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HEALTH, WEALTH, AND HAPPINESS |
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| "Networking is an essential part of building wealth."
- Armstrong Williams |
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| Boston-area readers: Join us tomorrow, live and in person, for a special networking event sponsored by the Boston Blockchain Association.
We'll be sharing clips from our recent interview with SEC Commissioner Hester Peirce on the state of blockchain regulation, with discussion from a panel of experts, and you!
This event is free and open to all, with plenty of food, drink, and networking opportunities. It happens tomorrow, June 23, 2022 at 6:00 PM ET, 155 Seaport Blvd., Boston, MA. Click here to RSVP! |
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| Uniswap Gets Into the NFT Game: Uniswap Labs announced the acquisition of Genie, the first NFT marketplace aggregator. This means Uniswap will soon support buying and selling NFTs across marketplaces, using the same user-friendly Web3 interface.
In other words, Uniswap is doing the same for NFTs that it originally did for tokens: creating a "meta-exchange" that could gobble up market share from the centralized NFT exchanges.
Investor takeaway: We're fans of Uniswap (UNI), the decentralized exchange that makes up part of our Future Winners Portfolio. While the token price has been hammered this year, we remain bullish on its prospects.
This latest acquisition is more proof that the company is thinking strategically, investing in smart acquisitions, and building out its core product. In our view, UNI is a better buy than ever. |
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Unlike the vast majority of crypto tokens, Uniswap is generating real revenue, in the form of transaction fees paid out to liquidity providers on its network: some $1.4 billion over the last year. |
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Investor takeaway: Our investing thesis on Uniswap has not changed: it's a good product, with good management, generating real revenue. Its entry into the NFT market will likely strengthen its core product, and UNI investors will likely benefit long term. |
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Hi everyone,
Hello again! I am filling in for my colleague Alex Lores, who is under the weather today.
There has been no shortage of headlines in the crypto world lately—price volatility, stablecoin crashes, a halting of withdrawals at a crypto lender and a DeFi platform trying to gain control of a large account. |
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| While centralized finance is full of third parties facilitating movement between counterparties, eliminating third parties is the primary goal of decentralized finance, or DeFi. By making financial products available on a public decentralized blockchain network, no banks or brokers are needed. No prior approvals are required, fees charged by banks are eliminated and funds are kept in a secure digital wallet.
However, the fallout from recent events—the collapse of USTerra, the halting of withdrawals by crypto lender Celsius—seems to have spooked Solend—an algorithmic, decentralized protocol for lending and borrowing on the Solana platform. According to defillama.com, Solend is the number one lending protocol on Solana, and the firm's Twitter feed states the protocol has over $1 billion in deposits.
Across DeFi protocols, the use of crypto for loans has become one of the main use cases for smart contracts with approximately 150 protocols providing crypto loan-based services. Crypto lending enables users to borrow and lend digital assets in return for a fee or interest.
And as in traditional lending, borrowers need to secure loans with collateral (although some platforms do perform flash loans). To evaluate risk, lenders will use a loan to value (LTV) ratio that measures the loan balance compared to the value of the collateral. In other words, using a 50% initial LTV, a $100,000 loan would require $200,000 in bitcoin deposited. If the collateral asset drops in value, a margin call results.
Over the weekend, the Solend protocol was faced with a situation. A single “whale” was holding a very large margin position—depositing 5.7 million sol tokens (the native cryptocurrency of the Solana blockchain), which at the time, accounted for over 95% of Solend’s deposits. Said whale then borrowed $108 million in the USDC stablecoin and ether.
On Saturday, as you can see in the chart below, the price of sol was trading around $28—getting close to the 20% marker of $22.30—and risking the chance of liquidations. Given the amount of this one account, it raised flags—enough for Solend to propose emergency powers to take over the account. |
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| Since June 13, Solend had been attempting to get in touch with the protocol’s largest user, also known as “3oSE...uRbE,” requesting the account to reduce the position. And then came the proposal to take over the account—a move that seems to totally fly against all that DeFi stands for. So Solend created a DAO—apparently on demand—to vote on a solution.
The protocol claimed it was preventing bad debt and chaos given the uncertain market conditions and the systemic risk that might occur if sol dropped below $22.30. So the community was presented with a vote—“yes,” enact special margin requirements and grant emergency powers to liquidate the account, or “no,” do nothing. Solend even rewarded users for voting with 50k SLND. |
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| To be clear, Solend would be liquidating the whale’s position over-the-counter by a smart contract upgrade, and the emergency powers would then be revoked following the move.
The vote (SLND1) passed—but barely. 1.15 million votes were cast with 1 million from a single account that moved the tokens in and out. Solend stated that the core team did not vote. However, the response was overwhelmingly negative to this seemingly very centralized act from a decentralized organization, so another vote was held (SLND2), this time to overturn the prior vote which passed.
Another vote was proposed, and somewhere before the expiration of that proposal, the whale crawled, or swam, out from their cave, contacted Solend and subsequently started moving millions of dollars of cryptocurrencies, potentially thwarting a meltdown. Recent market volatility has upended markets but in the end, Solend remained decentralized, and the crisis was averted on both ends. The transparency of the blockchain allowed awareness of the situation and Solend ultimately stayed true to decentralization......but not without coming dangerously close to violating the very reason for its existence. |
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| Make it a great day!
Evamarie Augustine Market Analyst |
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If you're not steady-drip investing each month, it's ruff. |
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| Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by Evamarie Augustine, Charles Bovaird, Mati Greenspan, John Hargrave, and Alexandre Lores.
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