Debtors saved over $100M using de-pegged stablecoins to repay loans

March 14, 2023 Coin Telegraph

Debtors saved over 0M using de-pegged stablecoins to repay loans

Aave

Debtors jumped on the opportunity to grab a discount on their loan repayments when USDC and DAI de-pegged from the dollar.

The depegging of USD Coin (USDC) and Dai (DAI) from the United States dollar prompted a frenzy of loan repayments over the weekend, allowing debtors to save a total of more than $100 million on their loans.

Following the collapse of Silicon Valley Bank on March 10, the USDC price dropped to lows of $0.87 on March 11 amid concerns about its reserves being locked at SVB.

MakerDAO’s stablecoin DAI also de-pegged briefly, going as low as $0.88 on March 11, according to CoinGecko.

*The USDC price briefly dropped to lows of $0.87 on March. 11. Source: Cointelegraph*

The depegging, in the backdrop of broader crypto turmoil, led to more than $2 billion in loan repayments on March 11 on decentralized lending protocols Aave and Compound — with more than half made in USDC, according to a report by digital assets data provider Kaiko.

Another $500 million in debts were paid in DAI on the same day, it noted.

*Digital assets data provider Kaiko found over $1 billion in USDC loan repayments on March. 11. Source: Kaiko*

This tapered off as both USDC and DAI started heading back toward their peg. The following days did not have anywhere near as many repayments, with a rough total of only $500 million in loan repayments across Tether (USDT), USDC, DAI and other coins on March 12, and roughly half of that on March 13.

Blockchain analytics firm Flipside Crypto estimates that USDC debtors saved $84 million as a result of paying back loans while the stablecoin was de-pegged, while those using DAI saved $20.8 million.

*Debtors used de-pegged stablecoins to save millions in loan repayments. Source: Flipside Crypto*

“Overall, DeFi markets experienced two days of huge price dislocations that generated countless arbitrage opportunities across the ecosystem, and highlighted the importance of USDC,” the Kaiko report said.

The depegging of USDC also led MakerDAO to reconsider its exposure to USDC, as crypto projects incorporating DAI in their tokenomics suffered losses due to a chain reaction.

Circle’s USDC began its climb back to $1 following confirmation from CEO Jeremy Allaire that its reserves were safe and the firm had new banking partners lined up, along with government assurances that depositors of SVB would be made whole.

According to CoinGecko data, USDC was sitting at $0.99 at the time of writing.

Ethereum Whale Moves 258,837,671,569 Shiba Inu (SHIB) in One Massive Transaction: On-Chain Data

March 12, 2023 The Daily Hodl

Aave freezes stablecoin trading on Avalanche V3 as activity surges on CEXs

March 11, 2023 Coin Telegraph

Aave

The trading freeze follows an analysis from DeFi's risk manager firm Gauntlet Network considering different scenarios for the USD Coin price.

Lending protocol Aave has frozen stablecoins trading and set Loan-to-Value (LTV) ratio to zero in response to recent price volatility on stablecoins after the USD Coin (USDC) depegged on March 11.

According to the Aave's governance forum, the trading freeze follows an analysis from DeFi's risk manager company Gauntlet, recommending that all V2 and V3 markets should be temporarily paused.

"Setting LTV to 0 definitely helps everywhere, but on the Avalanche v3 Pool, given that cross-chain infrastructure doesn’t cover Avalanche, the Aave Guardian can act immediately. Setting LTV to 0 in practise discounts the “borrowing power” of the asset, without affecting the HF of any user position," noted one participant in the forum discussion.

LTV is an important metric that determines how much credit you can secure using crypto as collateral. Expressed as a percentage, the ratio is calculated by dividing the amount of credit borrowed by the value of collateral.

Gauntlet's risk analysis examined the amount of insolvencies that might occur under different scenarios, considering that the price of USDC stabilizes, recovers, or declines significantly:

"V3 emode assumes correlation of stablecoin assets, but at this time, those correlations have diverged. The risk has increased given that the liquidation bonus is only 1% for USDC on emode. To account for these assumptions that no longer remain true, we recommend pausing the markets. [...] At current prices, insolvencies are ~550k. These can change depending on the price trajectory and further depegs."

*Screenshot - USD balances by protocol and Assets by symbol and protocol. Source Gauntlet Network*

Centralized crypto exchanges have seen a surge in trading volume in the past hours following the Silicon Valley Bank (SVB) collapse on March 10, according to digital assets data provider Kaiko.

Two big $USDC markets on exchanges seeing heavy sell pressure and huge volumes in last 24 hours

Despite plenty of reassurance on crypto twitter, most investors still selling USDC at a big discount pic.twitter.com/W9uy2HHax4
— Conor Ryder (@ConorRyder) March 11, 2023

Silicon Valley Bank was shut down by the California Department of Financial Protection and Innovation on March 11 after bank run triggered by the banks latest financial reports showing it had sold a large chunk of securities worth $21 billion at the time of sale, at a loss of about $1.8 billion. The California watchdog also appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver to protect insured deposits.

