Cointelegraph By Andrew Thurman
With a liquidity mining program set to launch on Monday, Aave could be on the cusp of becoming the dominant decentralized finance (DeFi) ledning protocol.
Earlier today, Aave Improvement Proposal (AIP) 16 reached quorum, meaning that starting on Monday, 4/26 liquidity providers and borrowers in Aave’s USDC, DAI, USDT, GUSD, ETH, and WBTC pools will earn stAAVE rewards in addition to their standard interest yield.
Per AIP 16, providers and borrowers in these pools will split 2,200 stAAVE tokens per day from the protocol’s current 2.9 million AAVE Ecosystem Reserve, currently worth nearly $1 billion.
The proposal, written by Aave investor Parafi Capital’s Anjan Vinod, notes that the goal of the program is to “drive lending and borrowing activity across markets,” as well as increase the decentralization of the protocol’s governance by distributing governance tokens to more users.
The move is something of a novelty for Aave. The lending platform has consistently been ranked among the largest DeFi protocols, despite not having a liquidity mining program like many of its competitors. Per their respective apps, Compound is currently the top lending protocol with over $15.4 billion in total value locked (TVL) across their markets, while Aave counts $6.8 billion across their Polygon, Ethereum v1, Ethereum v2, and AMM LP token markets.
Aave co-founder Stani Kulechov told Cointelegraph that he expects that the added incentives will bolster the protocol’s TVL significantly.
“The proposal allocates most of the rewards on stablecoins meaning that we will see substantial increase in TVL,” he said.
As the governance proposal notes, the lack of a liquidity mining program has historically put Aave at something of a competitive disadvantage. For instance, at the time of writing money market Compound offers 3.31% yield on stablecoin USDC, along with 2% in COMP governance tokens for a total of 5.51% yield. Aave’s market, meanwhile, also currently offers an identical 5.51% in pure interest yield.
A recent Tweet from Aave developer Emilio Frangella indicates that the new program will bolster yields by orders of magnitude, and notably offers yield to borrowers — yield which, at current rates, would well outstrip the APR borrowers owe on their loans.
Here is the estimate, if market conditions remain the same pic.twitter.com/3cLisnArPy
— Emilio Frangella (@The3D_) April 24, 2021
While the current program is slated to end 07/15/2021, the door is open to some form of liquidity mining continuing for the protocol for the foreseeable future. Per Vinod, “this program is being proposed as a beta to further investigate how the inclusion of liquidity mining rewards will benefit the Aave ecosystem,” and at the 2,200/day rate of distribution, the program would deplete only 5% of the Ecosystem Reserve tokens per year.
When first proposed in governance forums, liquidity mining only received 60% support from the community. Kulechov believes that the turnaround is due in part to the community seeing other liquidity mining programs successfully play out.
“Aave community has for and against views on the topic previously, against mainly because Aave Protocol has been successful in organic growth. However, since now liquidity mining network effects are proven to work, it gives an opportunity to experiment it in Aave and that might been grounds for the swing.”
Gelato Network launches ‘G-UNI’ Uniswap v3 management token
Cointelegraph By Andrew Thurman
While Uniswap’s highly-touted v3 has been racing to the top of TVL charts as of late, the need for active management has kept some retail participants out of their pools — a problem that a new product from the Gelato Network is aiming to fix.
First teased in a community call last week, the Gelato Network has released today the details of their “G-UNI” Uniswap v3 management system. G-UNI aims to perpetually maintain a liquidity range of 5-10% within the current price of an asset pair, with an oracle network checking prices and rebalancing liquidity pool position ranges every half hour. G-UNI also automatically re-invests trading fees for compounding returns.
“Passive G-UNIs work by just providing very broad liquidity, similar to Uniswap v2 that never has to be changed,” an announcement blog post reads. “It thus can be completely free of anyone’s control as it does not require changes in its price range.”
While Uniswap v3 allows liquidity providers to earn more fees by concentrating their funds at specific prices, it opens them up to risk of impermanent loss if the prices of the trading pair moves beyond the provider’s specified range.
Update: REKT ☠️ https://t.co/0MF0gCd9sm
— ameen.eth (@ameensol) May 29, 2021
The blog post notes that G-UNI’s auto rebalancing brings the benefits of concentrated liquidity, but with the option of passively managing the position in a manner more in line with Uniswap v2.
“The advantage of this includes that users can sit back and relax as all the difficulties that come with monitoring LP positions are taken care of.”
Composability and incentives
While the new tool will be a boon to passive liquidity providers, the real benefits of G-UNI might be for other DeFi protocols.
A self-described “Legendary Member” of Gelato, Hilmar, noted that projects can now incentivize concentrated liquidity in “pool 2” liquidity pools. Pool 2 is a colloquialism for a native governance asset paired with a popular base asset, such as ETH or MATIC.
3) Having an ERC20 wrapper around Uni V3 LP positions is extremely powerful, as this enables teams like Instadapp to offer “Liquidity Mining” incentive schemes on top of G-UNI.
