Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights. In this newsletter, we bring you the most significant developments from the past week in the DeFi space.
The past week in DeFi was dominated by developments in the popular decentralized exchange platform, Uniswap. Uniswap announced a 0.15% swap fee starting on Oct. 17, which sparked discussions and debates among the DeFi community. Additionally, an open-source hook on Uniswap generated controversy due to Know Your Customer (KYC) checks, raising concerns about the decentralized nature of the platform.
In other major DeFi developments, Platypus Finance managed to recover 90% of the funds it lost to an exploit on Oct. 12. This successful recovery showcases the resilience and security measures implemented by DeFi protocols. Furthermore, the layer-2 zero-knowledge Ethereum Virtual Machine (zkEVM) named “Scroll” launched its mainnet, providing developers with a new scaling solution.
Despite these developments, the total value locked (TVL) in DeFi protocols experienced a decline of nearly $2 billion. However, the top 100 DeFi tokens by market capitalization had a bullish week, with a majority of the tokens trading in green and recording double-digit gains on the weekly charts. This indicates investor optimism and confidence in the DeFi market.
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A notable report from crypto data aggregator CoinGecko revealed that the Ethereum liquid staking derivatives finance (LSDFi) sector experienced remarkable growth this year. The report stated that the sector has grown by 58.7x since January, showcasing the increasing preference among ETH holders to stake their assets rather than liquidate them. LSD protocols accounted for 43.7% of the total 26.4 million ETH staked, with Lido being the dominant player in this market.
Another significant development was the launch of the mainnet for Scroll, a new contender in the zkEVM space. Scroll aims to scale the Ethereum blockchain and offers existing applications and developer toolkits the opportunity to migrate to its new solution. The Scroll team emphasized that their solution is user-friendly and ready to be used out of the box, providing developers with a hassle-free transition.
Platypus Finance, a DeFi protocol that suffered a security breach last week, announced that it had managed to recover 90% of the stolen assets. The protocol’s net loss was limited to 18,000 Avalanche (AVAX), worth $167,400 at the time. The hacker voluntarily returned the funds, and the protocol assured users that no legal action would be pursued. Additionally, Platypus Finance hinted at providing withdrawal information regarding users’ assets soon.
Uniswap, one of the most popular decentralized exchanges, implemented a 0.15% swap fee on certain tokens starting from Oct. 17. The affected tokens include ETH, USD Coin (USDC), Wrapped Ether (wETH), Tether (USDT), Dai (DAI), Wrapped Bitcoin (WBTC), and several others. This fee sparked discussions about the implications it may have on liquidity and user behavior within the Uniswap ecosystem.
However, one development that has stirred controversy within the crypto community is the KYC hook available on an open-source directory for Uniswap v4 hooks. This hook enables users to be checked for KYC before they can trade in token pools. Critics argue that this undermines the decentralized nature of DeFi and opens the possibility of protocols being whitelisted by regulators.
Overall, the DeFi market experienced a combination of positive and negative developments in the past week. Despite a decline in TVL, the top DeFi tokens demonstrated strength and resilience with bullish price action. The growth of the Ethereum LSDFi sector and the launch of Scroll’s mainnet highlight the ongoing innovation and progress in scaling solutions within the DeFi ecosystem. However, the controversy surrounding Uniswap’s swap fee and the KYC hook serves as a reminder of the challenges and debates surrounding decentralization in this evolving space.
Thank you for reading our summary of this week’s most impactful DeFi developments. Stay tuned for more stories, insights, and education regarding the dynamic world of decentralized finance.
