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【Dapp Pocket】DeFi Weekly Report - Week 2 of July: Conversation with the founder of mStable

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【Dapp Pocket】DeFi Weekly Report - Week 2 of July: Conversation with the founder of mStable

Dear DeFi enthusiasts,

After the success of COMP, this week saw a flurry of activity in liquidity mining, with Aave, DMM, and mStable all announcing plans to launch liquidity mining programs. Wallets are also set to engage in liquidity mining through Uniswap. The decentralized oracle network, DOS Network, has officially launched. Synthetix has added governance tokens like COMP and LEND as underlying assets for binary futures products.

This week's highlights include a snippet of Vitalik Buterin's views on Reddit, where he mentioned that Ethereum 2.0 is expected to launch in 2020. There's also criticism from Ryan Adams regarding Coinbase selling its services to the Secret Service, as well as Brian Armstrong's response to the incident.

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mStable is a protocol that aggregates stablecoins, aiming to unify liquidity of dispersed USD stablecoins in the market, and it will soon open liquidity mining on Balancer. This week, we are honored to have James Simpson, the founder and CEO of mStable, to share his vision with us and discuss the concept of "putting lipstick on a pig."

What is DeFi?

DeFi (Decentralized Finance) refers to decentralized financial services. In simple terms, it is financial services that operate in a decentralized manner, with decentralized management, transparent information, and blockchain-based operations. DeFi aims to address issues in traditional finance such as slow transaction speeds, high costs, susceptibility to hacking, and potential misuse by governments or organizations. Current DeFi services include lending, synthetic assets, derivative products, and even unique flash loan services.

Author Introduction

  • Raizel / Economics major at NCCU, turned to focus on DeFi after being stuck with Bitcoin

  • Thomas / DeFi enthusiast working on chip design in Boston

  • Anderson / Founder of Dapp Pocket, believes in DeFi deposits > bank deposits

Weekly Highlights

Aave to Launch Liquidity Mining and Token Staking Rewards Program, Introducing New Token AAVE to Replace LEND

Decentralized lending platform Aave confirmed with ChainNews that it will launch liquidity mining and token staking rewards programs. Aave's COO, Jordan Lazaro Gustave, revealed that the platform will introduce a new token, AAVE, to replace the current token, LEND. The economic model designed for the new token AAVE will include mechanisms for liquidity rewards and token staking rewards.

Stablecoin Aggregator Protocol mStable to Distribute Protocol Token MTA via Balancer on July 15

Stablecoin aggregator protocol mStable will launch its protocol token, Meta (MTA), on Balancer on July 15, creating a liquidity pool. mStable will initially deposit around 2.66 million MTA tokens and 400,000 mUSD into the new liquidity pool on Balancer, setting the price of 1 MTA at 0.15 mUSD. After full dilution, MTA's valuation is estimated at $15 million (total MTA supply is 100 million). Moreover, decentralized governance will be implemented in the coming months.

DMM DeFi Money Market Foundation Proposes Launching DMG Liquidity Mining

The DMM Foundation states that mToken holders can not only earn a stable return of 6.25% from their deposits but can also earn DMG by providing liquidity to the DMM ecosystem. Additionally, DMM is creating a governance dashboard to enable DMG holders to vote on governance matters.

Synthetix Adds COMP, LEND, KNC, and REN as Underlying Assets for Binary Options Products

Binary options contracts are like simple yes-or-no questions where traders can choose from various assets and simply predict the direction of price movement without considering the magnitude of the movement. Synthetic asset platform Synthetix announced the addition of COMP, LEND, KNC, and REN as underlying assets in its binary options market, allowing traders to establish positions based on their judgment of these assets' price movements. However, these assets cannot be used as synthetic assets.

Decentralized Oracle Network DOS Network Officially Launches on Ethereum Mainnet

The Ethereum mainnet of the decentralized oracle network DOS Network, named Caelus, has been officially launched. The features of the DOS Network mainnet include: 1. Decentralized network; 2. Strong security with verifiable random number engine for oracle network and cryptographic signature technology; 3. Real-time verifiable results; 4. High scalability and low cost; 5. Positive incentive mechanism, where honest nodes in the network completing data acquisition or computation tasks will receive reward incentives, while malicious nodes will be penalized.

Other Updates

Data Indicators

This week's data is compiled from 7/7 to 7/13, with price extraction at 5:00 PM as the principle. TVL stands for Total Value Locked, indicating the total value locked in the platform. Data source: DeFi Pulse.

Lending Platform Scale

DEX Scale

Expert Perspectives

Vitalik Buterin: I Don't Believe Ethereum 2.0 Will Take Longer Than Four Months to Launch

Ethereum founder Vitalik Buterin shared his view on the launch of Ethereum 2.0 Phase 0 in EF's ETH 2.0 AMA on Reddit. He mentioned that Ethereum 1.0 took four months from the first multi-client testnet to launch, and although Ethereum 2.0 is more complex in some aspects, it lacks the complex GPU proof-of-work and VM considerations. Therefore, he believes the waiting time for Ethereum 2.0 Phase 0 will not be longer than that of 1.0.

