🦄 Recap: DeFi Week of June 20

Hello Defiers! Stop the presses… was it just us or was this week replete with skulduggery? We had rug pulls and soft rugs and inside jobs and court fights. This was a week when DeFi started to look like a film noir, with cloak-and-dagger players allegedly making off with tokens and angry community members firing away on Twitter.

It was also a week with redemption.

For starters, check out yyctrader’s take on the SharedStake insider exploit, a move that torpedoed the token and led to some serious blowback online. Owen Fernau, meantime, delved into the battle between Stakehound and Fireblocks over $74M in missing Ether. That’s a tidy sum, and it looks like the dispute is going legal. Owen also reported on a new form of DeFi scam — the soft rug. That’s when developers instead of bothering with complex hacks and stolen funds, they simply dump their share of tokens. Wild, Wild, West indeed…

Yet at the end of the week we also saw how DeFi players can put things right. Earlier this month, Malt Protocol suffered a horrendous launch when a bug caused heavy losses for community members. On Friday. yyctrader caught up with 0xScotch, Malt’s founder, to hear about the decision to reimburse the community $13.4M. It’s called doing the right thing.

In the tamer but no less interesting precincts of DeFi, we also explored how liquidity is bucking the downward trend in the marketplace, and how revenue, or rather, different forms of revenue, have stabilized during the selloff this month. And speaking of revenue, Lucas Outumuro from IntoTheBlock wrote about how Yearn Finance is raking in more money than traditional fintech firms, with a fraction of the resources. There was an update on the Alchemix bug that upended the protocol last week — the Alchemix team is offering an NFT to those who return funds.

If you want to geek out on mindbending computer science, be sure to curl up with Dr. Klaus Kursawe’s essay on the rise of arbitrage bots. Klaus walks us through how these elements have created price distortions in DeFi that are becoming increasingly powerful in the marketplace. His worry: They could kill the promise of decentralized finance. Klaus muses on how implementing a doctrine of ‘fairness’ in blockchain systems may be the answer.

We also posted a couple of tutorials to help you learn more about staking on Curve with Convex, and the ins and outs of DeFi’s first volatility index. Jess Sloss of Seed Club spoke with Camila Russo about how creators can leverage social tokens and DAOs to build wealth via their communities.

That’s quite a weekend brunch of DeFi news and research for you, so mix yourself a libation or brew a pot of coffee, and enjoy…


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🙌 Together with: 

  • Balancer, one of the leading DeFi automated market makers (AMM) for multiple tokens. Dive into their pools at https://balancer.finance/!

  • Kraken, consistently rated the best and most secure cryptocurrency exchange, which can get you from fiat to DeFi

  • Aave, an open-source and non-custodial liquidity protocol where users can earn interest on deposits and borrow assets. 

  • Kyber DMM, an automated market maker which prioritizes permissionless liquidity contribution and high capital efficiency


Before we get into everything else, an announcement:

The Defiant Ones: Our new show / community call where we get a chance to chat with all of you 🙌

The Defiant is a community of defying individuals so we wanted to create more spaces for all of us to chat! About the latest on The Defiant, DeFi, crypto and anything we feel like really :)

Put it on your calendar: This Wednesday June 30th @ 2pm EST see you at this Zoom link


Video

📺 Quick Take: Grayscale goes DeFi and Apes hit the afterburners

📺 Tuesday Tutorial: 💧Liquid + 🚀Boosted. Staking superpowers on Curve with Convex

📺 First Look: Fixed Rate Savings on Element Finance


Interview

"There Will be Billion-Dollar Communities on the Internet:” Jess Sloss

In this week’s episode we speak with Jess Sloss, the instigator of Seed Club, a DAO that builds and invests in community tokens. We talk about the emergence of the social token economy, and how that’s different from the creator economy or the gig economy; the difference is that social tokens and DAOs allow individuals to create wealth rather than create revenue. They’re tools for creators, and importantly, also for creator’ fans, to build something that’s similar to equity in a company, instead of having a salary. Another concept that describes this, Jess says, is the ownership economy. This is the idea that creators and fans can have actual ownership of their communities and platforms. Jess says we’re about to see billion-dollar communities on the internet. 

🎙Listen to the interview in this week’s podcast episode here:


Opinion

DeFi Can’t Kill Value- Extracting Robots But Can Learn to Manage Them

In this week’s guest opinion piece, Dr. Klaus Kursawe describes how the rise of arbitrage bots has created price distortions in DeFi that are becoming increasingly powerful forces in the marketplace, and could kill the promise of decentralized finance. Is implementing a doctrine of ‘fairness’ in blockchain systems the answer? 

Klaus rolls up his sleeves and explores how “miner extractable value” is challenging DeFi market participants by creating price discrepancies, and how the Ethereum upgrade in 2022 might address this phenomenon. He also delves into the competing agendas of miners and validators. It’s high-level stuff that any Defier will want to get a handle on, so enjoy!


Grayscale’s Most Exotic Crypto Bet is Soaring Yet Not Many are Biting

In this opinion piece, Contributing Editor Edward Robinson explores how the mainstream investment trust provider Grayscale took a flyer on Decentraland, and what the moment says about the tension between innovation and market madness in DeFi.


Inbox Dump #14

For paid subscribers only — The Inbox Dump is where we include the updates and announcements that flood our DMs each week and didn’t make it to The Defiant’s content platforms. We also include a compilation of DeFi and crypto funding rounds in the past week so you have these in one handy place.


