Many DeFi assets experienced a strong bounce as Ethereum fundamentals look “stronger than ever”
Following bitcoin (BTC) and ethereum (ETH), leading decentralized finance (DeFi) tokens bounced over the past seven days. Outperforming BTC, tokens such as Ren Network’s REN, Chainlink (LINK), and Aave (AAVE) have surged 10 percent over this time span.
But not all DeFi tokens have enjoyed a strong recovery. Yearn.finance’s YFI and Compound (COMP) are both down approximately five percent in the past seven days, underperforming Bitcoin and their DeFi peers. As of this article’s writing, YFI trades for $14,500 — more than 15% below the token’s price mentioned in last week’s blog.
A number of fundamental developments with Ethereum and DeFi applications took place this week that should support further growth in the space over the long run.
- The average DeFi token underwent a strong bounce this week, outperforming Bitcoin’s 7.5% rally and Ethereum’s 10% rally.
- Tokens such as REN, LINK, and AAVE are up by dozens of percent in the past seven days, while tokens such as COMP and YFI have slid 5–7%.
- The Chairman of the CFTC said that he is impressed with the innovation going on within the Ethereum space.
- Further development took place with layer-two scaling solutions.
- OkCoin is preparing to list three new cryptocurrencies, Chainlink (LINK), DFI.money’s YFII, and YF Link (YFL).
Fundamentals of Ethereum & DeFi stronger than ever
On-chain analysis by the head of DTC Capital Spencer Noon suggests that the fundamentals of Ethereum and DeFi are stronger than ever despite the correction in the market.
Trends showing strong fundamental growth in the space include DeFi protocols being on track to collect $500 million in annualized revenue, the number of DeFi users reaching 600,000, and decentralized exchanges transacting more ethereum than centralized exchanges.
CFTC Chairman says he is “impressed” with Ethereum
This week, the chairman of the U.S. Commodities and Futures Trading Commission (CFTC) made headlines when he announced his support for Ethereum.
According to CoinDesk, the regulator, Heath Tarbert, said that he has been “impressed by Ethereum, full stop, period.” Tarbert went on to state that he thinks the cryptocurrency can be likened to the internet if Bitcoin is to be likened to email. That’s not to say that Bitcoin isn’t useful — it’s “revolutionary.” It’s just that in Tarbert’s eyes, Ethereum has more use cases.
Speaking on DeFi in particular, Tarbert said that this industry has the potential to “lead to a massive disintermediation of the financial system and the traditional players.” The CFTC leader added that this may end up reducing “systemic risk in some ways because we don’t have the finance system concentrated in these large globally, systemically important institutions.”
As for how the CFTC is regulating DeFi, he said that he isn’t yet sure. He did note, though, that coins like YFI, Uniswap’s UNI, and others are more likely to be deemed commodities than securities.
Curve launches test layer-two scaling solution with Matter Labs
Stablecoin-focused decentralized exchange Curve Finance entered the layer-two scaling arena this week when it announced that it was collaborating with Matter Labs.
Matter Labs is a development company working to build “a trustless scalability and privacy engine for Ethereum.” Matter Labs’ core product right now is Zinc Alef, a layer-two solution built on Zero-knowledge Rollups (ZK Rollups). Read more about Rollups here.
Curve is the first application built on Zinc Alef’s testnet. Users will be able to test swapping between USDC and USDT through the exchange at effectively no cost and with transactions that take seconds, not minutes.
Synthetix launches the second phase of layer-two scaling after positive feedback
Synthetix recently launched the second phase of its Optimistic Ethereum testnet trial. Optimistic Ethereum is an Ethereum scaling solution built by Optimism that uses Optimistic Rollups.
Rollups are a technology where cryptography is used to migrate transactional throughput to a second-layer solution where users can send coins and interact with contracts at a much lower fee than the main blockchain.
Optimistic Ethereum currently has limited functionality. As it stands, the only application on the Optimistic Ethereum testnet is Synthetix’s Mintr staking platform. Optimism is attempting to onboard other protocols, though porting applications over to Optimistic Ethereum from Ethereum isn’t as easy as copy and pasting contract code.
This second phase will trial migrating SNX from layer-one Ethereum to layer-two Ethereum. The phase is also important because the project will allow more users to try out this new solution.
Polkadot is getting its own tokenized Bitcoin
While much DeFi news pertains to Ethereum, there was some movement in Polkadot’s DeFi ecosystem this week. OKCoin recently listed Polkadot’s native token, DOT.
Announced on October 14th, cross-chain DeFi development company Interlay will be introducing PolkaBTC, the network’s first wrapped Bitcoin solution. This will allow developers to integrate a trustless tokenized BTC into their DeFi applications. Users will be able to mint 1:1 Bitcoin-backed assets on Polkadot should Interlay’s solution succeed.
According to the announcement, Interlay has released a technical specification and is currently working on a proof of concept. Should the PoC work, Interlay plans to deploy this solution in early 2021.
OKCoin lists Chainlink, DFI.Money, and YF Link
Chainlink is an oracle protocol that aims to connect decentralized applications, be that decentralized exchanges or prediction markets, to data on the internet. LINK is the fuel for this network, as those that want to call Chainlink contracts have to pay a fee in the coin.
YF Link is a fork of the Yearn.finance protocol, with a focus on coordinating the LINK community. YF Link will soon be launching its own decentralized exchange called LinkSwap, which is attempting to iterate on Uniswap by adding unique features. YFL itself is a governance token that allows holders to determine which direction they want the YF Link protocol to head.
YFII is the governance token of DFI.Money, a yield aggregator based on Yearn.finance that differentiates itself with a focus on the Asian community. YFII also differs from Yearn.finance’s YFI in that it is more inflationary than its predecessor, which was capped at a 30,000 supply limit.
We are still considering the addition of many other DeFi-focused tokens, including but not limited to Algorand (ALGO), Ampleforth (AMPL), Balancer (BAL), Curve (CRV), MakerDAO (MKR), Ren (REN), Synthetix (SNX), and Solana (SOL).