DeFi

Berachain PoL and Honeypot FTO for enhanced liquidity

Published

9 months ago

27 July, 2024

Berachain PoL and Honeypot FTO for enhanced liquidity

Liquidity has been the backbone of DeFi (decentralized finance) since its inception. However, securing liquidity through locked capital is detrimental to DeFi in the long run. This realization served as the catalyst for the creation of Berachain’s Proof of Liquidity (PoL).

The traditional Proof-of-Stake (PoS) mechanism has some irreversible drawbacks. It gives an unfair advantage to network participants at the time of the TGE (Token Generation Event), paving the way for massive sell-offs. Furthermore, PoS leads to reduced liquidity for LP pools and transactions if the chain’s security were to be improved. Since PoS chains follow a single-token economic model, protocols do not have the flexibility to fund growth with their token holdings, as this can lead to a drop in the token price.

It is to address these challenges that Berachain relies on the PoL mechanism.

Enter Proof of Liquidity (PoL)

Much like PoS, PoL uses a gas token to incentivize validators to secure the network. However, PoL introduces an additional token called a governance token to incentivize liquidity providers and determine the potential reward for stakers who secure the network.

Berachain builds on PoL, introducing two tokens: $BERA – the native gas token, and $BGT – the governance token. Using PoL allows Berachain to attract liquidity by distributing $BGT as an incentive. Liquidity providers can contribute to the liquidity of BEX pools and earn $BGT (Bera Governance Token). $BGT holders then delegate their tokens to validators.

These validators then produce blocks proportional to the $BGT delegated to them. Delegators and validators are rewarded by Berachain for strengthening the network. Validators also have voting rights to decide on the inflation of $BGT.

What makes PoL so effective for Berachain?

Here’s how PoL solves the shortcomings of PoS:

Separate tokens: PoL separates the functionalities of the delegation token and the gas token ($BGT and $BERA in the case of Berachain), ensuring enhanced network security and sufficient liquidity.

Incentive Cash Collection: The only way to earn $BGT is by providing liquidity to BEX pools. This ensures sufficient liquidity for the pool, making trade settlements and on-chain transactions more efficient.

Inter-exchange market making: Fragmented liquidity is a major challenge in DeFi, leading to underutilization of available assets. PoL also allows larger exchanges to serve as primary market makers for emerging exchanges, facilitating the creation of an interconnected trading ecosystem within Berachain.

But there are some challenges to overcome…

Users participating in the PoL are required to lock up their assets. While this ensures liquidity at the beginning, it also means that these users will be eager to unlock their assets and sell them on the market shortly after the TGE to book profits.

Here, the liquidity strength depends on the willingness of these users to lock up their assets for a longer period. Since $BGT is a non-transferable token, these users have limited opportunities to generate more profits. Hence the reluctance to lock up their assets for a longer period.

With an insufficient number of tokens locked, a liquidity crisis is never too far away, creating a detrimental scenario for the entire Berachain ecosystem. And the solution to this problem had to come from within the ecosystem.

Enter FTO: The Driving Force Behind Honeypot’s Flywheel Model

Honeypot Finance’s FTO (Fair Token Offering) model designs actions following the same mechanism as Berachain’s PoL. While the end goal of both FTO and PoL is the same: to reduce selling pressure at or after TGEs, FTO is hyper-focused on creating liquidity through supplier volume rather than locked-in volume.

The Fair Token model offers:

100% Deep Liquidity: The FTO model ensures that all tokens are in the pool at launch, preventing market manipulation.

LP Token Creation: Instead of purchasing the actual token, investors purchase LP (liquidity provider) tokens at launch, creating liquid markets from day one.

Fair prices: The protocol and participants are treated equally and the allocation of LP tokens is split 50-50 between them, eliminating the risk of an unfair advantage for either party.

LP sale without price reduction: Protocols are allowed to sell LP tokens to raise funds for operational purposes. However, this sale has no impact on the token price.

Built on Berachain, Honeypot’s FTO is designed to accelerate activity and boost liquidity within the ecosystem.

