Shapella Activated: DeFi Week of Apr. 9

All eyes were on Ethereum’s Shapella upgrade this week, with punters fiercely debating whether the activation of staked Ether withdrawals would lead to a flood of ETH getting dumped on the markets and crashing the price.

But Ethereum defied naysayers by rallying more than 10% in the 24 hours following the upgrade and 33% since the start of March.

The network is now processing withdrawals at an orderly pace, with no more than 1,800 validators able to withdraw each day. Validators retrieving their initial stake represent just 5% of pending withdrawals, with the remaining 95% of requests comprising rewards.

The TVL and on-chain activity on Ethereum Layer 2s also continued to post new all-time highs. Upstart zkEVM contender, ZkSync Era, surpassed a $200M TVL just three weeks after launching.

Era’s principal rival, Polygon ZkEVM, is quickly getting left behind, having attracted less than $4M despite launching only four days after Era. But Polygon aims to catch up to its competitor and expects that a forthcoming Uniswap deployment could bolster its TLV in a big way.

And in this week’s podcast, Cami Russo spoke with Push Protocol founder, Harsh Rajat, to learn more about how artificial intelligence will interface with web3 and blockchain technologies.

Enjoy!

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Podcast

The AI/Web3 Intersection Will be Mindblowing

This week, Cami Russo spoke to Harsh Rajat, the founder of Push Protocol and a leading figure in the world of decentralized messaging. Push Protocol is an exciting messaging protocol that utilizes the power of decentralized networks to create secure, private, and efficient communication between dApps and Web3 users.

Rajat dives into Harsh’s background, the founding story of Push Protocol, their business model, intersection of Web3 and AI, challenges in Web3 UX, and much more.

Best of the Week

Samuel Haig covered the fallout from a $3.4M exploit that rocked Sushi last weekend. Although white-hat hackers were able to rescue hundreds of ETH, the project said a share of the stolen funds is “unrecoverable.”

Despite some of the assets being gone for good, Sushi said it is working on a plan to make all affected users whole again. “Our goal is to return all user funds to legitimate claimants,” Sushi said.

Owen Fernau examined the sudden growth of Voltz, a decentralized exchange facilitating interest rate swaps. With the tradfi interest rate swap market worth a whopping $18T, Voltz believes offering a decentralized alternative could serve as an enormous boon to DeFi.

“What interest rate swaps do in [their] simplest form is they enable you to transition from something that is variable, to something that is stable, seamlessly,” Simon Jones, Voltz’ CEO and co-founder, told The Defiant. “If we really want DeFi to become the financial system for the whole of the world, we need to solve this problem.”

Aleksander Gilbert dived into the restructuring of the long-running Rook protocol. The project’s management was recently accused of conspiring against its community and ignoring their complaints about the ROOK token’s lack of utility.

Now, the Rook community has voted in favor of the project’s DAO spinning-off and taking 60% of its assets, while management received the remaining funds and kept all rights to Rook’s intellectual property.

DeFi Alpha

DeFi Alpha: Using zkSync Era for a Potential Airdrop

Defiant Video

Crypto Taxes in 2023 (Quick & Dirty)

Much of our team lives in the U.S. and is going through the annual crucible known as tax season. So we thought we could make these trying times a bit easier on our viewers there and around the world with a quick guide to crypto taxes.

How Real Is The De-Dollarization Trend?

In an interview aboard an Airbus A330 this past weekend, French President Emmanuel Macron waxed poetic about “strategic autonomy.” Buried in that interview, however, was his assertion that Europe should reduce its dependence on the “extraterritoriality of the U.S. dollar.” The issue is, Macron is far from being the only world leader toying with this idea, so will we see a trend of declining US Dollar dominance, and what does this mean for crypto?

Friday

News

• Ethereum Researcher Predicts Solo Stakers May Get Airdrops Justin Drake, a researcher at the Ethereum Foundation, said there might be airdrops on the way for individual stakers in the Ethereum network. Drake implied other organizations, not necessarily the EF, were tracking information that is publicly available on the Ethereum blockchain, to identify the wallets of the most committed Ethereum users.

Markets & TVL

• Ether Surges To 11-Month High as Staking Deposits Outpace Withdrawals ETH last changed hands for $2,100, its highest level in 11 months. The bullish price action came in spite of the network processing a meaningful number of withdrawals, with 110,525 validators removing 221,253 ETH ($445.6M) since the upgrade. Meanwhile, deposits surged Friday and began to outpace withdrawals, though the total amount of staked ETH remains below its pre-Shapella high.

• Liquid Staking Platform Ether.Fi Deposits Surge Ahead Of Launch Ether.fi users retain custody of their Ether by generating mnemonic withdrawal credentials and validator keys. It’s the latest player in a fiercely competitive space. While growing fast, its deposits are a rounding error in the $19B staking industry. Lido, the industry leader, accounts for almost two-thirds of that figure.

NFTs

• Bored Apes Drop 8% As Major Holder Exits A single large holder of Bored Ape Yacht Club (BAYC) NFTs has sold 27 of them, worth nearly $3M, in the past day. Over the past two days, the BAYC floor price has fallen by nearly 8%. The fact that a single investor was able to move the price of the biggest NFT collection out there, underscores how illiquid and immature the NFT market still is.

