This Week In DeFi – October 7

To the DeFi community,

This week, Bitwise Asset Management has launched a Web3 exchange-traded fund (ETF), aimed at both retail and institutional investors. The Bitwise Web3 ETF will trade under the ticker BWEB and provide over 85% exposure to companies in Web3.

Bitwise describes the Web3 ETF as “a straightforward way to access the space” and “leverages our [Bitwise’s] expertise in crypto”.

The entire Binance Smart Chain has been halted, following an exploit that transferred over $400 million worth of BNB tokens from the Smart Chain token hub to a new address. The hacker managed to get away with at least $100 million of the funds before the blockchain freeze.

USDT stablecoins in the attacker’s wallet were also blacklisted by Tether, shortly after the hack was detected.

DeFi derivatives platform Ribbon Finance has launched Lend, a service allowing trusted institutions to borrow funds, uncollateralized – something Ribbon is calling an “undercollateralized Aave”.

So far, the Lend app’s interface shows active loans to crypto market maker Wintermute, as well as Folkvang, which is backed by FTX CEO Sam Bankman-Fried. Data shows a 9% APR return on the loans to each borrower.

Ethereum censorship concerns continue to mount as infrastructure service Flashbots is used to create a reported 39% of all Ethereum blocks on the new Proof-of-Stake network. 

Flashbots has become controversial due to its integrated censorship of any transactions linked to mixing service Tornado Cash, attempting to reduce regulatory risks. By extension, the primary worry is that a majority of Ethereum nodes may soon end up censoring any transactions prohibited by authorities.

The topic of centralization once again rears its head in this week’s news, as Binance Smart Chain validators shut down their entire blockchain to prevent further losses from yesterday’s 9-figure hack.

Censored blocks on Ethereum also reach almost 40%, in a concerning degree of over-compliance with Office of Foreign Assets Control (OFAC) regulations.

We are also seeing continued damage from centralized finance in the form of lending platform Celsius, whose executives cashed out millions before the company went under – and now have accidentally revealed an excessive amount of sensitive customer information in a public court filing. Nexo may not be far behind, as the company battles insolvency rumors.

Moving along from the pain points, DeFi is continuing to develop and evolve through the bear market as decentralized exchange GMX gets more exposure through exchange listings, Bitwise launches a Web3 ETF and Ribbon Finance expands to institutional lending.

Although overshadowed by significant drama, plenty of innovation and good news continues to be produced and should continue to surface over the next few weeks (Aave and Curve stablecoins, anyone?).