Layer 2s and Q1 Recap: DeFi Week Mar. 26

The buzz surrounding Ethereum’s growing Layer 2 ecosystem continued to dominate headlines following Arbitrum’s billion-dollar airdrop last week.

Polygon launched its zkEVM, a zero-knowledge powered rollup boasting Ethereum compatibility. ConsenSys, the blockchain software company behind the popular MetaMask wallet, also publicly opened the testnet for its own Linea zk-rollup.

The markets proved resilient in the face of growing regulatory headwinds, with Bitcoin trading above $28,000 despite the CFTC filing a lawsuit against Binance, the world’s largest crypto exchange.

ETH also rallied after the Ethereum Foundation scheduled the long-awaited Shapella upgrades for April 12, which will enable staked Ether withdrawals for the first time. Analysts expect the upgrade will bolster staking participation and boost Ethereum’s bubbling liquid staking sector.

With March coming to a close, we took a look at the broader performance of web3 for Q1 2023. So far, 2023 has seen rising asset prices and TVL, despite a drop in the number of active DeFi users.

Enjoy!

Premium Report

From dYdX to GMX: What Derivatives DEXs Have and Have Not Achieved

In this exclusive report from IOSG Ventures, Momir Amidzic discusses the state of the DEX derivatives market in the post-FTX era.

Podcast

Dan Finlay explains how MetaMask will become the Google of Web 3

This week, Camila spoke with Dan Finlay, the co-founder of the popular web3 wallet, MetaMask.

We explored Dan’s background prior to co-founding MetaMask, where Dan sees MetaMask heading in the upcoming years, and a potential MASK token. The discussion also dives into the origin story of MetaMask, and touches on Dan’s hopes and dreams for the next bull run.

Best of the Week

Samuel Haig covered MakerDAO governance approving a “constitution” ratifying its controversial Endgame overhaul. After more than a year of heated community discussion, MakerDAO will soon reorganize into a series of specialized subDAOs.

Tarang Khaitan reported on Disney shutting down its metaverse division just 14 months after announcing the initiative. The move comes amid a broader fiscal tightening across the company, with Disney set to lay off 7,000 workers and reduce overheads by $5.5B.

Owen Fernau dived into how Arbitrum’s ecosystem DAOs plan to use their ARB airdrop allocations. Owen also looked at Trader Joe’s impressive growth since it launched liquidity books in November.

Aleksander Gilbert reported on a Californian judge’s decision to allow a class-action lawsuit against the bZx DAO to move forward. The complaint argues the DAO should be held liable for a $55M exploit that rocked its users in November 2021.

Defiant Video

🏃Layer 2s for People in a Hurry💨

Perhaps you’ve heard: a new season is upon us. But this week, we’re not talking about the transition from winter to spring, bugs buzzing, flowers blooming. No, we’re talking about L2 season.

Terminal Tutorials

This week, we also published a series of instructional tutorials showing how to use our new data suite, The Defiant Terminal. The videos walk you through how to create charts, dashboards, and combined unique data points using the customizable interface.

🟩 Introducing The Defiant Terminal

🟩 How to create dashboards

🟩 How to create charts

🟩 How to create tables

🟩 Unique Data Combinations

🟩 Additional features

Friday

Regulation

• Governance Tokens Might Come With Legal Liability, US Judge Says The DAOs that govern supposedly decentralized crypto protocols have been pitched as 21st-century cooperatives whose members share in decision-making and, sometimes, profits. According to a federal judge in California, they could share legal risk, too.

Markets

• Crypto Markets Rally on Bets Fed Will Slow Pace of Rate Hikes Crypto and stocks rallied Friday after the publication of data that show inflation in the U.S. cooling in February. Bitcoin and Ether are up just over 2% after U.S. inflation rose at a slower rate than expected, signaling the Federal Reserve may cool the pace of interest rate hikes.
• DeFi TVL Bounces Back Even as Active Users Decline in Q1 Total assets deposited in decentralized finance rebounded this past quarter, despite the number of daily users slumping by double-digits. DeFi’s TVL rose by over 37% in three months to tag $83.3B while the number of unique wallets interacting with DeFi applications each day fell by nearly 15% over the same period.

