Category: DeFi

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Celsius Crypto Staking DeFi

Goldman Sachs is Raising $2 Billion to Buy Celsius’ Assets

Investment giant Goldman Sachs is said to be attempting to raise US$2 billion in an effort to buy the assets of distressed crypto lending firm Celsius amid the current turmoil engulfing the cryptocurrency industry.

The capital would allow Goldman Sachs to buy Celsius’ assets at a massive discount, should the company file for bankruptcy:

‘Fake News’ Claim Regarding Rumours

The bank has been looking into commitments from Web3 crypto funds specialising in distressed assets, and traditional financial institutions with cash on hand. The assets to be acquired, most likely cryptocurrencies having to be sold at a low, would then likely be managed by participants taking part in the fundraising.

However, angel investor Simon Dixon has claimed that the rumours are fake news, according to a “source” at Goldman Sachs:

Drama unfolded earlier this month with Celsius when the crypto lender had to halt withdrawals as well as other services on its platform, but only after it transferred over US$300 million in digital assets to FTX.

Users May Yet Be Left High and Dry

Concerns also exist that Celsius may be left unable to pay out users wanting to withdraw their funds if the value of staked ETH doesn’t regain parity with ETH. Staked ETH, which is extensively used by Celsius, started to lose parity with ETH when DeFi markets were sent into a spiral following the collapse of the Terra ecosystem. In the time since, Celsius has hired the restructuring consulting firm Alvarez & Marsal.

The company has also reached out to restructuring attorneys from the law firm Akin Gump Strauss Hauer & Feld. Additionally, global investment bank Citigroup has been employed by Celsius to advise on possible solutions, which include an assessment of an offer from rival crypto lender Nexo. Citigroup and Akin Gump have both recommended that Celsius file for bankruptcy.

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Avalanche Binance Coin Crypto News DeFi Ethereum

DeFi Yield Protocol (DYP) Pumps 107% Amid Coinbase ‘Experimental’ Listing

One of six Ethereum-based altcoins just listed on US crypto exchange Coinbase’s roster of digital assets, DeFi Yield Protocol (DYP), is up a significantly bullish 107 percent in a week and as a result is currently trading at US$0.43:

Experiment Gets Real

Coinbase says DYP will be phased in along with five other Ethereum-based altcoins – HOPR, MATH, PARSIQ, Elastos (ELA) and ALEPH – in trading pairs with Tether (USDT) after appropriate liquidity conditions are met. All six altcoins are grouped under the exchange’s ‘Experimental’ label, introduced in March this year:

DYP aims to offer users the ability to stake Ethereum, Binance Coin and Avalanche to earn a fixed 25 percent APR (annual percentage rate). It is also said to be working on an array of products for the decentralised ecosystem and seeks to be “accessible for both beginner and advanced users” through a combination of DeFi, NFTs and metaverse gaming.

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Crypto Exchange DeFi NFTs Uniswap

Uniswap Users Will Soon Be Able to Buy NFTs Directly on its Web App

Uniswap Labs announced on June 21 that it had acquired the NFT marketplace aggregator Genie, and plans to integrate NFTs into its products starting with the Uniswap web app:

The integration of NFTs into the popular decentralised exchange means users will soon be able to buy and sell the assets across most major marketplaces using Uniswap.

Uniswap Labs also plans to incorporate NFTs into its other products, including its developer APIs and widgets, which it says will make Uniswap “a comprehensive platform for users and builders in Web3”.

Airdrop for Genie Users

As part of its acquisition of Genie, Uniswap Labs will be launching an airdrop of USD Coin (USDC) to historical Genie users. In a tweet, the company said the airdrop would be open to any Genie users who had used the platform more than once before the snapshot was taken on April 15, along with any user who holds a GENIE:GEM NFT.

The airdrop is planned to launch in August and will be claimable by eligible users for 12 months.

Not Uniswap’s First Foray into NFTs

This is not the first time Uniswap Labs has dabbled in NFTs. In 2019, the company launched Unisocks, a platform where users could purchase a $SOCKS token that could then be redeemed for one real pair of limited edition socks. Uniswap Labs also helped to pioneer on-chain generative SVG images with the development of its Uniswap V3 NFT positions technology.

In its statement about the Genie acquisition, Uniswap Labs expressed its belief that NFTs are simply another way of generating value in the Web3 economy and are not separate from the ERC-20 tokens Uniswap has previously focused on:

We see NFTs as another format for value in the growing digital economy – not a separate ecosystem from ERC20s – and they’re already an important gateway to Web3.