Circle, the company behind the USDC, disclosed on March 11 that $3.3 billion of its $40 billion reserves were stuck at SBV, leading the major stablecoin price to fall below its $1 peg and affecting many stablecoin ecosystems as a result.

AAVE DAO votes for ‘rescue plan’ to save lost tokens

March 10, 2023 Coin Telegraph

Aave

The plan intends to allow developers to recover tokens from certain AAVE contracts and send them to owners who transferred them by mistake.

Some AAVE users who accidentally sent tokens to the wrong address may soon be able to recover them, according to the text of a proposal passed by the AAVE decentralized autonomous organization (DAO) on March 10. The proposal, called “Rescue Mission Phase 1 Long Executor,” authorized AAVE developers to upgrade smart contracts that have been mistakenly sent tokens in the past, causing the contracts to automatically send the lost tokens back to their original owners.

Here's your chance to join the rescue mission. Vote now https://t.co/JJr6qhTKAv
— Aave (@AaveAave) March 7, 2023

The confirmed proposal only affects lost AAVE, LEND, Tether (USDT), Uniswap (UNI) and staked AAVE (stkAAVE) tokens that were mistakenly sent to the AAVE token contract, the LEND token contract, the LendtoAaveMigrator, or the stAAVE token contract.

It further authorized the team to initialize a new implementation for these contracts. The Aave DAO said that during the initialization, the lost tokens will be sent automatically to a separate AaveMerkleDistributor contract, where they will afterwards be sent to the owners.

The proposal’s text emphasizes that these tokens will only be transferred during the contracts’ initialization phase, stating: “To be as less invasive as possible, these new implementations only include that extra logic on their initialize() function, with everything else remaining the same.” This seems to imply that only tokens lost in the past will be recoverable. Future tokens mistakenly sent to these addresses may be permanently lost unless a new proposal is passed in the future.

Losing tokens by mistakenly transferring them to a token contract is a common problem in the crypto community. ChainSafe developer Muhammad Altabba has estimated that hundreds of millions of dollars worth of tokens and Ether (ETH) are locked in the Ethereum null address (0x0) and token contracts. One Ethereum user lost over $500 thousand worth of wrapped ETH (wETH) by transferring it to the wETH token contract instead of calling its “unwrap” function as they intended to do.

If a contract cannot be upgraded, tokens lost in this way are usually impossible to recover.

By their nature, crypto transfers are supposed to be immutable. So even if mistaken transfers can be reversed, attempts to do so are sometimes controversial. In 2016, The DAO, an early version of today’s DAOs, was exploited for $60 million worth of ETH, which the investors in the DAO presumably did not intend to happen. The majority of Ethereum validators implemented a hard fork to reverse the exploit transaction, but some validators rejected this move, creating Ethereum Classic in the process.

The AAVE DAO vote to rescue lost tokens passed was not nearly as controversial. It passed with more than 99.9% of the vote. Only 1 user voted against the proposal, using a single AAVE token to do so.

Crypto Market Slides as Total Value Locked in Defi Falls Below $50 Billion Mark

February 25, 2023 Bitcoin.com

Total Value Locked in Defi Surpasses $50 Billion Mark for First Time Since FTX Collapse

February 16, 2023 Bitcoin.com

Avalanche (AVAX) price is up, but do fundamentals support the rally?

February 7, 2023 Coin Telegraph

Aave

AVAX price has been in a strong rally since the start of 2023, but a sustained uptick in its DeFi components is needed in order to sustain the current bullish momentum.

Avalanche (AVAX) witnessed a meteoric start to 2023, gaining 98% in 30 days, and traders are now curious about whether the rally will extend throughout February. AVAX’s year-to-date gains for 2023 have outpaced those of Bitcoin (BTC) and Ether (ETH).

Recent reasons for AVAX’s rally can be attributed to an Amazon partnership announcement on Jan. 11. The partnership is meant to easily deploy nodes on the Avalanche blockchain with Amazon Web Services (AWS). Ava Labs, which supports the Avalanche ecosystem, hopes the partnership increases blockchain usage for enterprises and governments.

While AVAX price has benefited from the news, some analysts predict that the move could have been a bull trap .

Let’s dig into the fundamentals to see if on-chain network activity supports the recent AVAX rally.

AVAX fees from DeFi are up

After the AWS news, AVAX price was not the only metric seeing a quick rise. On Jan. 14, Avalanche network hit a year-to-date high of $31,218 AVAX fees received. The increase in fees compared to the previous 30 days is 59%, signaling that positive price appreciation helped boost the fees that the network received.

*Avalanche network fees and AVAX price. Source: TokenTerminal*

While the Avalanche fee base is increasing, it still lags behind top EVM-compatible blockchains like Ethereum, Binance Chain (BNB), Optimism (OP) and Polygon (MATIC). Over the past 30 days, the fees Avalanche has generated rank 9th out of all blockchains.

