DeFi
Lido presents “Restaking Vaults” in collaboration with Symbiotic and Mellow Finance
Ethereum staking mainstay Lido has recently been grappling with the frenzy around the “resumption”, a new trend that threatens to erode the staking platform’s hold on decentralized finance (DeFi).
Lido is controlled by the Lido DAO, a consortium of LDO token holders who vote on protocol strategy and key upgrades.
A new initiative from the DAO will see the Lido partner with Mellow Finance, a platform that allows users to generate yield by depositing into reinvestment ‘vaults’, and Symbiotic, an authorization-free recovery protocol. Under the new initiative, traders will have access to restructuring tools that could help bring Lido stETH back into the spotlight.
“Lido’s strategy is to demonstrate to the market that using stETH as a reinvestment asset of choice is in fact the best way to reinvest,” said adcv, pseudonymous co-founder of Steakhouse Financial and the financial department of Lido DAO, in an interview. with CoinDesk.
Lido sits at the center of Ethereum’s DeFi ecosystem, allowing users to bet cryptocurrency– park it with the chain to help protect it – in exchange for rewards. The big innovation of Lido when it launched a few years ago was that it offered depositors a “liquid staking token” called Lido staked ETH (stETH) that users could trade even if their underlying deposits were technically locked up on Ethereum.
Lido currently ranks as the largest decentralized finance protocol on Ethereum, with 33 billion dollars value of deposits, according to DefiLlama. StETH, meanwhile, has become one of the most popular assets in DeFi.
But lately, The domination of the Lido has fallen as users have moved their assets to EigenLayer, a newer service that allows users to “reinvest” assets like ether (ETH) and stETH to help secure other networks in exchange for additional rewards.
Lido recently introduced The Lido Alliance—a group of partners and protocols committed to protecting the role of stETH in Ethereum DeFi. Hasu, head of Lido strategy, also highlighted reGOOSEa multi-pronged strategy to help Lido address the risks posed by reinvestment.
This new initiative – the launch of four stETH-centric restructuring products on Mellow Finance – is the first example of reGOOSE and The Lido Alliance in action. It’s also the first hint of how Symbiotic, a startup backed by the co-founders and Lido’s largest investor, could play a key role in Lido’s future plans.
Lido DAO provides formal support for Mellow Finance, a DeFi protocol that offers cash repossession “vaults”. Users can deposit assets such as stETH into the vaults, and “custodians” – who are like crypto underwriters – will deploy these assets across different actively validated services, or AVS (protocols secured by reinvested assets), to help users earn additional interest on their funds.
Mellow’s new platform is a response to fluid reconditioning protocols like Renzo and Ether.Fiwhich replenishes user deposits in EigenLayer (and, soon, other replenishment protocols) to help investors earn additional interest.
Like everything else DeFi, liquid restocking exists as a way for people to extract as much “economic efficiency” (read: yield) as possible from their digital assets. Users of the protocol earn receipts on their deposits called “liquid takeover tokens” or LRT, which can be traded, lent, and borrowed on other protocols in exchange for additional rewards.
When it comes to liquid foodservice, “you have players like Renzo and EtherFi who are doing it top to bottom, but Mellow brings a permissionless quality to it, which we found quite attractive,” adcv said.
While traditional liquidity restocking protocols take a unique approach to selecting where they deploy user capital, Mellow allows anyone to create a vault and distribute deposits based on their own risk parameters and business theses. ‘investment.
“Vaults are an important step in realizing the reGOOSE strategy, providing investors with the power to navigate the varied terrain of the risk/reward landscape,” Lido DAO said in a statement shared with CoinDesk.
Curators Mellow Steakhouse, P2P Validator, Re7 Labs, and MEV Capital are each introducing vaults that accept stETH in tandem with Tuesday’s announcement.
For now, the rewards users will receive for depositing into Mellow’s vaults will come in the form of vaguely defined “points” this could possibly be linked to future token airdrops. (There is currently no AVS paying interest on Symbiotic or any other recovery protocol.)
For now, vaults are best viewed as a proof of concept for why stETH is a useful asset for reinvestment. “StETH is the best possible asset to use as re-staking collateral,” insists adcv. “It has all the network effects. It has all the liquidity and it has the ability to abstract native staking. […] It generates the native staking yield at all times. »
“Personally, I expect and hope that other LRTs – Renzo, EtherFi, whatever – will also recognize this and in turn adopt it as their main guarantee,” the acdv said.
It’s no coincidence that Mellow Finance builds its restaurant vaults using Symbiotic, an up-and-coming competitor to EigenLayer.
Last month, a CoinDesk Report first revealed that Symbiotic was quietly funded by Paradigm, Lido’s largest backer, and cyber•fund, a venture capital firm run by Lido’s co-founders. The report also shows internal company documents detailing how the yet-to-be-launched Symbiotic protocol might work for the first time.
From a purely technical perspective, it makes sense that Mellow would choose Symbiotic to build its permissionless vaults: EigenLayer only accepts certain crypto assets (namely ETH, EIGEN, and some ETH derivatives), while Symbiotic accepts any type of crypto asset based on Ethereum. ERC-20 token standard.
But there is another reason, beyond investors or Symbiotic’s technicalities, why Lido DAO might choose to partner with a restructuring platform other than EigenLayer. Although EigenLayer accepts stETH deposits from Lido (meaning it is possible to use Lido and EigenLayer at the same time), it has capped the amount of stETH one can deposit.
The growth of EigenLayer therefore came at the expense of that of Lido, since some users withdrew their stake from Lido to channel more assets to the new reconstitution platform.
“EigenLayer was effectively limiting, on a discretionary basis, the amount of steETH that could be integrated into its middleware – rather arbitrarily, in my opinion,” adcv said. “I expect this type of restriction to become increasingly rare in the future, because from a restructuring provider’s perspective, you don’t want to put a damper on your ability to raise capital. “
EigenLayer “has had it very easy so far, but with more competition it will become more difficult to be so selective,” he said.
CORRECTION (June 11, 2024 2:12 p.m. UTC): Lido’s deposits are $33 billion, not $27 billion. Not all curators of Mellow’s stETH vault are members of the “Lido Alliance”.
DeFi
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
DeFi
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.
DeFi
Cryptocurrency and defi firms lost $266 million 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, loming $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.
DeFi
The Rise of Bitcoin DeFi: Then and Now
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.
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