Editorial
This past week in the crypto markets will go down as a Rorschach test for the ages. Hundreds of billions of dollars-worth in the sector’s aggregate market capitalization have been wiped in the wake of fear on all fronts; millions of centralized exchange accounts were liquidated in the midst of the volatility, to the tune of $10 billion-plus. To the outside observer, this would appear to be a condemnation of crypto’s supposed maturity: what serious asset class sees drops of 20-50% in a single day?
What that outside observer misses, however, is that this was a stress test that leading DeFi platforms passed with flying colors, one that our analogues in traditional finance could not have.
To get a better sense of this, consider some of the highlights of Bloody Wednesday:
Record DEX Volume: Despite record-setting gas fees on Ethereum mainnet, automated market maker platforms like Uniswap v2 and Sushiswap maintained 100% uptime, bagging liquidity providers $10.5M and $8.9M in fees for the day, respectively. Uniswap v3 demonstrated its capital efficiency by facilitating $2.7B in volume with only $900M in assets provided to the platform. Meanwhile, Bitcoin miners earned $4.7M as centralized exchanges (to which miners abdicate the lion’s share of transaction fee upside) flailed under the load.
Sustained Lending Solvency: Both Compound and AAVE saw dramatic declines in the value of their lending pools. Zooming in on AAVE, we can see that only $30M in liquidations were executed amidst a drop from $11.5B to $8.5B in TVL. Total debt outstanding still remains around 40% of provided liquidity. That we can assess this data in realtime, and that these systems retained such a degree of robustness in spite of the market crash, is a testament to how DeFi differentiates itself from the update-your-excel-sheet-with-your-PnL-at-COB opacity of traditional financial institutions.
The Promise of Layer 2: Perpetual swap platforms like dYdX and Perpetual Protocol gave us a glimpse of the DeFi future with their seamless performance throughout the worst of the crash. While relying on different scaling solutions, Starkware zero-knowledge rollups and the xDAI chain, respectively, both demonstrated that we can expect a DeFi renaissance as such solutions become readily available for more projects. The closer we get to the performance of centralized solutions, the greater the TAM for decentralized financial derivatives becomes.
Of course, these points come with their caveats. Centralized exchanges deal with orders of magnitude greater amounts of users; DeFi lending solutions sacrifice capital efficiency for robustness with over collateralization; all layer two solutions make compromises. But what stands out despite these asterisks is that these platforms a) weathered the storm far better than they did during the March 2020 downturn, and b) at a vastly greater scale.
While those of you reading this may not be happy with how these events have impacted your portfolios, I expect that this past Wednesday will come to be viewed as a watershed moment for recognition of what DeFi can offer by the old guard. And as much as I hate to suggest that we will have future days with this degree of volatility, I am excited to see what a more mature BarnBridge will be able to offer users under such conditions - junior SMART Yield tranches benefitting from stablecoin yield spikes as people rush to buy the dip, or a senior SMART Alpha tranche insulating ETH-denominated treasuries from the bulk of the downward move, are just two examples of how the protocol can provide value in turbulent times.
Stay safe,
- Max
Governance
DAO votes two and three are finally underway and encompass decisions reached in previous months’ Snapshot votes. As both were proposed in parallel due to the ten-action limit, you will be able to participate as they proceed along the following timeline.
Proposed on May 18th
Voting Begins on May 22nd
Voting Concludes on May 26th
If Passed, Votes are Executed on May 30th
This process is illustrated below and explained in greater detail in our documentation.
There are a few points worth noting for posterity:
The BOND to be deposited into the Bancor pool will be 50,000, not 25,000. This SnapShot was held prior to the formalization of having forum discussions be held prior to the vote, rather than in parallel. So while the vote was for 25,000 BOND, community and core team sentiment were in alignment regarding bumping the figure to 50,000.
10,000 BOND will be set aside for community team funding. Both our Integrations Team members and Leo, our China community manager, have been waiting for these votes to be held to receive payment for their work. In order to avoid similar scenarios going forward, this BOND will be allocated to community initiatives that receive support through the forum and SnapShot votes. With the reality of gas fees on Ethereum today, this will prove to be most efficient way for the community to remain nimble.
With that said, I’d like to provide an update shared by Leo on his recent efforts to educate the Chinese crypto community on BarnBridge.
Ongoing Content Efforts: As previously mentioned, we now have official BarnBridge channels across a number of different social media and news outlets. Leo is now at work translating existing BarnBridge materials and creating original content.
Shanghai Industry Conference: Leo attended a conference earlier this week that brought together both traditional financial institutions and crypto platforms. While BarnBridge did not host an event there, it was a successful networking trip that culminated in Leo giving an internal presentation to a multi-billion dollar asset manager. The insights were telling in that they found SMART Yield compelling, but still need to better educate themselves on DeFi smart contract risk.
Recent Headlines: With the Chinese government making a number of concerning statements regarding cryptocurrencies over the past month, Leo is consulting with the head of the leading regional blockchain industry association in the coming week on how best to position BarnBridge amidst regulatory uncertainty.
Key Metrics
While this week saw the launch of SMART Yield originators for both Aave and C.R.E.A.M., their contribution to overall protocol TVL is immaterial at the moment as we wait for passage of the DAO votes to incentivize their junior tranches.
Over on the cUSDC side of things, this week was a TVL rollercoaster as it ran as low as $75M and as high as $99M until settling at today’s $82M mark. Although I wish I could be reporting that elusive nine-figure TVL mark today, it is worth noting that this volatility earned the DAO some $150,000 in fee revenues. BOND token holders increased throughout this week’s selloff as well, numbering over 6,800 in total to set a new all-time high.
On SMART Yield
On the Uniswap BOND/USDC Pool and the BarnBridge DAO
Disclaimer: BarnBurner is not an official BarnBridge publication and is not meant to reflect the shared views of its core team or BOND token holders. BarnBurner is an educational weekly newsletter meant to share updates on technical and governance-related happenings that occur within the BarnBridge ecosystem. The content herein is not financial advice and readers should not base any investment decisions off of it.
Thanks to Zach Owens for his branding work, and 0xBoxer for their dashboards 🤝