*Top blockchains sorted by fees. Source: TokenTerminal*

Notably, layer-2 competitor Polygon earned close to four times the amount of fees compared to Avalanche. Even with the astounding growth thaAvalanche has experienced in 2023, the network will need to substantially increase fees to overtake more blockchains.

Active addresses and users are down

A sign of blockchain health is the number of active addresses, users and transactions. Despite reaching a year-to-date high on Jan. 18 of 1.84 million transactions, Avalanche’s transaction count is trending down.

A similar downtrend is witnessed when looking at active addresses in the Avalanche ecosystem. Active addresses denote transactions taking playing on unique wallets for a given day. After reaching a year-to-date peak of 54,978 active addresses on Jan. 31, only 34,624 active addresses were registered the following day.

*Active addresses and transactions. Source: Avalanche*

The downtrend in Avalanche activity is creating further separation between other blockchains. According to TokenTerminal, Avalanche’s all-time high (ATH) number of daily active users is 131,000, which is dwarfed by Polygon’s ATH of 737,000. Avalanche is now far from its all-time high of daily users, registering only 44,000.

*Blockchains sorted by daily active users, Source: TokenTerminal*

For blockchains to create sustainable fees, there needs to be daily active users participating on the network.

AAVE dominates Avalanche DApps

The active users on Avalanche seem to have a preference for using Aave (AAVE) on the AVAX blockchain. Over 36% of all Avalanche transactions flow through the Aave protocol. Investors have staked over $353 million on Aave’s Avalanche version, far surpassing the second-most popular protocol by verified total locked value (TVL), the Trader Joe decentralized exchange (DEX).

*Top Avalanche DApps. Source: DefiLlama*

While Aave and Trader Joe are leading the Avalanche blockchain, when looking at DEX activity on other blockchains, they witness far less trading volume. DEX volume directly correlates to the fees that a protocol receives.

Ethereum DEX activity leads the way with over $1.6 billion in daily volume, whereas Avalance only sees around $104 million.

*DEX activity by blockchain. Source: DefiLlama*

While Avalanche is currently witnessing immense growth from the AWS announcement, the blockchain is still small compared to competitors. The goal of the AWS partnership was to help increase network activity by reducing barriers to entry. Reaching the goal may increase Avalanche adoption but other ecosystems seem to be out to a large and early lead.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

DeFi protocols unite to promote permissionless Web3 experiences

February 7, 2023 Coin Telegraph

Aave

The collaboration of over 30 DeFi projects came as an effort to counteract the negative sentiments built in 2022 due to numerous CeFi ecosystem crashes.

The damages caused by the fall of major crypto ecosystems in the last year are on a path of steady recovery as good actors take proactive measures to rebuild trust among investors. Major players from the decentralized finance (DeFi) ecosystem came together to showcase the incentive behind operating trustless, interoperable and permissionless platforms.

For 24-hrs from Feb.6 to 7, over 30 DeFi protocols joined in an initiative to “permissionlessly” share tweets from other protocols — thus highlighting the permissionless and interoperable nature of Web3. Projects participating in this campaign include Yearn, MakerDAO, SushiSwap and Aave, among others.

An experiment in social coordination with @MakerDAO pic.twitter.com/lXOFPeqToS
— Element Finance (@element_fi) February 6, 2023

DeFi has amassed mainstream acceptance with significant institutions making their entrance into the space, it still has a shaky reputation due to its many exploits.

Mamun Rashid, the chief marketing officer at MakerDAO, said that in order to realize the “full potential” of DeFi there needs to be a collaboration between the ideas and expertise that exist in the space.

“Together, we can push the boundaries of traditional finance and build a more inclusive and accessible financial system through DeFi."

The projects collaborating in the campaign defined the “spirit” of DeFi as a more collaborative ecosystem, rather than a competitive one.

Jared Grey, the CEO of SushiSwap said DeFi is being built to challenge the current status quo of known financial frameworks, which historically create barriers and reduce economic freedom.

“Leveraging the composability of this new technology, we can democratize and provide more equitable, safer, and transparent financial tools and products to reach a global audience.”

Grey said the responsibility to portray the true message of DeFi comes first from within the space. Therefore, the initiative and solidarity of more than 30 builders within the space comes at a critical time.

Over the last year, the DeFi space was a major target for exploits. According to a report from Beosin, DeFi-based projects received the highest number of attacks in 2022.

This vulnerability led to a 47.4% rise in security losses in 2022 compared to the previous year, which totaled $3.64 billion in losses.

Additional industry insights revealed that the trend of DeFi exploits should be expected to continue into this year due to new projects entering the market and more sophisticated hackers.

Nonetheless, the space started the year off with significant growth, according to a DappRadar report. In January, a new $150 million ecosystem fund was created by Injective to boost DeFi and Cosmos adoption.