This Week In DeFi - May 13

This week, LUNA and UST enter a death spiral, Aurora launches a $90M development fund and Bancor 3 goes live.

May 13

To the DeFi community,

This week, TerraUSD took center stage for unfortunate reasons, as the third-largest stablecoin lost its peg – sending Terra’s native LUNA token into a “death spiral”. Kick-started by an apparent attack on the system, a significant de-pegging of UST to the dollar resulted in a rush to the exits by token holders. The outcome was a minting of an exponentially-increasing quantity of LUNA tokens as UST was redeemed, diluting the price to a mere fraction of a cent as supply reaches the trillions.

A potential bail-out fell through, while selling reserves wasn't sufficient or quick enough to stop the bleeding. The Terra team has since accepted its unfortunate fate, making adjustments to protect the network and ultimately accelerate the UST exit process for holders.

Do Kwon 🌕 @stablekwon

1/ Dear Terra Community:

Aurora, the EVM layer on NEAR Protocol, has launched a $90 million developer fund to boost DeFi adoption on the network, in an attempt to bring on more Ethereum-based developers. NEAR Protocol’s DeFi arm, Proximity Labs, will manage the funds and provide grants to developers building DeFi DApps on Aurora.

Aurora @auroraisnear

“Aurora DAO continues its mission to extend the Ethereum economy outside Ethereum blockchain. This grant is a next big step in the development of the Aurora ecosystem and I’m happy that Proximity Labs accompanies us in this journey,” said Dr. Alex Shevchenko, CEO of Aurora Labs.

The latest version of the Bancor protocol, Bancor 3, has gone live. The new protocol boasts 100% impermanent loss protection for liquidity providers, single-sided staking (as with Bancor 2) and lower gas fees. It will also have an auto-compounding mechanism, ensuring that fees and rewards are auto-compounded without transaction costs.

Crypto-Gucci.eth ᵍᵐ🦇🔊 @CryptoGucci

Bancor 3 is now live! - 100% Impermanent Loss Protection - New Omnipool Architecture - Single Sided Staking on 150+ tokens - Auto Compounding - Unlimited Deposit Limits - Lower Gas Fees - Redesigned UI The future of DeFi is here! https://t.co/gRdjWMHKhL

Bancor @Bancor

1/ Bancor 3 is here! The Ultimate DeFi Liquidity Solution empowering DAOs and their token holders to drive healthy liquidity and access safer, more sustainable yields that are 100% protected from Impermanent Loss. See what’s new 🧵 or dive right in 👉 https://t.co/SSNm5KiXQ7 https://t.co/SfACrF6Lo3

Shiba Inu has provided an update on new developments, which are full of active planning and development. Plans for the ecosystem include a Layer-2 scaling chain for Ethereum, as well as a “SHI” stablecoin that is reportedly close to completion. Interestingly, the SHI stablecoin appears to be targeting a peg of one cent, rather than one US dollar.

𝐋𝖆𝖉𝖞 🐦 𝐂𝖗𝖞𝖕𝖙𝖔 @_Lady_Crypto_

Recap: $SHI will be Shiba Inu Ecosystem's very own Stablecoin Pegged at One (1) Cent! 🔥🔥🔥 $SHIB

The crypto bear-market cleanse is in full swing, as unviable projects begin to be weeded out from more sustainable protocols amidst market volatility and real world stress-testing. The first major casualty came sooner than expected, as Terra's LUNA and UST reach the conclusion of their grand experiment with an unfortunate de-pegging and inflationary spiral. Multiple protocols and crypto-related funds also suffered immensely from the Terra contagion.

Regulators are taking keen notice of these downside risks coming to fruition, with a lot of commentary arising following the UST collapse. Tether also appears to be continuing its opacity over reserves, which may eventuate in an interesting story. Expect fresh regulation and new market rules on the horizon, as regulators across the world collaborate to put some reigns on the crypto world.

It's not all bad news, however, as development and innovation continue under the radar across the industry. Bancor 3, fresh funding for new projects and entire ecosystems are still chugging along. The cleanse will eventually provide us with truly valuable and sustainable projects emerging from the rubble – while the rest take their tumble.

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