The decentralized finance (DeFi) space has been steadily growing, going form less than $500 million worth of cryptocurrencies locked a year ago to over $9 billion at press time.
Data shows that the space’s exponential growth took off after DeFi lending protocol Compound started distributing its COMP governance token. A yield farming trend was started with the COMP token launch, with users lending and borrowing from protocols that issued their own governance tokens in a bid to maximize yields with the token rewards.
Since then, new protocols helping users maximize their earnings across different protocols were launched as well. Currently,DeFi Pulse data shows four decentralized finance applications – Uniswap, Maker, Aave, and Curve Finance – have over $1 billion locked in them. A total of 30 dApps have over $1 million locked in them.
The Defi trend has gotten to the point where a new yield farming project saw users lock in over $500 million worth of cryptoassets on it before a bug was discovered. Theproject, Yam.Finance, made it clear its code was unaudited and that caution was strongly urged before engaging with its smart contracts. It reads:
While the initial creators of the Yam protocol have made reasonable efforts to attempt to ensure the security of the contracts, including forking much of the codebase from existing well-audited projects and soliciting review from friends, nothing approaching the rigor of a formal audit has been conducted at this time.
Things went wrong for the project, as a bug in the smart contract was affecting the rebasing contract. This meant the smart contract would mint more YAM than intended to sell on the YAM/yCRV pool on the decentralized exchange Uniswap, making it impossible for the community to reach quorum as far too many tokens were attributed to the reserve.
The price of the YAM token soon plunged, withUniswap data showing that after hitting a $200 high it crashed down to $0.9 that same day. At press time, YAM tokens are worth a little over $0.01.
Users are throwing in rather large amounts of funds into the DeFi space in a bid to maximize their earnings, and while some are being very successful others are failing because of problems that are to be expected in such a nascent ecosystem. Various DeFi protocols have so far been exploited, mainly through the use of so-called flash loans.
A flash loan is a loan that, using DeFi lending services, is both taken and repaid in the same transaction. In a well-known case, an attacker used a 7,500 ETH flash loan to manipulate the price of a stablecoin and earn over $630,000 in the process.
Even projects that had their smart contracts audited by major firms havebeen exploited in the past. There are billions at stake in DeFi, and there could be huge payouts for hackers who put in the time to find ways to exploit smart contracts.
The solution for users trying to maximize their yields and sleep well at night could be crypto-insurance options.
Crypto-Specific Insurance Protects Users
Insurance has always been a way to mitigate risk and in the cryptocurrency space, several projects who got insured gained confidence from users. Decentralized finance projects aren’t just risky because of the lack of insurance, but also because they are based on smart contracts that could contain bugs in them.
A solution to this risk would be crypto-specific insurance options. One of these protections is offered by Nexus Mutual, which gives DeFi investors cover for smart contract bugs. Nexus Mutual is a mutual like any other, owned by its policyholders.
Its current applications are currently limited, as it does not protect users against natural disasters, but only covers smart contract failure. Its so-called “Smart Contract Cover” would have provided users an extra level of safety during the DAO hack In 2016.
Nexus Mutual’s payouts aren’t triggered by phishing attacks or network congestion issues, and are rather specific. As such, users should review the conditions of the coverage offered before purchasing it. Nevertheless, its coverage has already helped some recover lost funds.
The first successful DeFi insurance claim was with Nexus Mutual, as it agreed to honor two claims which totaled around $31,000. These claims were related to the bZx exploited mentioned above.
Members of the mutual have the final word on whether a payout should be triggered. Its members areNXM token holders, who must have to go through know-your-customer (KYC) and anti-money laundering (AML) checks to buy NXM.
Members are responsible for arbitrating governance proposals, as well as claims and risk assessments. Essentially when a claim is made, NXM holders can vote on whether the claim is legitimate or not.
The token can only be purchased through the Nexus Mutual platform, but there are ways to gain exposure to it. Even if you are not interested in the crypto-specific insurance, you may be interested in gaining exposure to the project’s token, which has already appreciated 300% year-to-date.
