"VCs Dumping on Retail" Cries Are Back With Some Key Differences
Also, banks can custody crypto, MakerDAO raises Dai debt ceiling, Visa updates views on crypto.
Hello Defiers! Here’s what’s going on in decentralized finance,
- mStable backtracks on token distribution after uproar
- US banks can now hold crypto
- MakerDAO raises Dai debt ceiling
and more :)
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mStable Backtracks in Early Investors’ Token Drop
mStable MTA token distribution has raised the question of whether DeFi token listings are actually an improvement on VC rounds and ICOs.
There was an uproar in the Ethereum community after members noticed on Tuesday that mStable distributed 3.1M MTA to investors who bought the tokens at $0.15 days before they were listed compared with a listing price of $3.5. This would have granted them with instant liquidity that could have given them a 24X return just three days after the initial sale.
The team swiftly responded to the concerns and decided to take the tokens out of circulation for three months.
mStable 🧮 @mstable_1/ We apologise sincerely for recent events. Our community is mStable’s greatest asset and I hope the actions outlined below go some way to show how committed we are to this project and its community over the long-term. Learn more:
tinyurl.comMTA Emission: Important UpdateTo all of our our MTA community, I sincerely and deeply apologise for the lack of transparency in the last 24 hours. It’s taken a while for the team to align internally as we work on several…4:19 AM ∙ Jul 22, 2020106Likes18Retweets
Red Flags and FUD
Critics’ main concern was that early investors would immediately start cashing out in MTA, depressing the price. This was fueled by an actual price drop of about 25%.
In reality, though, it appears that sellers were traders reacting to the news that mStable had distributed the tokens to early investors, but weren’t the early investors themselves, according to on-chain data tracked by Dex Blue co-founder Angelo Ming.
MTA had its initial sale via an auction on the Mesa platform for a total of 2.66 million tokens, on Saturday. Two days after, the token that had been bought by investors for $0.15 was trading at $3.5.
mStable’s team announced that the early investors who received the tokens spontaneously approached them and made a legally binding commitment to lock their tokens for three months. They committed to send the tokens back to the address from where they went sent within 24 hs and were also publicly supportive of mStable.
Even though mStable’s team had publicly announced that 2.8% of tokens would unlock from day one and 11% would unlock at Q3 (which included early investors), it was not clear that a whopping 3.1M would be ready to sell four days after the initial sale.
mStable’s team apologized stating that they hadn’t been transparent enough in communicating that the tokens would be unlocking during Q3, and not in the last month of Q3.
Additionally to locking the early investors’ tokens for three months, mStable’s CEO & cofounder, James Simpson, will start his vesting period within six months instead of three. The new and more granular vesting periods for both investors and the team have also been updated to provide more clarity.
Image source: mStable blog post
mStable committed to being fully transparent going forward and will announce when tokens are released publicly through their different channels.
While deals for early investors and vesting periods that spur fear of whales “dumping on retail” sounds very much like the ICO days one of the key difference with 2017, is that many projects already have products that deliver value and are seeking to distribute it among their communities by expanding the governance of their systems. In this case, there was no on-chain governance, but the community did speak out and the team responded accordingly.
US Banks Can Now Hold Crypto –– How Un-DeFi-Like
So banks can now hold your keys. That’s pretty much the opposite of what decentralized finance is trying to accomplish. But that doesn’t mean this isn’t good news —it’s great news for crypto.
The Office of the Comptroller of Currency (OCC), an independent bureau within the United States Department of Treasury, published aletter stating that national banks and federal savings associations are now allowed to custody their customers' crypto assets.
From now on, National Banks will be able to hold users' private keys and manage crypto assets in the same way they manage other assets, including by providing financial advice.
Crypto companies such as Gemini, Circle, and Fidelity had been granted licenses in the past years which allowed them to custody their customers' crypto assets. But this is the first time that the OCC has issued a statement regarding regular banks’ ability to custody crypto.
Yesterday's announcement is not a new regulation but a clarification concerning crypto assets specifically, as national banks and federal savings associations have been allowed to custody digital assets since 1998, the regulator said.
The move goes against one of the essential features of DeFi, which is for users to custody their own funds and avoid reliance on institutions that can potentially censor, or block them, or get hacked.
Still, the road to complete decentralization will be a long one, and this step opens the door to onboard a massive set of new investors and users who don't feel comfortable with taking control of their assets and want to trust in a centralized institution that provides the service.
Banks entering the custody game will also increase competition in these services, likely spurring innovation and better products for consumers. In addition, it may lead to a “more unified national regulation of cryptocurrency custodians, in contrast to the inconsistent patchwork approach inherent in state money transmission licensing,” CoinCenter wrote.
So while very un-DeFi-like, better crypto user onboarding and improved regulation are still positive for the space.
MakerDAO Voters Raise Dai Debt Ceiling
MakerDAO’s MKR holders have voted to raise Dai’s debt ceiling to 345M from 235M, which the stablecoin had already reached.
Dai is issued as a loan against collateral including ETH and USDC. The system sets a maximum amount of Dai that can be lent out, which it has been gradually raising. This latest increase is a sign if growing demand for MakerDAO’s stablecoin.
The vote raised ETH collateral limit to 220M from 180M, and USDC collateral limit to 80M from 40M.
Demand to borrow Dai against ETH is soaring with MakerDAO’s stability fee, or borrowing cost, is at 0%, which means borrowers would only have to pay Ethereum gas fees to take out a collateralized loan.
Balancer Thesis: Placeholder
Venture capital firm Placeholder’s investment theses on Balancer: “Balancer is a new financial primitive that combines asset management and decentralized exchange. For investors, Balancer currently offers indexed management of cryptoassets . Instead of paying fees to portfolio managers, investors earn fees for contributing their assets to Balancer pools . For traders, Balancer is a permissionless and non-custodial trading venue with competitive prices where the fees from trading increase returns for the asset depositors.”
Advancing Our Approach to Digital Currency: Visa
Visa, the world’s largest payment network, is updating its views on digital assets: “We believe that digital currencies have the potential to extend the value of digital payments to a greater number of people and places. As such, we want to help shape and support the role they play in the future of money.”
DEX volumes are climbing to all time highs, Anthony Sassano highlights, using Dune Analytics data.
Anthony Sassano | sassal.eth 👨🌾 @sassal0xWeekly DEX volumes on Ethereum just casually breaking all time highs again 🚀 Via @DuneAnalytics
1:14 PM ∙ Jul 22, 2020193Likes42Retweets
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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.