Ryan Sean Adams: Coinbase Selling Analytics Tools to Secret Service, Crypto Banks Will Disappoint Us

Reacting to the news of Coinbase selling analytics data to the US Secret Service, Mythos founder Ryan Sean Adams expressed his opinion on Twitter. He stated that while crypto banks are seen as bridges, they are choke points in the self-regulating cryptocurrency system. Adams believes that crypto banks will lead to failure, advocating for a move towards decentralization.

Brian Armstrong: Integrating Information is Costly, We Must Find Ways to Recoup Costs

Coinbase CEO and founder Brian Armstrong responded to the backlash over selling Coinbase Analytics. He mentioned that blockchain data analysis is not new, and the data is publicly viewable, often used to catch bad actors. Initially, Coinbase needed to share analysis information with other teams, but they didn't like sharing with third parties if conditions allowed. They later acquired and integrated many great teams to achieve this. However, integrating this information is costly, and to recoup costs, they sold it to some folks, which also legally helped them. Armstrong emphasized the importance of legal support for the crypto industry's development.

https://twitter.com/brian_armstrong/status/1282106176000233472

Visit from the Expert - mStable

In this episode, we invited mStable's Founder and CEO James Simpson to discuss mStable. mStable is a stablecoin aggregator protocol that mints mUSD by pooling various USD-pegged stablecoins to diversify risk and offers interest on deposits. Anyone can exchange their USD-pegged stablecoins for mUSD at a 1:1 ratio and vice versa through mStable. Additionally, mStable is soon to mint mBTC, representing various BTC tokens such as wBTC, tBTC, etc., to facilitate the transfer of Bitcoin value onto the Ethereum network.

What motivated the creation of mStable?

  1. Market Fragmentation: Various USD-pegged stablecoins and tokenized BTC exist, leading to fragmented market liquidity.

  2. Lack of Native Interest Rates: Apart from DAI, other stablecoins and tokenized assets lack native interest rates.

  3. Single Asset Risk: Holding a large amount of DAI exposes one to MakerDAO platform risk, while holding a large amount of USDC exposes one to operator risk.

What is mStable?

  1. mStable is a broad, standardized platform that allows investors to deposit and manage various tokenized assets - stablecoins, tokenized BTC, tokenized gold, etc., all pegged to specific asset values. Currently, mStable only offers stablecoin deposits, 1:1 exchange for mUSD.

  2. mStable invests the liquidity provided by investors widely in DeFi lending platforms like Compound, Aave, providing native interest rates for this liquidity; it is a floating rate.

  3. mStable offers guaranteed 1:1 token exchange with a fee, such as USDC-USDT swaps, and will soon offer wBTC:tBTC swaps; all swap fees are returned in full to depositors as interest. mStable calls this a straight-line bonding curve, different from other swap platforms like Uniswap where larger trade volumes lead to more price slippage. This is ideal for arbitrageurs. As long as stablecoin exchange rates fluctuate minimally, mStable operates smoothly.

  4. mStable will soon introduce its platform token Meta MTA. Meta stakers will be able to earn profits from mStable.

How does mStable guard against stablecoin collapse and permanent de-pegging?

When a stablecoin's price collapses, current liquidity management platforms automatically sell other stablecoins and buy a large amount of the collapsing stablecoin to balance the asset ratio in the liquidity pool, ultimately leaving liquidity providers with nothing. Therefore, for any liquidity pool, adding a new asset increases the risk borne by liquidity providers - completely contrary to the risk-sharing mechanism. mStable aims to truly diversify risks for liquidity providers - adding new assets effectively reduces the overall risk of the entire basket.

mStable aims to truly diversify risks for liquidity providers - adding new assets effectively reduces the overall risk of the entire basket.

When a stablecoin collapses, the Meta holders' community can vote to sell all of that stablecoin, buy back mUSD, and cover the loss by selling Meta. This process is known as recollateralization. In other words, the risk of a stablecoin collapse is borne by Meta holders. Therefore, Meta holders bear the responsibility of managing mStable, deciding on the addition and removal of each new asset, and therefore have the right to share profits with mStable.

What are Meta's governance features?

  • Holders can vote on various platform parameters, such as swap fees, adding new assets, determining the maximum weight of new assets, and creating new mStable tokens like mBTC.

  • When facing the collapse of a certain asset, holders can vote to decide whether to delist the asset and complete recollateralization by selling MTA.

How to earn Meta?

Currently, there are two ways:

  1. Provide liquidity for the mUSD-USDC liquidity pool on Balancer, with the pool's value currently around $17.5 million.

  2. Provide liquidity for the mUSD-wETH liquidity pool on Balancer, with the pool's value currently around $8 million.

mStable rewards liquidity providers for these pools with 50,000 Meta each per week.

mStable's Next Steps, Vision, and Ultimate Goal?