Dear DeFi enthusiasts,

Merry Christmas! Starting this week, we will be setting up a news submission area where everyone is welcome to provide interesting and valuable news or suggest DeFi news you would like us to cover!

This week, our focus is on the highly controversial Compound Chain. What does this protocol, which originated from a lending platform, aim to achieve through the creation of a new blockchain?

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Other headlines this week include: What does the Coinbase IPO mean for the crypto industry; Mixer Tornado Cash launches governance token TORN and airdrops to early users; and Perpetual Protocol launches its mainnet, currently offering BTC and ETH perpetual contract trading. Insights from industry leaders include a16z partner Kathryn Haun discussing the major issues with the new U.S. crypto wallet legislation.

1. Our Perspective

The next step for the largest decentralized lending platform, creating the cross-chain Compound Chain!

What is Compound Chain?

Compound Chain is a new blockchain protocol launched by the Ethereum lending protocol Compound. Its aim is to create a blockchain that can store and transfer liquidity between different blockchains with lower transaction costs than Ethereum. The native cryptocurrency of Compound Chain, CASH, will serve as the asset price benchmark, unit of account, and reward for node operators.

According to the Compound Chain whitepaper, the original Ethereum-based Compound platform faced three major limitations:

1. Risk of consolidating all supported assets, meaning a crisis in any asset could affect the entire protocol

2. Expensive transaction fees making small transactions difficult to operate

3. Support limited to assets on Ethereum only

In response, Compound Chain's design includes the following key features:

Accounts Addresses

Compound Chain functions as an open ledger for cross-chain services. When users interact with it, their addresses/private keys are the same as those on their friendly chains such as Ethereum, Solana, etc. For example, an Ethereum user with address 0x365...abc can also operate on Compound Chain with the same address. Additionally, on Compound Chain, assets from different blockchains can be transferred to each other. For instance, an Ethereum address can send WBTC on the Ethereum chain to an address from Tezos.

Assets

Similar to Ethereum, Compound Chain allows the creation of new lending coins that can be integrated into friendly chains. Through the Starports mechanism, users can transfer their supported friendly chain assets like ETH, UNI, DOT, etc., to Compound Chain. Moreover, Compound Chain enables asset lending where users can borrow asset Y by collateralizing asset X, similar to the Compound platform on Ethereum.

CASH Native Currency

CASH is one of the standout features of Compound Chain. This native currency is not generated through node rewards but by users lending other assets as collateral, similar to MakerDAO's Dai. In addition to serving as a unit of account, CASH is also used for transaction fees on the chain, akin to Ethereum's GAS. Interestingly, holding CASH generates interest income, although this income will naturally not exceed the interest rate for lending CASH. From the user's perspective, buying and holding CASH completes the process of "providing liquidity and starting to earn interest." Furthermore, the whitepaper mentions that the price of CASH may be governed in the future to anchor a basket of fiat currencies.

PoA Consensus Mechanism

Compound Chain adopts the Byzantine fault-tolerant Proof of Authority (PoA) network, where nodes can earn a portion of the interest and transaction fees generated on Compound Chain as rewards.

Why is Compound Chain Needed?

According to Compound's founder tweet, Compound Chain is not just born for cheap transaction fees but to expand Compound's liquidity network beyond Ethereum. As a lending platform alone, Compound's scope is limited to assets on Ethereum and supported assets only include those integrated into Ethereum like WBTC, which is quite passive. Compound Chain enables the protocol to actively integrate current and potentially future assets from various blockchains. Additionally, from the inference that "CASH price may track a basket of currency price indices in the future," Compound may be positioning itself for the emergence of CBDC central bank stablecoins.

Is Compound Chain Worth the Hype?

Community's View

As a pioneer in liquidity mining and a prominent Ethereum lending platform, Compound's latest initiative has faced criticism from the community. The Block's research director, Larry Cermak, openly criticized the move as "lowering security, significantly increasing complexity, they will regret it in the end"; Firstblood's CTO, Mikko Ohtamaa, stated that "the whitepaper is too incomplete, it's more of an announcement"; Kain, the founder of Synthetix, commented "why no mention of the relationship with COMP? And I don't understand why PoA is used, it sounds risky"; Set Protocol's CMO, Anthony Sassano, even wrote a lengthy article pointing out: "Compound Chain simply makes no sense."

