Finance Redefined: Acala wins Polkadot parachain, and Iota set to launch Shimmer, Nov. 12–19

Acala

Acala was victorious in Polkadot’s first parachain auction, Iota announced its staking network, and Uniswap liquidity providers lose money — all coming to you in this week’s Finance Redefined.

Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.

Read on to discover why almost half of the liquidity providers on Uniswap v3 are losing capital due to impermanent loss.

What you’re about to read is the smaller version of this newsletter. For the full breakdown of DeFi’s developments over the last week, subscribe below.

Acala wins Polkadot’s debut parachain auction

Decentralized finance protocol Acala was announced as the winning project in Polkadot’s inaugural parachain auction this week, beating fellow competitor Moonbeam to the finish line with a seismic total of 32.5 million DOT ($1.28 billion) raised from 24,934 contributors.

Acala is a multi-functional DeFi platform built on Polkadot that enables developers to build smart contracts applications with cross-chain capabilities, as well as being compatible with Ethereum. Its top investors include Digital Currency Group, Polychain Capital and Alameda Research, among others.

In the case of Acala, all of the proceeds from the crowdloan initial coin offering are classified as “crypto debt” and, therefore, must be paid back by the project following the conclusion of the rental agreement.

With over 32M DOT contributed by over 81,000 community members, Acala has won the first parachain auction on @Polkadot!

Thank you to everyone who took part in this historic event. (1/3) pic.twitter.com/CL2jCwA9Re
— Acala - DeFi Hub of Polkadot (@AcalaNetwork) November 18, 2021

Iota Foundation set to launch staging network and reward token

The Iota Foundation, an open-source, nonprofit entity endeavoring to support the Iota ecosystem, announced the upcoming launch of a staging network, Shimmer, this week alongside an accompanying token asset, SMR.

Shimmer is a layer-one sandbox platform that will enable builders and developers to test the efficiency and compatibility of their decentralized applications within the DeFi and NFT space, prior to deployment on the Iota mainnet.

Expected to launch in early-2022, the network will also facilitate community governance confirmations for Iota’s large-scale network upgrades, including the upcoming programmable multi-asset ledger, smart contracts, full decentralization and sharding.

Almost 50% of Uniswap v3 liquidity providers are in the red

A research report published this week by Topaz Blue and the Bancor Protocol revealed that almost half, 49.5%, of liquidity providers on Uniswap v3 have experienced financial losses due to impermanent loss, a common occurrence on automated market makers when supplying two-sided, volatile liquidity pairs.

An instance of this would arise if, for example, a user has supplied equal values of Tether (USDT) and Ether (ETH) in United States dollars to a liquidity pool and the price of ETH goes up.

This would mean that arbitrageurs — investors who often work in accordance with financial institutions to benefit from price discrepancies in the market — will remove ETH from the pool to sell at a higher price. This leads to a decrease in the U.S.-dollar value of the user’s position and, consequently, an impermanent loss.

The report suggested that, based upon current statistics, it may well be more profitable to simply hodl the market, as opposed to actively participating in liquidity services, stating:

“The user who decides to not provide liquidity can expect to grow the value of their portfolio at a faster rate than one who is actively managing a liquidity position on Uniswap v3.”

Token performances

Analytical data reveals that DeFi’s total value locked has decreased 7.89% across the week to a figure of $160.47 billion.

Data from Cointelegraph Markets Pro and TradingView reveals DeFi’s top 100 tokens by market capitalization performed indifferently across the last seven days.

Avalanche (AVAX) secured the podium’s top spot with 30.11%. Curve DAO Token (CRV) came in second with 0.67%, while Maker (MKR) came third with 0.34%.

Analysis and hot topics from the last week:

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us again next Friday for more stories, insights and education in this dynamically advancing space.

Iota Foundation to launch staging network and reward token

Coin Telegraph

The staging network, titled Shimmer, will ensure all upcoming Iota upgrades are community-approved before roll-out, one of the critical components of a decentralized governance system.

The Iota Foundation has announced the upcoming launch of a staging network, Shimmer, in a bid to advance through the Iota roadmap toward fully functional decentralization.

The layer-one network will act as an innovation testbed for developers and builders in the community seeking to evaluate decentralized finance (DeFi) and nonfungible token (NFT) applications. This sandbox model allows applications to establish efficiency and compatibility prior to launching on the Iota mainnet, ensuring smooth deployment.

The first major network upgrades hosted on the Shimmer network are a programmable multi-asset ledger, smart contracts, full decentralization and sharding.

The Iota Foundation is an open-source, not-for-profit entity — known as a stiftung in Germany — that was founded in 2018 to support multifaceted initiatives within the Iota ecosystem, such as research, development and education in the distributed ledger technology space.

IOTA token holders will be granted the ability to earn staking rewards in SMR via the platform’s Firefly wallet. Following a token distribution over the coming months, the Shimmer network is slated to launch in early 2022.

pic.twitter.com/3OCcQjUtjn
— IOTA (@iota) November 12, 2021

Dominik Schiener, co-founder and chairman of the Iota Foundation, cited the recent success of Polkadot’s canary network, Kusama, to explain the company’s assurance of market receptiveness toward this announcement.

“As we’ve seen with the success of Kusama and Polkadot, the Shimmer network will become an incentivized staging network offering crucial testing and public validation to our ambitious development roadmap.”

In mid-October, the Iota Foundation released its smart contract beta platform with the ambition of fostering the growth of DeFi and NFT applications as a result of proposed incentives of lower fees and higher scalability.

Schiener also outlined the potential risks of the network and how the team has worked to mitigate their probability.

“Introducing tokenization, complex output types, smart contracts and new consensus offers exciting new opportunities. These opportunities aren’t without significant risks, however, and Shimmer will ensure the safety of each upgrade. With Shimmer, we are supercharging the innovation playground around IOTA.”

SMR