Last Week’s Top 5 in DeFi/NFT News — February 21, 2022

Weekly DeFi/NFT news is a collection of major weekly events/announcements brought from the most trustworthy data sources, such as The Defiant, Spencer Noon, Week in Ethereum News etc. with comments and extra insight from the Bulldax DeFi labs.

Morgan Stanley Issues Ethereum Warning, Says ETH May Lose Market Share to Faster or Cheaper Challengers — The Daily HODL

• An analyst from banking titan Morgan Stanley says that leading altcoin Ethereum (ETH) could see its market share dwindle as investors turn to cheaper and faster competitors.
• In a new report, investment strategist Denny Galindo details the bear case for the top smart contract platform, saying that it could face future regulations, stiff competition from the likes of its challengers, in addition to scalability issues.

“Ethereum faces more competition in the smart contract market than Bitcoin faces in the store-of-value market. Ethereum may lose smart contract platform market share to faster or cheaper alternatives.”

• Prominent Ethereum alternatives include Avalanche (AVAX), Solana (SOL), Cardano (ADA), Terra (LUNA), Polkadot (DOT), and Algorand (ALGO).

“The second major Ethereum-specific risk is blockchain bloat and scalability. Blockchains are fundamentally expensive technologies because they have built-in redundancy.

• In order to be a global smart contract platform, Ethereum needs to store a very large amount of data (primarily variables for each smart contract), and it needs to be faster and less expensive to use per transaction than potential alternatives. Over time, Ethereum’s storage demand, unless changed, will likely outstrip its resources.
• The analyst also brings up how upcoming regulations could directly impact Ethereum’s decentralized finance (DeFi) and non-fungible token (NFT) markets.

“The changing regulatory landscape poses another big risk. Much of the activity on Ethereum is in DeFi and NFTs — two areas with rapidly evolving regulations. Regulations that restrict or eliminate certain market segments, such as finance, from using Ethereum could reduce demand for Ethereum transactions.”

• You can read the full report here.

Source: https://dailyhodl.com/2022/02/20/morgan-stanley-issues-ethereum-warning-says-eth-may-lose-market-share-to-faster-or-cheaper-challengers/

SEC Enforcement Against Wonderland Could Mean Trouble for DeFi — CoinDesk

• According to multiple legal professionals, recent events could provide the U.S. Securities and Exchange Commission (SEC) and other agencies a long-awaited foothold in the largely unregulated, $211 billion DeFi sector.
• In late January, noted on-chain sleuth ZachXBT revealed that the treasury manager for Wonderland, a popular DeFi protocol, was in fact Michael Patryn, a convicted felon and the co-founder of the fraudulent former Canadian cryptocurrency exchange QuadrigaCX.
• Prior to the reveal, Patryn and Wonderland founder Daniele Sestagalli grew notorious for aggressively leveraging Protocol Controlled Value, or PCV.
• PCV is a term for “the amount of funds the treasury owns and controls,” and the Wonderland treasury currently manages in excess of $700 million.
• While Wonderland’s PCV was ostensibly owned by token holders, it was largely unilaterally managed by the Sestagalli and Patryn.
• For many who were skeptical about Wonderland’s centralized treasury management, Patryn’s unmasking was a clear example of why the sector should strive to avoid centralized intermediaries, pseudonymous or not.
• Belton (a managing partner at Brookwood P.C) “absolutely” expects there will be regulatory activity from SEC on the PCV front — the first of what could be a number of cases where agencies test the sector’s claims to decentralization, as the agency analyzes “whether they’re dealing with a securities instrument, or a vehicle that needs to be regulated under the Investment Company Act.”
• Central management of funds increases the likelihood that Wonderland’s TIME and wMEMO tokens could be considered a security, especially given how active and vocal Sestagalli was about his management as a perk of the protocol.
• The SEC or other, similar regulators in other jurisdictions might say, ‘This looks a lot like a centralized enterprise because effectively the checks and balances are not enforced by code.’ You have soft power via signal Snapshot voting, but the hard power is held by the multi-sig.

Read full analysis on Coindesk: https://www.coindesk.com/policy/2022/02/14/sec-enforcement-against-wonderland-could-mean-trouble-for-defi/

Introducing Suberra: Recurring Payments Protocol for Web 3.0 on Terra

• Suberra Protocol is a Recurring Payments Protocol that builds software to move money between users.
• Suberra Protocol consists of smart contracts deployed on Terra, making it possible for users to transfer money to another user periodically without Suberra touching the funds in between.

