DeFi Daily

👀 The Merge Won’t Drive Big Scalability Gains For Ethereum, But EIP-4844 Might

Hello Defiers! Here’s what we’re covering today: News The Merge Won’t Drive Big Scalability Gains For Ethereum, But EIP-4844 Might Synthetix Community Considers Ditching Inflationary Tokenomics Stargate’s STG Token Surges Ahead Of FTX Listing Rocket Pool To Incentivize rETH Liquidity

Hello Defiers! Here’s what we’re covering today:

Trending in The Defiant

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Scaling Ethereum

👀 The Merge Won’t Drive Big Scalability Gains For Ethereum, But EIP-4844 Might

Proto-Danksharding Could Boost Throughput Of Layer 2 Rollups By 100x

By: Samuel Haig

CHAIN-MERGE All eyes may be on Ethereum’s forthcoming transition to Proof-of-Stake consensus, but there is a lesser-known upgrade that’s set to cut Ethereum’s transaction costs, improving scalability – unlike the so-called Merge.

UPGRADE EIP-4844 upgrade is set to introduce ‘proto-danksharding’ alongside the next Ethereum fork following The Merge, which is tipped to boost the scalability of Layer 2 rollups by up to 100 times while paving the way for full sharding to be implemented.

SHARDING This is key, as Ethereum’s current roadmap is banking the network’s burgeoning Layer 2 ecosystem will handle scalability and fee mitigation, until sharding is implemented further down the track. Sharding will split Ethereum’s computational load across an ecosystem of small chains working in parallel, with Layer 2 chains expected to become the network’s shards in the future.

EXPENSIVE According to L2fees, simple token transfers cost roughly $0.1 on Ethereum’s leading rollup networks, with swaps estimated at around $0.15. But this isn’t good enough, says Vitalik Buterin, Ethereum’s co-founder and chief scientist, who tweeted in May that transaction fees on L2 must be below $0.05 “to be truly acceptable.” 



Synthetix Community Considers Ditching Inflationary Tokenomics

Proposal Calls For Capping SNX Supply At 300M Tokens

PROPOSAL On Aug. 25, Kain Warwick, the founder of Synthetix, published a proposal advocating for capping the SNX supply at 300M tokens in two and a half months.“Inflation was intended to bootstrap the network, it has done this extremely effectively,” the proposal said.

“Now that fee yield from atomic swaps and perps is meaningful and growing it is time to wind down inflation.”

Synthetix is currently the 24th-largest protocol with more than $522M locked in its smart contracts, according to DeFi Llama. It has recently found success on the Layer 2 Optimism network, emerging as the second largest protocol on the chain. But its SNX token has taken a beating since early 2021, slumping 89% since tagging an all-time high of $28.5 during February of last year, according to The Defiant Terminal.


Price Action

📈 Stargate’s STG Token Surges Ahead Of FTX Listing

The Cross-Chain Protocol’s TVL Is Up 60% In A Week

By: Owen Fernau

NEWS Stargate Finance had an eventful start. 

SELL OUT The cross-chain protocol held an auction for its STG token on Mar. 17, only to have trading firm Alameda Research, buy all 100M of them in the very first block, as confirmed by then-CEO, Sam Trabucco

EXTRA SALE This prompted the project to initiate another sale of 20M STG on Mar. 30 in order to distribute the token to the broader community. 

MOONSHOT A day after the second auction, the token pumped to an all-time high of $4.14 on Apr. 1, but a month later, it was trading at $0.95. STG proceeded to slowly dwindle to an all-time low of $0.33 on Aug. 18. 


Staking Derivatives

🚀 Rocket Pool To Incentivize rETH Liquidity

Nine-Member Team Will Be Tasked With Crafting RPL Incentives

By Aleksandar Gilbert

NEWS The community behind Rocket Pool, the second-largest Ethereum liquid staking protocol, is rallying to increase traction for the project’s staked ETH token in a bid to narrow the gap with Lido, the liquid staking leader.

VOTE In an overwhelming show of support Wednesday, holders of Rocket Pool’s governance token, RPL, voted to approve a new incentive committee’s budget, charter and membership

LIQUID The nine-member team will be tasked with boosting rETH liquidity. Rocket Pool allows users to stake ETH in Ethereum’s proof-of-stake Beacon chain in exchange for a token – rETH – representing that deposit.

SUPPORT All three proposals passed with at least 98% of votes in favor. 


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Funding Round

🛒Shopify Backs Thirdweb Web3 Toolkit

$24M Series A Was Led By Haun Ventures

By: Jason Levin

FUNDING On August 25, Thirdweb — a startup behind a developer toolkit to launch blockchain-based apps including games, NFTs, DAOs and marketplaces — raised a $24M Series A funding round led by Haun Ventures with participation from Coinbase and Shopify.

USAGE Over 55,000 developers ranging from independent creators to major organizations like Coinbase have deployed more than 150,000 smart contracts using the platform, across six blockchains — with Polygon being the most popular.



