DeFi Market Overview
-Will Sheehan
MEV Yields
Despite cycle lows in on chain activity, mev boost yields have been coming in higher than expected. Lido MEV rewards are a great overall proxy for this and they have been steadily increasing since a flurry post merge. If these market conditions are producing ~0.15 ETH per block MEV yields staking becomes incredibly attractive when DEX volumes pick up.
App Chains
Ribbon announced plans for a dedicated rollup for a new derivatives exchange called Aevo. Aevo looks to be a deribit like product with portfolio margining and a wide array of ETH options products. Ribbon, notably is not using the cosmos-sdk for this chain but a fork of an EVM rollup. The app chain thesis has ebbed and flowed over the years but this time we have real teams with real traction putting their weight behind the effort. Derivative products are uniquely well suited for app chains in that performance is essential and composability is usually secondary. I have my trepidations for spot DEXs but derivatives will be the flag in the sand on this. Big questions are if the actual UX of bridging can even approach that of a Uniswap market order, gut says atomicity is hard to fake - we will see.
Cosmos is the major player here on the infrastructure level and the recent 2.0 announcement looks to rejuvenate ATOM and the hub.
NFT Market Overview
-kezfourtwez
Some very large trades happened this week but not so many new projects or renewed interest in older ones. The famed hoodie ape punk sold for 3.3k ETH ($4.4m), an M3 mega mutant for 1k ETH ($1.3m) and a trippy fur ape was swapped for 3 floor apes, 3 kodas and a BAYC tier otherdeed. Don’t be fooled though sweet child, this type of stuff is exciting and impressive and may briefly take our mind off our bear market sorrows, but we’re not out of the woods until we see comparable and consistent volume return to NFT’s and these HTF volume charts look a whole lot better.
Historically September is bad for all markets, maybe Uptober will bring us some relief. I would love to see volume range back up to early may levels to confirm that we did just experience a local bottom, but with the looming global macro issues I’m not hopeful.
Highlights and performance:
QQL mint pass DA sold out yesterday at 14 ETH, the floor price has since risen to 19 ETH with almost 4k ETH in volume since inception
Hedz have steadily climbed their way from a low of 1.3 back up to 2.1 ETH
Cryptopunks at almost 8k ETH in weekly volume, making up 11% of all Ethereum NFT volume this week
New mint Azragames, 0.2 to 0.33 ETH and currently sits at #8 on the weekly volume chart with 1.5k ETH traded in under 2 days
About the big buys - Notorious punk trader and holder of the only 7-attribute punk Seedphrase, has sold the only hoodie ape for 3.3k ETH or $4.4m. This is the highest ever ape sale in ETH but not in USD. He bought it for 150 ETH or $71k in late 2020, a nice 62x in just under 2 years. 3 years before that, this punk was sold by another prominent punk holder for just $1400, pain.
Leveraged Mega Mutant trade - Fragment.xyz has borrowed 1000 ETH against two mega mutants on p2p loan protocol Arcade.xyz, and used the proceeds to buy a third Mega mutant ($1.3m) from prominent Yuga ecosystem holder Machi Big Brother. Fragment now owns 5/12 M3 MAYC’s including what is currently locked up in the loan.
AI pfp’s - Last week I briefly mentioned the rise of a new meta. AI generated art, low supply (200 - 1k), almost free mint price, between 5% and 10% royalties. It’s incredibly fomo inducing when a completely new style of art hits the market running and with such a low supply. I think it took a while for most to catch on that it is in fact AI - many are advertising the collections as made up of 1/1’s. The creators get in, make a quick 5 - 10 ETH off mint, hold some of the supply to sell as price rises and make 5 - 10% from royalties on top before the collection eventually trends to 0.
The collection that kicked all of this off was 8pes which minted for 0.008 and ran all the way to 0.9 ETH at the top. Low supply causes high volatility and incredibly fast run ups as well as dumps. You can see the vertical fomo sweeps before any more could be listed.
Arguably 8pes success was due to a combination of the art being objectively appealing and a brand new art style, which caused enough market confusion and fomo to swiftly send it almost 100x. The success has led to a many more low effort derivatives being pumped out everyday, some successful and some not - Shimashi, Walk the Plank, Cannibals, Exoliens, Exostamps, Yuki and the list goes on.
Basically what is happening is the advance of AI image generation and its accessibility to the public has made it incredibly easy for creators to churn this kind of content out. Anyone can now download and run open-source models like Stable Diffusion on their own machines and train these models on whatever images they like. They then have the model spit out X number of images aligned with their chosen theme and use services like fair.xyz for a no code contract creation and mint.
Waifu Diffusion is a good example, a model trained on waifu’s that will spit out waifu-esque images no matter the input prompt because that’s what it’s learned from. Another example is Walk the Plank which looks like it was trained on One Piece characters.
I don’t expect this meta to last very long, especially taking into account the quality and speed of similar products entering the market. Though a more interesting topic is what new AI meta’s will arise and stand in its place? What kind of sustainable ways can we expect to see AI included in the NFT space? Here is an article from the founder of Webaverse with some interesting takes on how it may play out more broadly.
Opensea bug bounties - Opensea got a lot of heat earlier on the year for an alarming number of incidences where hackers had found a way to buy old listings of expensive NFT’s. Many BAYC’s, Clones, Doodles etc were stolen and it resulted in millions of dollars in user losses. The wider NFT audience has not been impressed with the marketplace’s lack of proactivity and prevention of these types of exploits in the past. Along with their below average bug bounties.
But OS has recently upped their security game and entered into partnership with HackerOne to provide up to market standard bug bounties for exploits ranging from low risk to critical. Two whitehat hackers, Corben and nix.eth have recently been awarded $100,000 each for reporting critical bugs. $100k may seem like a lot if you you are not familiar with bug bounties but it’s not. A number of crypto protocols offer huge multiples of that amount to protect against potential large scale hacks. The difference is the volume of stolen funds possible between an NFT related hack and a token treasury hack. Many of these large DeFi protocols manage hundreds of millions of dollars and up to billions, if they are to go down it’s likely that whole sectors of the treasury can get drained. Whereas an NFT hack is generally picking off funds user by user like the ‘old listing’ exploit.
Layer 0 recently offered the highest ever crypto bug bounty at up to $15m for the most critical of issues, and MakerDAO offers $10m. ImmuneFi reported that there was a total of $10b lost to DeFi hacks in 2021 as opposed to $12m in BAYC’s alone, stolen between 2021/2022.
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
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