DeFi Market Overview
-Will Sheehan
Unsecured Lending, DeFi Edition
With Ribbon’s recent launch of their dedicated under-collateralized lending app, the category is becoming more crowded with >$300m in loans outstanding across Maple, Ribbon, TrueFi and dAMM. The Ribbon product already has >$25m in a few weeks, solid numbers
The Primary driver of this growth is the attractive yields being offered by the trading firms doing the borrowing, yields ranging between 8% and 12% while compound and aave sit around 1.25%.
This growth has come during an epic credit crunch in CeFi lending, with Genesis and the like remaining tight. The question becomes -once liquidity ramps up again from CeFi lending desks will supply come in on-chain markets to provide the size market makers will need. Ceteris paribus MMs will prefer the increased privacy from a centralized counter-party so these markets will have to compete on yield. Supply here could scale with passive investment vaults or by introducing leverage [e.g. borrow against your maple deposit]. Ultimately defaults will happen though, until then I’d imagine DeFi will push it to its limits and underprice that risk until it comes crashing into depositors.
Infrastructure
This week arbitrum announced that it had acquired Prysmatic Labs. ETH clients have notoriously been underfunded and this is the first case I can recall of major client software team being acquired. The landscape of client software is incredibly fragmented, with hundreds of slightly different evm implementations, geth forks, lack of archive nodes for many. For arbitrum this strikes me as a move to become a complete infrastructure stack. The benefits are clear from the development side - namely consistent devops tooling for service providers.
NFT Market Overview
-kezfourtwez
Wow what a week for crypto as a whole, $600m stolen across multiple DeFi hacks, the SEC probe into Yuga labs and a CPI print that seemed uber bearish and then turned bullish with a sharp V-shaped recovery. Since late July NFT volume has been ranging between 60k and 100k ETH per week, we were on the lower end this week with 73k ETH across all major marketplaces.
We’ve had a few exciting releases and some solid rises this week. Anthony Hopkins released a project, Street Machine, Genuine Undead and the Digidaigaku ecosystem have been showing strength.
Performance highlights:
Anthony Hopkins - The Eternal dropped yesterday, minting for 0.25 and currently sits around 0.80 ETH
YuGiYn from a 0.088 mint to a top of 0.3, now sitting at 0.22 ETH
Street Machine is this weeks screamer, 0.03 mint to where it currently sits now at 0.52 ETH - a swift 17x in just over 7 days
Genuine Undead just will not stop, now sitting at 0.7 ETH floor
Digidaigaku full set now sits above 20 ETH
The Forgotten Runes ecosystem has seen some action since their latest game teasers - Warriors are up almost 3x
Runiverse - The team at Forgotten Runes has been working hard behind the scenes. This week they released a bunch of new information about the game they are building. Runiverse is described as a WoW style MMO, explore, complete missions, battle NPC’s and players, earn XP and upgrade your character.
You will be able to play solo or in a team, but fighting in a team will give strategic benefits and XP bonuses
For the combat system they’ve implemented the action time bar. When the the player picture reaches the right hand side they will be able to attack or complete an action. Multiple players can attack/action concurrently
Users will want to act strategically in regards using actions, attacks and abilities as they have unique cooldown periods
Upgrades, gathering and crafting will all play an integral and intricate part of the game
As a player levels up, so will the enemies they encounter
Combat will be optional and getting into a fight will be proximity based, but first movers have an advantage
In a detailed twitter thread Dotta put an emphasis on creating a game for the sake of being fun - ‘fun-first’, crypto components second. Loopify has the same stance with Treeverse and I agree with their take. Incorporating NFT’s and play to earn mechanics is a great idea and an awesome way to help move the needle forward in terms of web3 gaming, but it has to be fun first and foremost. The crypto mechanics must be complimentary.
