Maven's Insights - May 2022

03 June 2022

In April the announcement came out that the ‘Merge’ for Ethereum would be happening at the end of summer 2022, meaning that the Ethereum network will undergo a transformation to the Proof-of-Stake consensus mechanism. In preparation for this event multiple testnet merges have taken place already, with the most recent one having been the ‘Kiln’ testnet. This event was followed by a shadow fork of the mainnet going live as mentioned in our April newsletter. On May 30th, it was announced that the beacon chain for the Ropsten testnet had gone live. The beacon chain is the Proof-of-Stake consensus layer and it’s expected that this testnet merge will be completed on June 8th.

The biggest event of May was UST, an algorithmic stablecoin native to the Terra ecosystem, losing its peg to the price of one dollar. This was due to a confluence of circumstances and the risks which come with algorithmic stablecoins. Due to the de-peg, the price of UST crashed in consonance with the ecosystem’s native token LUNA. After this situation, the team behind the Terra ecosystem decided to launch a similar project dubbed LUNA 2.0 in cooperation with existing ecosystem projects. The de-peg of UST and collapse of LUNA caused a massive shockwave throughout our industry and we expect it to continue to have ripple effects for the foreseeable future.

Instagram announced that it’s going to integrate NFTs into their platform, which will be compatible with multiple of the platform’s functionalities. Initially only NFTs on the Ethereum blockchain will be accepted, but other networks will be integrated later as well. The introduction of NFTs by the social media platform could help the technology be introduced to a broader audience and signals continued interest from traditional tech companies in decentralized technologies.

Coinbase, one of the biggest centralized exchanges, previously stated that “DeFi will become the place where people actually will be heading to if they want to participate in the crypto economy”. As part of their strategy to offer DeFi accessibility to a broader range for their customers, Coinbase  will integrate the biggest dApps into their Coinbase app so users can buy NFT’s or use a protocol such as Uniswap directly from their app.

Last month was a leap forward for another centralized exchange from a regulatory point of view because Binance received its first European license in France to become a Digital Asset Service Provider (DASP). Just 3 weeks later Binance obtained its second European DASP license in Italy. These developments demonstrate that it’s possible to offer cryptocurrency services while remaining compliant with multiple jurisdictions in which an exchange operates.

Compound, the well-established DeFi lending protocol, received a ‘B-’ credit rating from credit rating agency S&P Global Ratings. A historical moment, as the protocol is the first DeFi protocol in history to receive a credit rating from one of the largest rating agencies in the financial world. Additionally, the Siam Commercial Bank, which is the third largest bank of Thailand, became a user of Compound’s ‘treasury service’. The service allows financial institutions to interact with DeFi to earn 4% yield by lending their assets to the protocol. As part of the integration between DeFi and TradFi, Compound offers the ‘Treasury service'. This service allows multiple (financial) institutions to enter DeFi and gain a 4% yield per annum by lending their deposit out to borrowers. The latest institution to use this service is the Siam Commercial Bank (SCB) which is the third biggest bank of Thailand.

Celestia launched its ‘Mamaki’ testnet, which will serve as an upgraded version of the now-retired devnet. The new testnet marks a massive step towards the 2023 mainnet launch, and allows for multiple new functions to be tried out by both developers and community members. We will pay close attention to developers starting to build on top of the testnet as the first few use-cases will take shape.

This month our venture investment in Saga was announced. Saga is allowing developers to spin up ‘chainlets’ within the Cosmos ecosystem while limiting the amount of technical overhead that is typically required, such as having to bootstrap validators for the network. Furthermore, portfolio company Chainflip raised another 10 million USD. The funds that are collected in this raise will be used to fund the project for the upcoming three to four years.

Our portfolio company, Maple Finance, has issued over 1.4 billion USD in loans as of this month. The newly launched Ethereum pool issued more than 10 million USD worth of Ethereum loans this month, while the USDC pool issued close to 30 million USD in loans. If you would like to learn more about being a lender on Maple Finance, you can reach out to us directly.