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Welcome back to 0xResearch. Here's what we’ve got for you today:
Bitcoin DeFi continues to grow
Chart: Celo’s usage is overstated
Governance: Synthetix governance takeover
Bitcoin DeFi gathers steam
A hot subsector in crypto of late is Bitcoin L2s, or BTCFi (bitcoin finance).
As far as I can surmise, the core thesis goes a little something like this:
Bitcoin is a great asset with a trillion-dollar market cap;
But Satoshi Nakamoto was not thinking about yield when he wrote the Bitcoin white paper and Bitcoiners want to do more with it than just hold their BTC in cold storage.
Since the Bitcoin blockchain has no smart contract compatibility, we need to first bridge BTC onto a smart contract-enabled chain.
As far as “target addressable markets” (TAM) go for venture funds, the $1.2 trillion dollar market cap of bitcoin may just be the motherlode of TAMs.
And boy, does everyone want a slice of that pie.
Unsurprisingly, that thesis alone has led to hundreds of millions of dollars in raises across hundreds of BTCFi infrastructure projects in recent years.
(Macauley covered this space extensively in a series of 0xResearch newsletters last week, which you can go back to read starting with the Sept. 10 edition here.)
In the last week alone, builders from the Cosmos, Solana and Berachain ecosystems have announced attempts to bring some shape or form of wrapped bitcoin to their respective ecosystems.
Osmosis is partnering with Omnity Network to bridge the ckBTC (chain-key bitcoin) to Cosmos, making it the first non-custodial tokenized bitcoin on the Cosmos network. Omnity is an interoperability omnichain protocol built on the Internet Computer L1.
Chainflip, a cross-chain DEX appchain, announced the integration of Solana on its chain to allow native onchain bitcoin swaps to the SVM world without the need for bridges of wrapped tokens, its press release claims.
Finally, the decentralized custody engine Nomic is launching nBTC to the L1 Berachain. With Nomic’s “interchain deposits,” builders can “generate BTC deposit addresses that automatically commit nBTC to Berachain addresses in a single-step user experience,” according to its press release.
None of these attempts are particularly original from the standpoint of target market segmentation — but I suppose the devil’s in the technical details of the underlying security models.
For instance, Osmosis and Omnity’s ckBTC is preceded by Nomic’s “stBTC” liquid staking token in Cosmos, which was briefly touched on in last Thursday’s edition of 0xResearch.
The Chainflip integration of Solana comes around the same time as Coinbase’s announcement at Breakpoint 2024 to bring its tokenized wrapped bitcoin cbBTC over.
There’s a dizzying array of BTCFi infrastructure projects, from virtual machines and L2s to sidechains and bridges. Plus, no one’s even clear on what a Bitcoin L2 really is.
If you thought Ethereum’s infrastructural bloat was bad, brace yourself for what’s to come with BTCFi.
— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)
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Celo’s usage is overstated:
The L1 Celo blockchain, set to transition to an Ethereum L2 today, is trending on Twitter after Vitalik Buterin posted about the chain’s seeming burst in stablecoin usage. But “hold the CELObrations” because these usage metrics are probably overstated, Blockworks Research Analyst 0xMims says.
Of the $470 million USDT deployed on Celo, only $18.7 million USDT is actually used by users after accounting for $452 million sitting in Tether’s treasury and CEX wallets.
Celo’s cUSD stablecoin drives most of the transaction volume and count (43%) in Nigeria from payment and gaming apps like Blockscratch, Valora and Minipay.
But the median transaction value is of extremely low value (see chart below); not sufficient to even buy a Big Mac meal locally. This suggests that volumes are likely driven by Sybil activity.
For the full data analysis, see the complete flashnote on Blockworks Research.
— Donovan Choy
Synthetix governance takeover
The Synthetix perpetuals protocol might be seeing something of an overhaul.
A new governance proposal by Benjamin Celermajer titled “A Synthetix Reboot” aims to overhaul the protocol’s governance structure and market strategy. Celermajer cites the need for an intervention due to “constant delays of key work modules, low energy product launches, limited vision, reduced market awareness and limited accountability” — without which, risks Synthetix “becoming an irrelevant protocol with diminishing market share, consistent price decline against peers and development stagnation.”
It’s an ambitious governance proposal with a lot on the to-do list. Among the laundry list of actionable items include revamping SNX tokenomics to place the token “back at the center of Synthetix,” deploying a new SNX-backed stablecoin, redesigning the UX of the Synthetix staking frontend, launching Synthetix v3 perps on Ethereum mainnet and Solana, and aggressively scaling BD and product marketing.
The proposal also calls to reform Synthetix’s tripartite governance structure into a new “Spartan Council” that will include Celermajer himself, and ex-Synthetix founders Jordan Momtazi and Kain Warwick. The latter of whom has since gone on to build Infinex, a UX aggregator that recently raised $65 million in NFT sales.
The proposal will be opened for voting on Sept. 27 at 8 pm ET for seven days, with a successful vote requiring at least a 66.67% in the affirmative.
— Donovan Choy
SKALE is a modular network of EVM-compatible chains with pooled security. As the pioneer of the chain subscription model, its main value proposition is offering a gas-free blockchain experience for end users. SKALE chain growth will be a key metric to follow as the network’s economic sustainability depends on new chains joining the network and paying a monthly subscription fee.
Celo stablecoin activity metrics are receiving increased attention, and there is an indication of increasing onchain activity. A deeper dive shows that activity is overstated, and potentially driven by sybils.
Sanko Game Corp (DMT) is a crypto-native gaming and social media studio building a suite of products ranging from Animal Crossing-style games to an onchain Twitch competitor. They raised funds publicly, have high float and could pose as an antithesis to low-float, high-FDV crypto gaming infrastructure projects with less organic activity if they are able to deliver on their next suite of upgrades, new games and expansions.
Is AI x crypto overhyped? Permissionless is bringing you the highest signal conversations at the nexus of these two nascent technology sectors.
Wake up: Decentralized compute is now a human imperative.
This week hasn’t been very volatile, but it might not stay that way for long.
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.