Uniswap blog

Highs and Lows

Launching in late 2018, Uniswap was one of the first – and is currently one of the largest – decentralised exchanges on the Ethereum blockchain. In February 2021, the volume of Wrapped Bitcoin (wBTC) trading on the platform hit an all-time high following Tesla’s purchase of large amounts of Bitcoin.

More recently, in April this year a class-action lawsuit was launched against Uniswap alleging the decentralised exchange had been involved in the sale of unauthorised securities.

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Bancor Crypto News DeFi

‘Bancor’ DEX Pauses Impermanent Loss Protection Amid ‘Hostile Market Conditions’

DeFi pioneer protocol Bancor has paused its impermanent loss protection (ILP) function, citing “hostile market conditions”:

In a June 20 blog post, the Swiss-based DEX was quick to point out that the ILP pause is strictly a temporary measure to protect the protocol and its users: “[This] should give the protocol some room to breathe and recover. While we wait for markets to stabilise, we are working to get IL protection reactivated as soon as possible.”

What Is ‘Impermanent Loss’ and How Does It Work?

In DeFi, impermanent loss happens when a user provides liquidity to a liquidity pool and the ratio of deposited assets later changes, potentially leaving investors with more of the lower value token. The bigger the change, the more users are exposed to impermanent loss.

The problem, says Bancor, is that many DeFi projects seem to ignore the issue, which ultimately results in inaccurate APR (annual rate of return expressed as a percentage) numbers reported by some protocols.

Insurance by Any Other Name

Bancor’s impermanent loss protection (ILP) feature imposes a cost on a protocol, similar to the insurance cost incurred by an insurance company.  This cost is offset in two ways:

  • ILP is funded by Bancor’s protocol-owned liquidity – the protocol stakes its native token BNT in its pools and uses the earned fees to compensate users for any impermanent loss; and
  • when earned trading fees are greater than the cost of impermanent loss on a given stake, the protocol is effectively burning excess BNT.

It seems not all investors approve of this modus operandi, however:

Elsewhere in the troubled world of DeFi this week, crypto lenders Babel Finance and Celsius have been forced to pause withdrawals and transfers due to what they respectively deemed “unusual liquidity pressures” and, echoing Bancor, “extreme market conditions”.

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Australia DeFi Synthetix

ETH Layer 2 Synthetix Surges 100% Amid Curve Finance Collaboration

Australian Ethereum layer-2 scaling solution Synthetix has seen its native token SNX balloon 100 percent after linking up with liquidity provider Curve Finance.

The partnership has led to the creation of Synthetic Ether, Bitcoin and USD, providing investors with cheap conversions:

Synthetix Now Ranked #3

The knock-on effect since June 20 has pushed the scaling solution to the position of third-largest protocol. As Synthetix was one of the first protocols launched on Ethereum, investors are pleased to see this positive movement:

The collaboration with Curve Finance has resulted in curve pools for Synthetic Ether (sETH)/Ether (ETH), Synthetic US dollar (sUSD)/3CRV, and Synthetic Bitcoin (sBTC)/Bitcoin (BTC). This tech allows the platform to offer more derivatives tokens.

While these synthetic assets are Synthetix’s main product, it appears that new fundamentals have strengthened the project and played a significant role in the surge of SNX.

Kain Warwick, founder of Synthetix, believes the company’s recent success is down to its willingness to experiment with novel mechanisms to provide stability, and the community’s responsiveness under difficult circumstances.

Australian Web3 Witnesses Rapid Development

In February last year, Synthetix successfully raised A$12 million with the aid of a handful of venture capital (VC) firms. The funds weren’t sent directly to Synthetix, rather they were raised through the purchase of Synthetix’s native token, SNX. The fundraising supported the notion that a place was developing for VC money within DeFi.

Thanks to the emergence of DeFi, DAOs and NFTs, the Aussie Web3 scene has seen rapid development over the past few years, due in no small part to Synthetix, DAO Under, Immutable, Maple Finance and Sigma Prime, who have all helped foster interest from investors.

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Crypto News DeFi Solana

Solana DeFi Protocol Votes to Liquidate Whale’s Account to Protect the Network

The team at Solana-based DeFi protocol, Solend, recently liquidated a whale’s account, ostensibly to mitigate risks posed to the Solana network.

A vote was undertaken by the Solend community on whether or not to take temporary control of the whale’s account and liquidate its holdings through an over-the-counter (OTC) trade.

Among the major concerns was that with the price of SOL dropping to US$22.30, the whale’s account would liquidate up to 20 percent of borrows, estimated at around US$21 million, and in such event could have landed Solend with a significant amount of bad debt.

