This Week In DeFi – September 30

To the DeFi community,

This week, USDC issuer Circle has announced that it will be expanding USDC natively to five new blockchains: Aributrum One, NEAR, Optimism, Polkadot and Cosmos. 

The company will also launch its own cross-chain transfer protocol to improve the ease of movement of USDC tokens across the different blockchains. USDC will be available on a total of 14 blockchains after the expansion is complete.

Censorship remains an issue, however, with talks of blocking USDC from entire IBC channels on Cosmos if necessary.

Chianlink has made headlines for a pair of reasons, the first being its announcement of its Sustainable Chainlink Access for Layer 1 and 2 Enablement (SCALE) program – aimed at growing decentralized applications by lowering cost barriers to oracle services.

Secondly, Chainlink has engaged in a partnership with global payments network SWIFT, in a proof-of-concept project that will test SWIFT messaging to instruct on-chain token transfers.

Mainstream trading app Robinhood has launched its non-custodial crypto wallet in beta, with access to 10,000 waitlisted customers on iOS. The app will have USDC as its primary stablecoin, as well as a rewards center.

The initial version of the app is integrated with the Polygon network only, however Robinhood claims that multiple networks will be supported in the future.

Ribbon Finance has announced its own crypto options trading platform, called Aevo. The project will build upon Ribbon’s existing "DeFi Option Vault", a yield-generating instrument based on options and derivatives. 

Aevo will be launched in closed beta in October, with plans to launch to the public before the end of 2022. Ribbon has high expectations for the product, predicting up to $100 million in daily trading volume within 6 months of its launch.

Censorship is an issue that continues to surface in recent discussion, as the centralized aspects of the ecosystem reveal themselves as more and more threatening to the ethos of crypto.

Two primary demonstrations of this have made themselves headlines this week, with potentially major implications for the wider cryptosphere.

The first of these surrounds the control of a single entity and token, in the form of USDC – the second-largest stablecoin in the market today. Those involved in USDC’s integration into Cosmos have demonstrated a worrying willingness to block entire apps and chains from USDC if required.

Being such a major component of DeFi as we know it today, USDC’s expansion into Layer-2 platforms and other blockchains should be treated with caution. Although the problem may seem restricted to USDC, it is likely to grow to affect other centralized stablecoins too, as regulators formally enact rules and begin to enforce them for the asset class.

The second censorship issue that has reared its head is on the deeper protocol level, as up to one-quarter or more of all Ethereum blocks are now actively censoring Tornado Cash-affiliated transactions, via a service called Flashbots.

Although I’ve mentioned this outcome likely occurring, it is worrying to see the crypto ecosystem slipping slowly into a garden-walled environment – subject to the approval and whim of external actors.

Of course, this is still just the tip of the iceberg for censorship and regulatory influence on crypto. How far it will go – and how we will respond – is yet to be seen.