The Disrupt Weekend

“Numbers compare performance in Q4 2020 to Q4 2021.

Protocol Summary:

  • Network Revenue rose 1,777% from $231.41 million to $4.34 billion.
  • Average Daily Active Addresses grew 35% from 425,636 to 572,700.
  • ETH Inflation Rate fell 64% from 1.13% to 0.46%.
  • ETH Staked increased 471% from 1,545,486 to 8,818,933.
  • Average Transaction Fee rose 557% from $4.09 to $26.89.

Ecosystem Summary:

  • DeFi TVL grew 770% from $17.73 billion to $154.20 billion.
  • DEX Volumes rose 495% from $48.97 billion to $291.53 billion.
  • BTC on Ethereum grew 133% from 138,190 to 321,730.
  • OpenSea Sales increased 50,078% from $71.57 million in $35.91 billion.
  • Layer 2 TVL increased 11,002% from $50.01 million to $5.55 billion.”

GridPlus has developed a universal system for securely and privately transferring any cryptoasset off-chain: Phonon. Phonon is Satoshi’s “Digital Cash” vision realized. The protocol enables secure, instant, privacy-preserving cryptocurrency transactions.

With the Phonon network, any cryptocurrency gains the same properties as the cash you might now hold in your pocket. Asset transfers are instant, private, free, and secured using a peer-to-peer network of secure devices. Phonon works with any blockchain, but the token and protocol governance framework are built on Ethereum.

The initial implementation of direct P2P off-chain transactions is uniquely useful on its own, but it will be an effective foundation for more ambitious applications such as:

  • Instant L1← →L2 withdrawals and cross-L2 transfers. Liquidity providers with secure hardware can provide fast exits to users for a fee, without the need for challenge periods and fraud proofs. This is an ideal solution for cross-chain and cross-layer communications because it does not dilute economic security or rely upon a third-party validator set. It is hardware secured and instant.
  • Private, fully trustless, cross-chain DEX. Using the same approach employed for cross-layer fast exits, Phonon can provide the foundation for a privacy-preserving cross-chain DEX. There is an opportunity for the DAO to develop such a DEX on its own or integrate the technology into an existing protocol.
  • Integration of Phonon into Telecommunications and IoT Networks. Any device with a compatible secure chipset will be able to leverage the Phonon Protocol for fast, private, secure P2P value transfers. Future iterations of the protocol could support cellular telephones via existing networks or via a P2P mesh.
  • IoT Micropayments. Phonon was originally conceived to support cost efficient IoT micropayments and even the initial iteration of the protocol combined with Lattice1 hardware opens up a host of possibilities for automated pay-as-you-go payment streams.

The initial implementation of the Phonon spec is a developer-focused alpha that works with smartcards and any third party USB card reader. Github repositories for a Phonon client and the Phonon Javacard applet are now public. With these starting points, developers will be able to begin experimenting with their own implementations and uses for the protocol.”

“Celer IM fundamentally changes how multi-blockchain dApps are built and used. Instead of deploying multiple isolated copies of smart contracts on different blockchains, developers can now build inter-chain-native dApps with efficient liquidity utilization, coherent application logic, and shared states.

Users of Celer IM-enabled dApps will enjoy the benefits of a diverse multi-blockchain ecosystem with the simplicity of a single-transaction UX, without complicated manual interactions across multiple blockchains.

By making cross-chain composability possible, the Celer IM framework opens up an entire galaxy of opportunities for inter-chain-native applications. Celer IM is currently live on testnet.”

Rollups need new token models, and currently-deployed models have shortcomings. There are many benefits to protocol tokens, e.g. they allow incentivizing liquidity, and can create an engaged community. However, they are not without downsides—and those downsides can potentially make a token worse-than-useless.