While NXM isn’t trading on centralized exchanges or even decentralized exchanges like Uniswap, it is possible to gain exposure to it and other DeFi-related tokens without having to deal with smart contracts.
Gain Exposure to DeFi Using Centralized Exchanges
Most top centralized exchanges have over the last few months been helping users gain access to the decentralized finance space, with most initially just listing Compound’s COMP governance token so users could trade the token that started the yield farming trend.
One exchange that has been standing out isOKEx as it has so far listed a total of 35 DeFi-related projects on its platform. The spot and derivatives exchange has been listing the tokens over time, and at one point added atotal of eight DeFi tokens in a single day.
The number of listings is essentially allowing the exchange’s users to access the advantages of the decentralized finance space without having to worry about getting a Web 3 compatible wallet and trusting a smart contract.
Responding to the recent controversy surrounding SushiSwap, OKEx CEO Jay Hao revealed he believes the development of DeFi is a “big event to the entire crypto industry.”
OKEx has launched a “DeFi category” on its website which helps traders quickly find information on decentralized finance tokens. In previous announcements, the exchange has said its listings reinforce its commitment to the potential of the decentralized finance economy.
As reported, OKEx was the first centralized exchange to list Curve’s CRV token, and boosted the Dai Savings Rate’s rewards for its users if they deposited via its Earn program.
Featured image via Pixabay.
Supercar maker Mazzanti Automobili launches security token offering
Italian luxury car manufacturer Mazzanti Automobili has launched its security token offering on regulated digital marketplace STOKR.
As part of the offering, Mazzanti aims to raise 999,999 euros ($1.2 million) on STOKR to develop a special edition of its hypercar model Evantra Millecavalli R.
According to a Feb. 25 announcement, Mazzanti’s STO will allow investors to purchase MZZ tokens, priced at 1 euro each. The token is issued by Mazzanti via Blockstream AMP, a platform for the tokenization of securities built on the Liquid sidechain of Bitcoin (BTC), which has been directly integrated with STOKR.
As part of the STO, MZZ investors will be able to receive a 50% revenue share in the sale of the Evantra special edition. The offering is available for select European countries, with a minimum investment of 50 euros, the announcement notes.
Mazzanti’s founder Luca Mazzanti said that the company has been considering running an STO for a while. The company initially announced its upcoming STO plans earlier in February.
In conjunction with the STO, Mazzanti also announced that the company will allow its customers to purchase all editions of the Evantra model with Bitcoin starting from Feb. 25. The move echoes Tesla’s recent move toward accepting Bitcoin payment for its electric vehicles.
Based in Luxembourg, STOKR has been listing various STOs in compliance with capital market laws of the European Union. Last year, Germany’s Federal Financial Supervisory Authority approved ParkinGO’s offering as the first cross-border STO on STOKR.
Finance Redefined: Ethereum exodus continues as Binance ‘helps,’ Feb 17–24.
The parabolic rise of the Binance Smart Chain has been all over the news this week, aided by a few seemingly unfriendly moves by the exchange itself.
It started on Friday, when Binance suddenly froze withdrawals of Ethereum-based assets for about one hour. Many interpreted it as a move against the blockchain and its ecosystem, given that the cited reason was “congestion issues” — something one hardly imagines is a problem for an exchange, unless they shoulder withdrawal costs for the user.
The day after, FTX started shaming Binance for excessive promotion of BSC on the exchange. Specifically, FTX was apparently “spending millions” in failed deposits that came over the Smart Chain but were meant for Ethereum. FTX’s accusation toward Binance, one of its investors, is that the exchange put BSC as the default option for withdrawing many ERC-20 assets, which caused a lot of failed deposits to FTX.