Potential Chaos Alert

Apparently, but for Solend’s actions, liquidations would otherwise have placed significant strain on the Solana network, and liquidators would be especially active and spam the liquidate function – which has been a known factor causing Solana to go down in the past:

Solend Forced to Take Decisive Action

Despite its best efforts, the team at Solend has been unable to contact the whale via on-chain messages to reduce the risk, forcing it to take decisive action:

Options presented to the community included doing nothing, which would present a systemic risk to Solend and its users. Allowing liquidations of this magnitude to happen on-chain is risky as the DEX liquidity isn’t deep enough to handle a sale of this size and could cause cascading effects.

The team at Solend decided that any action taken had a set of trade-offs to consider and it posed a vote to the community with two possible outcomes:

  • Vote Yes – enact a special margin requirement for large whales that represents over 20 percent of borrows and grant emergency power to Solend Labs to temporarily take over the whale’s account so that liquidation can be executed OTC; or
  • Vote No – do nothing.

Votes were cast and the community voted yes:

Categories
Crypto News DeFi Hackers

‘Inverse Finance’ Exploited Again in $1.2 Million Flash Loan Attack

Inverse Finance, a decentralised lending protocol built on Ethereum, has lost over US$1.2 million in the industry’s latest DeFi hack:

To make matters worse, this is the second such incident for Inverse Finance after US$15.6 million was stolen in an exploit just three months ago.

Flash Loan Attack

Flash loans are DeFi-specific crypto loans in which large amounts of capital can be borrowed with little collateral, provided the loan is paid back within the same transaction.

While typically used by traders, hackers have demonstrated success in being able to trick a protocol’s smart contract into manipulating prices and then taking over the liquidity pool’s assets.

This is a so-called “flash loan attack”, a technique utilised by the exploiter in this latest incident, confirmed by security firm PeckShield:

On-chain data reveals that the culprit flash-borrowed 27,000 wrapped bitcoin from lending protocol Aave to conduct the attack. The funds were subsequently routed through swap service Curve for various stablecoins before being used to remove DOLA, a stablecoin, from Inverse Finance pools.

CoinDesk - Unknown
Evidence of the flash loans. Source: Etherscan

In total, the exploiters managed to steal more than 53 bitcoin, worth US$1.1 million, and 10,000 tether (USDT). As a result, Inverse implemented a temporary pause on its lending:

Since the exploit, an address tagged “Inverse Finance Exploiter” has apparently been sent 900 ETH, worth around US$1 million, to Tornado Cash, a privacy mixer often used when attackers wish to conceal their funds.

‘Generous Bounty’ Offered

In a post-mortem, Inverse Finance encouraged the person(s) behind the incident to return the funds for a “generous bounty”. And to mitigate the risk of further incidents, it added that it had retained the services of security experts to not only further understand the breach, but also to prevent further such instances in the future.

Categories
Crypto News DeFi Investing

Crypto Hedge Fund ‘Three Arrows Capital’ Faces Insolvency Amid Forced Liquidations

The future of Singapore-based crypto venture capital firm Three Arrows Capital (3AC) has been blunted by rumours it faces insolvency after being liquidated on several fronts by its lenders to the tune of around US$400 million.

After a three-day social media silence, co-founder Su Zhu has addressed the rumours with the following, perhaps intentionally vague statement on Twitter:

3AC Sweats on a Repayment Plan

Sources say 3AC – which includes troubled financial services company BlockFi among its venture bets – is working on a way to repay lenders post-liquidation, the latest disaster for an investment firm that has backed the likes of Avalanche, Polkadot and Ether, down 57 percent, 38.8 percent and 47 percent respectively in the past 30 days.

3AC itself sustained significant losses during the collapse of the Terra ecosystem last month after investing heavily in its native token, LUNA. Insolvency rumours escalated when Zhu removed 3AC’s investment profile from his Twitter bio, retaining only a mention of Bitcoin.

Luke Davies (left) and Su Zhu, co-founders of Three Arrows Capital. Source: bloomberg.com

Then both he and Three Arrows Capital co-founder Kyle Davies went conspicuously quiet:

Celsius Stares Down its own Potential Insolvency

Meanwhile, DeFi banking platform Celsius has been shoring up positions to avoid liquidations and this week was positioned for a buyout by crypto services business Nexo after pausing withdrawals in an attempt to stave off insolvency.

Celsius funds account for a significant proportion of the total value locked in various platforms in the DeFi ecosystem, while 3AC is a major borrower. The collapse of either or both would have significant implications for the entire space.

 

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Celsius Crypto Staking DeFi Ethereum Lido stETH

Celsius and the Risk Posed by Staked ETH Losing its Peg

After pausing all withdrawals, swaps and transfers between accounts on June 13, there are now fears the popular staking platform Celsius is facing a more serious liquidity crisis triggered by the declining value of Lido Finance’s staked ETH token relative to the value of real ETH. 

