2 October 2020
The last week in crypto has been a mix of new developments in the DeFi market as well as CBDC advances across the globe. DeFi lending platform Aave makes a new milestone issuing $500 million worth of loans in 9 months. On the other hand, the DeFi platform Uniswap becomes the first to cross $2 Billion in Total-Value-Locked (TVL).
CBDCs continue to be on the radar of central banks. Germany’s largest bank – Deutsche Bank – released a report saying CBDCs can shape the future of global financial institutions in the future and replace the U.S. Dollar as the world’s reserve currency.
The European Central Bank (ECB) has also moved to trademark the term ‘Digital Dollar’ while talking about new developments in the space. Let’s have a look at each of these exciting news in detail.
Aave Eclipses $500 Million in DeFi Loans in 2020
Since January 2020, open-source decentralized finance (DeFi) lending protocol ‘Aave’ has issued $500 million worth of flash loans to users. The growth in the DeFi sector has stormed the crypto markets in 2020.
Flash loans are an increasingly popular tool in the DeFi space offer clever traders to leverage financial power and make more money. With trading activity surging really high, the Aave flash loans have helped users to get access to millions-of-dollars worth capital for a small fee. The flash loans are basically new financial tools or loans provided only for a few seconds.
Traders usually leverage these flash loans to make arbitrage trade for whale-sized transactions without requiring collateral. As per Aave analytics data provider Aavewatch, the flash loans allow Aave users to take out millions-of-dollars worth loans for a fee of just 0.1%. The flash loans last merely for 30 seconds, the time period for an Ethereum transaction block.
eToro Unveils Staking Service for TRON and Cardano
Multi-asset brokerage and crypto trading platform eToro has announced staking services for Iron (TRX) and Cardano (ADA). Since both these cryptocurrencies follow the Proof-of-Stake (PoS) protocol, token holders can participate in the staking process and stake their funds to validate transactions and secure the network.
For this, the token holders receive a certain percentage in staking rewards. Currently, Tron (TRX) yields annual rewards of 5.78% while Cardano (ADA) yields annual rewards of 7.82%.
eToro’s staking service for TRX and ADA will go live by the end of October and the rewards shall be distributed on a monthly basis without any major inputs on behalf of the user.
Tron founder Justin Sun applauded eToro’s decision saying: “As we continue to see diminishing returns from traditional [centralized finance] services, [decentralized finance] is continuing to expand. Services such as eToro’s new staking service takes the complexity and confusion out of the staking process, and makes it accessible to everyone.”
CBDCs Threaten Dollar’s Primacy in Global Finance
Global banking giant Germany’s largest Deutsche Bank released a report in September 2020 stating that central bank digital currencies (CBDCs) will transform the future of global finance and could also “erode the dollar’s primacy in the global financial market”.
In the report titled “Central bank digital currencies: Money reinvented”, Deutsche Bank notes that major economies will use their respective CBDCs for bilateral trade while bypassing the USD.
Currently, the U.S. Dollar has a lion’s share accounting for over 90% of the global transactions as per data by the Bank of International Settlements (BIS). Thus, the USD is also touted as the world’s reserve currency. The report mentions: “Issuing one of the first CBDC would also be a step towards China’s target of becoming a world leader in science and innovation by 2050 and provide a reserve currency.”
Furthermore, the report explains that CBDCs can make transactions cheaper and more decentralized. But along with it also adds that “payments need to be secure and simple for individual adoption” and “universal access has to be guaranteed”.
Uniswap Crosses $2B in Total Value Locked
Decentralized Exchange and DeFi protocol Uniswap, which launched its UNI governance token 15 days back, has quickly climbed the charts to become the first and only DeFi protocol with over $2 billion in total-value-locked (TVL).
TVL is a popular metric used in the DeFi market, a relative indicator for the token’s overall market strength. As per data aggregator DeFi Pulse, there’s nearly over $11 billion in TVL for the overall DeFi market. Thus, Uniswap alone accounts for nearly 19% of the overall market.
The Ethereum-based Uniswap protocol used automated market-making systems (AMMs) for leveraging liquidity pools and allowing users to swap between ETH and other ERC20 tokens. In September alone, Uniswap processed nearly $2 billion in trading volumes.
European Central Bank Applies for “Digital Euro” Trademark
The European Central Bank (ECB) is taking bold measures to further its developments of a pan Europe central bank digital currency (CBDC). On Thursday, October 1, Bloomberg reported that the ECB has applied or the European Union Intellectual Property Office to trademark the ‘Digital Euro’ term.
Earlier today, October 2, the ECB released another report talking about intensifying its work on Digital Euro. The Eurosystem High-Level Task Force has recently published a comprehensive report for the Digital Euro CBDC and approved by the Governing Council.
Christine Lagarde, ECB President said: “The euro belongs to Europeans and our mission is to be its guardian. Europeans are increasingly turning to digital in the ways they spend, save and invest. Our role is to secure trust in money. This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”
The Eurosystem Taskforce will identify several possible scenarios for the issuance of Digital Euro. The ECB’s development with Digital Euro CBDC comes at a time when it has been strongly opposing the presence of other private stablecoin operators like Libra.