I can’t say I’ve ever noticed Binance Smart Chain being “the default option” for withdrawals. BSC is the first listed when you attempt to withdraw something like USDC, though it does not actually select the blockchain for you. Still, I can see how some newbies could get swindled by this. People overestimate the degree to which terms like “ERC-20” are known in the casual crypto community. Testing the withdrawal now, Binance forces you to go through a quiz where you confirm you know what you’re doing by selecting BSC. I have no idea when this was introduced, but it’s not impossible that it’s a response to FTX’s statements.
Overall though, there’s nothing inherently wrong with one company using its products to promote another of its products. From the official responses it seems that the Ethereum congestion incident won’t happen again because they “upgraded the systems.”
Cheap tricks would never be able to undermine Ethereum without there being an underlying fundamental weakness. And I think we’ve all had enough with Ethereum gas fees. I tried a non-Ethereum DeFi product recently, and it felt so good to pay just a few cents for a complete interaction.
Binance Smart Chain is already processing more transactions than Ethereum and has over 5 million unique wallets. Ethereum, with its much longer history, is currently sitting at 140 million wallets in total.
Ironically, Ethereum fans should secretly want the bull market to end right now. The longer it goes on, the more gas fees will remain high, and the more people will want to migrate away and seed other environments.
Second largest liquidation day in DeFi history
Speaking of the end of the bull market, a massive slide in crypto markets triggered some $24 million in liquidations on Tuesday, the second highest loss in DeFi history. It would’ve been the highest if not for that infamous day in November when Compound thought Dai was worth $1.3.
The firesale was triggered by nothing in particular, though I suspect that rising bond yields are having their effect on the riskiest of assets on Wall Street, of which Bitcoin is the quintessential representative. And then Bitcoin dragged the rest of crypto with it.
I don’t normally talk about price because I’m not a financial advisor or even a successful trader. But I am feeling a lot of fundamental and sentimental indicators of a coming correction, ranging from a wavering stock market to, well, the strength of Tuesday’s dump.
To top it all off, my non-crypto feeds are being invaded by crypto stuff, which is never a good sign. I certainly hope that I’m misinterpreting what is actually unprecedented adoption and acceptance, but let’s face it — it’s all about price for now, while fundamentals are still lagging.
With layer two platforms and new blockchains coming online, we may get something useful out of crypto and DeFi soon. But everything could happen before we get there. Be especially careful right now and, most importantly, don’t get liquidated.
In other news
Blockchain soccer gaming startup Sorare raises $50M
Sorare, a major blockchain-based soccer gaming platform, has raised $50 million from high-profile investors backing major companies like Twitter, Instagram and Discord
The fresh Series A round brings Sorare’s total funding to $60 million, the company told Cointelegraph Thursday.
The funding round was led by Benchmark, an investment giant famous for funding companies like Twitter, Uber and Snap. Accel Partners was another lead investor, known for backing companies like Facebook and Spotify. The round also included some additional investment from investors like Reddit co-founder Alexis Ohanian, VaynerMedia CEO Gary Vaynerchuk, and Barcelona striker Antoine Griezmann.
With the new funding, Sorare is planning to continue growing its ecosystem, including launching a mobile application and onboarding the top global 20 football leagues. “We’re designing an experience where fans can celebrate, share, and live football moments at a deeper connection. We’re making fantasy football a reality,” Sorare said.
Founded in 2018, Sorare provides a digital collectibles platform based on the Ethereum blockchain. With non-fungible tokens, the platform offers a collective fantasy football experience allowing players to manage their players and earn prizes.
Gerard Piqué, strategic advisor at Sorare, explained that the platform aims to meet the significant shift to online and digital fan experiences:
“As world football has shifted from local supporters to global fanbases, football fans are looking for new ways to be connected to the game, the players and other fans.”
Blockchain and cryptocurrency startups have been actively tapping the soccer industry in order to bring new ways of fan engagement using emerging technologies. Socios and Chiliz represent some of the best-known industry efforts, jointly providing blockchain fan tokens for popular global soccer clubs like FC Barcelona, Juventus and Paris Saint-Germain. Earlier this week, Polish Legia Warsaw became the latest soccer club to join Chiliz and Socios.
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