Most importantly, FTO unlocks additional usage for $BGT by integrating it into Honeypot’s Flywheel model. Here’s how:

$BGT holders delegating to the BeeHive node (Honeypot Finance’s node) receive $HPOT (Honeypot’s governance token) as bribes.
The corruption mechanism is directly tied to voting rights, which strengthens incentives for the $HPOT and $Honey token pools.
In return, $HPOT holders can collect $BGT profits by participating in PoL mining.

PoL vs FTO: FTO acting as an accelerator for PoL

Users holding $HPOT, $Bera, or $Honey can invest in the $HPOT-$Honey-$Bera liquidity pool to earn $BGT. More importantly, they only need to hold one of these three tokens to be able to earn $BGT.

Together, $BGT and $HPOT power a lucrative revenue flywheel model, which leads to:

Significant increase in platform revenue and community node size
HPOT share buybacks surge, boosting its market value
Increased bribes and incentives for people with disabilities, further increasing demand for $HPOT

Every time a user unlocks their tokens to withdraw liquidity, they lose their ability to generate income from $BGT issuance. Eventually, they can burn their $BGT holdings to acquire $BERA. The FTO model encourages more users to provide liquidity because it minimizes the probability of loss, with users getting back 50% of their invested tokens as LPs.

Final verdict

Once Honeypot gains prominence and helps emerging protocols attract liquidity through its Dreampad, the need for $BGT staking could increase significantly to fuel the network as well as the liquidity pool. Technically, FTO is meant to promote PoL, while addressing the problem of fragmented liquidity with efficient use of capital.

Proof of Liquidity (PoL) drives on-chain activity, speeding up the circulation of tokens. This allows PoL networks to achieve similar or even better economies of scale with fewer tokens compared to Proof of Stake (PoS) systems, where many tokens are locked up by validators, reducing the circulation speed.

Fair Token Offering (FTO) also improves token circulation by providing immediate liquidity after launch. This readily available liquidity facilitates the token’s exchange, further enhancing the PoL system’s ability to achieve substantial economies of scale. Together, these mechanisms complement each other, improving the overall functionality and sustainability of the DeFi ecosystem on Berachain.

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DeFi

Haust Network Partners with Gateway to Connect to AggLayer

Published

9 months ago

1 August, 2024

Financial Block Staff

Haust Network Partners with Gateway to Connect to AggLayer

Dubai, United Arab Emirates, August 1, 2024, Chainwire

Consumer adoption of cryptocurrencies is a snowball that is accelerating by the day. More and more people around the world are clamoring for access to DeFi. However, the user interface and user experience of cryptocurrencies still lag behind their fundamental utility, and users lack the simple and secure access they need to truly on-chain products.

Haust Network is a network and suite of products focused on changing this paradigm and bringing DeFi to the masses. To achieve this goal, Haust Network has announced its far-reaching partnership with bridgeseasoned veterans in rapidly delivering revolutionary blockchain utilities for projects. The Gateway team empowers blockchain developers to build DAOs, NFT platforms, payment services, and more. They drive adoption of crypto primitives for individuals and institutions around the world by helping everyone build their on-chain presence.

Gateway specializes in connecting sovereign blockchains to the Aggregation Layer (AggLayer). The AggLayer is a single unified contract that powers the Ethereum bridge of many disparate blockchains, allowing them all to connect to a single unified liquidity pool. The AggLayer abstracts away the complexities of cross-chain DeFi, making tedious multi-chain transactions as easy for the end user as a single click. It’s all about creating access to DeFi, and with Polygon’s technology and the help of Gateways, Haust is doing just that.

As part of their partnership, Gateway will build an advanced zkEVM blockchain for Haust Network, leveraging its extensive experience to deploy ultra-fast sovereign applications with unmatched security, and enabling Haust Network to deliver its products to its audience.

The recently announced launch of the Haust Wallet is a Telegram mini-app that provides users with access to DeFi directly through the Telegram interface. Users who deposit funds into the wallet will have access to all standard send/receive services and generate an automatic yield on their funds. The yield is generated by Haust Network’s interconnected network of smart contracts, Haustoria, which provides automated and passive DeFi yielding.

