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- 🟣 Curve’s trial by fire
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Welcome back to 0xResearch. Here's what we’ve got for you today:
Curvemageddon
Polkadot JAM
Listen & Read: Rare Eth co-founder reunion
CT: Curve damage control
Bitcoin is consolidating Friday following the sharp drop earlier this week. Momentum has shifted southward on daily and 2-day timeframes, so the best case for the bulls short term is to chop around the mid-$66k support area for a while before making another try higher.
Curve liquidation day
One common critique of the investment thesis for CRV — the governance and incentive token of the Curve Finance ecosystem — has been that a huge percentage of the token’s supply has historically been concentrated in the hands of founder Michael Egorov.
Such heavy centralization in control of supply is generally seen as a red flag.
Risks include centralized control over governance, potential conflict of interest, price volatility with the risk of dumping, liquidity concerns and regulatory risks.
A huge chunk of Egorov’s CRV was deployed in lending protocols as collateral to borrow stablecoins. These positions had been close to liquidation last summer when the CRV price fell as low as $0.38, but a string of OTC deals averted any major catastrophe.
This week, one of Egorov’s chosen lending platforms, UwU, suffered an exploit that resulted in his collateral being dumped on the market. That sent the CRV price crashing to levels not seen since 2020 and put all his loans underwater.
FraxLend, Silo Finance and Inverse Finance all managed to liquidate Egorov’s CRV positions without incurring bad debt.
But Curve Finance’s own LlamaLend briefly became undercollateralized on Thursday. Egorov and the Curve team worked to plug the hole, and have reportedly reduced the bad debt incurred from about $9 million down to zero, according to Curve Discord admins.
Importantly, there’s no adverse impact on Curve’s stablecoin, crvUSD.
“[LlamaLend] markets are all isolated so only the [CRV] market was affected…protocol itself and [crvUSD] was not affected,” an admin wrote.
CrvUSD is collateralized from ETH, wBTC and their staked derivatives, so although it is employed within LlamaLend, there was never a solvency issue for the stablecoin.
Can DOT get out of a JAM?
Recently ratified by Polkadot’s decentralized governance, the Join-Accumulate Machine (JAM) is a minimalist blockchain concept designed to facilitate secure rollup domain-specific chains.
Launched with a $64.7 million prize by the Web3 Foundation, JAM is an evolution of Polkadot's relay-chain, emphasizing a permissionless, simple and versatile design to maximize application development. It operates as a distributed computer, focusing on data collection, refinement and accumulation within a blockchain network.
Unlike traditional blockchains where users perform transactions directly on the chain, JAM’s essential functions like governance and staking are embedded within system services. This design choice allows JAM to achieve synchronous composability and a more unified and scalable blockchain environment.
Typically, developers choose between L1 smart contracts, which are faster to develop but face constraints and competition for resources, and appchains, which are efficient but require separate maintenance. JAM unifies these approaches into a single framework, allowing applications to benefit from both efficiency and scalability without the complexities of rollups (a method to improve scalability by processing transactions offchain).
In short, JAM merges Polkadot and Ethereum elements for a design that aims to keep the network secure and maintain its integrity while providing a scalable solution for diverse applications.
But what can it do for the DOT price?
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LlamaLend equity curve:
Whether you’re a trader, a company or a DeFi protocol, this is never a chart you want to see fall off a cliff.
The brunt of “CRVmageddon” fell upon Curve’s own LlamaLend, where the protocol’s collateral went negative on Thursday, June 13.
The collateral ratio fell below 100% for a time, but has since been restored to over 160%.
Ten years after launching Ethereum, co-founders Gavin Wood and Vitalik Buterin recently reunited at EthPrague.
Despite Wood's early departure to create Polkadot, the co-founders’ meeting highlighted their growth as blockchain innovators. Wood discussed how his thinking has evolved, particularly regarding Polkadot's multichain architecture and its challenges with fragmentation.
He discussed JAM, the new initiative to improve scalability.
Both men reflected on governance issues, acknowledging Ethereum's success in community building and Polkadot's focus on agile decision-making.
Their matured perspectives on governance and technology ring a note of optimism that the crypto industry can move beyond early polarizing debates and tribalism.
One line from Wood that caught our ear: “Crypto is primarily a technical and financial product being marketed to people who have basically zero relevant technical needs and background.”
Fireside chat recording: YouTube
Written summary: Forbes
Ethereum, long heralded as the undisputed leader in the blockchain space, is starting to show signs of vulnerability. Its once unshakeable position is now being challenged by a new wave of competitors, innovative technologies and evolving market trends. The landscape is shifting, and Ethereum's dominance is no longer a foregone conclusion.
Earlier this year, Sanctum launched Infinity — a multi-LST pool on Solana that improves liquidity for a growing list of LSTs and makes it really easy for users to swap between them. Sanctum’s one-stop shop for LSTs is well-positioned to play a key role in fostering Solana’s LST market expansion, and the upcoming $CLOUD launch is designed to offer the community and investors an opportunity to purchase $CLOUD at a great price.
Bitfarms’ latest shareholder rights plan does not preclude Riot from making unsolicited takeover bids, the company said.
Rep. Nickel, who will be leaving Capitol Hill in 2025, said it’s important to reiterate that SEC Chair Gary Gensler does not represent all Democrats’ views.
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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.
