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This Week In DeFi – January 19

This Week In DeFi – January 19

Alex Miguel
January 19, 2024

Happy Friday, DeFi readers!

This week…

Is Aave expanding to Solana?
ONDO reaches $2B market cap within 24h
dYdX passes Uniswap in daily volume
Tether becomes 11th-largest holder of BTC

Is Aave expanding to Solana?

The Aave governance forum is currently reviewing a proposal to deploy Aave v3 on Neon EVM, a platform that facilitates the expansion of Ethereum dApps onto the Solana network.

Proposed by the Neon Foundation and Aave Chan Initiative, the plan aims to introduce Aave's lending services to Solana as a minimal viable product (MVP), featuring limited collateral options such as SOL, mSOL, and jitoSOL, along with USDC as a borrowable asset.

In the "temperature check" phase, the proposal seeks feedback from the Aave community before potential advancement to an on-chain vote for final decision if sufficient support is garnered.

🚨 BREAKING BIG:
@aave one of the largest lending protocol on ETHEREUM is reviewing a proposal to deploy their protocol on @solana via Neon EVM.
— SolanaFloor | Powered by Step Finance (@SolanaFloor)
3:08 PM • Jan 15, 2024

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ONDO reaches $2B market cap within 24h

Real-world asset (RWA) platform Ondo Finance has seen its ONDO token’s fully diluted market cap surpass $2.3 billion, within the first day of trading.

Ondo unlocked 14.3% of its native ONDO tokens, with major exchanges like ByBit, Gate.io, KuCoin, and Coinbase listing the token. ONDO holders will govern parameters on the associated lending platform, Flux Finance.

Ondo boasts nearly $200M of tokenized securities, and aims to cater to both crypto users and large institutions, offering products restricted to qualified purchasers while providing a permissionless protocol for DeFi users.

$ONDO launched today, and the tokenomics are quite intriguing.
The circulating supply over the next 12m is:
- 200M Community Sale
- 1.25B Ecosystem Fund
Which means actual float is only 200m atm, so 200m current price of 0.20c is a marketcap of 40m.
— Bingoτo 🫛 (@Bing0to)
11:22 PM • Jan 18, 2024

dYdX passes Uniswap in daily volume

Decentralized derivatives exchange dYdX surpassed Uniswap as the largest decentralized exchange (DEX) this week, in terms of daily trading volume.

The Cosmos-based v4 version of dYdX recorded $757 million in volume over a 24-hour period, outpacing Uniswap v3 with $608 million.

Despite concerns about a potential decline in activity after leaving Ethereum, dYdX's high trading volumes, now exceeding Uniswap and its own v3 DEX, validate its decision to switch ecosystems.

dYdX, a Cosmos SDK chain, is now the world's largest DEX by volume!
The #Cosmos appchain thesis is being validated and reaching widespread adoption.
And with #IBC leading as blockchain interoperability standard - 2024 is the best year to build on the #interchain
— Cosmos - The Interchain ⚛️ (@cosmos)
6:44 PM • Jan 16, 2024

Tether becomes 11th-largest holder of BTC

Stablecoin issuer Tether has silently become the 11th-largest bitcoin holder in the world, following a $380 million purchase that brings its total holdings to 66,465 BTC.

The company announced that it would begin allocating its profits to purchasing crypto in May of last year, allocating the holdings to the “reserve surplus”.

Tether’s market share grew by 21% over 2023, now dominating the stablecoin market with a 71% slice.

Interestingly, a UN report was published this week suggesting that USDT has become a prominent tool for money laundering and scams in Southeast Asia.

Meanwhile, Cantor Fitzgerald CEO Howard Lutnick had some interesting unsolicited words about Tether backing:

Cantor CEO Howard Lutnick's full comments on Bloomberg about Tether:
"I manage many of their assets. [...] from what we've seen, and we did a lot of work, they have the money they say they have [...] we've seen it, and they have it"
— nic 🌠 carter (@nic__carter)
2:56 PM • Jan 16, 2024

Appchains. Will they catch on, or is dYdX an isolated case?

dYdX is doing huge numbers as a new appchain in the Cosmos ecosystem, this week surpassing Uniswap for the number one spot for DEXes in terms of daily trading volume.

Being an appchain, there’s really only one thing you can do when you deposit funds into dYdX chain – and that’s trade on dYdX.

So, will this cross over into other appchains, and will they replace protocols coexisting on a single, general chain?

dYdX is a unique example, because it somewhat resembles a centralized derivatives exchange. dYdX chain users don’t need interoperability between dApps, nor do they move their money around much to other protocols.

Just like with a centralized exchange, they’re there for one thing: Trading major cryptocurrency derivatives with leverage.

In this sense, dYdX is a unique case. Derivatives traders are used to keeping their money in an exchange, with no other purpose. They’re there to make bets on asset prices, often as part of a larger trading strategy.

But what about other applications?

For a majority of dApps we see today – outside of derivatives trading – interoperability is an important thing. It’s useful to have lending protocols and decentralized (spot) exchanges that exist on the same chain, to improve liquidity, arbitrage, and reduce transaction costs between procotols.

Although cross-chain infrastructure is improving, it’s still a pain to have to shift assets from one to another.

Further, there is no real reason for many of these apps to have their own chains; they perform just fine on Ethereum, or an Ethereum Layer-2.

For dApps to reasonably require their own chain, they likely will need to have some (or all) of the following characteristics:

Special requirements for performance, not provided by existing general chains
Minimal need for interoperability with other dApps
Users that have minimal needs for moving their assets out of the dApp.

The reality of the situation is that most dApps don’t need their own customized appchain. Some niche use cases such as gaming ecosystems and leading derivatives protocols, just might.