DeFi Bulletin: token storage in a Swiss bank, Beam’s roadmap and CFTC attention

The decentralized finance (DeFi) sector continues to attract heightened attention from cryptocurrency investors. ForkLog has gathered the most important events and news from the past weeks in this digest.

Key metrics of the DeFi segment

Total value locked (TVL) in DeFi protocols has fallen to $94.88 billion. The first, fourth and fifth places are occupied by lending protocols Aave ($9.3 billion), Compound ($5.94 billion) and MakerDAO ($5.48 billion).

DeFi Llama includes in its total value the group of tokenized Bitcoins. WBTC, at $6 billion, ranked third. hBTC with $1.26 billion ranked 20th.

TVL in Ethereum applications declined to $46.77 billion. Over the last 30 days the figure fell by 19%.

Total market value of tokenized Bitcoins on Ethereum (WBTC, HBTC, renBTC and others) declined to $7.8 billion. Three weeks ago the figure stood at $8.53 billion.

Trading volume on decentralized exchanges (DEX) over the last 30 days amounted to $73.1 billion.

61.9% of the total volume of noncustodial exchanges is accounted for by Uniswap. The second DEX by trading volume is SushiSwap (12.1%), the third — Curve (7.8%), the fourth — 0x Native (6.2%).

TVL of projects on Binance Smart Chain (BSC) has resumed growth. The aggregate figure reached $26.24 billion, up 34% over the last 30 days.

Swiss crypto bank Sygnum offers trading and custody of DeFi tokens

The Swiss-regulated crypto bank Sygnum expanded its range of services, offering clients custody and trading of DeFi project tokens.

Sygnum added support for Aave, Aragon, Curve, Maker, Synthetix, Uniswap and 1inch Network, as well as banking services using the stablecoin USDC.

In the next phase, the bank will integrate yield-generating products and services from the DeFi space.

Beam team unveils roadmap for developing a confidential DeFi platform

Developers updated Beam’s blockchain development roadmap and the launch of the confidential DeFi infrastructure BeamX.

The basis for further development was the third hard fork in the mainnet, which took place on June 14, 2021 at block #1,280,000. The update made possible the use of smart contracts (Shaders). It also simplified the wallet UI by reducing address types; confidential assets became available via the application.

In Q3, developers plan to present a Metamask-style browser wallet. In the future:

• Beam Web Wallet will be directly connected to Metamask, providing direct access to assets on the Ethereum blockchain;
• the wallet UI update will simplify work with addresses;
• the app will enable the exchange of confidential assets.

As part of preparation for BeamX, the project will move to a decentralized governance system in the form of a Decentralized Autonomous Organization — DAO Core, and will also create a store of dapps.

In Q4 or later, the Beam team plans to launch:

• inter-chain bridges;
• oracles;
• a DeFi ecosystem stablecoin.

Additionally, the project aims to forge partnerships to implement automated market maker (AMM) and lending mechanisms.

Further development of BeamX is to be aided by a grants system for dapps; funding will be allocated by votes of the DAO Core community.

Mark Cuban calls the DeFi segment a new growth engine for the US

Billionaire Mark Cuban stated that the US could lose “the next big growth engine the country needs” if they do not stop regulating the crypto industry and the DeFi segment.

In his view, the US should not curb cryptocurrency innovation, including in the DeFi segment.

The billionaire accused American regulators of pushing DeFi projects out of the country and warned of the risk of losing growth potential if regulation of the industry continues.

“When we look back at the pandemic in 10-20 years, we will see that in 2020 and 2021 world-changing companies were created,” Cuban said.

CFTC questions the legality of DeFi derivatives markets

Decentralized platforms for trading derivative financial instruments could violate the US Commodity Exchange Act (CEA), said commissioner CFTC Dan Berkovitz.

He noted that the fundamental idea of DeFi is the exclusion of intermediaries, which proponents say gives consumers greater control over their investments.

However, the commissioner is sure that intermediaries play a key role in the current financial system. They provide critically important services and bear responsibility for client funds, Berkovitz stressed.

“In the United States, the most efficient and effective capital-formation and risk-management markets in the world. When people want to invest their money or manage their risks safely, they turn to the U.S. financial system. One of the main reasons for its strength is the legal protections investors have when they place their money, most often through intermediaries,” he said.

According to the commissioner, there is no such protection in DeFi systems:

“There is no intermediary to monitor markets for fraud and manipulation, to prevent money laundering, to safeguard user funds, to ensure counterparty performance or reimburse customer losses in the event of a system failure. A system without intermediaries is a Hobbesian market where everyone looks after themselves.”

Regarding legality, he reminded that under the CEA, futures trading must be conducted by entities registered with the CFTC as a designated contract market or swap execution facility.

