OMG Can Take USDT Transactions Off Chain. Bitfinex is a Great Start But it Needs More
Hello Defiers! Here’s what’s happening in DeFi:
- OMG Network launches with USDT integration
- Balancer starts issuing BAL tokens
- mStable is the latest stablecoin protocol
and more.
If you’re receiving this email, that means you’re a paid subscriber of The Defiant, (thank you!) You’re getting the full content of this newsletter, while free subscribers are getting only a portion of it. Subscribers also get exclusive access to The Defiant’s Discord chat group for the community, here’s a new link to join.
🎙Listen to this week’s podcast episode here:
🙌 Together with Status, a secure messaging app, crypto wallet, and Web3 browser, & Quantstamp, a leading blockchain security firm keeping your money legos safe.
OMG, Ethereum Scaling is Here
The launch of OMG Network was a big step towards a more scalable Ethereum but its effects may not be felt just yet.
Ethereum scaling solution OMG Network —previously OmiseGo— launched after three years of development and announced Bitfinex will be using the system for its USDT stablecoin right off the gate.
This is huge news, since USDT is the biggest contributor to Ethereum activity. The second-largest blockchain urgently needs scaling solutions such as OMG’s, as activity climbs to record levels and gas prices, which users pay to use the network, spike.
Bitfinex will enable USDT deposits and withdrawals on the OMG Network, which will “reduce confirmation times, make payments faster, and lower transaction costs at the same level of security as Ethereum,” OMG Network wrote in a post Monday.
More Exchanges Needed
But more meaningful impact on network congestion will be felt once other exchanges integrate with the OMG, Vansa Chatikavanij, OMG Network CEO, said in an interview with The Defiant. Most USDT transactions happen between exchanges as traders use it to arbitrage, according to on-chain data compiled by Flipside Crypto.
“A rising tide lifts all boats, but we need all the boats to be in the water,” Chatikavanij said. The integration with USDT hasn’t been completed yet, she said.
The OMG Network uses a variety of the Plasma scaling technology known as More Viable Plasma, to increase the processing capacity of Ethereum to thousands of transactions per second, while reducing transaction fees to a third of their cost. The system relies on batching transactions on a child chain, before committing them to a root chain, in this case Ethereum. So-called “watchers,” or entities running specialized software, validate transactions on the child chain.
Staking OMG
For now, watchers will be composed of entities which are transacting value on the network, like Bitfinex, Chatikavanij said. OMG token holders will be able to stake their tokens and become watchers in exchange for rewards at a later stage, Chatikavanij said.
Ethereum users paid $1.9M in gas fees to transact with USDT in the past 30 days, according to ETHGasStation. USDT used to trade mostly on Bitcoin-based OMNI network but the Ethereum-based version overtook the Bitcoin-based one last year. While Tether switching to Ethereum highlighted the blockchain’s faster transaction times and lower fees, it has also put additional strain on the network.
Scaling is here
OMG Network is the latest of a series of important developments in Ethereum’s Layer 2 solutions this year. Loopring launched a Dex using zkRollups, while the Optimism research group is running a test DEX with Synthetix using Optimistic Rollups, which like Plasma, rely on taking some computation and storage off the main Ethereum chain. StarkWare is another project using zkRollups for transfers, while Matic Network is using an adapted version of Plasma.
All of these projects enable thousands of transactions per second for pennies on Ethereum, right now, which means developers and users won’t have to wait for the launch Ethereum 2.0 upgrade to use the network at scale. It’s already happening.
You’re Still Early to Get The Hot, New Governance Token
DeFi power users now have a new platform to put their capital to work in exchange for governance rights. Balancer started issuing BAL tokens to liquidity providers Monday.
Balancer is the latest in a growing number of DeFi protocols to use their native tokens to incentivize activity, enable community participation, and establish a new business model, in which the core team benefits from token appreciation while users participate in future upside.
Balancer Labs @BalancerLabsThe current Balancer pools don't suit your needs? Now you can easily create your own. ✨ Welcome aboard, liquidity mining starts this Monday! 🚀 medium.com/balancer-proto…
medium.comBalancer Liquidity Mining BeginsThe proposal of distributing Balancer Governance Tokens (BALs) to liquidity providers on Balancer has received very positive feedback…6:00 PM ∙ May 29, 202089Likes26Retweets
In Balancer’s so-called Liquidity Mining program, users who contribute liquidity to a Balancer Pool are eligible to earn a pro-rata portion of the 145,000 BAL allocated each week. Balancer plans to distribute 75% of total 10M BAL to Liquidity Mining, with the remaining 25% held by the team and early investors.
Users will receive BAL tokens as long as the pool they’re contributing liquidity to contains two or more tokens with a price listed on CoinGecko.