Thursday

News

• Vitalik Says Ethereum Will Focus On Scalability Post-Shapella With the “Shapella” upgrades in the rear-view window, Ethereum’s developers will now prioritize delivering significant improvements to scalability, Ethereum creator Vitalik Buterin said. Buterin confirmed that Ethereum’s next hard fork, rumored to take place sometime around the start of 2024, will include EIP-4844, also known as proto-danksharding.

Research

• ETH Stakers are Withdrawing Rewards, Not Principal In the day since Ethereum’s long-awaited “Shapella” upgrade, people and entities that have staked Ether have largely withdrawn rewards accrued from their staking, rather than their principal. More than 95% of withdrawals — more than 172,000 Ether — were staking rewards, according to TokenUnlocks. The remaining 5% was users’ original stake.

• Post-Shanghai Upgrade: Could Lido Dominate Liquid Staking Long-Term? Liquid staking users can stake their ETH through a third-party service provider. Lido, a non-custodial staking protocol, is currently leading the charge, capturing a commanding 30% of ETH staking market share. Yet, some influential voices in the Ethereum community have been pushing for limits to Lido’s growth. Vitalik Buterin, for example, has argued that staking projects, both custodial and non-custodial, should set self-imposed caps, proposing a 15% threshold.

Markets & TVL

• Ether Surges Past $2,000 After Successful Upgrade Markets caught a tailwind after a report from the U.S. Department of Labor showed that initial jobless claims are at the highest levels since January 2022. The Consumer Price Index report also came out yesterday from the U.S. Bureau of Labor Statistics — CPI clocked in at an annualized rate of 5%. Ether is trading above $2,000 for the first time since August 2022, a day after its heavily anticipated Shapella upgrade was executed successfully.

Wednesday

News

• Staked ETH Withdrawals Were Activated in Major Upgrade Ethereum’s long-awaited Shapella upgrades are now live, allowing those who staked ETH in the blockchain network to withdraw their cryptocurrency for the first time. “The Shapella Upgrade represents a game-changing development that positions Ethereum for sustained growth and success,” Chen Zhuling, Founder and CEO of RockX, a Proof of Stake node collective.

• Sushi Plans To Reimburse Victims Of $3.4M Exploit Decentralized exchange SushiSwap will soon begin returning funds to users after a faulty smart contract caused over $3.4M of losses over the weekend, but the majority of the stolen assets are yet to be recovered. Sushi said that while funds stolen by malicious “black-hat” hackers are unrecoverable, it’s working on a claim process to make affected users whole.

Markets & TVL

• zkSync Era Crosses $200M In TVL While Polygon zkEVM Trails Two highly-anticipated scaling solutions for Ethereum that launched within four days of each other are seeing markedly different results.zkSync Era, which launched on March 24, has attracted $218M of user deposits in the 19 days since its deployment. Meanwhile, Polygon’s zkEVM, which launched just four days later, holds just $3.6M, according to L2Beat.

Research

• Predicting the Impact of Stake Withdrawals on Ethereum’s Market Dynamics As the Ethereum network prepares for the anticipated Shanghai update, which introduces stake withdrawals for users participating in the Proof of Stake (PoS) consensus mechanism, the potential impact on market dynamics and user behavior remains a hot topic. By evaluating key on-chain metrics such as total staked ETH, the number of validators, staking rewards, withdrawn stake, ETH price, daily transaction volume, and gas prices, we can form an educated opinion on the potential consequences of the Shanghai update.

Tuesday

Markets & TVL

• Users Choose Tron and BNB Chain Over Ethereum Despite Falling Fees Ethereum’s comparatively higher fees remain a deal-breaker for many newer crypto users even as the average fees associated with most Ethereum transactions dropped to just a few dollars amid the downtrend. Ethereum is the only of the top-five networks by unique users to post a decline in its daily active users (DAUs) over the past year, with a 16% drop in 12 months.

• Voltz’s Growth Shows You May Need Speculators For Fixed Rates to Work in DeFi Voltz has figured out a way to spark activity in the so-far sleepy fixed-rate game in DeFi: Make sure there are variable rates for speculators to play. Voltz crossed the $10B mark in notional trading volume on March 30 and has jumped up another 15% to over $12B as of April 10.

NFTs

• Bitcoin Surpasses 1M Ordinals Inscriptions One million NFT-like assets have been inscribed on the Bitcoin network, as the popularity of the Ordinals protocol surges on the world’s most valuable blockchain. Ordinals use jumped at the beginning of the month and passed the million mark on Sunday.

Monday

News

• Ethereum Project Rook is About to be Splintered A long-running protocol on Ethereum might splinter weeks after members of its community accused management of conspiring against them. The protocol, Rook, helps users avoid fees on Ethereum. The DAO that governs Rook is currently voting to create an independent, spin-off organization that would receive almost 60% of the DAO’s assets. If the proposal succeeds, management would receive a little more than 40% of the DAO’s assets and keep rights to its intellectual property.