News

• Arbitrum Airdrop is Helping Smaller DAOs Survive the Bear MarketArbitrum’s unique airdrop is throwing some crypto projects a lifeline. Arbitrum, an Ethereum scaling solution, made airdrop history by distributing tokens to treasuries of decentralized organizations, not just to individual wallets. Of 1.3B tokens airdroppped, 8.9% were gifted to 137 DAOs. Now, projects big and small are deliberating on what to do with their stack of ARB – a windfall that in some cases amounts to more than the value of projects’ treasuries.
• Kava Flips Solana As New Lending Protocol Boosts TVL New DeFi applications on Kava have sent user deposits soaring over the past month. Since March 1, the total value locked on Kava has risen almost 80% to $350M, leapfrogging popular Layer 1 blockchain Solana. The surge has been driven by a pair of new applications – Mare Finance, a lending protocol, and to a lesser extent Équilibre, a decentralized exchange.
• Crypto Scammers Pilfered Over $370M In Q1 More than $370M was lost to hacks and exploits during the first three months of 2023, down from a whopping $5B in the last quarter of 2022. “It’s worth noting that January 2023 was one of the lowest months for hacks, with a total of $14.6 million lost, a sum that wasn’t registered in all of 2022,” said DappRadar. “This may be a positive sign that the industry is taking security more seriously and implementing better measures to prevent hacks and exploits.”

Tech

• Aave To Launch on Polygon zkEVM Aave, the top decentralized lending protocol with nearly $8B in total value locked (TVL), is set to launch on Polygon’s new zkEVM Layer 2 network. A preliminary poll pitching the deployment on Polygon ZkEVM passed on Wednesday with near-unanimous support. The proposal will now move to a formal on-chain vote.

Thursday

Business

• Disney Shutters Metaverse Division Entertainment powerhouse The Walt Disney Company has reportedly shut down its metaverse division. The entire division of 50 employees is reported to have been laid off. The move is part of a broader restructuring which will see Disney reduce its workforce by approximately 7,000 workers and cut its budget by $5.5B, and comes at a time when the company is going through a shakeup after its streaming service Disney+ lost nearly 2.4 million subscribers in the first quarter.

Tech

• ConsenSys Opens Public Testnet For ‘Linea’ zkEVM ConsenSys, the blockchain software company behind the popular MetaMask crypto wallet, has opened up the testnet for its zero-knowledge rollup to developers and users. Linea’s private testnet launched in January and processed 1.5M transactions in the first few weeks following its launch, according to the project.

News

• Staked ETH Withdrawals To Activate On April 12 Ethereum’s long-awaited Shanghai and Capella (Shapella) upgrades will be deployed on mainnet on April 12, allowing ETH stakers to withdraw their coins for the first time. Shapella’s scheduling drove a spike in the price of Ether, with the second-largest digital asset rallying 5% on the news, according to The Defiant Terminal.
• Trader Joe is Fastest-Growing DEX After Shift to Uniswap v3-Like Model Decentralized exchange Trader Joe is growing faster than its counterparts in 2023 thanks to a shift to a Uniswap v3-like model. The DEX ranks fifth among all exchanges in terms of weekly volume, according to DeFi Llama, a data provider, and is growing faster than all DEXs in the top five this year.

Wednesday

Markets

• Market Shrugs Off CFTC Lawsuit Against Binance A U.S. regulator took aim at the biggest target in crypto Monday. Investors don’t seem to care. The value of crypto locked in the Binance-built BNB blockchain has dropped 2.7%, while BNB, the token that powers that blockchain, has declined 4.3% since news broke on Monday that the Commodity Futures Trading Commission had sued Binance, its founder and a former executive. Those declines just barely outpaced a broader drop in crypto markets.

News

• MakerDAO Ratifies Constitution Aiming to Decentralize DAI MakerDAO on Monday passed a governance proposal that ratifies a “Constitution” which proponents argue will make the second-biggest DeFi protocol and issuer of the Dai stablecoin more resilient against censorship. The proposal, which passed with 76% support, includes measures for MakerDAO to increasingly decentralize DAI collateral, allow the stablecoin to free-float relative to the dollar, and improve the protocol’s governance.

NFTs

• Wassies NFT Project Launches Pop-up Hotel In Singapore Popular NFT project Wassies has launched a themed pop-up hotel in Singapore which will run from March to September. The six-floor hotel consists of 55 rooms, with 49 rooms being Wassie-themed and six rooms featuring ‘Wassies & Friends’ – CryptoPunks, Pudgy Penguins, Azukis, Nouns, Squiggles, and the Kong Collective.

Monday & Tuesday

Tech

• Polygon’s Zero-Knowledge Rollup Goes Live On Mainnet Polygon has released its Layer 2 blockchain built with zero-knowledge technology, becoming the second company in four days to make a so-called ‘zkEVM’ available to the general public. Polygon zkEVM remains in beta, and the company stressed that it should be used with caution – a fact that will change in the coming months, according to co-founder Mihailo Bjelic.
• Teller V2 To Offer Fixed Term Loans Against ‘Any’ Crypto Asset Teller, a decentralized order-book-based lending protocol, will soon launch its V2 iteration to the public, offering fixed-term loans without the risk of liquidation due to falling prices. Time-based liquidations mean that borrowers will lose their collateral only if they fail to make repayments on time.