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

November 19, 2021 Coin Telegraph

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.

Half of Uniswap V3 Liquidity Providers Underperform Holding: Bancor Study

November 18, 2021 The Crypto Briefing

izumi Finance Raises $2.1M to Innovate Liquidity Mining with Uniswap V3 LP Tokens

November 10, 2021 The Crypto Briefing

While the Value Locked in Defi Soars, Dozens of Dapps Leverage Cross-Chain Support

November 7, 2021 Bitcoin.com

Data Shows Decentralized Finance Took a Hit in Q2 but Is Still Booming

July 17, 2021 Bitcoin.com

BSC Project Clones Uniswap V3 Despite License

June 7, 2021 The Crypto Briefing

Uniswap v3 overtakes SushiSwap by volume, on track to surpass v2 this month

May 20, 2021 Coin Telegraph

Coin Telegraph

Uniswap v3 is now the second-largest Ethereum-based decentralized exchange by volume, ranking only behind Uniswap v2.

Despite launching to the Ethereum mainnet just two weeks ago, Uniswap v3 has already overtaken SushiSwap to rank as the second-largest Ethereum-based decentralized exchange by trade volume.

On May 20, Ryan Watkins of crypto data aggregator Messari noted that v3 had hosted 81% of the volume hosted by v2 over 24 hours earlier this week.

The researcher shared data showing that as of May 16, v3 had processed 15% more weekly volume than major Ethereum-based DEX SushiSwap, beating out Sushi’s $5.6 billion with $6.5 billion. 0x ranked behind SushiSwap with $3 billion, followed by Curve with $1.9 billion, and Balancer with $1.2 billion.

Yesterday Uniswap V3 reached 81% of the volume as Uniswap V2.

This is all without liquidity incentives, passive LP managers, or even its soon to come layer-2 deployment. pic.twitter.com/L93wExSKHZ
— Ryan Watkins (@RyanWatkins_) May 19, 2021

With v3 coming within reach of v2’s daily volume despite only holding 15% of the total value locked, or TVL, v3 appears to be realizing its mission of increased capital efficiency.

Watkins noted that v3 is the only automated market maker that turns over more than 100% of its $900 million TVL each day, beating out its rivals by more than 400%. V3’s turnover is equal to 104% of the platform’s TVL, Uniswap v2 ranks second with 20%, followed by SushiSwap with 16%, Bancor with 6%, and Balancer with 5%.

The combined market share of v2 and v3 suggests Uniswap now represents more than 60% of all Ethereum-based DEX trade.

Uniswap founder, Hayden Adams, tweeted that v3’s daily volume surged to 3.3 times its $900 TVL amid yesterday’s frenzied crash that saw Bitcoin test support at roughly $30,000, with v3 processing more than $2.6 billion worth of trades in 24 hours — beating out its previous record by more than $1 billion.

Adams added that layer-two scaling is next on v3’s roadmap to lower fees for users.

2/

The demand and value prop of defi is quite clear at this point

And so are next steps - L1 and L2 scaling to support more users while lowering fees
— Hayden Adams (@haydenzadams) May 20, 2021

Uniswap v3’s volume initially appeared to have bolstered by the speculative dog-token frenzy that briefly gripped the markets in early May, with the Ether/Shiba Inu ($SHIB) pairing ranking as v3’s dominant pair by fees generated and total number of trades and third by weekly volume five days after the platform’s launch. Akita Inu ($AKITA) and Dogelon Mars ($ELON) also ranked fifth and sixth by total number of trades respectively.

SHIB has since fallen to rank seventh by volume and third by fee generation, however, is still half of v3’s top-ranked pairing by weekly number of trades.

Will the launch of Uniswap v3 spark a new DeFi boom?

May 5, 2021 Coin Telegraph

alchemist coin

With Uniswap’s TVL growing from $13.7 million to $8.5 billion since launching its v2 iteration, some onlookers believe the DEX’s v3 launch could spark the next DeFi rally.

With the total value locked in decentralized finance on Ethereum now $89 billion, the market is eagerly waiting to see if the launch of UniSwap v3 could be the catalyst for DeFi’s next big bull run.

Uniswap v3 promises advanced new features and opportunities for yield generation with its launch scheduled for May 5.

