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Codefi

NEWSLETTER #7: The Q2 2020 DeFi Report

A review and analysis of DeFi protocols and performance in Q2 2020 by ConsenSys Codefi.

by Nicole AdarmeJuly 15, 2020
q2 2020 defi report cover

DeFi in Q2 2020

Yesterday, we published our quarterly DeFi report. The Q2 2020 DeFi Report is a data-driven summary, analysis, and discussion of the emerging financial ecosystem being built on top of Ethereum.

Some of the main topics covered in the report include:

  • Overall DeFi data statistics, summaries, and visualizations.

  • DeFi user behavior and network visualizations of the user relationships between protocols.

  • COMP, Compound, and Yield Farming.

  • BTC tokenized on Ethereum.

  • Major security incidents and the rise of DeFi insurance.

  • The performance of specific high-profile protocols, including Uniswap, Maker, and Compound.

  • The state of stablecoins in Ethereum DeFi.

  • A look towards DeFi in 2020 and beyond.

Take, for example, the metric Total Value Locked (TVL) that is commonly used as a benchmark of the progress of Ethereum DeFi. TVL is the USD measurement of all the assets (ETH, WETH, and ERC-20 tokens) locked in DeFi at any point in time. We wanted to answer the question: how strong is this metric? Is there a possibility that we are double counting some locked funds and inflating TVL?

To provide a theoretical example: a user may lock 1 ETH in Compound and receive 250 DAI as a loan (assuming 1 ETH = $250), then move to another protocol and lock that 250 DAI up. If we look at TVL, we would say that $500 USD is locked in DeFi, when in reality the true locked USD value is just the value of the initial locked ETH, $250.

So we looked at the data. A concrete example happened on June 8th, when a user (0x…aa7a) withdrew 12M DAI from Compound and AAVE, borrowed another 2.5M DAI on dYdX, and then deposited all of that DAI into a MakerCDP. With a rough estimate of ~200% collateral ratio for WETH deposit, we know that by the time that user moved those DAI into CDP, they locked at least $5M USD on dYdX (in order to borrow the 2.5M DAI) and $14.5M USD on Maker. That means they contributed to $19.5M USD in TVL in DeFi, while the actual funds the user brought into DeFi is around $17M USD ($5M USD on dYdX and $12M withdrawn from Compound and AAVE). The movement of this user’s funds can be seen in the figure below.


TTVL Codefi Q2 2020 DeFi Report

The rest of the Q2 2020 DeFi report covers a broad range of topics, all of which are accompanied by objective, on-chain data. Check out the rest of the report and keep up to date with DeFi.


Quick Codefi Hits

  • New to the Newsletter and to Codefi? Check out this explainer video about ConsenSys Codefi.

  • ConsenSys Codefi Feedback: TLDR; we want to get to know you better and it’ll take a minute.

  • Ready for Ethereum 2.0? On June 16, ConsenSys announced the launch of Codefi Staking, an Ethereum 2.0 staking-as-a-service platform with institutional functionality for exchanges, custodians, funds, wallets and other potential customers.

  • Looking Back on 5 Years of Proof of Work. Powered by Codefi Data, the Proof of Work Mining Report is a full retrospective on the performance of PoW and the evolution of mining since the launch of the public Ethereum mainnet in 2015.

  • The SKALE Network is Live on Mainnet! On June 30, SKALE went live on the Ethereum mainnet. In February, Codefi announced that SKALE would be the first decentralized network to launch a token on the Activate platform.

  • Speaking of SKALE, the auction on Codefi Active is around the corner. The auction will be a Dutch Auction, “a decreasing price auction featuring a single seller and multiple buyers who collectively determine the final clearing price.” Sound complicated? It’s not – let us explain in more detail.

  • The ConsenSys Partner Program offers technology partners, systems integrators, application firms, and software vendors access to custom benefits and new business opportunities with our leading blockchain products. Access to, support for, and training of Codefi products is just one of the benefits of joining the Partner Program.


Upcoming Events

  • Thursday, June 16: “Syndicated Loans and Blockchain Technology.” An introduction to the syndicated loans market and the opportunity for blockchain-based solutions. Speakers include Bridget Marsh, Executive VP of the LSTA, Didier Le Floche, CTO of ConsenSys Codefi, and Guillaume Dechaux, Global Head of Strategic Sales and BD at ConsenSys.


Codefi Spotlight: Codefi Staking

On June 16, ConsenSys Codefi announced the launch of Codefi Staking. Codefi Staking is an Ethereum 2.0 staking-as-a-service platform with institutional functionality for exchanges, custodians, funds, wallets and other potential customers.Codefi revealed its first batch of Pilot Program participants, designed to incorporate feedback and feature requests while designing and building the Codefi Staking API ahead of the Ethereum 2.0 launch. Through the completion of the pilot program, partners gain a deeper understanding of Ethereum 2.0 and have the opportunity to be first to market in providing their customers with Ethereum 2.0 staking capabilities.

The Pilot Program participants include major ecosystem players, including: Binance, Crypto.com, DARMA Capital, Huobi Wallet, Matrixport, and Trustology.

“With staking on Binance, users can receive staking rewards without needing to set up nodes, or worrying about minimum staking amounts, time lengths, or any catches. Users deserve the rewards that their coins can earn them. With the eventual launch of Ethereum 2.0, we are excited to support staking for all of our ETH holders on Binance,” said Changpeng Zhao (CZ), CEO at Binance.

Codefi Staking is built on top of a trusted software stack built by ConsenSys. The mission is to provide a white-label institutional grade API, with easy and efficient access to the Ethereum 2.0 network to enable enterprises to safely and profitably engage with the next phase of Ethereum’s evolution.

Codefi is accepting Early Adopter customers to partner with prior to the Ethereum 2.0 Beacon Chain launch. Early Adopters stay ahead of the competition with a low risk, low barrier to entry way to provide feedback on the service as well as learn directly from Eth2 teams building the next generation of Ethereum and begin staking ETH. To sign up, click here.


Final Remarks

Thanks for sticking through this newsletter. Follow us on Twitter, learn more on our website, and let us know your thoughts. Whether you’re interested in working with us, for us, or you just want to say hello, please feel free to contact us.

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Till next time,

The ConsenSys Codefi Team