Total Value Locked in DeFi Climbs to New Record

Also, BlackRock CEO's climate change worries, and donate without spending in DeFi-powered charity

Hello Defiers! This is what’s going on in DeFi,

  • Total value locked in DeFi surges with ETH rally
  • BlackRock CEO worries about climate change. How does Ethereum fare?
  • New charity concept powered by DeFi: Give without spending

and more…

If you’re receiving this, it’s because you’re a paying subscriber (thank you!). You will be getting today’s full issue of The Defiant, while free signups will receive only the headlines.


Total Value in DeFi Climbs to New Record

Value in decentralized finance platforms approached $800 million, a record, amid a broader crypto rally, and as savers rushed to earn higher deposit rates.

Total value locked in DeFi one of the most popular metrics used to gauge the space’s growth, climbed to $783 million Tuesday, the highest ever, according to data tracked by DeFi Pulse. The level is up 11 percent from the previous day and up more than 20 percent from a month ago.


Image source: DeFi Pulse

Reflects Activity

💡TVL measures the dollar value of Ethereum-based tokens held in decentralized finance platforms’ smart contracts. Most activity in DeFi is currently based on users putting up collateral to borrow or depositing funds to earn interest, so these “assets locked,” are a good reflection of activity in the space.

The increase was driven in part by a one-day 14 percent jump in ETH to ~$165. Ethereum’s native cryptocurrency accounts for about 65 percent of total value locked.

Still, it wasn’t just the crypto rally. Net amount of tokens in the ecosystem also rose. While the amount of ETH in DeFi increased marginally, the biggest change was in Dai, as users added 1.3 million of MakerDAO’s dollar-pegged stablecoin yesterday, and 18 million in the past month.

Dai Pouring In

Dai in DeFi started picking up right after an increase in the deposit rate, known as the Dai Savings Rate, from 4 percent to 6 percent was put up for executive vote by the system’s token holders. The vote passed five days later on Jan. 8.


Image source: DeFi Pulse

With more than 87 million Dai outstanding, MakerDAO voters will probably have raise the 100 million debt ceiling soon. It’s also worth pointing out, Dai has maintained its peg at $1 amid this week’s crypto rally and increased demand to save in the stablecoin.

Will we get to $1 billion locked in DeFi in the first quarter? Beyond nice round-number milestones, the B would signal more meaningful adoption.

As Climate Change Worries Rise, ETH Has Green Way Out

BlackRock’s Larry Fink sent a letter to his fellow CEOs sitting at the heads of the companies his firm invests about $7 trillion of client assets in. He said they should confront climate change, as not doing so will hurt shareholders in the long term.

This shows it’s not just activists pushing for more sustainable, low-carbon sources of energy. The issue is now at the forefront of every company executive and of their clients, and that’s bound to change products and consumption habits.


So what does that mean for crypto? The elephant in the room is proof-of-work, the energy-intensive consensus mechanism used by Bitcoin and Ethereum. It’s estimated that a large part is carbon-based. If investors and consumers increasingly reject carbon-based energy, will that turn them off from the biggest cryptocurrencies?

In that case, Ethereum fares better than Bitcoin, as it consumes 7.8 Twh per year, compared with with Bitcoin’s 73 Twh per year, according to the Digiconomist. Still, its energy consumption is equivalent to that of Kenya.


Image source: EthereumEnergyConsumption via Digiconomist

It’s one of the main reasons for Ethereum’s move to proof-of-stake, where transactions are confirmed according to the amount of ETH held by validators, not by the amount of energy spent by miners.

Ethereum’s PoS chain called is expected to launch early this year, but in its first stage, it will only allow staking. A fully functioning chain will take more than another year to launch — and it’s still unclear whether the DeFi ecosystem will be transferred to the new chain. Until then, Ethereum users, and that means DeFi users, won’t have many alternatives but to live with the current chain’s level of energy consumption.


Visa Bets on No-Card Transfers (DeFi Bets on No-Bank)

Visa plans to buy Plaid, which connect end users’ bank accounts with fintech apps such as Venmo or Acorns, for $5.3 billion. 75 percent of the world's “internet-enabled consumers” used a fintech application to move money n 2019 versus 18 percent in 2015, the press release said. The acquisition is a sign the credit card giant wants to gain access to the growing popularity of fintech apps and nocard payments. DeFi is taking this trend beyond no card, to no bank —but it’s unlikely Visa would be willing to go that far.

New Charity System: Donate Without Spending Money

The team behind rDai, which lets users redirect interest earned on their Dai, have now built rTrees. The idea is to enable Dai savers to generate interest with their idle stabelcoins from lending pools and donate the accrued interest to Trees for the Future. For every 1 DAI of interest donated, 10 real trees are planted, according to a Medium post explaining the concept. Users keep control of their DAI at all times and can stop donating at any time they wish.

Token Sale Regulations in the U.S. Continue to Tighten

The SEC alerted users “to use caution” before investing in so-called “initial exchange offerings.” IEOs are like ICOs, except they’re offered directly on an online trading platforms calling itself an “exchange,” even if it’s not registered as such with regulators. “As in the case of ICOs, depending on the facts and circumstances of the offering, the offering may involve the offer and sale of securities,” the SEC said.


Liquidators, The Secret Whales Helping DeFi Function: Tom Schmidt

Tom Schmidt of Dragonfly Capital analyzes the role and state of liquidators in DeFi: “The same attributes that make being a Liquidator compelling — low barrier to entry, high margins, off-the-shelf tooling — also work in reverse to attract competition, compressing margins for existing liquidators.”


Paul, Streamer of Money @PaulRBergHow to do founder vesting web3 style: 🖨️ Mint the company shares as ERC20 tokens 💳 Assign it all to a 1-of-n multisig ⏳ For each founder, create a @SablierHQ stream w/ their equity allocation & set the duration to 4 years If a founder leaves, anyone can cancel their stream.8:08 PM ∙ Jan 14, 202052Likes7Retweets

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.