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This is a weekly tutorial on the most compelling opportunities to consider yield farming, written by our friend DeFi Dad, an advisor to the Defiant and the Chief DeFi Officer of Zapper. The goal is to expose more Defiant readers to new DeFi applications and their associated liquidity mining programs.
Background on Protocol: Convex Finance is a new protocol dedicated to earning with CRV by Curve Finance with a better boost. Convex makes it possible for Curve liquidity providers to earn trading fees and claim boosted CRV without actually locking CRV themselves. In Curve Finance, one of the main incentives for CRV holders is the ability to boost your rewards as an LP. Vote locking CRV allows one to acquire more voting power to participate in the DAO and earn a boost of up to 2.5x on the liquidity you are providing on Curve.
Below you can see (third column from the left) all the ways you earn fees and CRV by locking CRV in veCRV with Curve to earn this “boost” in rewards.
Convex Finance solves a huge problem by allowing Curve LPs to skip several expensive steps depositing and locking CRV. Instead, Convex pools CRV for Curve liquidity providers so that LPs can gain boosted earnings with minimal effort:
Earn claimable CRV with a high boost without locking any CRV
Earn CVX rewards (the governance token of Convex)
Zero deposit and withdraw fees
Zero fees on extra incentive tokens (SNX, etc)
If you like earning trading fees and rewards as an LP in like-asset pools with Curve nearly zero impermanent loss, Convex Finance may interest you!
Opportunity: There are 2 very different opportunities with Convex depending on whether you are a Curve liquidity provider vs those who hold CRV and wish to be a CRV/cvxCRV LP to earn yield farming rewards in the form of CVX.
TLDR It’s been a rough week for the crypto market̶ and it appears to be at the hands of n00bs. Bitcoin (BTC) has been hit especially hard with a 25% loss over the past seven days, and the majority of people selling BTC since the end of April have been traders that have been holding onto the cryptocurrency for less than one month, according to data from IntoTheBlock.com.
HODLERS BUY The number of addresses holding BTC for more than one year increased by 120,000 from 21.81M to 21.93M. The weighted average time held is 5.5 years. This suggests that while some short-term traders are selling, BTC’s core base of holders are still hodling.
BULLISH ETH NEWBIES Ethereum (ETH) is down 15% from its all-time high of $4,356 on May 12, 2021, trading just above $3,300 at the time of writing. Similar to BTC, the number of long-term ETH holders has only increased since April. Yet unlike Bitcoin, the number of short-term ETH traders with addresses holding for less than one month has increased substantially.
TLDR Polygon, which in the past month soared to become the most popular Ethereum scaling solution, is coming under fire as critics say it is too centralized to be considered secure.
SO WHAT Ethereum scaling solutions are crucial for decentralized finance to continue to grow, as using dapps directly on the network is becoming prohibitively expensive. Scaling solutions take processing and storage off the Ethereum main chain to allow for cheaper and faster transactions. Polygon is one such solution and for many, it seemed like Ethereum’s scaling woes were finally being solved. But that’s now being called into question by critics who say the network is not much better than using centralized solutions.
MATIC CONCENTRATION The crux of the issue is that about 55% of staked MATIC assets which secure the network appear to be controlled by only two parties, Binance and the Polygon team, according to analytics platform, Nansen AI.
RISK The risk for a network with concentrated validators is that it becomes easier for participants to collude and make arbitrary changes, which in the case of Polygon could in theory include blocking users from porting assets back to Ethereum.There are currently 100 validators securing Polygon’s chain.
SIDECHAIN OR LAYER 2 The other issue Polygon is facing is whether it’s a true Layer 2, which derives its security directly from the main Ethereum chain, or a sidechain, which has its own security.
TOKEN SOARS Despite the technical debates which continue to pop off on Twitter about whether Polygon is a true Layer 2 solution and what degree of security the chain offers, investors continue to pile in into the MATIC token, which is up almost 50% in the last 24 hours at the time of writing.
TLDR BSC has seen impressive growth, but users are proving to be fickle in the recent sell-off. The chain’s decentralized exchange Pancake Swap concentrates much of the chain’s activity, compared with a more diverse DeFi ecosystem on Ethereum.
ETH VS BSC TVL As the crypto sell-off continues, the Ethereum community has been more resilient than the Binance Smart Chain ecosystem. While TVL on Ethereum had dropped 3.16% to $104.4B from $120B, Binance TVL had dropped 35% to $20B from $36B, according to data platform DeFi Llama.
FEWER DAPPS The amount of dapps running on BSC is also considerably smaller than Ethereum. Of the 45 BSC protocols listed on DeBank, 20 of them are DEXs, with 16 of those also being AMMs. There are also 8 lending protocols and 7 yield-aggregators. Only 4 BSC protocols ̶ PancakeSwap, Venus, and two other DEX/AMMs ̶ have over $1B TVL. In comparison, Ethereum has 291 dapps running on top of it, 14 of which have over $1B TVL
COPYCATS BSC’s lower barrier to entry not only means that people with less money can participate more easily, but it also provides a far cheaper environment for developers to build dapps. And because of that, some questionable applications, like copycat NFTs and memecoins, have made a home of BSC.
TLDR Aave is hinting at a new product for allowing institutions to practice DeFi. On Monday, Aave founder Stani Kulechov tweeted the words “Aave Pro for institutions” alongside a cryptic screenshot. Kulechov previously teased Aave Pro on May 12, when he tweeted about a private pool for institutions to “practice before aping into DeFi.”
GAME-CHANGER The overall number of DeFi users, while growing quickly, is still extremely small. Currently, there are an estimated 2.4M DeFi users based on data compiled by 1confirmation’s Richard Chen using Dune Analytics, which tracks unique addresses interacting with major DeFi dapps. In light of this, serious institutional involvement in DeFi would likely be game-changing for the space.
GATEKEEPING While many people signaled their satisfaction with the idea on Twitter, some members of the DeFi community weren’t happy with the prospect of Aave providing special resources for institutions. Yearn Finance core dev Banteg retweeted Kulechov’s post saying that Aave Pro could be considered gatekeeping.
“The startup behind a user dashboard for decentralized finance (DeFi) has netted $1.5 million in seed round funding after winning Kyber's DeFi Hackathon last year.”
“Cathie Wood’s Ark Investment reported holding 639,000 units of Grayscale Ethereum Trust (ETHE) last quarter in what appears to be the largest yet institutional acquisition of the growing cryptocurrency investment vehicle.
“Last week, we announced Splits, a new feature on Mirror that allows you to continuously route ETH to an unlimited number of Ethereum addresses, according to a set of percentage allocations. The feature took off in novel ways across the Mirror community, already demonstrating exciting signs of early product-market fit. (…) As a new primitive of economic attribution, patronage, and giving thanks, Splits hold a lot of potential. In addition to the use cases we’ve already seen, they present a particular opportunity we believe is especially worth highlighting: the funding of public goods.”
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🧑💻 ✍️ Stories in this newsletter were written by Dan Kahan, Owen Fernau, Eugenio Croitoru, and DeFiDad, and edited by Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, 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).