Balancer is a non-custodial, automatic market maker, which allows users to create baskets of any two or more tokens, with any ratio among them. This is different from other AMMs, which allow for liquidity pools made up of two evenly balanced token pairs. Balancer pools can be designed to meet specific liquidity and investment needs, a concept the team calls “programmable liquidity.”
Balancer lets liquidity providers set their own fees for trading in pools they create. The AMM is using its BAL token to incentivize lower fees by increasing BAL allocation as pool fees decline. This should also spur higher trading fees for LPs, as those bullish on BAL would be more likely to supply capital, thus generating more volume, to pools with smaller Swap Fees.
At the time of writing, the standard Swap Fee for Pools with the highest volume was ~0.2% - slightly below Uniswap’s protocol fee of 0.3%.
Uniswap, the largest Dex by trading volume, is so far the only major AMM left that doesn’t yet have its own token. If Balancer starts taking away its market share, many will start to ask, for how long.
mStable is the Newest Money Lego on Ethereum
mStable launched on the Ethereum mainnet on Friday. The protocol includes a native stable coin, a savings option, and the ability to swap between assets.
Users can deposit USDT, USDC, TUSD, DAI, or a combination of them, and mint mUSD, mStable’s native stable coin, at a 1:1 ratio. Users can then deposit their minted assets into the Save option and start earning yield, which is currently at 31.5% APY. Users can also swap in between any of the accepted assets with no price slippage by paying 0.3% plus transaction fees.
mStable tokens aim to reduce investors’ exposure to single-pegged assets, while offering higher yields by adding swap fees to interest earned by lending the system’s collateral at Compound and Aave. In the future, mStable plans to add more assets such as BTC and will launch its protocol token called Meta, which is expected to ensure the system and provide governance capabilities to holders.
pTokens Bitcoin Bridge Releases Decentralization Plan
pTokens, an interoperable bridge to port top cryptocurrencies like Bitcoin to Ethereum, released a framework for decentralization through the introduction of a pNetwork DAO and PNT governance tokens.
pTokens 🦜 @pTokens_ioIntroducing the pNetwork and $PNT! 🦜 With a commitment towards progressive #decentralization, here's how we're building a truly decentralized system. medium.com/@provablething…
medium.comIntroducing the pNetwork & PNTThe heartbeat of cross-chain composability4:34 PM ∙ May 29, 202070Likes27Retweets
Whereas pTokens are currently validated by a single operator node, the new design introduces network validators responsible for the minting and management of new pTokens. Validators must post a bond of 200k PNT to validate, with protocol decisions like fees, pegs and supply caps being governed by the pNetwork DAO.
To incentive participation, pNetwork validators will receive attractive PNT inflation over the course of the first two years.
Aave Allows Users to Borrow Against Uniswap Liquidity
Aave released a Uniswap Market - allowing users to borrow against Uniswap V1 Liquidity Provider Tokens as collateral. UNI tokens represent underlying capital in a specific Uniswap pool, meaning that provider can earn a pro-rata share of Unsiwap’s 0.3% protocol fee while taking out a DeFi loan on Aave’s 20+ supported tokens.
Aave @AaveAaveWhat do you get when you cross a unicorn with a ghost? 🦄👻 The new Aave money market: The Uniswap Market! 💫🌟👏 Check out our latest blog post by @JordanLzG to learn all about the first of many markets to come @UniswapProtocol medium.com/aave/the-unisw…
medium.comThe Uniswap Market is Live on Aave Protocol!This is the story of unicorn meets ghost, a love story for the ages with a fairytale ending — the new Uniswap Market on Aave! The Uniswap…1:29 PM ∙ May 28, 2020378Likes110Retweets
The release of the Uniswap Market positions Aave as a protocol for Money Market creation, with Set Protocol’s TokenSets next to receive support. Aave’s Uniswap Market currently only supports UNI V1 pools, with the expectation to support V2 pools in the near future.
The introduction of these markets marks a new wave of composability in which revenue-generating DeFi tokens become more liquid through the introduction of borrowing opportunities.
DeFi777 Wants to Simplify Trades to Single Transactions
DeFi777, a prototype set of contracts using the ERC-777 token standard, aims to simplify DeFi protocols by turning more complex actions into simple token transfers. The system uses Ethereum’s human-readable ENS names, which are primarily used to send tokens between users, as an interface for interacting with DeFi protocols. As an example, sending tokens to dai.uniswap777.eth initiates a trade on Uniswap to swap their tokens into Dai.
DeFi777 hopes this is a UX improvement to DeFi, especially for users already comfortable with crypto wallets, and suggests added impacts on flash loan liquidity. Be careful testing though, creator David Mihal warns you can lose ERC-20 tokens if you send them to DeFi777 contracts.
Philippe Castonguay summarizes all the Ethereum scaling progress that’s happened in just the past month.
1:16 PM ∙ Jun 1, 2020499Likes146Retweets
Hope you’re enjoying The Defiant. If you are, spread the word!
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 founder: 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.