I’m a huge sucker for good pixel art since long before NFT’s, but oh my it looks amazing. The environment looks incredible, the art style is refined and well executed and the asset animations are addictive. I just love the whole style of Forgotten Runes, I don’t currently own any but man did I feel the fomo when these sneak peeks came out. On the flip side, something I have struggled to mentally model is how NFT games are going to incentivise holders enough to maintain the multi-thousand dollar price tags on their assets. I hold Otherdeeds and would love to be proven wrong but for now I remain cynical yet cautiously optimistic.
If amazing pixel art and collaborative open world games excite you, I highly recommend checking out the full combat and production updates here and here.
nftperp - Begrudged jpeg haters have long been looking for ways to short our digital pictures to 0, soon they’ll be able to with nftperp. A decentralised perpetual protocol with the main purpose of longing and shorting NFT’s with up to 5x leverage. It’s currently in a beta phase and not on mainnet yet, but when it does it will go live on Arbitrum. The protocol uses a vAMM (virtual automated market maker). vAMM’s emulate regular AMM’s except no assets are actually stored inside the vAMM and all are synthetic. The engine instead just calculates the entry and exit prices of each trade and the users make leveraged trades based on collateral stored in an external vault.
The price feed is derived from an integrated chainlink oracle using a robust calculation to deem the ‘true floor price’. It removes outliers and has multiple safeguards against real world price manipulation. The oracle is only used as a guide, vAMM’s are a PvP virtual liquidity pool. When someone longs the price goes up, when someone shorts the price goes down. So how does the virtual price track the price of the real world asset? The answer is the funding rate, when the virtual price is above the real world price the funding rate becomes positive. This means that every 8 hours, longs have to pay shorts a percentage of their trade - the key here is it incentivises the price to come back down closer to the real world price.
nftperp are currently holding a paper trading competition on Arbitrum. Sign up on Tide and you’ll be able to mint some fake WETH and begin trading. Prizes range from NFT’s to different tiers of airdrops for when they launch $NFTP, but the competition ends in a few days so you better hurry!
I am but a small minded jpeg enthusiast and have not thought through the potential long-term ramifications of being able to short NFT’s (welp). In saying that, I get extremely excited by any sort of NFT x DeFi innovation and this certainly ticked that box, I’ve been messing around with the paper trading and having a lot of fun.
Solana royalty debate - Just four weeks ago the largest Solana NFT marketplace was defending its decision to launch Metashield, a royalty enforcement tool for creators aimed at deterring sellers from listing on 0% fee marketplaces. Creators could log into the tool using the wallet that was used to create their collection, see where their NFT’s were being listed and at what royalty percentage. If holders were trying to bypass their desired amount they could then modify the metadata, add a watermark and blur the image. If the listed NFT is bought using a lower than usual royalty, it incurs a debt which can be paid to return it to its original state.
Since then ME has begun to lose marketshare due to the large range of lower fee alternatives. The situation is similar to the OS, X2, Sudo battle on Ethereum. Now, just four weeks later, they have backflipped on their stance and teamed up with Solana NFT aggregator Coral Cube to offer their own 0% royalty alternative.
They are not the only ones heading in this direction either. Degods front ran this whole situation and announced a few days ago that they would be dropping all royalties across Degods and y00ts to 0% and looking for alternative income streams.
Personally I think royalties can be great, but I also think that the market as a collective entity will continue to become more efficient and more liquid, and that probably means less emphasis on royalties for the most liquid NFT’s as opposed to 1/1 art etc. Though I’m also confident that the same market will come up with even better income stream innovations. Frank has always been an innovator, a first mover and an experimenter, I’m not surprised that Degods made the move and I'm interested to see what he comes up with.
EDIT. Magic Eden just announced they are making their whole platform royalty optional. In an effort to help move the ecosystem forward they are hosting a ‘Creator Monetisation Hackathon’ and putting $1m towards the prize pool, read more here.
In other news:
Bye for now, make sure to use Parsec to stay on top of the market and we’ll see you next week.
good
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