A Controversial September. Not for DeFi Though
Despite a negative monthly close, the third quarter ended with a double-digit gain. Decentralized finance knows no downside and continues to set new records. Meanwhile, stablecoins...
At the beginning of the week, the total capitalization of all stablecoins exceeded $20 billion for the first time. This exponential growth has doubled the market cap in less than five months. By mid-May, the entire capitalization reached $10 billion. At the time, the Tether (USDT) stablecoin held 87% of the market share with over $9 billion. While market capitalization continued to increase, rising to over $15.5 billion (as of October 1st), recent months have seen USDC Coin, issued by US-based Coinbase, quadruple its market capitalization from $700 million on May 18th to $2.5 billion (as of October 1st). This is a circumstance that has resulted in USDC gaining more than 12% of the entire market share, negatively impacting USDT's market cap which drops to 76%, the lowest level ever.
The growing demand for stablecoins is increasingly attracting the attention of governments and central banks worldwide. While the United States seems ready to review its position towards stablecoin issuers, after contesting the launch of Facebook Libra and repeatedly denying rumours about the development of a digital dollar, last week the European Central Bank (ECB) published a report assessing the possible threats that the use of stablecoins could pose. But instead of bans or sanctions, the report suggests ways to limit the potential risks. It is news of the last hours that on September 22nd officials of the European Central Bank presented at the ECB Bock Legal - European Intellectual Property Office - the filing of the trademark with the term "digital euro".Â
Stablecoins have so far been used mainly to facilitate the purchase and sale of cryptocurrencies and for cross-border transfers in countries where there are embargoes or limitations on US dollar holdings, and lately, there has been a substantial use for yield farming among project in the decentralized finance (DeFi) sector. While this could incentivize the various traditional financial institutions, on the other hand, what is happening has attracted the attention of regulators who, in addition to having to clarify the uses between various jurisdictions, will have to move as soon as possible to clarify the thin line between securities and stablecoins. This has not slowed down the launch of new projects that have been under study for some time and are ready to be offered to the public. Last year the IT giant IBM announced the launch of a project to support the banking networks that would launch its stablecoin; Wells Fargo and JPMorgan - financial services multinationals among the four largest banks in the US - are planning the next launch of a proprietary corporate stablecoin for cross-border transfers. Visa and MasterCard - the leading giants for credit card payments - have announced the establishment of research departments to create a stablecoin that will facilitate credit card payments by reducing time and cost of use.    Â
This list of companies could continue, pending a clearer and more defined regulatory framework. The future already has the answer ready, the timing is not known but the process of change has already started.
DeFi
The total value locked on decentralized financial projects continues to grow. According to the figures from DeFi Pulse, the month of September closed with over $11 billion in locked assets. The most used collateral remains Ethereum with over 8.5 million deposited. Bitcoin tokenized using the ERC20 standard also grew to over 137 thousand BTC. WBTC is the leading project launched in 2019 by BitGo, the company that manages the custody and manages the 1:1 Bitcoin peg on the Ethereum network. On September 30th, with over 998 thousand BTC deposited, the value exceeded one billion dollars for the first time. A historical record. The Lightning Network payment system, Bitcoin's official layer 2 payment system, with more than 1,110 BTC deposited (as of October 1st) also breaks the previous record set in May 2019.
Total Value Locked in DeFi
The month of September recorded a total trading volume on decentralized exchanges (DEX) of over $23.5 billion. For the second consecutive month, a growth of more than 100%. In one quarter, from July to September, total monthly trade increased from $4.4 billion to $23.5 billion.Â
Monthly DEX volume (grouped by year)
This is largely due to the Uniswap DEX which, after the tensions of the SushiSwap fork, has once again become a leader among decentralized exchanges. About 70% of the exchanges are managed by Uniswap, which in the last week became the leader among all decentralized finance projects with over $2.2 billion of collateral locked on the platform. This is the first time that a decentralized project climbs over the $2 billion wall. A threshold that will most likely be surpassed in the coming days by Maker, a project that is once again the leader among lending platforms.   Â
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Analysis and Operation
by Federico Izzi
Bitcoin (BTC)
After a good start of the month with the first attacks on the price of 11,000 USD, sales are once again prevailing, accompanied by the tensions of financial operators that think Trump testing positive for Covid will have an effect on the outcome of the US elections only one month before the elections. At the moment of writing, the decline does not push prices out of the lateral channel that has been characterizing prices since the beginning of September, fluctuating between 10,000 and 11,200 USD.Â
With the passing of the days, the bullish trendline that has accompanied the trend until the beginning of September moves away. For this reason from next week it will require an alignment of the convergence points for the reference minimums. In order to maintain the bullish trend that started from the mid-March low, it is important to defend the technical and psychological support of the $10,000 USD in the medium term.
A week later there is no change in the hedging strategies of option derivative traders. Downwards, the strength shifts to protect the $9950 support to the detriment of other levels considered less influential in the event of a downturn. While upwards the defence spreads over two levels of resistance. In addition to the $11,200, which has already been present for two weeks, the strike in the area of $10,800 is also strengthened, a level that coincides with this week's highs.
Ethereum (ETH)
The trend in weekly prices reflects the structure of Bitcoin. After having twice missed the recovery above 380 USD, prices continue to fluctuate above and below 350 USD. The passing of the days increases the chances of testing the dynamic bullish trendline, which has maintained the bullish trend since mid-March, unlike Bitcoin which broke down during the downturn at the beginning of September.
The $325 area is the level considered crucial in the medium term also among option traders. In fact the most important protections are for the two strikes at $335 and $315. Caution continues to prevail. The strength of Call options with a 3:1 ratio with Put options is increasing. The contracts protecting the $405 remain stable, while the protections of the $385 increase, becoming the level with the highest strength among the most used strikes.