As part of this partnership, the Haust Network development team will work closely with Gateway developers to launch Haust Network. Gateway is an implementation provider for Polygon CDK and zkEVM technology, which the Haust wallet will leverage to deliver advanced DeFi tools directly to the wallet users’ fingertips. Haust’s partnership with Gateway comes shortly after the announcement of a high-profile alliance with the Polygon community. Together, the three will work to build Haust Network and connect its products to the AggLayer.

About Haust Network

Haust Network is an application-based absolute liquidity network and will be built to be compatible with the Ethereum Virtual Machine (EVM). Haust aims to provide native yield to all users’ assets. In Telegram’s Haust Wallet, users can spend and collect their cryptocurrencies in one easy place, at the same time. Haust operates its network of self-balancing smart contracts that interact across multiple blockchains and then efficiently funnel what has been generated to Haust users.

About Gateway

bridge is a leading white-label blockchain provider that offers no-code protocol deployment. Users can launch custom blockchains in just ten minutes. They are an implementation provider for Polygon CDK and have already helped projects like Wirex, Gnosis Pay, and PalmNFT bring new utility to the crypto landscape.

About Polygon Labs

Polygon Laboratories Polygon Labs is a software development company building and developing a network of aggregated blockchains via the AggLayer, secured by Ethereum. As a public infrastructure, the AggLayer will aggregate the user bases and liquidity of any connected chain, and leverage Ethereum as the settlement layer. Polygon Labs has also contributed to the core development of several widely adopted scaling protocols and tools for launching blockchains, including Polygon PoS, Polygon zkEVM, and Polygon Miden, which is currently under development, as well as the Polygon CDK.

Contact

Lana Kovalski
haustnetwork@gmail.com

Fuente

DeFi

Ethena downplays danger of letting traders use USDe to back risky bets – DL News

Published

9 months ago

1 August, 2024

Financial Block Staff

Ethena downplays danger of letting traders use USDe to back risky bets – DL News

Ethena and ByBit will allow derivatives traders to use USDe as collateral.
There is a risk in letting traders use an asset partially backed by derivatives to place more bets.

Ethena has downplayed the dangers of a new feature, which will allow traders to put up its synthetic dollar USDe as collateral when trading derivatives, which are risky bets on the prices of crypto assets.

While allowing users to underwrite their trades with yield-bearing USDe is an attractive prospect, Ethena said there is potential risk in letting traders use an asset partially backed by derivatives to place even more derivatives bets.

“We have taken this risk into account and that is why Ethena operates across more than five different sites,” said Conor Ryder, head of research at Ethena Labs. DL News.

The move comes as competition in the stablecoin sector intensifies.

In recent weeks, PayPal grown up the amount of its stablecoin PYUSD in circulation 96%, while the MakerDAO cooperative plans a rebrandingaiming to increase the supply of its DAI stablecoin to 100 billion.

US dollar growth stagnates

It comes as Ethena has lost momentum after its blockbuster launch in December.

In early July, USDe reached a record level of 3.6 billion in circulation.

That figure has now fallen by 11% to around 3.2 billion.

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New uses for USDe could boost demand for Ethena’s products.

This is where the new plan, announcement Tuesday with ByBit, one of its partner exchanges, is coming.

Ethena users create USDe by depositing Bitcoin or Ether into the protocol.

Ethena then covers these deposits with short positions – bearish bets – on the corresponding asset.

This creates a stable support for USDe, unaffected by price fluctuations in Bitcoin or Ether.

Mitigate risks

While using USDe as collateral for derivatives trading is proving popular, it is unclear what the effects will be if the cryptocurrency market experiences major fluctuations.

Using derivatives as collateral to place more bets has already had disastrous effects.

In June 2022, Lido’s liquid staking token stETH broke its peg to Ether following the fallout from the Terra collapse.

Many traders who used looping leverage to increase their stETH staking yields were liquidated, creating a cascade that caused the price of Ether to drop by more than 43%.

Ethena Labs founder Guy Young said: DL News His office and his partners have taken many precautions.

Ethena spreads bearish bets supporting the USDe across the five exchanges it partners with.

