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Deutsche Bank is planning a layer-2 launch on ZKSync, signaling Ethereum’s growing role in TradFi. The permissioned network aims to balance regulatory compliance with blockchain innovation, reflecting Ethereum’s appeal to institutions. Plus, we cover an unusual opportunity on Pendle’s yield trading marketplace.

Pendle (un)USUAL opportunity:

This chart illustrates the forward curve of the implied yield (APY) on USD0++ as priced on Pendle, a DeFi yield tokenization platform. The red line represents the underlying yield on USD0++ (net of the collateral yield of  approximately 3.8% APY), whereas the blue curve reflects the implied fixed APY market participants can lock in across different maturities.

The fixed yields range from 22% to 34% APY, presenting a substantial premium over the underlying deposit yield. However, these rates fall below the implied total yield (54%) when accounting for USUAL token emissions and airdrops. This divergence indicates that participants are predominantly opting for principal tokens (PT), which secure fixed yields but lack exposure to the more volatile, speculative upside of USUAL token rewards.

Meanwhile, yield tokens (YT), which derive value from USUAL emissions, may offer underpriced access to the protocol’s equity upside, albeit with greater risk tied to the market value of the USUAL token post-launch.

Blockworks Research's latest report by Luke Leasure goes into detail on how investors bullish on USUAL can take advantage of this apparent mispricing.

— Macauley Peterson (X: @yeluacaM | Farcaster: @Macauley)

Deutsche Bank eyes an L2 launch on ZKSync

Bull markets are the time of exciting mainnet launches, airdrops and announcements.

After the world’s shortest testnet, Kraken brought forward yesterday the mainnet launch of its Ink L2 rollup — months ahead of schedule. Then, Sophon, a consumer-focused validium L2 on the Avail data availability layer, also launched its mainnet.

But the announcement that's getting ETH bulls excited today? Banking giant Deutsche Bank is planning an L2 deployment on ZKSync’s Elastic Chain stack, Bloomberg reported.

Codenamed Project DAMA 2, Deutsche Bank’s initiative was first announced in early November as part of the Singapore central bank’s Project Guardian. Project Guardian is a global consortium of 27 financial institutions and eight key policymaker groups, focused on nudging financial institutions towards experimentation with asset tokenization and blockchain ledgers.

Deutsche’s L2 is a TradFi development, so all the trappings of a TradFi L2 is to be expected.

That is to say, it’s a permissioned L2 network that needs to prioritize regulatory compliance over the kinds of financial degeneracy replete elsewhere on public blockchains.

Regulators are increasingly coming around to recognizing the merits of blockchain technology, but even the most forward-thinking policymakers aren’t giving up their power in a pinch.

Put simply, financial regulators are saying: Go forth and innovate with blockchains, but not to the point where it undermines our political bottom lines, please.

As AdrianoFeria.eth put it: “The only pragmatic choices for institutions that require stringent oversight and interoperability are to either run their own private, permissioned layer-1 chains, or to harness Ethereum’s L2 ecosystems.”

So Deutsche, like other centralized institutions that have launched L2s, has turned to the premier destination for that customizable solution: Ethereum.

Ethereum’s pivot from sharding to a rollup-centric roadmap in 2020 was largely pitched as a technological bet on horizontal scaling rather than the vertical scaling route that Solana has taken. I.e., the global state can’t fit on one blockchain, we need to split it up.

That modular freedom to launch a chain however you want is also what motivates many TradFi institutions to choose Ethereum.

This strategy is, of course, not exclusive to Ethereum. Avalanche too, has pursued this aggressively with its subnet model.

Avalanche’s traction, however, has been subpar relative to Ethereum rollup adoption, for the reason that it has been one step behind Ethereum in technology.

“Firstly, Ethereum rollups came out before Avalanche’s subnets. And when subnets were ready, it carried a far higher upfront cost compared to launching an OP Stack rollup. All the while, costs of rollups were trending down with EIP-4844 and new data availability solutions like Celestia,” Blockworks Research analyst Nikhil Chaturvedi explained.

But that too is changing for Avalanche. 

Avalanche's Etna upgrade this week is drastically cutting the costs of launching an Avalanche subnet (now rebranded to Avalanche L1s). Previously, P-Chain validators had to stake 2000 AVAX, whereas costs today would be more than 10x smaller.

“The costs are now reduced to be cheaper or comparable to the cost of a rollup on Celestia,” Chaturvedi said.

— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)

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SKALE, the gas-free invisible blockchain, is “Built Different” for mass adoption: high-throughput, scalable, and fair. As a network of interoperable EVM-compatible L1s, SKALE’s user experience focus has accelerated a strong ecosystem across gaming, AI, and more. Due to SKALE’s gas-free nature, blockchain can be integrated invisibly, creating accessible Web2-like experiences for users and developers.

SKALE has:

• Over 50M UAWs

• 9 Games on the Epic Games Store

• Saved Users over $9.5B on Gas Fees

dYdX has long been at the forefront of DeFi as one of the primary innovators of onchain perpetual futures.

With the launch of dYdX Unlimited on Nov. 19, 2024, the protocol has brought new functionality to the platform that aims to diversify their product suite.

Relative valuation metrics suggest dYdX could be undervalued compared to market leaders, analyst Daniel Shapiro writes in the most recent Blockworks Research report. This indicates that the market is not yet fully appreciating the impact of these recent developments.

• M^0 and Usual have introduced UsualM, a stablecoin built on M^0’s infrastructure. UsualM enables collateral diversification for Usual's products, offering transparency and interoperability while maintaining 1:1 fungibility with the M token. This partnership strengthens stablecoin infrastructure, addressing security and programmability for issuers. Usual’s TVL recently reached $844 million, highlighting ecosystem growth.

• Neon EVM on Solana has released mainnet updates including EIP-1559 relating to gas fee support, a Solana-native Signature SDK, and improvements to block.timestamp functionality. These features enable Ethereum dapps to integrate Solana wallets like Phantom, as well as streamline transactions across both networks to enhance compatibility for time-sensitive applications. The updates aim to simplify development and improve usability for both developers and users.

• Acurast launched Processor Lite for iOS, enabling iPhones to join its decentralized cloud network. Users earn cACU rewards by contributing compute power. The app, built on Polkadot (DOT), promotes sustainability by repurposing devices, democratizing cloud computing and fostering a secure, decentralized infrastructure revolution.