The decentralized finance (DeFi) landscape is experiencing a significant loss of Total Value Locked (TVL) across major blockchain networks, including Ethereum, Solana, and Cardano, causing unease in the crypto market, while the Base blockchain network shows unexpected growth in TVL.
Pendle Finance is introducing a new product that leverages real-world assets (RWA) to provide users with yields from traditional sectors, such as U.S. Treasury Bonds and tokenized assets, aiming to attract institutional investors into the decentralized finance (DeFi) space.
The past week in DeFi saw the developers behind Base and Optimism protocols collaborate on a revenue and governance sharing framework, while evidence emerged regarding the $1.5 billion Multichain hack and victims search for answers, and blockchain security provider Quantstamp introduced a new DeFi tool to detect flash loan attack vulnerabilities. Additionally, Shiba Inu's Ethereum layer 2, Shibarium, is preparing for a relaunch, and the DeFi market experienced a minor dip in total value locked.
Decentralized finance (DeFi) has been heavily impacted by the crypto bear market, with the total value locked in DeFi reaching its lowest point since February 2021, as investors withdraw approximately $170 billion in deposits due to decreased yields and increased exploits. However, newer protocols like Unibot are attempting to simplify the DeFi experience and show promising signs for reigniting the DeFi space.
Aerodrome, a cross-chain DeFi platform, has attracted over $150 million in locked value within 24 hours of launch, aiming to support projects and generate liquidity for the Base ecosystem by rewarding users with AERO tokens for providing liquidity, conducting swaps, and participating in governance.
Hackers have targeted decentralized finance (DeFi) protocols almost 500 times since 2019, stealing a total of $6 billion, highlighting the vulnerabilities of the smart contracts that underpin DeFi platforms. The recent surge in hacks, along with declining market share and increasing interest rates, has led to the closure of several platforms and calls for regulations to prevent money laundering and enhance security measures.
The total value deposited into DeFi contracts on the Base network reaches an all-time high of $301.2 million due to liquidity mining incentives on the Aerodrome decentralized exchange, while lending protocols like Aave on the Ethereum layer-2 see scarce liquidity.
Binance CEO Changpeng "CZ" Zhao predicts that decentralized finance (DeFi) has the potential to surpass centralized finance (CeFi) in the next bull run, emphasizing the positive impact of regulatory clarity and the need for broader cryptocurrency adoption worldwide.
Decentralized exchange Brine Fi has raised $16.5 million in funding, led by Pantera Capital, to address challenges in institutional and mainstream adoption of DeFi.
The International Monetary Fund (IMF) and the Financial Stability Board (FSB) have published a joint policy paper with recommendations for regulating stablecoins and decentralized finance (DeFi) activities, in response to the risks associated with crypto assets.
Global securities regulators have outlined a blueprint to hold participants in decentralized finance (DeFi) accountable for their actions and protect market stability, as the sector has experienced significant shrinkage and is being used for money laundering; regulators are proposing a framework to ensure investor protection, risk management, and cross-border cooperation.
According to a Bank for International Settlements (BIS) bulletin, a centralized oracle based on trust may be the only option for DeFi, but this compromises the decentralization ethos underlying crypto DeFi.
The Commodity Futures Trading Commission (CFTC) has charged Opyn, ZeroEx, and Deridex with illegally offering derivatives trading through decentralized finance (DeFi) operations, requiring them to pay penalties of $250,000, $200,000, and $100,000 respectively. The companies are accused of using blockchain-based protocols and smart contracts to function as trading platforms in violation of regulations.
Binance CEO predicts that DeFi will surpass centralized finance in the next bull run, while the US CFTC takes regulatory action against three DeFi protocols for alleged registration failures; a report from the Bank for International Settlements argues that pure DeFi has little use case in the real world due to the need for oracles; Binance is refunding $1 million to users over a token incident, and the Shiba Inu ecosystem's layer-2 network, Shibarium, has reached over one million wallets but has yet to impact the price of SHIB token.
Finoa, a Berlin-based cryptocurrency custody firm, is expanding its services to include decentralized finance (DeFi) through its custodial wallet infrastructure, offering regulated institutions access to a curated list of web3 platforms and permissioned DeFi applications.
Coinbase CEO Brian Armstrong advocates for decentralized finance (DeFi) protocols and suggests legal action to establish a legal precedent, while MakerDAO's founder believes decentralized stablecoins could dominate the crypto market, and Polygon CEO acknowledges the success of their $1 billion investment in zero-knowledge proof rollups. Additionally, market surveillance firm Solidus Labs reveals that decentralized exchanges have become a hotspot for wash trading, and a DeFi advocacy group petitions to stop a patent troll from targeting DeFi protocols. Despite a mixed week for the top 100 DeFi tokens, the total value locked into DeFi protocols remains above $49 billion.