According to Ethena, 48% of short positions supporting USDe are on Binance, 23% on ByBit, 20% on OKX, 5% on Deribit, and 1% on Bitget. website.

In doing so, Ethena aims to minimize the impact of an unforeseen event on a stock market.

The same theory applies to the distribution of risks across different supporting assets.

Fifty percent of USDe is backed by Bitcoin, 30% by Ether, 11% by Ether liquid staking tokens, and 8% by Tether’s USDT stablecoin.

Previous reviews

Ethena has already been criticised regarding the risks associated with USDe.

Some have compared USDe to TerraUSD, an undercollateralized stablecoin that collapsed in 2022.

“It’s not a good design for long-term stability,” said Austin Campbell, an assistant professor at Columbia Business School. said as the USDe launch approaches.

Young replied to critics, saying the industry needs to be more diligent and careful when “marketing products to users who might not understand them as well as we do.”

Ethena has since added a disclaimer on its website stating that USDe is not the same as a fiat stablecoin like USDC or USDT.

“This means that the risks involved are inherently different,” the project says on its website.

Tim Craig is DL News DeFi correspondent based in Edinburgh. Feel free to share your tips with us at tim@dlnews.com.

Fuente

DeFi

Cryptocurrency and defi firms lost $266 million to hackers in July

Published

9 months ago

1 August, 2024

Financial Block Staff

Crypto companies, defi lost $266m to hackers in July

In July 2024, the cryptocurrency industry suffered a series of devastating attacks, resulting in losses amounting to approximately $266 million.

Blockchain Research Firm Peck Shield revealed in an X post On August 1, attacks on decentralized protocols in July reached $266 million, a 51% increase from $176 million reported in June.

The most significant breach last month involved WazirX, one of India’s largest cryptocurrency exchanges, which lost $230 million in what appears to be a highly sophisticated attack by North Korean hackers. The attack was a major blow to the stock market, leading to a break in withdrawals. Subsequently, WazirX launched a program in order to recover the funds.

Another notable incident involved Compound Finance, a decentralized lending protocol, which suffered a governance attack by a group known as the “Golden Boys,” who passed a proposal who allocated 499,000 COMP tokens – valued at $24 million – to a vault under their control.

The cross-chain liquidity aggregation protocol LI.FI also fell victim On July 16, a hack resulted in losses of $9.73 million. Additionally, Bittensor, a decentralized machine learning network, was one of the first protocols to suffer an exploit last month, lo m ing $8 million on July 3 due to an attack targeting its staking mechanism.

Meanwhile, Rho Markets, a lending protocol, suffered a $7.6 million breach. However, in an interesting twist, the exploiters research to return the stolen funds, claiming the incident was not a hack.

July 31, reports The Terra blockchain protocol was also hacked, resulting in a loss of $6.8 million across multiple cryptocurrencies. As crypto.news reported, the attack exploited a reentrancy vulnerability that had been identified a few months ago.

Dough Finance, a liquidity protocol, lost $1.8 million in Ethereum (ETH) and USD Coin (USDC) to a flash loan attack on July 12. Similarly, Minterest, a lending and borrowing protocol, saw a loss of $1.4 million due to exchange rate manipulation in one of its markets.

Decentralized staking platform MonoSwap also reported a loss of $1.3 million following an attack that allowed the perpetrators to withdraw the liquidity staked on the protocol. Finally, Delta Prime, another decentralized finance platform, suffered a $1 million breach, although $900,000 of the stolen funds was later recovered.

Fuente

DeFi

The Rise of Bitcoin DeFi: Then and Now

Published

9 months ago

1 August, 2024

Financial Block Staff

The convergence of Bitcoin’s robust security and Layer 2 scaling solutions has catalyzed the emergence of a vibrant DeFi ecosystem.

By expanding Bitcoin’s utility beyond simple peer-to-peer payments, these advancements have opened up a new frontier of financial possibilities, allowing users to participate in decentralized lending, trading, and other complex smart contract operations on Bitcoin.

Read on to learn about the rise of Bitcoin-based decentralized finance and how the space has expanded to accommodate a new generation of native assets and features.

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What is DeFi?

