CEO)Welcome to a very special edition of the Defiant Weekly as we get to joust with one of the most mercurial talents in the crypto space. As the CEO and co-foun...7:25 PM ∙ May 9, 202280Likes31Retweets

Trevor Jones 🎨 @trevorjonesart"3 reasons why markets are crashing and what you can do" ~ a short video by @DefiantNews & @IamSuperMassive. youtu.be/HgT46iVRLeQ Check it out. 👆👆

6:12 PM ∙ May 9, 202229Likes5Retweets

leek @chief_leekCheck out this article on the Coinbase NFT platform ⬇️ Thanks for the feature @DefiantNews @iamjasonlevin

thedefiant.ioCoinbase NFT Draws Fire as a ‘Web3 Instagram’ - The DefiantAfter two weeks in private beta, Coinbase NFT launched to the public on May 4. Straight away skeptics weighed in with concerns the platform’s embrace of social media functionality might backfire.9:08 PM ∙ May 5, 202233Likes11Retweets

₳llison Fromm @Allison_FrommAnother great podcast from @CamiRusso! I particularly enjoyed hearing about the Buenos Aires perspective on SSI (from approx. 30.00 to 46.00) ⚓

anchor.fmBuenos Aires City Innovation Chief Talks Crypto Tax Payments and How Web3 will Revolutionize Democracy by The Defiant - DeFi PodcastThis week we speak to Diego Fernandez, the secretary of innovation and digital transformation for the city of Buenos Aires. Recently, news broke that Buenos Aires will be taking tax payments via crypto, an initiative that Diego helped shape. We talk about what this means for residents of the city an…9:52 AM ∙ May 10, 20225Likes1Retweet

Defi For Degens @defi4degensWhat is DeFi? 🤔 The Ultimate DeFi 101 Guide to Ethereum, Layer 2s, Yield Farming, and More by @DefiantNews Check it here: thedefiant.io/what-is-defi-u… #DeFi #defidaily

thedefiant.ioWhat is DeFi (Decentralized Finance)? The Ultimate DeFi 101 Guide - The DefiantThroughout history, money is often moulded to benefit autocratic regimes. But in light of recurrent issues like debasement and rising inflation - alternatives such as decentralized finance, or DeFi, have emerged as an effort to re-establish sovereignty and power to the everyday person.9:07 AM ∙ May 8, 202221Likes9Retweets

Cori.eth 🐝 @0xCorinaAbsolutely brilliant work and mindblowing journey filmed by @DefiantNews @IamSuperMassive @alpGasimov Can’t believe this video has less than 8K views. Fantastic job @EpoLabs @TopDogBeachClub @BossBeautiesNFT on storing the first NFTs in the AWA 🗻❄️ youtu.be/sM0G9KDtfd4

youtu.beThere are NFTs buried in the Arctic. We went to find out whyDISCLAIMER: The Defiant was not paid by Top Dog Studios to make this film, nor were Top Dog Studios allowed any input into editorial. They did kindly cover o...11:49 AM ∙ May 8, 20228Likes3Retweets

Mehdia.eth 🦇 🔊 @MehdiaethThis really looks cool.. Thanks @ETHMovie and @CamiRusso for airdropping this art..

8:01 AM ∙ May 8, 202237Likes3Retweets

JPMex.eth @jpmex_Crypto adoption in emerging markets with a killer panel #MITBitcoinExpo

10:57 PM ∙ May 7, 202222Likes2Retweets

martynambl.eth @MartynaMBLHow's everyone else spending their Friday evening? 😇 @CamiRusso you're incredible and I couldn't be more excited for @ETHMovie 🔥

10:58 PM ∙ May 6, 202255Likes8Retweets

🧑‍💻 ✍️ Stories in The Defiant are written by Owen Fernau, Samuel Haig, Jason Levin, and yyctrader, and edited by Edward Robinson, yyctrader and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.

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