One of the key properties of rollups is trustlessness. Rollups are secured by Ethereum, not a separate miner/validator set, and this is a key distinguisher between rollups (layer-2) and normal sidechains (not layer-2). With that in mind, here are some suboptimal token models that should be avoided:

  • A Proof-of-Stake (PoS) token, where a majority of validators sign off on blocks. This allows a majority of validators to censor new blocks, meaning user funds can be frozen. There is no need for PoS to secure a rollup, because a rollup is secured by Ethereum.
  • A fee-paying token, where users must pay fees in the token. For non-sovereign layer-2 protocols (like rollups on Ethereum), this is worse-than-useless because it adds friction for users to actually use the rollup.
  • A governance token, where a majority of votes can upgrade the rollup contract. This allows a majority of token holders to steal all user funds.

The finite execution capacity of a rollup is scarce, and this scarcity can be tokenized. Rollups can tokenize this block space scarcity through the right to collect fees as a block producer. Just as with fee-paying tokens, increasing demand for block space increases fees which increases demand for this right to collect fees. This does not add friction to end users, since they can use the rollup without needing that token to pay fees.

This token model helps solve a major challenge in rollup design: decentralizing block production.

See Also: Bankless: L2 Migration Panel Discussion (Video)

“The total supply of the USDC stablecoin on the Ethereum blockchain has surpassed that of rival Tether’s (USDT) for the first time. The current total supply of USDC on Ethereum stands at 39.92 billion, whereas USDT’s total supply on the blockchain stands at 39.82 billion, according to Etherscan.

One of the main reasons for USDC’s recent growth has been its increased usage in the decentralized finance (DeFi) market. USDT’s demand is mainly driven by centralized exchange users and institutions.

Looking at the bigger picture, USDT’s total supply across blockchain continues to remain higher than that of USDC’s. The former’s current total supply stands at over 82 billion, and the latter’s stands at around 45 billion.”

“EPNS can now be accessed through on the Ethereum blockchain. The protocol can be used by two broad audiences: channels and subscribers.

Channels are dapps, users, and businesses that want to send notifications to others. These notifications can be sent manually, or they can be built to respond automatically to on-chain or off-chain information. For example, a media company can push out alerts for breaking news when a story is released. Or, a DeFi project can allow users to automatically receive notifications when their loans are closing in on liquidation.

Subscribers are those who wish to receive notifications from others. Subscribers can browse the live channels on EPNS through the app, and opt-in to receive notifications from any of them. Notifications are then delivered to the subscriber’s ‘inbox’.”

“As the token-economic principles behind the multibillion-dollar “Curve Wars” expand to other protocols, a cottage industry of supporting projects is beginning to flourish. On Wednesday, governance markets platform Bribe announced the close of a $4 million seed round to help build what it refers to as a Voter Extractable Value (VEV) protocol.

Bribe joins a growing number of projects attempting to build on top of decentralized finance (DeFi) governance processes, routing value to governance token holders by enabling “bribes” – payments in exchange for voting on proposals in a certain way.

As unseemly as it may sound, it’s a flourishing tech stack spurred on by the success of Convex, a protocol effectively designed to maximize the value other projects can extract from decentralized exchange Curve Finance’s governance. The “Curve Wars” refer to an escalating battle for other protocols to accumulate and control Curve’s CRV governance tokens, which can incentivize user deposits into specific trading pools.

Bribe will initially focus on an auction platform for bribing votes in Aave governance before expanding to market-making protocol Tokemak.”

“The lawsuit, filed by a software engineer named Joseph Kent, has challenged the legality of PoolTogether’s operation, saying the scheme is essentially a lottery and prohibited under New York law.

A former technology lead for Sen. Elizabeth Warren’s 2020 presidential campaign, Mr. Kent is described in his lawsuit as someone “gravely concerned” at the prospect that cryptocurrency, which consumes voluminous amounts of electricity, could contribute to climate change, besides enabling bad actors to circumvent financial sanctions.

According to legal experts, Mr. Kent’s lawsuit could be among the first to squarely address the question of who is legally accountable when a DeFi application—known as a “protocol”—is at odds with the law or causes actionable harm to a user.

It’s an open question how courts and regulators are going to respond to these unique features of DeFi.

Mr. Cusack, PoolTogether’s founder, also has defended the protocol against the lawsuit.

It’s filed by someone who works in politics. It’s clearly written by someone who doesn’t understand how protocols operate or even what PoolTogether is.”