The decentralized finance (DeFi) ecosystem experienced a decline in on-chain economic activity in August, with exchange volume decreasing by 15.5%, the DeFi Index falling 21%, and the total value locked decreasing by 8%; however, positive developments such as stablecoin growth were observed.
The concentration of assets in decentralized finance (DeFi) could pose a risk if stablecoins surpass the market capitalization of the native tokens of their underlying blockchains, creating a potential for double-spending and control by token holders, highlighting the need to rethink distributed ledger technology (DLT) architecture and explore alternatives to blockchain such as directed acyclic graphs (DAG).
Decentralized finance (DeFi) projects in the US face significant regulatory risk, according to Synthetix founder Kain Warwick, who believes that US regulators are neglecting the advantages of transparent and open infrastructure in financial markets and that it will be left to the courts to resolve these issues.
Summary: Economic activity in the DeFi sector dropped by 15.5% in August, according to an analysis by investment management fund VanEck, while blockchain capital announced two new crypto-focused funds totaling $580 million, and Balancer protocol attributed its recent exploit to a vulnerability in its DNS service provider. Additionally, Chainlink and Arbitrum have partnered for decentralized application development, and the top 100 DeFi tokens experienced a bearish week.
Decentralized finance (DeFi) has the potential to revolutionize the financial industry, but its fragmentation and lack of interoperability pose significant challenges for mass adoption; however, platforms like GAMI World aim to solve this problem by providing a unified, user-friendly interface for accessing various DeFi use cases.
DeFi has become centralized, with stablecoins and real-world assets dominating the market, but crypto staking yields can bring decentralization back to the space by offering a viable alternative.
Interest-bearing stablecoins are becoming increasingly popular in the DeFi sector as they offer attractive yields generated from real-world assets, such as T-Bills and government bonds, providing a transparent and auditable alternative to traditional banking systems.
The co-founder of Aptos believes that a universal identity application, stablecoins, and decentralized finance (DeFi) innovation are the key factors that could attract a billion new users to the digital assets space.
Decentralized finance (DeFi) has the potential to revolutionize wealth building globally, and the use of Artificial Intelligence (AI) can address challenges such as liquidity, language barriers, regulatory compliance, and security to further enhance its adoption and growth.
Yield Protocol, a decentralized finance (DeFi) lending protocol, has announced its decision to shut down due to a lack of business demand and global regulatory pressures, including unfavorable crypto regulations in the United States, Europe, and the United Kingdom.
The Sui Foundation has announced a $51.3 million fund to support its DeFi ecosystem and on-chain central limit order book-based platform, DeepBlock, with the aim of emulating the high-frequency trading capabilities of centralized exchanges by leveraging the Sui blockchain's transaction speed and other advantages.
September became the biggest month for crypto exploits in DeFi, with over $300 million in losses, the popular DeFi lending protocol Yield announced its permanent closure by December, and Polygon co-founder Jaynti Kanani stepped down from his day-to-day roles at the firm, while decentralized autonomous organizations (DAOs) were praised for their potential in helping scientists find funding and community.
The European Securities and Markets Authority (ESMA) released a report on decentralized finance (DeFi) and its risks to the EU market, highlighting the liquidity risk, counterparty risk, vulnerability to scams, and lack of recourse mechanisms as key concerns, although it concludes that DeFi currently does not pose significant risks to financial stability due to its small size and limited interconnectedness with traditional financial markets.
The European Securities and Markets Authority (ESMA) has warned of the "serious risks" of decentralized finance (DeFi) despite its early stage, citing concerns over investor protection, operational vulnerabilities, and lack of a responsible party. ESMA plans to further investigate this nascent market that defies traditional regulatory frameworks for centralized entities like banks and exchanges.
The total amount of capital locked in decentralized finance (DeFi) protocols has dropped to its lowest point since February 2021 as traders seek higher yields and less risk in traditional finance products, leading to a decline in the DeFi sector during the ongoing cryptocurrency bear market.
The French Central Bank has concluded its consultation on the regulation of decentralized finance (DeFi), finding that it is more appropriate to refer to DeFi as "disintermediated" finance due to the persistence of centralization patterns and the operational risk of high concentration in blockchain infrastructure. The majority of respondents support continued deployment of DeFi on public blockchains, with regular auditing and regulation of intermediaries and smart contracts. The European Securities and Markets Authority (ESMA) also highlighted the benefits and risks of DeFi in a recent report.
Summary: European securities regulators have released a report highlighting the risks and benefits of decentralized finance (DeFi), Uniswap has launched an Android wallet beta, Star Arena recovered 90% of stolen tokens after offering a bounty, Platypus Finance fell victim to another flash loan attack, and the total value locked in DeFi protocols reached $45.67 billion.