Here’s what users can expect soon when Suberra launches:

• 🔄 Subscriptions: Suberra helps businesses set up their subscriptions quickly to start receiving recurring revenues. Smart contracts store the business logic describing how much the product is and how frequently charges should be made. Suberra provides a hosted checkout page for your customers to complete the subscription registration just like how businesses are used to with Stripe and Paypal. Subscribe to services from Delphi Digital, Coinhall, and Kado.
• 👥 Peer-to-Peer Recurring Payments: Set up a recurring payment instruction to regularly pay any address money. Ideal for use-cases where payments are one-to-one, such as payroll, rent, or retainer fees.

• 💰 Smart Wallet: Your personal, non-custodial smart contract wallet allows you to segregate your funds from your main account. Funds in this account are deposited into Anchor Protocol, earning yields passively while you spend time on things that matter more.

Read full announcement: https://medium.com/suberra/introducing-suberra-recurring-payments-protocol-for-web-3-0-fab4b719187

LooksRare Team Reaps $31M Windfall as Token Plunges 70% From All-Time High — The Defiant

• LooksRare team transferred roughly 10,500 wrapped ETH (wETH), worth more than $31M, to personal wallets, according to Zodd, who works for the NFT exchange. The wETH came from LooksRare’s 2% exchange fees, all of which go to LOOKS stakers.
• The team has made a lot of money in a short amount of time while the LOOKS token has plummeted 43% in the last week and has lost 70% of its value since its all-time high on Jan. 20.

• Crypto Twitter is still processing LooksRare’s mechanics, which have allowed the team to profit in wETH while not selling their LOOKS tokens because of the vesting schedule. The first LOOKS tokens will be unlocked for both investors who participated in what was called the “strategic sale” and the marketplace’s team on July 9.

• Stragetic sale investors have also been profiting by staking their non-tradeable LOOKS.
• “I think people don’t really read into or look at what they’re actually buying,” zachxbt, the self-identified, on-chain sleuth who broke the news that the CFO of the network of DeFi project’s known as Frog Nation was a convicted fraudster, told The Defiant. “From the start the LooksRare docs were very transparent with how the tokenomics were structured.”
• The investigator added that the entire investor list in LooksRare wasn’t posted publicly, sharing with The Defiant a screenshot of some well-known influencers in DeFi who participated in the strategic sale.

• While seed investors can cash out wETH, they don’t get additional LOOKS through staking as airdrop recipients have.
• Plus, it’s not just the team and early investors who are profiting — according to a Dune Analytics query shared by researcher Igor Igamberdiev, retail LOOKS stakers have earned 64.6% of the LooksRare wETH fees.

• Plus, LooksRare airdropped 12% of the total LOOKS supply, meaning that recipients who staked have accessed the wETH revenue for essentially free.
• Even when the recent kerfuffle around the team and strategic sale participants’ extreme profitability dies down, LooksRare does have other issues — volume has more than halved since LOOKS rewards were cut on Feb. 9.

Source: https://thedefiant.io/looksrare-plunges-team-windfall/

Polygon hits 2.4mm unique monthly active addresses — Spenser Noon

• Polygon’s user base continues to expand and display increasing engagement, with 2.36m unique addresses last month. Daily unique addresses have increased over the past 3 weeks, and are now back to 346k after dipping from Sunflower Farms’ peak insanity. Last week’s top dApps by users include QuickSwap (77.1k), Crazy Defense Heroes (66.5k), Arc8 (32.2k), Pegaxy (30.6k), Sunflower Farmers (19.2k), SushiSwap (18.8k), and Uniswap (16.6k).

• Polygon is seeing multiple successes in the gaming sector. Last month, at least 7 titles had >10k monthly active users. Gaming impact extends to NFTs, where currently all of the top 10 collections on OpenSea are gaming related, led by Decentral Games.

• Weekly net inflows averaged +$93mm last month over PoS bridge. More impressively, there are 38x the number of depositors as withdrawers. Finally, network revenues have recovered back to $92k/day after the implementation of EIP 1559 stabilized and adjustments were made.

Source: https://ournetwork.substack.com/p/ournetwork-issue-109