Apr 30, 2021
Weekly Crypto Update: Week of April 26th
Top and bottom projects of the week in crypto
Disclaimer: This article is made for educational purposes. Hopefully, people find these updates helpful in keeping up with the breakneck pace of progress happening in crypto these days.
This is not financial advice; always do you own due diligence on coins :)
Reflections from the week
This week was a good week to be an ETH maxi.
ETH broke ATH (again) earlier today at $2780. It also is gaining traction against BTC, with the ETH/BTC across 0.05 for the first time since 2018.
This is partially due to European Investment Bank (EIB), the publicly owned lending arm of the European Union, selling a 100M euro 2-year digital bonds registered on the Ethereum.
On the Ethereum platform side, the network is continuing to break records on unique addresses, active addresses, volume, etc.
Gas prices have remained manageable — with prices during off-peak hours at a reasonable 40–50 gwei range (that’s when I do most of my yield farming).
For reference, that’s about $4 to transfer money — which, trust me, is super cheap compared to earlier this year in the height of the bull run.
On a similar note, Polygon’s native coin MATIC 3x’d since last week — going from .30 at the low to .93 at the peak of its run.
Total value locked (TVL) in Polygon’s PoS Ethereum bridge Ethereum has spiked to $2B, doubling from $1B in 3 days 🤯
This is partially due to the team’s unrelenting focus on great user experience, as well as the industry-wise movement toward Layer 2 scaling solutions on top of Ethereum — in search of cheaper gas fees.
As I stated earlier this week in the Layer 2 Wars deep dive:
The winner of the L2 wars will have to satisfy two conditions:
1. The technology that they utilized (e.g., child chains, optimistic roll-ups, zero knowledge roll-ups) will solve the necessary user issues that are currently prevalent in Ethereum L1
2. There’s a network effect of dapps and users on the platform
The second condition means they put in the go-to market (GTM) elbow grease to acquire users: both from a product growth perspective, as well as partnerships and marketing.
Lots of dapps mean lots of users. Great liquidity mining programs means lots of users. And users will have a sticky relationship with their L2 solutions (at least for now) — given the friction of moving funds onto L2 currently.
I’m continued to be always blown away by the innovation new DeFi projects in the space, building on top of one another for a brand new open financial layer.
The common theme of many of this week’s top projects is a new wave of financial products that I had never thought of before — due to the power of composability.
Top Projects of the Week
Liquity (https://www.liquity.org/)
Liquity is out on Ethereum mainnet and drumming up lots of support and interest from the Crypto Twitter community.
From their blog post:
Liquity is a decentralized borrowing protocol that allows you to draw 0% interest loans against ETH used as collateral. Loans are paid out in LUSD — a USD pegged stablecoin, and need to maintain a minimum collateral ratio of only 110%.
Two really interesting things that stand out to me from this project:
- Interest-free loans
Liquity allows you to stake your ETH and take out an interest free loan in USD (technically, LUSD which is Liquidity’s USD-pegged stablecoin). I imagine it’s interest free because the protocol is generating a yield from other protocols on your ETH and essentially subsidizing the interest rate.
2. 110% collateralization rate
Industry standard right now is generally 150–200% collateralization to take out loans. That means that you need to stake 1.5 to 2x of the amount that you wish to borrow: e.g., $1000 of ETH for a $500 USD loan.
Liquidity has a “highly efficient liquidation mechanism” (from their website) that allows for 110% collateralization.
I think the industry needs to think harder about capital efficiency and undercollateralized loans. Well post a dedicated post about this later next week!
Alchemix (https://alchemix.fi/)
I talked a bit about Alchemix earlier this week, and I’m super impressed with this project.
Here’s the blurb:
Alchemix builds on top of Yearn. It places money into Yearn to earn a yield, and while the capital is earning yield, Alchemix allows people to take a loan out against the allocated capital as collateral, and instead of paying off the loan, Alchemix uses the yield from Yearn to pay off the principal + interest.
Essentially, you can take out a loan on Alchemix and never have to pay it back — because the protocol is paying off your loan with the yield it’s earning from your collateral.
Flashstake (https://flashstake.io/)
Flashstake is in the similar vein as Alchemix and Liquity — a crazy awesome product that is only possible through DeFi.
When you stake with Flashstake, you have the option to access your yield upfront.
Yes, you can your yield at the beginning of your loan, not at the end or in periodic bursts!
Doing so, you have to specific how long you want to lock up your collateral for.
There’s also a neat use case in which you can flash your yield to different wallets that that of your own — essentially becoming a transferless payment mechanism.
Bancor (https://bancor.network/)
I’m a big fan of Bancor — especially when they released two awesome features on their AMM pools: one-sided liquidity pool staking through matching the stake with their BNT treasury, and impermanent loss insurance.
Now, the team at Bancor is back with xBNT — drastically simplifying the user experience with Bancor.
Now, BNT is auto re-staked using BNT, so there isn’t unnecessary gas fees that need to be paid from claiming and re-staking BNT.
Also, there’s a ‘set it and forget it’ option for the easiest staking yet.
Layer2 Finance (https://layer2.finance/)
Layer2 Finance announce their v0.1 launch on Ethereum mainnet earlier this week — building on top of Celer Network, another Layer 2 Ethereum scaling solution.
Layer2 Finance has a pretty novel approach to scaling — which they describe themselves as “the subway vs. the Uber Black to the DeFi city of Ethereum network” in an ELI5 blog post.
They batch transactions — similar to a subway — and send them to the specified DeFi protocols for transactions to be performed. And all while bridging Layer 1 assets onto Layer 2 through Celer.
Bottom Projects of the Week
No bottom projects this week — just lots of good vibes from the Ethereum community.
However, I will say that TradFi and CeFi options are getting less and less attractive.
Insanely low interest rates — a “high” yield savings account these days will net you 10 measly bps per annum. Add in the above 2% inflation that the Fed is targeting this year, and you’re effectively losing real money / purchasing power by putting money in these TradFi accounts.
Even CeFi options like BlockFi are lowering their interest rates. Not to mention that they’re absolutely terrible to use from a user experience perspective…
Anyway, thanks for tuning in to my weekly spiel. Until next week :)
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