This Week In DeFi – August 5

This week, Solana and Nomad see major exploits, Aave goes ahead with its GHO stablecoin and Ethereum PoW supporters rise ahead of the Merge.

August 05, 2022

To the DeFi community,

This week, panic spread across the Solana network this week as almost 8,000 wallets were affected by an exploit, which saw both SOL and SPL tokens drained. It was eventually discovered that the exploit arose from an issue associated with mobile wallet, Slope – likely a “supply chain attack” on iOS wallets. Users have been recommended to create a new wallet and shift their assets, with a full post-mortem to be published soon.

 

Cross-chain bridge Nomad suffered a $190 million hack – with more than 300 participating exploiters joining the “feeding frenzy”. A primary attacker took $95 million for themselves, while hundreds of additional addresses copied the attacker’s code to sweep the remaining vulnerable funds. The bug responsible for the attack came during a smart contract update, which was unaudited.

Aave governance has passed the proposal for its new yield-generating stablecoin, GHO. 99% of votes were in favor of launching the stablecoin, which will allow users to mint GHO tokens against supplied collateral assets. The GHO code will now be audited, while the community votes upon a starting interest rate for GHO and discount rate for AAVE stakers minting GHO. 

Proof-of-Work (PoW) maximalists within the Ethereum ecosystem are gearing up to launch their own hard-forks of the network, as the formal transition (“The Merge”) to Proof-of-Stake nears. It has been reported that multiple PoW forks will emerge once The Merge is put into motion, with some worried about potential damage from such a split.

As “The Merge” continues to draw closer for the Ethereum network, proponents of the Proof-of-Work (PoW) chain are beginning to express their differences in ideology  with the Proof-of-Stake Ethereum community.

At least six PoW forks have reportedly been planned by groups within the ecosystem, however the amount of traction that any of these forks may obtain may not be highly significant. 

Why? Well, in contrast to the original Ethereum fork that resulted in Ethereum Classic and the Ethereum we know and use today, the current ecosystem hosts the marvel of several stablecoins and DeFi protocols.

Following a chain split, the entire state of the blockchain will be copied – including all stablecoin balances and DeFi positions. Of course, these projects cannot honor redemptions and positions on both chains simultaneously – so they must choose their preferred singular chain to support.

To a certain degree, it is these entities that have the final word on which chain is to be the primary one. Although arguments for a PoW network are strong, it appears that it may become very difficult for an Ethereum fork to thrive given today’s conditions. A fragmentation between multiple PoW forks will also weaken the likelihood of success of any individual one.

How much of a market share can an Ethereum PoW fork really capture? How viable is it for an Ethereum project to tear away from the rest of the ecosystem, with which it currently coexists? Do all Ethereum-based projects have an incentive to stick together in their decisions?

September will tell all.

Interest Rates

Highest Yields: Nexo Lend at 10% APY, BlockFi at 6.00% APY

MakerDAO Updates

DAI Savings Rate: 0.01%

Base Fee: 0.00%

ETH Stability Fee: 0.50%

USDC Stability Fee: 1.00%

WBTC Stability Fee: 0.75%

Highest Yields: Nexo Lend at 10% APY, BlockFi at 7.50% APY

Top Stories

Stat Bo

Total Value Locked: $40.22B (down 0.9% since last week)

DeFi Market Cap: $48.61B (down 2.9%)

DEX Weekly Volume: $12B (down 14%)

DAI Supply: 6.98B (down 0.1%)

Bonus Reads

[Tom Matsuda and Adam Morgan McCarthy – The Block] – Arnault-backed VC firm Aglaé Ventures to launch €100 million web3 fund: sources