INTRODUCTION

The month of September once again reminds us that this space continues to surprise in ways more than one. And in return to those that are following and investing in the space, continuation of sleep deprivation, drama, and at times confusion warps us to another level of questioning our participation in this industry. But we love it. We love seeing the novel advancements of permission-less finance, the innovation on protocol governance and launches, the lighthearted trends of food-meme’d tokens, and so on and so forth. We’ve finally been able to shift away from focusing on layer 1 protocol tokens to immense usage of DeFi tokens that are built on top of those layer 1 protocols. The haphazard in these high flying DeFi tokens have also positioned PANONY in being more thorough in our due diligence of partnering with DeFi projects. There’s a swarm of skeptical money to be made in this space right now but we’ve stuck to our adaptive cores and principles in working with sound partners.

DeFi HAS TURNED INTO A DeRama

As we have mentioned last month in our August Newsletter, “What DuhhFi just happened?!”. From when we wrote that newsletter until our current writing of the September Newsletter (currently September 27^th as the time of this writing), the Total Value Locked (TVL) in DeFi protocol smart contracts (according to DeBank.com) have risen from around $7 billion to a current level of around $14.5 billion. [Microsoft1] That represents a bit more than a 50% growth and it doesn’t seem to be the end of it. All of crypto twitter was about DeFi, spurring jealously from the non-DeFi’ers, aka bitcoin maximalists. But there has got to be those bitcoiners getting in on the action as we have seen the amount of wrapped bitcoins also getting in on the fun. Since last month, the growth in wrapped bitcoins was over 100% while we saw a short bloodbath in the price of DeFi tokens.

The DeFi explosion has also pulled in the traditional CeFi players to get in and build out their own DeFi ecosystem. [Microsoft2] Although their intention is fear of losing users and trading volume forcing them to take swift desperate actions in staying relevant. Such quick rollouts, such as Binance Smart Chain, have some influencers in the space, like OKEx’s Jay Hao, in poking speculation that such projects aren’t really decentralized by nature. PANews captures a snapshot of the DeFi ecosystem of the most popular exchanges in China (Binance, Huobi, and OKEx) in the graphic below and can be summarized in this piece.

Despite the threat of DEXs replacing CEXs, PANews’ data analyst, Carol, positions that is not the case. On one hand you can look at the on-chain flows of ETH off of CEXs flowing into DEXs, but the flows of stablecoins going the opposite way tell a different story. More on that positioning can be read in her piece here.

UNI is a type of SUSHI right?

The more interesting monstrosity of flows was witnessed between a forked version of Uniswap called, SushiSwap (yes we went from single food items such as yams to now more complex concoctions such as sushi, and bentobox?) To give a very brief recap of what happened during this very young project (hitting 1 month now in existence): a pseudonymous developer forked Uniswap’s open source code, mimicking the whole protocol, with the only difference being supplying a governance token called $SUSHI. In such DeFi speed fashion, TVL in SushiSwap galvanized to around $1 billion, in less than 2 weeks with that same pseudonymous developer secretly cashing out the developer’s fund worth about $14 million sparking online outrage amongst CT. The funds have then miraculously been returned in a series of events with the actual protocol’s multi-sig smart contract keys in the hands of a about a dozen crypto influencers which we brightly illustrated here. For a more sequence by sequence timeline of what unfolded, we also artistically illustrated it in the below graphic. 

It’s not done yet. In a beautifully orchestrated clap back to SushiSwap (as some would also describe them as vampire mining Uniswap), Hayden Adams and the team at Uniswap decided to air drop around $1,400 in a new governance token, $UNI, to every historical user of their platform. The tables have turned and Uniswap is now the golden boy. You could call it a DeFi stimulus package to anyone who got burned the past few months.

THE OCC BACK AGAIN

As mentioned in last month’s newsletter of the OCC’s decision to allow bank to custody crypto, this month they have made more fronts in allowing national banks and Federal savings associations (FSA) to provide normal banking services to stablecoin issuers. A timely guidance on when stablecoins have boomed over the summer with the supply of USDC more than doubling and the value of non-USDT stablecoins as a % of the value of USDT rising from 21% to 31% over the past month. We dived a bit deeper into this interpretation by the OCC here, but nonetheless it’s something inches closer to the narrative of “mass adoption”.

WRAPPING IT UP

The month of September was more or less the same as the month of August. DeFi DeFi DeFi, but more exacerbated and the eventual plunge in DeFi tokens with some down almost 50% mid-month. The next trend in crypto prepares to marry DeFi with the advantageous of NFTs. Axie Infinity have taken the NFT world by storm along with popular NFT marketplaces such as Rarible and OpenSea providing the necessary platform for buying and trading. The highly anticipated NFT mainnet launch will be all eyes on Aavegotchis. The combination of popular DeFi platform Aave and every 90s child’s favorite electronic pet, Tamagotchis.

 As a trivial side note of what caught our eye the past month was the mention of DeFi in China’s CCTV2 天下财经 (TianXia CaiJing) broadcast which caught the flurry of attention amongst the crypto community. Although it wasn’t an official announcement by the Chinese government as one may think due to its broadcast; CCTV2 doesn’t command the same official authoritative level as CCTV1. And unfortunately, the result of this subtle mention didn’t launch a 40% price increase in any of the cryptocurrencies, as we saw last October, but in a way reflected a maturation of the growing awareness and casual reporting of crypto in China.

WHY WE ARE HERE

The whole DeFi space can be really convoluted and confusing to people who are just starting out in understanding what bitcoin is. Tinkering and investing in these unaudited DeFi protocols is something we do not advise for those that are new here. The past few months there have been many warnings and comparisons of this DeFi craze to the ICO craze of 2017. It is hard to reason how some of these tokens orchestrate pump and dump schemes which is ultimately giving DeFi a bad rap and spurring up posts like this titled “The corruption of DeFi in 2020”. There are good and well reputable projects in the space. There is no doubt about that. And PANONY along with PANews strives on working with these types of projects, such as Linear Finance, to not only further adoption, but to also increase education to those tainted by adverse situations in the traditional space.

-Team PANews/PANONY