August 25, 2023

This Week In DeFi – Aug 25

To the DeFi community,

This week, decentralized exchange Balancer identified a "critical vulnerability" in some of its V2 pools. The project’s team was able to almost immediately mitigate 80% of the threat, however around 4% of the protocol’s funds – or $33M – remained at risk.

Users were advised to migrate their funds to safe pools or simply withdraw, with the UI updated to assist affected users through the withdrawal process.

It appears that the vulnerability has not been exploited since its discovery, however around $2.8 million in funds still remain at risk. This figure represents only 0.42% of the protocol’s total value locked (TVL).

https://twitter.com/Balancer/status/1694690230152876486

EigenLayer

Restaking protocol EigenLayer raised deposit caps on its liquid staking token (LST) restaking pools, closing them when any one pool reaches 100,000 tokens.

The stETH pool quickly hit the cap, halting new deposits after 85,000 stETH were received, along with 6,600 cbETH and nearly 5,000 rETH.

EigenLayer has a total value locked (TVL) of around $240 million and introduced an NFT collection called Eigen Worlds, allowing community members to create their own names and symbols.

EigenLayer enables other projects to use restaked ETH for security, offering yield to restakers.

https://twitter.com/eigenlayer/status/1694012932651102711

Base to decentralize

Coinbase has revealed its intention to transition the Base network, based on Optimism's OP Stack, to a decentralized model.

The plans involve technical enhancements to ensure that no single entity has control, achieving this by implementing fault proofs and utilizing diverse client software to maintain censorship resistance. The current phase, where Coinbase operates the Base network's sequencer, will be replaced to foster full decentralization.

Base is currently facilitating a higher average number of daily transactions than both Arbitrum and Optimism, however the other two protocols still lead in TVL.

Several cryptocurrency projects, including Avalanche and Lido, are scheduled to unlock a total of over $120 million worth of tokens into circulating supply this week.

The largest unlock in terms of dollar value is Avalanche’s 9.54 million AVAX tokens, worth around $102 million at current market prices. Around $48 million will be allocated to the team, with the rest being allocated to strategic partners, the Avalanche foundation and airdrops.

Liquid staking platform Lido will see 8.5 million LDO tokens distributed to investors, and represents the project’s final “cliff unlock.”

https://twitter.com/genesisvalles/status/1694726765640568904

The second-largest stablecoin, USD Coin (USDC), is making moves as its market share shrinks compared to market leader, Tether (USDT).

USD Coin’s governance body, the Centre Consortium, has announced its dissolution this week, while the token will be launched on multiple new networks.

Although the same two parties are involved – Coinbase and Circle – Coinbase has now invested in Circle. In turn, Circle will take over Centre’s responsibilities, becoming the sole issuer of USDC.

Both Coinbase and Circle will continue to earn revenue from USDC’s reserve assets, based on the amount of USDC held on each company’s platform.

The major stablecoin will be expanding to six new blockchains, including Polygon PoS, Base, Polkadot, NEAR, Optimism, and Cosmos via the Noble network.

Looking over to legal precedents involving crypto, Tornado Cash has once again made headlines as co-founder Roman Storm is arrested by the FBI.

Fellow co-founder, Roman Semonov (yes, they’re both named Roman!), has also been added to the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) Specially Designated Nationals list – due to the Tornado Cash protocol’s alleged use in laundering funds for criminal actors.

Crypto policy advocacy group, Coin Center, has raised concerns about the indictments, suggesting that the case could potentially criminalize the publication of software code.

They have also alleged that the charges do not appear to align with Financial Crimes Enforcement Network (FinCEN) guidelines, and the Bank Secrecy Act exempts anonymizing software providers from being classified as money transmitters.

Overall, the idea that the act of creating open-source code is legally punishable is an extremely scary thought.