Uniswap is emphasizing three new features for liquidity providers — customizable capital deployment across a markets’ entire price curve in the form of concentrated liquidity, tiered market maker fees offering boosted returns for volatile pairs subject to impermanent loss, and cheaper access to oracles for improved data integrity.

The expected reduction in Ethereum’s fees due to the EIP-1559 upgrade come July is also expected to boost v3’s value proposition, and the latest version of Uniswap will also launch on Optimism after the layer-two rollups solution goes live.

With its new concentrated liquidity feature promising users' unique and customizable yield products, a nascent DeFi sector specializing in tokenizing future yields appears poised to flourish.

1/ Uniswap v3 will improve capital efficiency and liquidity for synthetic tokens built with UMA.

The defining feature of this upgrade is "concentrated liquidity." It grants individual liquidity providers more control over how they provide liquidity.https://t.co/sysXbun0qg
— UMA (@UMAprotocol) May 3, 2021

Emerging projects like Alchemix have recently enjoyed meteoric growth from the promise of tokenizing future yields, while the likes of Alchemist Coin are using Ampleforth’s V2 Geyser contracts to allow users to create nonfungible tokens representing claims to future Uniswap liquidity provider fees.

Further, new decentralized exchanges are innovating to facilitate trade in tokenized future yields, with Pendle raising $3.5 million from major investors last month to build an automated market maker specializing in time-degrading assets.

Commenting on the completion of Pendle’s public LBP offering earlier this month, Cinneamhain Ventures Partner, Adam Cochrane, described the forthcoming exchange as creating “an entirely new category of market in the DeFi space.”

1/23

One of the newer small caps I've been wanting to cover recently is $PENDLE (@pendle_fi).

I think they are one of the only new projects I've seen that I think creates an entirely new category of market in the defi space. pic.twitter.com/by1u3PZabT
— Adam Cochran (@adamscochran) May 1, 2021

Uniswap v2 in history

Uniswap v2 launched on Ethereum’s mainnet on March 18, 2020. Back then, the decentralized exchange had roughly $13.7 million locked in total value locked, or TVL, while the broader DeFi sector’s TVL was roughly $550 million.

Despite attracting controversy early on for the popularity of its open listing policy among scammers and impersonators and its relatively high trade fees compared to some centralized platforms, Uniswap's TVL pushed above $100 million in August as the sector’s TVL surged to $7.5 billion by September.

After facing a series of vampire mining attacks from rival yield farming DEXes in a bid to siphon away the platform’s liquidity, Uniswap airdropped its native governance token to the v2 protocol’s users in September and closed the month with a TVL of more than $2 billion.

While the DeFi markets cooled in Q4 2020 while Bitcoin into new all-time highs above $20,000, the sector’s TVL has rocketed since the start of 2021, while value locked in Uniswap grew from $2.15 billion to $8.53 billion, according to DeFi Llama.

@Uniswap weekly trading volume just passed $10b for the first time!!!

$10b/week is over $0.5 trillion per year pic.twitter.com/ZibcDT9Zob
— Hayden Adams (@haydenzadams) April 20, 2021

Uniswap V3 Video NFT Sells for $525,000

March 27, 2021 The Crypto Briefing

Following Uniswap’s V3 announcement, an NFT of the video teaser has sold for $525,000.

Uniswap V3 Video Gets Tokenized

An NFT of Uniswap’s V3 video has fetched $525,000 in an auction.

The video’s creator pplpleasr tokenized the piece through the NFT marketplace Foundation on Thursday. The animation, titled “x*y=k,” was initially listed for 8.88 ETH on Friday.

pplpleasr has recently become known for her eye-catching DeFi-themed animations. She’s previously created videos for key projects like Aave, Sushiswap, and Yearn.Finance.

The Uniswap V3 video depicts a dreamy scene in which a unicorn finds its way to an Ethereum logo floating above a lake. It also features several curve formations and ends with a star constellation that reads “V3.”

In a video explaining the piece, pplpleasr said that the animation represents a journey towards “the Ethereum promised land.” Uniswap’s emblem is a unicorn, and the curves featured in the piece are a reference to the price curve used in Uniswap’s liquidity pools. x*y=k is the equation that determines the price of each asset in a Uniswap pool.