Interview with Beni Hakak, CEO of LiquidApps
This week DeFi Today interviewed Beni Hakak, CEO of LiquidApps to talk about Ethereum scalability, EOS and Reddit's community token MOON.
The DAPP community recently launched a bridge between the EOS and Ethereum blockchains, what have been the results so far?
We were all very excited to see a cross-chain bridge between Ethereum and EOS come to life for the very first time. The bridge, which you can see in this demo, sets the stage for a whole new world of multi-chain DeFi applications to emerge. Furthermore, the code and infrastructure for the universal bridge were designed in such a way as to allow anyone from the community to set up bridges for their own purposes, and who knows which other chains the community will be connecting next.Â
The DAPP Network community came together in a remarkable way to make the bridge a reality. 6 notable DAPP Service Providers (DSPs) were involved in setting the code and infrastructure that turned the bridge dream into reality, and the entire community rallied behind them. We have enjoyed reading and participating in some thought-provoking conversations that have sparked up surrounding the novel use-cases that this bridge enables as well as the governance models that could allow for sustainable bridges at scale
How many dApps use your products such as LiquidAccount, vRam and vCPU?
Tens of projects are harnessing DAPP Network services. While some projects may only use a single service, most take advantage of the unique ability to combine several services in a plug-and-play fashion on the DAPP Network. The combination of services can lead to amazing places, such as the cross-chain bridge. LiquidOracles in particular is already a robust component for many applications, and various teams rely on it as their decentralized data provider of choice, including notably Bancor, Equilibrium, Blockstart, Phoenix, and EOSOptions, among others. These projects span across sectors from DeFi to social media, wallet services and content platforms.Â
How fast is LiquidOracles compared to decentralized solutions or what can be found on other dApps?
Faster. LiquidOracles is a fully decentralized oracle solution that allows for data feeds to be updated every second. With LiquidOracles, the Service Level Agreement (SLA) of every oracles request, as well as the result, is returned on-chain where the dApp can verify its integrity. Furthermore, LiquidOracles can integrate seamlessly with the rest of the DAPP Network's service suite, including LiquidStorage, vRAM, LiquidChains and others. From sourcing, to storing, and on-chain aggregation, every function associated with data can be carried out on the DAPP Network. Using a revolutionary interoperability mechanism, LiquidOracles, together with the entire suite of DAPP Network services, will be the first available cross-chain products to work seamlessly on Ethereum as well.
We must mention Reddit's initiative regarding scalability with your solution, do you think they have the wrong blockchain?
Reddit’s willingness to embrace decentralization is an exciting move for the blockchain space, and their scaling challenge was a welcome step in the right direction. It was amazing to see how the DAPP Network community instantly recognized the power that DAPP Network’s cross-chain scaling solution could bring to bear in the case of Reddit. A submission was made for the bounty that utilized DAPP Network services to create a bridge for all kinds of data, not just tokens, and we are currently evaluating it.Â
As for Reddit's choice of chain, this is part of an industry-wide dilemma facing large companies and independent developers alike when it comes to choosing which chain to build on. We believe that companies should have a wealth of scalability tools at their disposal, regardless of what blockchain they choose, as well as the ability to transition between chains when the need arises. That is why the DAPP Network’s suite of services are blockchain-agnostic in nature.Â
How do you feel about the multitude of EOS sister chains, are they all relevant?
The emergence of the DAPP Network’s cross-chain bridge can allow for other chains to utilize EOSIO as their 2nd layer. Many variants of EOSIO-based blockchains are being run by communities and organizations alike and each chain brings its own functionalities and its own advantages. There is room for the great entrepreneurs and communities that are behind these chains to bring their visions to fruition, while enabling better infrastructure for real-world applications. In order to maximize its true scaling potential, EOSIO must realize its vision of interoperability by connecting all these chains into a single, integrated network.Â
In a recent interview, Daniel Larimer referred to a system to bring BTC and ETH to EOS in an innovative way, do you think your solutions will fit this?
It’s exciting to see that leaders in various ecosystems in our industry share a similar vision of interoperability that the DAPP Network has already carried out in breakthrough technologies. Blockchains are better together, and exchanging data and tokens between chains is imperative for blockchains to reach mass scale.
Will a system of governance and staking be introduced for those who have DAPP tokens?
DAPP token staking has been live from day one and serves as the backbone of the free market for DSP services. Developers stake DAPP tokens towards DSP service packages in order to unlock functionalities such as LiquidOracles, vRAM memory and more. Staking DAPP tokens is also essential for any DSPs and community members who wish to enable a cross-chain token bridge. Community members can also participate in tuning the DAPP token inflation. They do so by staking their preferred service package based on its specific inflation rate, thereby demonstrating which inflation rate they wish to see applied to the entire DAPP Network.Â
Governance discussions are springing up in the DAPP Network community. We encourage these conversations and the trends towards giving DAPP Network community members an opportunity to take a more active role in governance since we are great believers in the concept ourselves.
DeFi often needs stablecoins, are you planning to create a system that uses DAPP as collateral?
We provide the technology and code examples that developers and projects are free to use as they see fit. As part of the discussions that have sprung up around the cross-chain bridge, the DAPP Network and DAPP Accounts DAO (DAD) communities have already shared ideas that involve utilizing collateral as a fundamental for enabling secure cross-chain bridges at scale.
Do you think DeFi will move from ETH to EOS, along with the users?
Yes and no. Instead of looking at ETH and EOS as two rivals locked in zero-sum competition for users and liquidity, we view them as complementary systems that can be blended together to yield the next generation of DeFi products. The DAPP Network’s cross-chain bridge is a massive step in the direction of synergistic, interoperable DeFi that expands win-win opportunities for all chains.Â