This is a repost of the latest edition of Finance Redefined where Cointelegraph unpacks the latest developments in DeFi. The newsletter is sent to subscribers every Wednesday.
DeFi has been reasonably calm about key fundamental developments and instead let prices do the talking. Many tokens accumulated, both popular and almost forgotten. Aside from a few hiccups from Bitcoin’s shaky price performance, we’re still well into the DeFi season.
Unfortunately, this price action means that using DeFi is next to impossible. Ethereum gas fees have been steadily hovering over 100 Gwei, which will seem like an incredibly large number to any veteran. While we’re not quite at the 300 Gwei spotted by DeFi that summer, it’s worth noting that ether is worth roughly 3-4 times as much as well.
For a fun exercise, put your wallet address in fee.wtf and be amazed at how much money you’ve thrown on miners.
Average gas prices in 2021, source: Etherscan.
The good old days when you could safely send a transaction for 2 Gwei seem so far away now. Until we get back to that point, fees remain a serious deal breaker for mere mortals who cannot do business for tens of thousands of dollars at a time.
With DeFi, you can’t afford to be stingy either. A transaction sent to Uniswap or another decentralized exchange has to be confirmed fairly quickly, otherwise it can fail due to slip protection or other restrictions. A failed transaction stings twice: not only does it not do what you want, it also uses up the gas fee.
Unfortunately, there isn’t much you can do about it. However, I wrote an article this week on how to find the right time to send a transaction.
Choosing the right time is probably the most easily accessible trick. To completely fix the problem, Ethereum and its liquidity must be abandoned. I suggest you still explore the various non-Ethereum options available, including layer two chains and external blockchains. Chances are you’ll find what you need, assuming you’re not a sophisticated ape tracking down Andre Cronje’s wallet for his latest unreleased project.
Kyber announces a 3.0 upgrade
Kyber Network has come up with a pretty cool upgrade to its liquidity log. A little contextualized, the exchange was pretty competitive with Uniswap in early 2020, but fell behind in the second half of the year. Jumping gas charges likely contributed to this result, as decentralized exchange is one of the most expensive protocols.
Fortunately, the gas situation will change with the 3.0 upgrade. The team is redesigning the contracts to optimize gas usage, which will hopefully allow Kyber to keep up with the rest of the ecosystem. The new system was also designed for integrations with Layer 2 platforms that should be useful in the long term.
The core of the upgrade is the concept of specialized liquidity pools. Instead of having two or three decentralized exchanges doing different things – for example, Uniswap for buying tokens and Curve for exchanging stablecoins – Kyber will just have different types of pools for different assets. Since Kyber is also an aggregator not dissimilar to 1 inch, this should make the protocol an all-in-one decentralized exchange.
In addition, there are dynamic fees for the log based on volatility. This can be very helpful in the case of inconsistent losses, as liquidity providers are more compensated for their potential losses.
The only real downside to 3.0 is time – the full rollout will take place in the second half of the year.
DSD’s central bank cannot revive the project
I can’t help but laugh at the irony of what happened in algorithmic stablecoin land this week. The Dynamic Set Dollar community, one of many such “stablecoins” that have recently emerged, has apparently made a pact with a whale to prevent them from dumping all of their DSD and pushing their price down.
The reason? Community members held coupons worth $ 84 million that were due to expire in two days. Coupons give you the right to receive newly minted coins if the price is over $ 1. If the peg to the USD breaks down, the coupon holders take the risk of burning their “dollars” to get the promise of getting more with the next offer.
Imagine my surprise when I learned that not only must voucher holders hope that the price of the coin will ever drop back to $ 1, but they must do so quickly. In just two weeks, to be precise.
So the community did the only natural thing and bought 5.5 million tokens from a whale that went from escobar.eth who had previously dumped millions of tokens. The exchange was made at a price of $ 0.62, according to Etherscan protocols.
After the defeat of the shameful Escobar, have the DSD coupon holders been looking forward to the next expansion of their offer? No.
DSD price chart from CoinGecko.
DSD hit nearly $ 1 after the news. But right after that something went wrong and the coin fell to $ 0.29. As you would expect, those million coupons have expired. Seriously, who will buy vouchers when they know you only have two weeks?
The intervention was ultimately a valiant attempt by the DSD holders to defend their currency and it really is no different from the central banks of countries that have pegged their fiat currency to another. George Soros first rose to fame by successfully shorting out such a pen for the British pound.
Famed crypto attorney Preston Byrne wrote so eloquently back in 2017: “These situations are an important lesson in why you don’t try to peg currencies: because you can’t hold the peg any longer than you can afford to subsidize yours Disagreement with the market. “