Decentralized finance (DeFi) represents a paradigm shift in financial services, offering internet-based financial products such as trading, lending, and borrowing through the use of decentralized public blockchains.

By implementing blockchains, smart contracts, and digital assets, DeFi protocols provide financial services through a decentralized ecosystem, where participants do not have to deal with intermediaries when transacting.

What is Bitcoin DeFi?

The inherent limitations of the Bitcoin mainchain in supporting the intricacies of decentralized finance have created the need to develop smart contract-based Layer 2 solutions.

Additionally, the advent of the Ordinals protocol in 2023, which facilitated the emergence of fungible token standards such as BRC-20 and Runes, catalyzed the growth of DeFi on the Bitcoin blockchain.

This expansion in protocol diversity has broadened the applications of the world’s leading cryptocurrency network beyond the core base-layer use cases around value preservation and transactional capabilities.

Therefore, Bitcoin DeFi has become a nascent sector within the digital asset market, after previously being a missing essential part of the Bitcoin ecosystem.

Bitcoin DeFi in its early days

Integrating decentralized finance (DeFi) concepts into the Bitcoin ecosystem has been a journey of innovation and perseverance. Early attempts to bridge the gap between Bitcoin’s fundamental simplicity and DeFi’s complexities have spawned pioneering projects that, while laying essential foundations, have also encountered significant obstacles.

Colored coins

Colored coins represented an early foray into tokenizing real-world assets on the Bitcoin blockchain. By leveraging the existing network to track ownership of assets ranging from stocks to real estate, this approach highlighted Bitcoin’s potential as a platform beyond digital currency. However, scalability and practical implementation challenges have limited its widespread adoption.

Counterpart

Building on the colored coins, Counterparty has become a platform for creating and trading digital assets, including non-fungible tokens (NFTs), on Bitcoin.

The introduction of popular projects like Rare Pepe NFTs has demonstrated the growing appeal of digital collectibles. However, constraints around user experience and network efficiency have hampered its full potential.

These early experiments, while not fully realizing their ambitions, served as valuable stepping stones, informing Bitcoin DeFi’s subsequent developments. Their challenges highlighted the need for more sophisticated infrastructure and protocols to harness the full potential of decentralized finance on the Bitcoin network.

Bitcoin DeFi Today

Today, building DeFi applications on Bitcoin is primarily done in the realm of Layer 2 (L2) networks. This architectural choice is motivated by the limitations of Bitcoin’s base layer in supporting complex programmable smart contracts.

Bitcoin’s original design prioritized security and decentralization over programmability, making it difficult to develop sophisticated DeFi protocols directly on its blockchain. However, the recent emergence of protocols like Ordinals, BRC-20, and Runes, while not DeFi in their own right, has sparked possibilities for future DeFi-like applications on the main chain.

In contrast, L2 solutions offer a scalable and programmable environment built on Bitcoin, enabling the creation of various DeFi products.

By expanding Bitcoin’s capabilities without compromising its core principles, L2s have become the preferred platform for developers looking to build DeFi applications that encompass trading, lending, staking, and more.

Leading L2 networks such as Lightning Network, Rootstock, Stacks, and Build on Bitcoin provide the infrastructure for these efforts. Some of these L2s have even introduced their own native tokens to the network, further expanding Bitcoin’s DeFi ecosystem.

Essentially, while Bitcoin’s core layer presents challenges for DeFi development, its security and decentralization have provided a foundational layer for the innovative L2 landscape to thrive.

Bitcoin Layer 2 offers a promising path to building a robust and thriving Bitcoin-based DeFi ecosystem that offers trading, staking, lending, and borrowing. All you need is a DeFi Wallet like Xverse to access the new world of decentralized financial services secured by Bitcoin.

Conclusion

The integration of DeFi principles into the Bitcoin ecosystem, primarily facilitated by Layer 2 solutions, marks a significant evolution in the digital asset landscape.

Building on the foundational work of pioneers like Colored Coins and Counterparty, the industry has evolved into more sophisticated platforms like Rootstock, Stacks, and Build on Bitcoin to create a thriving Bitcoin-powered DeFi ecosystem.