5 September 2020
When the crypto market is rallying, everyone becomes an expert. Brash talk, bold predictions, and all manner of hubris from purported experts become the norm; including from some who just relied on pure luck.
You’ll naturally expect this, especially when helicopter money is being pumped to lubricate an exhausted system or when innovation sparks FOMO.
The Federal Reserve’s determination to spark the economy at the expense of savers is often cited as a cause for cheap money flooding this space. That said, it may not paint a wholesome picture of the frenzy within crypto. You may, or may not have heard but DeFi is the new buzzword, the predominant talk in crypto town.
People made money even as the cost of transacting soared to untenable levels. It is a game of tradeoffs. Regardless, Vitalik Buterin—one of the six co-founders of Ethereum, isn’t impressed.
Vitalik Buterin of Ethereum: Lean on Caution
In a tweet early this week, the Canadian prodigy once again reiterated his reservations. Barely a month ago, Vitalik uncharacteristically compared yield farming to the Federal Reserve only that DeFi protocols like Compound and Aave, in his observation, were notorious for printing money out of thin air.
Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they're all run by Ron Paul.
— vitalik.eth (@VitalikButerin) August 31, 2020
Freebies in the form of governance tokens, which are unsustainably minted with tiny deflationary supply to incentivize participation, clog Ethereum.
In his assessment, leading yield farming protocols–specifically those involved in market making, were unfairly trying to force grab liquidity from Uniswap (a decentralized exchange) which has no governance token, unlike their model.
Even so, Vitalik warnings—as expected, fell on deaf ears.
Earlier, Binance—which is one of the leading centralized exchanges, announced the launch of a “super cheap and scalable” smart contracting platform, the Binance Smart Chain (BSC).
Binance Smart Chain and the Intriguing Centralized Automatic Market Makers (AMM)
It runs parallel to the Binance Chain–which hosts the Binance DEX. However, the BSC distinguishes itself—aligning with Binance’s goal, by being interoperable with Ethereum.
Angling for the lucrative DeFi market, Changpeng Zhao said their sole objective in days ahead will be to build a vibrant DeFi ecosystem without revealing extra details leaving investors in limbo.
#Binance Smart Chain Has Launched! 🚀
Numerous crypto projects are already working with the Binance Chain community to help make BSC a robust blockchain platform, such as:
— Binance (@binance) September 1, 2020
As it turns out, Binance’s grand scheme was to unleash a bizarre product as revealed on Friday. A centralized Automatic Market Making (AMM) protocol. The announcement hit the ground like a bomb. Changpeng Zhao was heavily criticized for his “shameful” DeFi duplication attempt.
Although the new centralized AMM would run on a different algorithm to supplement events in the dominant Ethereum, this game plan undercuts their business. As an exchange with an order book, they rely on fees. The new model diverts those fees away to liquidity providers.
Introducing #Binance Liquid Swap!
Instant liquidity via Automated Market Maker with 0.04% transaction fees for the first month.
Binance Liquid Swap advantages:
— Binance (@binance) September 4, 2020
All in all, it’s interesting how DeFi lending protocols like Aave, Compound, or Maker, will cope with falling Ether and BTC prices. As per trackers, the amount of ETH under management by DeFi dApps fell from $9.5 billion to $8 billion at the time of writing.
Bitcoin Dum and the Swiss Allowance
It could be worse given how instrumental Bitcoin is and its direct correlation with altcoins. Even so, keeping our heads up and focusing on positive news, there could be one or two reasons to remain optimistic.
Bitcoin, the king, will now be accepted as a method of paying taxes in Zug, Switzerland. The Canton is always receptive to new ideas and therein, in the valley of innovation, tax authorities will allow individuals and firms to settle their obligations in partnership with Bitcoin Suisse.