Hello and welcome to Protocol Fintech. This Wednesday: Aave’s big DeFi upgrade, Meta crypto’s new alumni project, and the release of Sarah Bloom Raskin.
out of the chain
I’ve been thinking a lot about US regulatory fragmentation lately. President Biden’s Executive Order on Cryptography more or less accepted this reality, directing a series of Cabinet departments and other agencies to work together. But this whole-of-government effort only exposes the shortcomings of our government. Why can’t crypto regulation, for example, consider environmental, financial stability, and innovation risks together? The answer is that our regulatory apparatus is designed around agencies with narrow and specific attributions. Compare that to the more holistic process in the EU, and it’s no surprise that we don’t regulate well.
—Owen Thomas (E-mail | Twitter)
The Trillion Dollar Upgrade
Can DeFi go mainstream? Aave, an early popular DeFi protocol for crypto lending, is revamping itself for a much bigger market opportunity than its creators anticipated. This means expanding to a number of new blockchains and adding features to mitigate risks that have emerged over the years.
The challenge facing Aave is not uncommon in crypto today. It was designed to handle millions of dollars in value, but now has a total value of $18 billion locked or deposited.
- The new version of Aave’s liquidity protocol, V3, attempts to close some of its shortcomings by reducing risk, improving scalability and making Aave a true cross-chain protocol, said the founder and CEO of Aave. ‘Aave, Stani Kuleshov.
- “When we built the V2 protocol, we thought we would have maybe $200 million of locked-in value,” he said. The V3 protocol, he added, “could actually be worth hundreds of billions, or even a trillion”. This requires a different kind of scalability.
Aave has grown rapidly, thanks to its open system where anyone can contribute code. But this means that the risk has also increased significantly for these stand-alone liquidity systems.
- The new release’s risk mitigation features include supply caps, which limit the amount of a certain asset that can be supplied to Aave; borrowing limits, which limit the amount of a certain asset that can be borrowed from Aave; and asset isolation, meaning you can only borrow the same asset that you provided as collateral.
- Aave has built “very successful” DeFi technology for Ethereum, Avalanche, and Polygon, said CoinFund investment analyst Billy Dishman. “Aave remains one of the most trusted places to borrow and lend capital in DeFi.”
- With V3, Aave will be live on seven different blockchains, including Fantom, Arbitrum, Optimism, and Harmony.
- Aave recently launched Aave Arc, a service allowing large institutions to trade in DeFi only with specific approved parties, which could ease concerns among large investors. The effort is still new but more than $30 million has been invested in the service, Kulechov said.
Aave, which has a decentralized governance system, collects around $50 million in revenue a year for its treasury through its various activities, which makes it self-sufficient, Kulechov said. He sees other areas of growth for Aave, such as fixed income products and collateralized NFTs.
— Tomio Geron (E-mail | Twitter)
A version of this story first appeared on Protocol.com. Read it here.
A MESSAGE FROM FIREBLOCKS
As one of the best super apps in the world, Revolut is always looking to launch new products and improve its existing offerings. Revolut used Fireblocks to handle the heavy technical work so it could focus on shipping new products to its 15.5 million users.
on the money
Crypto.com is starting a limited rollout to US institutional investors. The Singapore-based crypto exchange is expanding its presence in the US market and plans to roll out to consumers soon — you know, people watching Super Bowl ads.
ConsenSys is now valued at $7 billion after raising $450 million. The MetaMask maker’s Series D was led by ParaFi Capital, with participation from new and existing investors such as Third Point, Temasek, SoftBank Vision Fund 2 and Microsoft.
Former Meta employees formed a blockchain startup and raised $200 million. The startup, Aptos, has already attracted funding from major crypto players in its latest fundraising round, led by a16z, with participation from Tiger Global, Coinbase Ventures and others. The team had been working on Meta’s ill-fated crypto payments project.
Kazakhstan has forced the closure of another 106 crypto mines. Due to government pressure and state investigations, 55 crypto mines voluntarily shut down, while another 51 were forced to close.
The former CEO of BitBay is reportedly missing. Sylwester Suszek, who founded the Polish crypto exchange, was the last known to be on his way to a business meeting in Poland.
Sarah Bloom Raskin has withdrawn from her candidacy for the Federal Reserve Board. After numerous delays, a Senate Republican boycott of his nomination hearings and, as a final blow, Sen. Joe Manchin’s signal that he would not support his candidacy, Raskin removed his name in order to let other nominations move forward.
The week hasn’t been good for the Twitter user @dino_dealer, who accidentally entered a EtherRock NFT for 444 wei instead of 444 ether, selling it for less than a cent. “With one click, my entire net worth of around $1 million is gone. Is there any hope? Am I GMI? Can snipers show mercy?” the user tweeted.
Candidate for the United States Senate Bryan Solstin wants to make bitcoin his top legislative concern if elected. “I declare my candidacy for the United States Senate. Making #Bitcoin Legal Tender in the US will be my primary focus in the Senate. #Bitcoin is the great reset,” the software developer tweeted.
Edward Snowden think governments are right to view crypto as an evolving threat. “I think governments correctly perceive an evolving threat to the traditional tools they have grown accustomed to, in terms of the ability to impose regulation on privacy and, more broadly, private commerce,” he said in an interview at Camp Ethereal 2022.
Just a question to Kara Calvert, Senior Director of US Policy at Coinbase
Calvert joined Coinbase late last year just as the crypto exchange was beefing up its team in Washington.
How Has the War in Ukraine Changed the Crypto Regulation Debate?
We’re seeing more and more decision makers on both sides of the aisle paying attention to technology and, in many cases, recognizing its transformative potential. The humanitarian promise is clear – it has provided a transparent cross-border mechanism to fund people on the ground in Ukraine. It’s powerful, and the world is watching.
A MESSAGE FROM FIREBLOCKS
Over 1,000 institutions have enabled crypto and digital assets for their clients with Fireblocks. Help your team speed time to market, minimize technical maintenance, and deliver an easy-to-use crypto cash system. Fireblocks is quickly becoming the go-to platform for the most innovative organizations.
Thanks for reading – see you tomorrow!