🏛 The Davos Crowd Eyes DeFi
Hello Defiers! Here’s what we are covering today…
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🙌 Together with:
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
TLDR Curve Finance, long distinguished by its homogenous-asset pools, has taken a walk on the wild side. The automated market maker (AMM) rocked DeFi yesterday by releasing a pool containing USDT, WBTC, and ETH on Ethereum and another including USDC and DAI as well on Polygon. This was a first for Curve, which had up until then only served trade between different versions of the same asset, such as WBTC and renBTC.
ORACLE Curve’s new algorithm reduces slippage by concentrating liquidity around what the associated paper calls an “internal oracle.” As trades happen the oracle will register the new relative prices, with the protocol moving liquidity to that point.
TLDR The World Economic Forum, a bastion of the global establishment and ultra-exclusive club for heads of state, billionaires, and policymakers, is embracing DeFi. Well, sort of.
SO WHAT In another sign that decentralized finance has spurred serious study in influential think tanks, the Geneva-based WEF issued a “Policy-Maker Toolkit.” The 38-page white paper explores DeFi’s benefits and opportunities, as well as its risks. It also unpacks the potential policy and regulatory responses states might take as decentralized finance protocols are adopted. Given the WEF’s clout — the organization hosts the prestigious Davos confab every January — it’s bound to influence the thinking of lawmakers and regulators coming to grips with DeFi.
“Understanding DeFi’s business models and the full set of relationships underlying DeFi is crucial for an accurate risk assessment and nuanced policymaking,” the white paper’s authors write.
FIVE RISKS One of the report’s most important sections analyzes five categories of risk: financial, technical, operational, legal compliance and emergent risks. For instance, the authors highlight a Ciphertrace study which found that half of the digital asset hacks in 2020 targeted DeFi services; in 2019 the number was “negligible.”.
TLDR Lots of laser eyes….but little actual legislation, at least for now. El Salvador’s adoption of Bitcoin as legal tender this week has captured the imagination of lawmakers across Latin America.
UNBANKED That’s no surprise considering the region, long plagued by underdevelopment and volatile politics, has struggled to enfranchise its citizens in the global financial system, with too many households remaining unbanked. Bitcoin and DeFi, with their digital ubiquity and lack of centralization, are looking increasingly attractive in a part of the world desperate to improve its fortunes.
BITCOIN ADOPTION El Salvador’s legislation on Bitcoin went from announcement to enactment in five days thanks to President Nayib Bukele. Now other leaders in a host of other Latin American countries are eyeing their own Bitcoin adoption moves.
TLDR: Stablecoins are taking big leaps forward toward achieving Satoshi’s goal of a pure peer-to-peer cash system, but there is still a raft of technical and market structure challenges that lie ahead. David Liebowitz of DeFi protocol Gelato goes through the advantages and disadvantages of different stablecoins’ designs.
Hardware wallet maker Ledger has just closed a massive Series C funding round led by digital asset fund 10T Holdings. The Paris-based company raised $380 million, according to a press release on Thursday.
“Decentralized organizations enable work to be distributed to the community members instead of being entirely driven by top-down decision-making hierarchies. While tokens financially align participants to contribute value to such a network, it is grassroots community leadership and ownership that enables the long-term success of a token network.”
🔗 The CryptoPunk Alien auctioned by @sillytuna at @Sothebys just sold for $12M (4,761 ETH) after fees: @justintrimbke
🧑💻 ✍️ Stories in this newsletter were written by Dan Kahan, Owen Fernau and David Liebowitz, and edited by Edward Robinson. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila Russo, edited by Alp.
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).