Bidding on the NFT heated up last night until PleasrDAO came through with the final 310 ETH bid. The DAO was set up specifically to purchase the NFT.

pplpleasr said that she was “moved beyond words” by the sale. She also said that she and Uniswap would donate the funds to charities supporting Asian Americans and Pacific Islanders and other minority groups, in line with Friday’s #StandWithAsians event.

Uniswap announced its V3 update after much anticipation earlier this week. The next iteration of the protocol is designed to give liquidity providers 4,000 times more capital efficiency, among other improvements. It’s set to launch on mainnet on May 5, with a further launch on Layer 2 solution Optimism sometime after.

Disclosure: At the time of writing, the author of this feature owned ETH and AAVE. They also had exposure to UNI, SUSHI, and YFI in a cryptocurrency index.

Uniswap V3 launches — UNI prices surges by 8% in minutes

March 23, 2021 Coin Telegraph

Coin Telegraph

UNI, the native governance token of Uniswap, surged immediately after the Uniswap V3 launch.

UNI, the governance token of Uniswap, the most widely utilized automated market maker (AMM) in DeFi, has surged significantly after the launch of Uniswap V3 on March 23. At just over $35 per token, UNI has gained nearly 23% in the past week

The Uniswap team said:

"Today, we are excited to present an overview of Uniswap v3. We are targeting an L1 Ethereum mainnet launch on May 5, with an L2 deployment on Optimism set to follow shortly after."

With a market capitalization of $17 billion, it has surpassed some major perennial altcoins such as Litecoin (LTC), putting UNI right under XRP whose market cap is over $25 billion.

*UNI/USD 4-hour price chart (Gemini). Source: TradingView.com*

Why is UNI and Uniswap seeing strong momentum?

There are two key reasons behind UNI's massive rally in the past two months.

First, Coinbase's planned initial public offering (IPO) in the U.S. market has caused the rerating of exchange tokens and AMMs.

Second, the overall increase in the interest in the DeFi sector has pushed up the valuation of major AMMs, including Uniswap and SushiSwap.

On March 21, the price of UNI reached a new all-time high at $35.2, fueled by the excitement surrounding Uniswap V3.

Analysts at Intotheblock said:

"Uniswap's governance token $UNI reached a new high of $35.2 with a lot of excitement building around the upcoming v3. In just 78 days of 2021, the protocol did $73.1b in traded volume and over $219m in fees. As well, the Total Value Locked reached a new ATH of $5.23b."

*Uniswap statistics. Source: intotheblock*

Investors and DeFi analysts say that the release of Uniswap V3, which essentially is the third version of Uniswap, would likely cause a DeFi and Uniswap "boom."

The pseudonymous investor known as "Johnny" wrote:

"In my opinion once $UNI v3 comes out and $ETH 2.0 comes out we will see a larger Uniswap boom than we saw in the summer. The plan is to starting planting your seeds now before it happens"

UNI is already a bluechip

UNI has become the go-to crypto asset to gain exposure to the DeFi market for many investors due to its dominance in the AMM market and high valuation.

Investors have long considered UNI as a bluechip asset, representing the exchange and AMM market within DeFi.

Alongside Compound, Aave and SushiSwap, Uniswap remains as one of the four major bluechip DeFi tokens.

Mike Abundo, a DeFi analyst and investor, said:

"Each Ethereum finance vertical seems to have a venture-driven blue chip and a community-driven blue chip. For lending, that's $COMP and $AAVE. For exchange, that's $UNI and $SUSHI. Wonder if we'll see similar dichotomies arise in Ethereum art and gaming verticals."

As long as the interest in DeFi and the total value locked (TVL) of all DeFi protocols continue to increase, the demand for UNI is expected to rise.

According to Dappradar, the TVL of the DeFi market has crossed $41 billion and has remained relatively stable above this level.

Out of the $41 billion, $4.75 billion comes from Uniswap, which means well over 10% of the entire DeFi market's TVL is in Uniswap.

Particularly as the Coinbase IPO nears, the momentum of UNI would likely accelerate, which would likely also positively affect SushiSwap, BNB, FTT, and other exchange-related crypto assets.

uniswap v3