Happy Friday defiers! Here’s what’s going on in DeFi:
No sign of ether short sellers after price drop
A new bitcoin on ethereum is in the works
Bitcoin-backed Dai loans are live
Argent wallet integrates with Compound Finance
Plans for a platform that optimizes DeFi interest rates
No Sign of Ether Short Sellers After Price Drop
Ether had an awful week, dropping below $200 for the first time since July, except this time, as opposed to one month ago, it didn’t bounce back above that level and kept falling. It was ay around $184 last time I checked.
But traders aren’t betting on a further decline.
The first sign of bears using DeFi to short ETH would be a spike in ether loans –short sellers would borrow eth to sell it, with the expectation they’ll be able to buy it back at a lower price in the future and and profit on the difference. While Dai being used as collateral increased this week, it wasn’t used to take out ETH loans. Only 9 percent of loans originated this week were in ETH, while more than 70 percent were in Dai.
Image source: LoanScan
Bears aren’t shorting ETH in centralized exchanges either. Short positions are still near the low for the year on Bitfinex, (though slowly starting to tick up, so will be something to watch going forward).
Image source: Trading View
Ether locked in DeFi also jumped this week, according to DeFi Pulse. One reason is that borrowers probably had to add more ETH to their collateral as it declined in value, to avoid getting liquidated. Borrowers may also be generating new loans against ether, which would be a sign they’re bullish on the cryptocurrency as it’s effectively a way of going long.
New Bitcoin on Ethereum is in the Works
“Bitcoin on Ethereum, no KYC, no middlemen, no bullshit,” is how developers at blockchain companies Summa and Keep describe their project, TBTC.
It’s an attractive proposition because it would open up Bitcoin’s liquidity and track record as a store of value to Ethereum-based financial platforms. All the millions of people holding bitcoin would be able to borrow against it, earn interest on it, etc.
Wrapped Bitcoin, or WBTC, is the closest we have for that today. The downside is that it relies on third parties to mint it, instead of allowing any bitcoin holder to get WBTC in return, and then redeem it back for BTC. The only way most people are be able to get WBTC is buying it at an exchange. Another downside is the need to trust a centralized party (BitGo) to store the Bitcoin.
The advantage of TBTC is that anyone would be able to mint the ERC20 token with their bitcoin, and that bitcoin will be stored in a digital wallet controlled by the depositor and other signers. Users would be able to use the new TBTC ERC20 token on any other Ethereum platform. For more details on how the system works, read the documentation here.
Bitcoin-Backed Dai Loans are Live
More Bitcoin on Ethereum: A project called Soda launched on mainnet yesterday, allowing users to borrow up to 1,000 Dai using bitcoin as collateral. Rates on the loans are fixed and last stood at 13.65 percent.
This is how it works: Users send BTC to the Soda system, which will automatically be locked in a bitcoin address linked to the user’s Ethereum address, and SODABTC, an ERC20 token, will be minted. Next the user will send their SODABTC to be used as collateral –loans are overcollateralized by 140 percent– and will get Dai in return, directly in their MetaMask account. The user will then pay back the loan in Dai, get SODABTC and covert it back to bitcoin.
WBTC was the precursor of getting bitcoin on Ethereum, and this week we’ve already seen two other projects attempting to improve on that model. All this development signals it’s likely a matter of when and not if bitcoin will be used widely within DeFi.
Argent Wallet Integrates Compound Finance
Smart contract-based mobile wallet Argent integrated with Compound Finance to allow its users to start gaining interest on their tokens. This follows the wallet’s recent MakerDAO integration, which allows users to open CDPs.
Argent has done a great job of abstracting away many of the steps needed to use crypto. For example, users never see gas payments being made along the way. The same is true for the Compound product, as once you have the asset you want to lend, it only takes two steps to start gaining interest. Interest on Dai is currently just over 10 percent.
Huobi Wallet made a similar announcement yesterday, and it’s easy to see most wallets going in the same direction.
Plans for an Interest-Rates Optimizing Platform
Topo Finance is planning to launch in the coming months a non-custodial lending platform that optimizes users’ interest rates across market-based lending protocols, initially integrated with Compound, dYdX, and Fulcrum. It’s a needed tool in a space where there’s still huge gaps between rates offered by the different protocols.
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