Our View

We believe that Compound Chain, overall, has the potential to achieve significant advancements. With the inevitability of CBDCs being pushed by various countries, the low likelihood of all CBDCs being issued on Ethereum suggests multiple CBDCs running on different blockchains. This limitation in supporting only Ethereum assets could hinder Compound's future prospects. If Compound aims to advance towards becoming the largest lending protocol in the cryptocurrency world, the launch of Compound Chain is quite reasonable. Admittedly, this whitepaper is rudimentary, the security of PoA is debatable, and issues like how COMP holders can participate in Compound Chain are challenges that Compound must address. Looking back at Compound's innovation from launching the first mainstream blockchain lending protocol, developing liquidity mining mechanisms, they are indeed at the forefront of innovation and execution in this field, hence we are more excited about the future development of Compound Chain.

2. Highlights of the Week

✨ Headlines of the Week

Shaking the lending platform! The launch of "Compound Chain" in 2021 will bridge assets with CBDC

The veteran DeFi project Compound released a new project called "Compound Chain." The project aims to create a distributed ledger system that can transfer value and liquidity between different blockchains and introduce more assets from different blockchains into Compound's currency market ecosystem. However, not everyone is optimistic about this approach, as The Block's research director Larry Cermak openly expressed his skepticism.

What Coinbase IPO Means for the Crypto Industry

On 12/18, Coinbase announced its plans to go public. As the first IPO company with a cryptocurrency operation, Coinbase is likely to establish new foundations and standards for the entire industry. For the financial sector, Coinbase's listing means that anyone buying stocks can invest in the cryptocurrency industry without buying coins, and the regulatory scrutiny post-listing is bound to increase. Currently, Coinbase is valued at around $28-32 billion.

Tornado Cash Introduces Governance Token TORN with Airdrop to Early Adopters

DeFi mixer Tornado Cash announced the launch of a governance token, allowing holders to participate in project governance proposals and voting. Additionally, they introduced liquidity mining and airdrops to early users, similar to the September Uniswap airdrop.

Perpetual Protocol Launches Mainnet, Currently Open for BTC and ETH Perpetual Contract Trading

Taiwanese DeFi derivatives protocol Perpetual Protocol announced the launch of its mainnet, where users can currently trade Bitcoin BTC and Ethereum ETH perpetual contracts with leverage up to 12x. Moreover, no gas fees are required during the trading process.

Uniswap Introduces Sybil Governance Tool for Identifying Delegates

Decentralized exchange Uniswap announced the launch of the Sybil governance tool for identifying delegates. Currently, many votes are passed through representatives, leading to uncertainty about who is actually voting. Through Sybil, representatives and their delegate addresses can be identified, supporting Uniswap and Compound governance. Additionally, wallet addresses can be linked to social verifications like Twitter.

🚀 DeFi Protocols

• SushiSwap aims for $3! Launching a Polkadot version soon

• DeFi insurance project Cover Protocol initiates community governance

• MakerDAO initiates multiple executive votes, including adding Aave as collateral and whitelisting Gnosis in the oracle whitelist

• The Graph listed on Coinbase, Binance

• One-stop DeFi portal DeFiBox officially launched

💰 Funding

• Innovative interest rate trading platform Horizon Finance receives investment from Compound founder Robot Ventures

• Financial privacy public chain Findora completes multi-million dollar funding, led by Polychain Capital

• Paxos secures $142 million in Series C funding, with participation from PayPal Ventures and other institutions

⛓ Cross-chain

• DeFi aggregator Frontier to launch new synthetic asset USDF1 on December 21

• Anchorage and Tokensoft collaborate to introduce wCELO and wCUSD assets on Ethereum

• dForce deploys cross-chain trading aggregator dForce Trade on Binance Smart Chain

❎ Attacks

• Attacker targeting Nexus Mutual founder demands 4500 ETH ransom

🎨 NFTs

• 88mph collaborates with APY.Vision to release 25 limited edition NFTs, distributed to liquidity providers through random draw

🏛 Regulation and Institutions

• Implications of upcoming US crypto wallet regulations

3. Industry Leaders' Perspectives

a16z Partner Kathryn Haun: These regulations will not only fail to prevent money laundering but will also put the US crypto industry at a disadvantage

Nexus Mutual Founder Hugh Karp: I don't need personal donations... I need fundraising instead

Tesla CEO Elon Musk: Bitcoin is as dumb as fiat

4. Data Indicators

The data for this week is collected from 2020/12/15 to 12/21. TVL (Total Value Locked) indicates how many assets are stored on the platform; IPY (Interest Per Year) is the current lent funds * annual interest rate, i.e., the platform's annual interest income. Data source: DeFi Pulse. (Unit: million USD)

5. Weekly Memes

pic.twitter.com/aJYRccl5JS

— icebergy ❄️ (@icebergy_) December 20, 2020