✋🏼What Is Web3?

A Step-by-Step Guide to a Decentralized Web

By: Rahul Nambiampurath

TECHNOLOGY Every technology goes through generational cycles, including the internet. When a critical threshold of upgrades is crossed, it marks the beginning of a new generation. This moment, and its significance for the marketplace, can prove confusing. 

EVOLUTION After all, the features that existed in the first generation still exist, only with additional layers. This is what happened when Web1 morphed into Web2 and now we see this occurring in the shift to Web3.



⚔️ How Maker and Frax Are The Diplomats of DeFi

Stablecoins Face Challenges In Wake Of Tornado Sanctions

By: David Liebowitz

SANCTIONS Earlier this month, the crypto world was rocked by the Office of Foreign Asset Control’s move to sanction 44 addresses associated with Tornado Cash, putting the decentralized protocol on their Specially Designated Nationals and Blocked Persons list. 

BLACKLISTED With the announcement, it became outright illegal for US citizens to access the privacy-preserving protocol or otherwise face hefty fines and jail time. As a preemptive measure, Centre, the consortium behind USDC, froze $75,000 worth of USDC that were located in Tornado Cash’s smart contracts and nearly doubled the number of their banned addresses. The aftermath of the sanctions has resulted in intense discussions among crypto community members about censorship risks that exist throughout the ecosystem. 

STABLE TOKENS In particular, stablecoins have been a flashpoint of this debate and for good reason. Stablecoins have proven to be one of the most utilized application areas of crypto. Today, there are over $150 billion worth of stablecoins in circulation and tens of billions of dollars in volume. Although the majority of activity comes from traders, stablecoins have been increasingly used for everyday activities such as salaries, remittances, payments, etc. Whatever the case, stablecoin use is growing and will continue to grow as more and more participants are onboarded to DeFi.

BACKLASH Yet, as the shadow of the USDC blacklisting looms, heated discourse online has fueled an array of emotional reactions. Decentralization purists have blasted DAI and FRAX for having USDC as collateral and have espoused alternatives that boast their anti-centralization prowess. Do they have a point though? What good is a stablecoin if it could be censored as simply as with an off switch? The answer is much more nuanced than what has proliferated.


The Tube

📺 Esports joins the block & how to produce The Degen Trilogy


🔗 SEC Delays VanEck’s Bitcoin ETF Decision Another 45 Days: Decrypt

VanEck, the New York-based asset management firm, is once again forced to wait for the U.S Securities and Exchange Commission (SEC) to rule on its latest Bitcoin exchange-traded fund (ETF) application. In an August 24 filing, the SEC said it was extending the decision on VanEck’s application by another 45-day period, until October 11, when the regulator would “either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”

🔗 Singapore Steps Up Crypto Questioning as Firms Brace for Changes: Bloomberg

Singapore is intensifying its scrutiny of cryptocurrency-related firms in the city-state ahead of planned regulatory changes, according to people with knowledge of the matter. The Monetary Authority of Singapore has sent a questionnaire to some applicants and holders of its digital-payments license seeking highly granular information about their business activity and holdings. 

🔗 Japan Looks at Corporate Crypto Tax Breaks to Entice Startups: CoinDesk

Japan’s financial services agency (FSA) and the ministry of economy, trade and industry are considering a tax reform proposal for 2023 that could exempt crypto startups that issue their own tokens from paying taxes on unrealized gains. The potential tax reduction is aimed at encouraging startups to remain in Japan.

Trending in The Defiant

Record Low Burn Rate Threatens Ethereum’s Deflationary Narrative

With The Merge just around the corner and set to reduce new Ether issuance by almost 88%, many observers predict that Ethereum will become deflationary by default once it has transitioned to proof-of-stake. But Ethereum’s plummeting on-chain activity since mid-February appears to have invalidated the deflationary hypothesis.

Coinbase Launches cbETH Liquid Staking Token

Coinbase is launching a new liquid staking derivative (LSD) of ETH called cbETH. The move marks the crypto exchange’s entry into a space dominated by decentralized players like Lido Finance and Rocketpool. Like Lido’s stETH and RocketPool’s rETH, cbETH can be freely traded, borrowed against, and used like any other asset on the Ethereum blockchain. 

Tornado Cash Developer Pertsev Remanded For 90 Days

Following an August 10 arrest, a Dutch judge has ruled that Alexey Pertsev, a coder tied to crypto mixing service Tornado Cash, must remain in prison for 90 days pending his trial. Pertsev’s case does not appear to be related to U.S. sanctions. Rather, Dutch officials suggested it was the culmination of an investigation that began in June.

🧑‍💻 ✍️ Stories in The Defiant are written by Owen Fernau, Aleksandar Gilbert, Claire Gu, Samuel Haig, Jason Levin, and yyctrader, and edited by Edward Robinson, yyctrader and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.

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