DeFi Weekly #50

Dharma launches, Stability Fee reduces by 5.5%, DeFi Primitives

Latest this week

  • Last week Dharma launched with their all new product. On first look and playing around with it the user experience is absolutely amazing. You can see the team's put a lot of thought on how the entire stack should be structured and the tradeoffs between user experience and decentralisation. One example of this is the 2 of 2 multi-signature wallet that protects client-side signature abuse but also in the case that the Dharma server is compromised/doesn’t emit a heartbeat in 6 months funds are released to the respective owner. To make great, easy to use blockchain experiences a well engineered middleware layer will be needed that takes into consideration a lot of the application's specific objectives. Key management is getting better with services like Fortmatic but developers still need to do a lot of heavy lifting if they want to provide seamless email/password sign ins. Torus and other players unfortunately still force developers to use external popups or their branding throughout the experience. I'm hopeful that some company will fill this need.

  • While we're seeing a new lending market mature on DeFi, without new demand rates can only go lower. The Stability Fee was recently reduced to 5.5% which lowers the cost of capital in the ecosystem which will also push down lending rates. It'll be interesting to see the CoC will fluctuate in the future given the data points we have so far. One point which hasn't been considered into the whole ecosystem is the emergence of more decentralised, stable coins. CT has been quite vocal about the fact that MCD with regulated securities is a threat to the ecosystem. From conversations I've had with multiple developers, many of Maker's network effects will erode at a much faster pace once the change goes live.

  • DeFi primitives are growing up and the innovation is exciting to see each week/month. David Hoffman wrote this great piece on a new type of funding model through the lens of DAI/ETH being locked up. The basic idea is that any Ethereum application that locks up money can generate interest and provide token holders to receive a claim to the dividends through burning their tokens - not exactly a burn and mint model though. I'm still very bullish on tokens and believe they will be the future of crypto, they're just not popular yet. Regulatory concerns play a role in this as well, ultimately the motto will be regulated or be rogue. Regulation's core problem is how it silos liquidity and ends up forcing players to compete in the same arena as banks/neos/tech cos. Unregulated crypto is the real innovation breakthrough.

On Chain Statistics

  • Total Locked in DeFi: $640M (ATM ETH high).

  • Biggest Gainer: Synthetix up by another $40m reaching $90m locked up!

  • Interesting Stat: Lightning Network still struggles to get any volume despite being out for a considerable amount of time now.