Weekly DeFi Index

This week's market cap and volume indices were negative at -11.77% and -11.34%, respectively, while the volatility index was positive at +37.53%.

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Chart of the Week

Ethereum Layer-2 networks are experiencing an increase in total value locked (TVL) at the start of the year, reaching a record high of US$20.83 billion on 5 January, according to L2Beat. This represents a significant year-on-year growth of 312%, starting from approximately $5.05 billion in January 2023.

News Highlights

• The testnet schedule for the Ethereum Dencun upgrade has been confirmed during its latest All Core Devs Execution (ACDE) call. It is set to be implemented on the Goerli, Sepolia, and Holesky testnets, with the upgrades scheduled for January 17, January 30, and February 7, respectively. Discussions were also held around priorities for the next upgrade following Dencun, dubbed Prague-Electra.

• Stablecoin issuer Paxos is seeking to deploy PayPal's PYUSD stablecoin on the Aave lending protocol to boost its liquidity and venture into the DeFi space. Aave is currently conducting an initial temp check to decide on PYUSD’s onboarding. 

• Unisat Wallet announced its plans to adhere to the Ordinals Jubilee upgrade, ensuring that BRC-20 tokens remain integrated within the Ordinals system. This move has been met with criticism, and it sparked broader discussions around the evolution of the BRC-20 token standard. 

• Arbitrum Orbit, which allows developers to build dedicated chains using Arbitrum technology, has introduced support for custom gas tokens, allowing select ERC-20 tokens (that meet the technical criteria) to be used for transaction fees on its networks. 

• Ethereum Layer-2 network Starknet has approved the implementation of the Alpha version 13.0 update, which will introduce the ability to pay transaction fees using both STRK and ETH. The network plans to eventually transition to exclusively using STRK for transaction fees in the future. 

• Manta Network unveiled its upcoming airdrop called Into The Blue. It seeks to reward long-term users and supporters of Manta with an immediate airdrop of 50 million MANTA tokens, equivalent to 5% of the total supply.

• Orbit Bridge, a bridging service of the cross-chain protocol Orbit Chain, suffered a hack which resulted in the loss of over $81 million worth of ETH and stablecoins. The hackers funded a wallet using the privacy protocol Tornado Cash before attacking Orbit Chain's Ethereum vault, and the stolen funds were then transferred to multiple Ethereum wallets.

• DeFi protocol Gamma Strategies suffered an exploit, resulting in a loss of around $3.4 million. Security firm BlockSec’s analysis points to a critical vulnerability in the protocol's ‘accounting mechanism’ as the root cause. This allowed the attacker to manipulate the prices of specific liquid staking tokens and stablecoin vaults, and to withdraw an excessive amount of tokens.

Recent Research Reports

• Alpha Navigator: Quest for Alpha [December 2023]: FOMC minutes appear to reaffirm the prospect of an interest rate turnaround. Risk assets were mostly up in December, led by BTC and ETH.

• Exploring the Future of Blockchain Gaming: Trends and Opportunities: A comprehensive review of the blockchain gaming industry, the state of the gaming market, current challenges and opportunities, and what lies ahead for on-chain games.

• 2023 Year Review & 2024 Year Ahead: 2023 has been an eventful year for the crypto industry. In this report, we curate the top crypto events and trends of 2023, followed by our outlook for 2024.

Recent University Articles

• What Is Nakamoto Consensus? The Mechanism That Powers Bitcoin: Learn about the original blockchain consensus mechanism, the Nakamoto Consensus, that still powers Bitcoin today.

• On-Chain vs Off-Chain Cryptocurrency Transactions: What Is the Difference?: Learn the difference between on-chain and off-chain cryptocurrency transactions and how they work on the blockchain.

• Bitcoin Halving 2024: What to Know: In this article, learn the dynamics of Bitcoin halving — what previous events have shown, and what future ones may involve.

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