If the value of staked ETH doesn’t regain parity with ETH, it is feared Celsius may be left unable to pay out all users wanting to withdraw their funds.

Staked ETH, which is used extensively by Celsius, started to lose parity with ETH when DeFi markets were sent into chaos last month in the wake of the Terra ecosystem collapse.

What Is Staked ETH?

Staked ETH (stETH) is an artificial representation of ETH created by the DeFi platform Lido Finance. When users stake their ETH through Lido, it’s not locked up as it would be if it were staked directly to Ethereum 2.0. 

Rather, any ETH users who stake through Lido receive the equivalent amount of stETH in return, allowing them to then lend, stake or trade their stETH for other tokens. This kind of staking is known as liquid staking because the users’ assets effectively stay liquid.

Regular crypto users along with other DeFi platforms can use Lido Finance to stake real ETH in return for stETH. Celsius is one of Lido Finance’s major clients, staking large amounts of ETH through Lido on behalf of its users, and in the process generating staking rewards, with which it in turn pays its users’ annual percentage yield (APY). 

This system of liquid staking works well while stETH and ETH maintain parity. But once stETH starts to drop in value, as it now has, the system starts to unravel.

What Does This Mean for Celsius?

According to blockchain analytics platform Nansen Research, Celsius has over US$475 million worth of stETH and has been sending large quantities to exchanges over the past few days, presumably to sell in an attempt to increase liquidity. 

Unfortunately, this also has the effect of reducing the price of stETH, exacerbating the disparity between stETH and ETH. Other whales have also been selling large amounts of stETH over the past few days, which has further suppressed the price of stETH and increased pressure on Celsius.

In addition, according to Jack Niewold, founder of the Crypto Pragmatist newsletter, only around US$1.5 billion of the $US10 billion worth of customer assets held by Celsius are currently accounted for on-chain, a rather large discrepancy that has further spooked users.

It’s not known if Celsius has the remaining user funds and, if it does, where they are exactly. Niewold provides a fascinating breakdown in a detailed Twitter thread:

How can Celsius resolve this crisis? Niewold says there are four major possibilities:

  • it receives external funding;
  • it gets a loan;
  • it’s acquired by another company with enough capital to deal with this situation (Nexo has already expressed interest); or
  • it simply declares bankruptcy, ending the crisis but leaving users very much high and dry.
Categories
Blockchain Crypto News DeFi Solana

Solana Challenges Poor Safety Rating from DeFi Watchdog

Solana has rejected the safety ranking of “second-worst” that it received from DeFi Safety this week after the DeFi watchdog raised concerns over the platform’s frequent downtime and unsatisfactory node structure:

Lack of Transparency Cited

There are five different criteria that DeFi Safety uses in its blockchain evaluations: security and testing, node count, node diversity, documentation, and supporting software. The concerns raised by the watchdog predominantly revolve around the lack of transparency from the network’s archive node, alongside Solana’s processes for storing the blockchain’s data.

Beyond the platform’s insufficient node clients (software aiding users in connecting to the blockchain), Solana’s repeated downtime was a decisive factor for DeFi Safety.

Solana presents systemic technical risk. There is no doubt about it. User funds, in our eyes, are at risk. We penalise them heavily for downtime because users cannot access their funds when the chain goes down.

DeFi Safety Twitter – @DeFiSafety

Presently, Solana has only a single piece of software for its node operators, which DeFi Safety claims has not been audited since 2019. However, the report isn’t entirely negative as the watchdog has given the platform credit for aspects where it performs well.

Credit where it’s due, Solana has made significant strides in validation decentralisation. Thanks to an impressive program that incentivises many validators on other continents, Solana scores well on this point.

DeFi Safety Twitter – @DeFiSafety

More than 15 blockchains and 240 decentralised finance protocols have been reviewed by DeFi Safety so far. Ronin blockchain, Axie Infinity’s popular play-to-earn gaming platform, was ranked the worst. Ronin was hacked for US$625 million in March, in what was the biggest DeFi hack to date.

Solana’s Plagued Past

Heavy downtime has plagued Solana for some time, with several instances over past months inconveniencing users. On January 6, Solana crashed temporarily following a Distributed Denial of Service (DDoS) attack which caused massive transaction delays. Upsettingly, a second crash followed in the same week. Solana denied it was due to another potential DDoS attack, claiming the downtime was the result of an increase in high compute transactions.

Last month, Solana was down for seven hours after bots attacked ‘Candy Machine’, the platform’s NFT minting tool, causing four million transaction requests that the platform could not keep up with.