DeFi

DeFi Gigabrain Tarun Chitra on ETH staking and re-staking and why “financial nihilism” is a real consumer product

Published

8 months ago

13 May, 2024

DeFi Gigabrain Tarun Chitra on ETH staking and re-staking and why “financial nihilism” is a real consumer product

Crypto is a world built for self-taught people, a playground for mathematicians. Tarun Chitra, founder of the risk management, economic research and software optimization organization Gauntlet, is just one shining example. In a conversation with Chitra, this comes through. There seems to be no corner of crypto that he hasn’t examined.

Chitra, who often takes her time to pause before answering questions, will speak at Consensus 2024, May 29-31, Austin, Texas.

CoinDesk caught up with the real DeFi celebrity known for his colorful style (hair, glasses And clothes) to talk about new financial primitives in crypto, artificial wombs and why he appreciates hecklers.

This interview has been lightly edited for brevity and clarity.

I thought maybe we could start with a quick overrated/underrated roundup. You can skip any of them or clarify your statements if you prefer.

Of course.

Extension of life?

I have a very rough classification in my head, like between passive and active life extension. The passive is: I’m getting healthier by eating better and maybe taking supplements. Active is: I get all kinds of esoteric experimental therapies and, like, injections. You know what I mean, one involves surgical procedures and the other involves simpler habit change.

I was thinking more about the first one.

Probably overrated. I think the latter is correctly noted.

Yeah. Healthy living is good.

But that’s why I wanted to separate them.

Artificial wombs?

Actually, I think it’s pretty well rated. Maybe slightly underrated, actually. But not super underrated. I feel like they get a lot of hype.

CLOB [central limit order book exchanges].

Overrated.

Could you say why?

I think we had the CLOB era as the only thing that worked. Then AMMs took off and CLOBs were like shit. And then, in the world of perpetual, low-latency blockchains, everyone was saying “CLOBs are better, CLOBs are better.” Not that we’ve necessarily seen a lot of people coming back to CLOBs, but I feel like the tide has changed at the moment. People talk about PAD all the time. So it’s good. But it feels like there’s always this cyclical thing between the two.

Dutch auctions?

A shot Dutch auctions are overrated. Dutch multi-plane auctions are underestimated.

Omnichannels?

Can you define what you mean by omnichain for this context?

Honestly, not so much. It’s just a term I’ve seen pop up a lot recently, and I can’t say what it is.

Yeah, well, I found it to be more of a marketing term than anything real, to be completely honest. So overrated that it feels like it’s not real. This doesn’t refer to a single technical thing that I could write equations for and say, “That’s a guarantee you’re getting out of it.”

The story continues

That’s the impression I had too. It may be mean, but Aave.

Refuse to answer.

Who are your intellectual heroes?

Paul Dirac. John von Neumann. I’m trying to think of a more recent one. Boring is like Terence Taos of the world. Is there anyone who isn’t as famous? …Yeah, stick with it. These are the ones that are quite well known, I have the impression that the others are far too specialized.

Fair enough. You have written about DAO governance in 2021. I was wondering if you think we’ve learned anything since then? whether the governance of the DAO has improved in the years that followed?

I think there’s kind of a thing where the actual governance processes for many DAOs have gotten worse or better. Whether it’s because of sclerosis, or because of centralized buyout or something else, there are plenty of reasons for one or the other. I don’t think there have been many new mechanics that people have focused on because you don’t get rewarded for improving a DAO mechanic.

With Compound, I feel like because of the way they launched, they were rewarded as a team for improving the DAO mechanics when they decentralized governance in 2020. But since then , everyone who has innovated in governance is generally outside of DeFi. And these did not succeed.

There are still many mechanistic innovations that have not been realized. And part of the reason it hasn’t been done is because it’s underfunded compared to other things, right? For example, you can raise a lot more money to make another robot than you could ever raise for a new governance system.

When is it appropriate for crypto to embrace financial nihilism? As in, lean into it?

Good question. I have the impression that we are currently considering this question. So I don’t know if that’s an answer to the question of when it’s appropriate – but hasn’t it already happened? The problem for me is that financial nihilism is a real consumer application. Most other things are considered crypto for consumers, people say it’s a scam or a lie, or that it doesn’t really need crypto at all, it would work fine as Web2 for me – I can browse the list.

Financial nihilism is a real consumer product. Like there’s no way around it. It’s hard to get around the fact that they found a way to make Binance more fun for someone who doesn’t like looking at candles – and I think that’s why Pompe.fun exist. People love it because it’s the same thing but it doesn’t seem like it and it’s a good consumer app.

This will disappoint anyone raising millions of dollars to do mainstream crypto, but that’s exactly what it is.

Do you think Farcaster will ever completely supplant Crypto Twitter and would it be a loss for Farcaster if CT was completely recreated on Farcaster?

Farcaster is like where WAGMI refugees [we are all gonna make it] the 2021 movement is gone. At first, they were all people who were really sincere about being part of the cult of toxic positivity. I feel like those who were serious about it went and created Farcaster. I just don’t feel like trader type people will ever fit in perfectly, so it doesn’t seem possible to fully recreate the “degenerate side”. Farcaster is so much healthier.

Do you see any interesting financial primitives emerging that you think will become increasingly important?

I mean, in general, I think restaking is part of it. But things that allow you not to know which network you are on, but which offer you the same security guarantees as this network; Re-staking is a version of that, aggregation stuff that people do and ZK-land is a version of that. I think this is the key to making the UX of the multi-chain world as good as something like Solana.

Some fear that there is already too much ETH staked or that there will soon be too much. Do you agree with this argument? Is there an appropriate amount?

Honestly, it depends. I don’t think there is a static, fixed quantity that will always be the right quantity. It depends on the usage. If it turns out that ETH is used a lot in on-chain applications or in centralized exchanges, then it’s pretty bad to have a lot of ETH staked, because then there’s no liquidity and you could find yourself in a supply crisis.

On the other hand, if there is too little ETH staked, then yes, of course, different types of attacks are possible. In some ways, the biggest problem with proof-of-stake is that it’s easy to calculate the monetary value of an attack. I can always take 1/3 times the amount bet and figure out how much an attack costs.

With proof of work, because people can join and leave, it takes a while to determine the cost of an attack and you can’t determine it as accurately. So the lower bound of proof of work is actually harder to estimate, and it’s actually harder to attack in some ways.

So I think it will always be dynamic. Some new technology will help reduce the amount you need to stake – that’s the whole point of ZK and advanced crypto, but it will never be constant. It really depends on how much apps you want to use and if the apps use a lot of ether.

How many pairs of glasses do you own?

Probably around 10.

And finally, is there anything in particular you’re looking forward to at Consensus?

Do another live podcast.

I was there last time. It was good!

Yes, live podcasts are fun. Especially if you act like a heckler.

I’ll try to find something intelligent to heckle.

Yeah, well, thanks for stopping by.

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Financial Block Staff

We are the editorial team of Financial Block, where seriousness meets clarity in cryptocurrency analysis. With a robust team of finance and blockchain technology experts, we are dedicated to meticulously exploring complex crypto markets with detailed assessments and an unbiased approach. Our mission is to democratize access to knowledge of emerging financial technologies, ensuring they are understandable and accessible to all. In every article on Financial Block, we strive to provide content that not only educates, but also empowers our readers, facilitating their integration into the financial digital age.

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DeFi

Haust Network Partners with Gateway to Connect to AggLayer

Published

6 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

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DeFi

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

Published

6 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.

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DeFi

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

Published

6 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.

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DeFi

The Rise of Bitcoin DeFi: Then and Now

Published

6 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.