Welcome to Finance Redefined, your weekly DeFi Insights – a newsletter designed to bring you the most significant developments of the past week.
The past week has seen major developments centered around the integration of Ethereum into the DeFi ecosystem.
The Aave (AAVE) community has proposed a temporary ban on Ether (ETH) lending ahead of the merger, citing the potential problems with high ETH usage as liquidity losses are severe or impossible and annual percentage yields (APYs) can reach negative numbers. An industry expert has shared his opinion on the potential censorship vulnerabilities that the Ethereum network may face following its eventual transition to a proof-of-stake (PoS) blockchain.
Moving ahead of Ethereum integration developments, other major events that made headlines include the eventual shutdown of Babylon Finance after months of recovering from the negative momentum caused by the Flying Fuse exploit. The United States Federal Bureau of Investigation (FBI) has issued a new warning to investors on DeFi platforms that are targeted by a $1.6 billion exploit by 2022.
The top 100 DeFi tokens have seen price action over the past week, with most trading in the red, barring a few tokens showing double-digit growth.
Will Ethereum 2.0 Be Vulnerable to Censorship? An industry expert explains.
According to Ethereum community member and investor Ryan Berkmans, the Ethereum network can withstand the risks of censorship in the short and long term.
The banning of Ethereum-based privacy tool Tornado Cash by US authorities earlier this month has led many to speculate that Ethereum transactions may be at risk of censorship, especially after Ethereum recently moved to a proof-of-stake system.
Aave community has proposed to temporarily suspend ETH lending before the merger
With Ethereum integration on the way, risk research and analysis group Block Analytics has proposed a temporary freeze in ETH lending to reduce the risk of a DeFi implosion in the Aave lending protocol during the integration.
The group pointed out the problem of using high ETH, which can make liquids difficult or impossible and reach negative API numbers. Additionally, the uncertainty surrounding the merger and Ethereum’s proof-of-work (PoW) fork may prompt liquidity providers to start banking, pushing usage to higher levels.
Diffie protocol shuts down months after Rari Fuse hack
Babylon Finance has finally announced its closure after months of trying to recover from the negative impact of the Flying Fuse exploit.
In a statement, founder Ramon Requeiro said that while the team has tried to deal with the domino effect of the hack, the platform has had an unavoidable negative impact. According to Recuero, the protocol lost $3.4 million. Following this, the total value locked in the platform went from $30 million to $4 million. To make matters worse, the Fuse pool disclosed that $10 million worth of the loan market had been withdrawn.
The FBI has issued an alert regarding exploits by cybercriminals targeting DeFi.
The US FBI has issued a new warning to investors in the DeFi platform, which is the target of a $1.6 billion exploit by 2022.
In a public service announcement on Tuesday, the FBI’s Internet Crime Complaint Center said the exploits cost investors money — advising investors to do their due diligence on defecation platforms before using them, and urging platforms to improve monitoring and conduct rigorous code inspections.
Overview of the DeFi market
Analytical data shows that Defy’s total price is locked in, little changed from last week. TVL’s value was about $61.97 billion at the time of writing. According to data from Cointelegraph Markets Pro and TradingView, the DeFi top 100 tokens in the market had a mixed week. Although most of the tokens are trading in the red on the weekly charts, the price change is small compared to the previous week.
Lido DAO (LDO) was the biggest gainer among the top 100 tokens, recording a weekly gain of 5.31%, followed by PancakeSwap (CAKE) with a gain of 1%. The rest of the top 100 tokens recorded single-digit declines last week.
Thanks for reading this week’s roundup of the most impactful DeFi developments. Join us next Friday for more stories, insights and lessons.