This means you can now incentivize your community to provide liquidity around specific ranges
— Hilmar X 冰淇淋 团队 (@hilmarxo) June 16, 2021
Projects often have to provide ample liquidity mining incentives for participants in pool 2s, as liquidity providers take on the risk of the native governance token collapsing in price. Concentrated liquidity rewards may help stabilize native asset prices to a more regular range.
Additionally, G-UNI is a ERC-20 token as opposed to a NFT, which opens it up to a broader number of possible applications in DeFi. Many lending platforms accept liquidity pool tokens as collateral, but aren’t yet widely prepared for positions represented as NFTs; G-UNI will allow them to onboard v3 liquidity positions faster. Likewise, yield vaults like Yearn.Finance, which has been planning to incorporate exchange positions for some time, may find it easier to integrate ERC-20s.
G-UNI will be used out of the gate as part of the launch of Instadapp’s governance token. The team is setting aside 1,000,000 INST tokens for INST/ETH liquidity mining, with 3/4ths of the rewards focused on a higher INST price liquidity range.
Per the Instadapp dashboard, the incentivized pools are currently live and offering 2,200% and 1,800% APY respectively.
Alchemix patches ‘Reverse Rug’ exploit, address $6.5 million shortfall
Cointelegraph By Andrew Thurman
It’s as miraculous as Aladdin taking off on a magic carpet: in a possible first, some of the users of a decentralized finance protocol were the ones to benefit today from an exploit, turning the concept of a ‘rugpull’ on its head.
A colloquialism for when liquidity is drained from a project (often an unscrupulous founder or developer draining the funds themselves), depositors and DeFi users are most often the ones holding bad debt and/or worthless tokens — left to hope for compensation plans that can take months or even years to fully vest.
In an exploit today, however, the users are the ones who got to pull at the seams for a change.
This morning, Alchemix announced that the contracts for one of their synthetic assets, alETH, had experienced an “incident.”
There has been an incident with the Alchemix alETH contracts. Together with the fantastic team at @iearnfinance, we have identified the error and are both working on a post-mortem and a solution to the problem.
Funds are safe.
— Alchemix (@AlchemixFi) June 16, 2021
In a incident report published later in the day, Alchemix developer “n4n0” said that “an issue with the deployment script of the alETH vault accidentally created additional vaults,” some of which the protocol used to incorrectly calculate outstanding debts, which in turn meant protocol funds were used to “pay off user debts.”
As a result, for a short window of time users were able to withdraw their ETH collateral with their alETH loans still outstanding — a rugpull by the community to the tune of $6.5 million.
Alchemix innovating again… this time with the reverse rugpull.. a ‘rugput’
Joking aside there was a little incident with the new alETH vault in which nobody lost any funds but some users actually gained@n4n084191635 with a great incident report herehttps://t.co/Vo3cWRnZPx pic.twitter.com/68G3y1s3x0
— ⟠ toast.eth (@intocryptoast) June 16, 2021
Per the incident report, the team paused the mint contract for alETH two and a half hours after the exploit was discovered. The report notes that no users lost funds as a result of the exploit, and that Yearn.Finance — whose yield vaults automatically repay Alchemix’s synthetic loans — suffered no loss as well. Additionally, a “conservative” initial debt ceiling prevented the protocol loss from being more extreme.
The team, including incident report author n4n0 appear to be taking the loss in stride:
— n4n0 (@n4n084191635) June 16, 2021
A trio of solutions is being deployed to cover the shortfall, including a temporary increase in protocol fees, a injection of ETH liquidity from Alchemix’s treasury, and a sale of DAI from the treasury for additional ETH. The team says they will be deploying an entirely new vault to address the flaws of the original.
Further changes may be on the horizon for the alETH asset as well. Alchemix currently has a alETH/ETH pool live on Saddle, a VC-backed fork of Curve Finance, following Curve reportedly turning down creating a pool for the synthetic Ether. However, in the past 48 hours the Curve social media account has been making overtures in an effort to bring Alchemix’s latest synthetic asset back.
DeFi3 days ago
Tim Draper Says Bitcoin to Hit $250K in 2022
Ethereum2 days ago
Shiba Inu and Chiliz jump 33% and 26% on Coinbase Pro listings
Bitcoin2 days ago
New Bitcoin bull market hodlers are refusing to sell at $40K, data suggests
DeFi3 days ago
Polkadot (DOT) Trading to Be Launched on Coinbase Pro
Bitcoin3 days ago
Within five years, US hedge funds expect to hold 10.6% of assets in crypto
Blockchain2 days ago
New DAO launches after $230M funding round including Peter Thiel, Alan Howard
Bitcoin2 days ago
Bitcoin price hits $41K, then rejects after sellers defend the 200-MA
Regulations2 days ago
Democratic lawmakers have formed group to address regulatory concerns around crypto