Friday

Thursday

Dives
  • Malt Protocol Steps Up and Reimburses $13.4M To Bug Victims Refund is a word rarely heard in DeFi. So is redemption. Malt protocol is an algorithmic stablecoin that launched two weeks ago on the Polygon network. After an explosive launch, bugs in the smart contracts caused the MALT stablecoin to lose its peg and left many users unable to withdraw their funds. The protocol was essentially shut down and the team immediately promised to compensate users after analyzing the situation. While many in the project’s Discord remained unconvinced, the team did a great job managing expectations with daily updates.

Markets
  • Stakehound Accuses Fireblocks of Losing $74M of ETH It’s a he said-she said scenario, and it’s about more than $74M in ETH. Stakehound, a service which gives users a synthetic asset to trade for their staked Ether, has accused Fireblocks, a digital asset security firm, of losing 38,178 ETH.

  • SharedStake Down 95% After Insider Exploit SharedStake, a decentralized ETH2.0 Staking-as-a-Service protocol, is in disarray after a suspected inside job. In a series of transactions on June 19 and June 23, a ‘rogue developer’ withdrew $500K worth of SGT, the project’s governance token, from the team’s allocation. These tokens were locked in a vesting contract and were meant to be unlocked gradually over time as the project progressed.

Bytes
  • Gitcoin Opens the Dog Food to Fund its DAO In a fresh move to bootstrap Gitcoin’s DAO, holders of the protocol’s GTC token voted to add a $50K category to its grants program. Gitcoin, a funding platform that supports open source development, typically concentrates on what it calls Grant categories. These include “Infrastructure Tech” and “Dapp Tech.”

Links

Wednesday

Markets
  • Liquidations Ease Up as Investors Search for a Crypto Bottom Where’s the bottom? That’s the vital question investors are asking with ETH down almost 18% in the last 30 days, and with other major Ethereum-based DeFi tokens nosediving as much as 57% in the same time span. The one bright spot is that this week hasn’t been quite as brutal as the horrorshow from May 16 to May 23. ETH’s price cratered 45.6% to $2,109 during that span. In contrast, this week’s 28.1% swoon for Ether doesn’t look so bad.

Dives
  • What Bear Market? YGG Goes Big on Gaming NFTs with Token Launch Defying the funk that’s gripped the broader crypto market, Yield Guild Games (YGG) announced today that it will release its YGG token on July 27 on Sushiswap’s MISO launchpad. The move comes as NFTs are increasingly being utilized in gaming. Launched in October 2020, YGG is a decentralized autonomous organization (DAO) that invests in NFTs; specifically those used in virtual worlds and blockchain-based games such as Axie Infinity, The Sandbox and League of Kingdoms.

Bytes
  • The Latest Scam in DeFi: ‘Soft Rugs’ Anyone in DeFi is probably familiar with the rug pull — the scam in which crypto developers abandon a project and vanish with investors’ tokens and funds. Now say hello to the “soft rug.” In this new breed of grift a project’s founders simply dump their tokens and exit a project instead of taking control of users’ assets. It appears to be the new rug of choice in open finance.

Links

Tuesday

Markets
  • How Stable Is DeFi in This Crypto Selloff? It’s grim times for DeFi tokens but as prices plunge, protocol revenue remains stable. The DeFi Pulse Index, which tracks the performance of 14 key tokens including Uniswap and Maker, has skidded 31% in the last seven days and 6.5% in just the last 24 hours, compared with a 2.1% decline for ETH from yesterday.

Bytes
  • Wicked Cranium NFTs Sell Out in 30 Minutes Investors continue to have an appetite for NFT collectibles despite the recent downturn in crypto markets. Wicked Craniums, an Ethereum-based, algorithmically-generated NFT project, launched on June 20 and all 10,762 pieces were sold out within the first 30 minutes. The NFTs were available to mint for 0.06 ETH, bringing the total raised by the project to 645 ETH worth $1.3M.

  • Alchemix Asks Users to Return Funds After alETH Bug It isn’t often that a market player appeals to the morality of its customers to correct a mistake. But that’s what’s unfolding this week as Alchemix Finance made traders an offer to iron out the alETH debacle that unfolded on June 16.

Tutorials:
  • Staking superpowers on Curve with Convex Convex allows Curve.fi liquidity providers to earn trading fees and claim boosted CRV without locking CRV themselves. Liquidity providers can receive boosted CRV and liquidity mining rewards with minimal effort.

  • Defiant Degens: How to Mint DeFi’s 1st Volatility Index by Volmex Finance If there’s one word to describe crypto markets, it is volatile! Volatility is also a way to gauge market sentiment, especially fear among investors. What we haven’t managed to build in DeFi until recently is a volatility index natively built with smart contracts. volmex.finance is just that--a protocol for tokenized volatility, built on Ethereum. Volmex enables VIX-like indices for crypto assets and trading functionality.

Research:
  • Yearn Revenues Projected to Surpass TradFi’s Fueled By Thriving Community Yearn Finance is quickly turning into an asset management behemoth. Propelled by its thriving community, Yearn’s fundamentals are looking stronger than its traditional finance counterparts.  After recently hitting a new all-time high of $5 billion+ in TVL, Yearn also broke its highest monthly revenues. Making over $10 million in revenue in May only, Yearn is projected to generate $123.12 million in annualized revenue.

Links

💜Community Love💜

Thanking all the amazing Defiers for the support and love this week (and always)!


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. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content.Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($15/mo, $150/yr).