“The CEA contains no exemptions from registration for digital currencies, blockchains or smart contracts,” the commissioner said.

He is convinced that we should not allow DeFi to become an unregulated shadow financial market in direct competition with the regulated one. Berkovitz cited the experience with the shadow banking sector, where competition between legal and unregulated institutions led the first to take on more risks to sustain profitability.

“For these reasons we should not permit DeFi to become an unregulated shadow financial market in direct competition with the regulated one,” he concluded.

Investments in DeFi

The decentralized crypto derivatives exchange dYdX closed a Series C funding round of $65 million. It was led by venture firm Paradigm with participation from Andreessen Horowitz (a16z), Polychain Capital, Three Arrows Capital, Wintermute. Among new strategic investors are QCP Capital, CMS Holdings, CMT Digital, HashKey, Electric Capital, Delphi Digital and others.

The DeFi protocol Goldfinch, which provides unsecured crypto loans, closed a Series A funding round of $11 million. It was led by a16z with participation from Mercy Corps Ventures, A Capital, Access Ventures and Divergence Ventures.

The funds will be used to build out a network of borrowers and lenders. Talks are under way with marketers and underwriting specialists to expand regional presence.

The DeFi startup Umee, developing a \”bridge\” between DeFi projects across different blockchains, closed a seed round of funding totaling $6.3 million. It was led by Polychain Capital with participation from IDEO CoLab, Alameda Research, CMS Holdings, Coinbase Ventures, Consensys, Tendermint and CEO BKCM Brian Kelly.

The DeFi project Unbound Finance raised $5.8 million from Pantera Capital and Arrington XRP Capital with participation from CMS Holdings, Hashed, LedgerPrime, LD Capital, TRGC, ArkStream Capital and ZeePrime Capital.

Funds will be used to develop the protocol, including expanding the team, conducting audits, ensuring liquidity and developing new products.

Singapore-based investment company Spartan Group launched a $110 million venture fund to back DeFi applications. The vehicle will place particular emphasis on the applied layer of DeFi, investing in applications across multiple blockchains, including Ethereum and Solana.

The company did not disclose the names of investors in the new fund but noted that they are wealthy individuals and family offices, recently entering the market.

Hacks and scams

The DeFi protocol IRON Finance recommended users withdraw funds from pools after the TITAN token devalued due to \”bank panic\”.

The IRON Finance protocol operates on Polygon and BSC. The project has a partially collateralized stablecoin IRON, softly pegged to the US dollar.

IRON’s stability is ensured by holding sufficient collateral in smart contracts with a time lock. The collateral consists of two assets: on the Polygon network USDC and TITAN, and on BSC — BUSD and STEEL.

IRON’s minting mechanism requires a user to lock 25% in TITAN and 75% in USDC to issue IRON. Thus, when new IRON is minted, demand for TITAN grows with its price. When TITAN’s price falls sharply, IRON becomes unstable.

This happened on the night of June 16-17. According to CoinGecko, TITAN quotes collapsed from $64.19 to nearly zero. The IRON stablecoin price also fell by 31% to $0.689. The STEEL token fell 62% to $0.665.

When large holders started selling assets, they flooded the market with excess tokens. Since the protocol minted TITAN and pulled liquidity in an attempt to stabilise IRON, an arbitrage opportunity appeared. This, in turn, brought even more tokens to the market and had the opposite effect.

The IRON Finance team offered to redeem tokens in USDC. Project representatives promised to disclose more details on the incident later.

DeFi project Impossible Finance operating on the BSC ecosystem was attacked using flash loans.

Project representatives said they would fully compensate funds contributed to liquidity pools. They promised to inform users about the investigation’s progress but did not specify how much was withdrawn.

SushiSwap developer Mudit Gupta noted that it amounts to $500,000.

Beetsfarm Finance, a yield-farming project on the Polygon blockchain, was suspected of fraud. RugDoc specialists accused the developers of misappropriating more than $120,000 from users.

RugDoc said their scanner, tuned to detect unverifiable smart contracts, rated Beetsfarm as a \”high risk\” project.

Contract verification shows that the Beetsfarm smart contract allows deposits and withdrawals to external wallets. After a user approved interaction with the contract, anyone can initiate a transaction from their wallet to the project\’s admin address.

No statements from Beetsfarm\’s administration followed. The project\’s Telegram channel was deleted, and its Twitter account was marked as \”restricted\”.

Also on ForkLog:

• The DeFi project 1inch launched a new protocol for limit orders.
• The online bank Revolut launched trading of nine DeFi tokens in its mobile app.
• Mark Cuban did not change his stance on DeFi after the IRON Finance protocol collapse.
• Amazon posted a blockchain specialist vacancy in DeFi.

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