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Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.
As the crypto community filled its crypto stockings for the holiday season, the Grinch emerged to gift a grimacing fate to two DeFi platforms, stealing their festive spirit and a whole lot of dollars.
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Binance Labs, the venture capital side of global crypto exchange Binance, facilitated a $60-million capital funding raise for cross-chain router protocol Multichain. Other notable participants included Sequoia China, IDG Capital and Three Arrows Capital.
Amid Multichain’s corporate rebrand from AnySwap last week, analytical estimates placed the protocol’s total value above $5 billion and reported over 300,000 users on the platform. The funds raised will be utilized across various domains, including research and development of crypto algorithms, audits, security and general ecosystem growth.
In addition to the capital support, Binance has also pledged to develop a broader relationship with the protocol, announcing that Multichain will be officially recommended as a tool to bridge bToken across chains through Binance’s smart contract platform, the Binance Smart Chain (BSC).
BSC expressed high praise of Multichain, noting that it is “one of the biggest routers on BSC.” Zhaojun, a co-founder of Multichain, stated that the protocol connects “more public blockchains and crypto assets than anyone else, with lower transaction fees, shorter bridging time and higher security levels.”
— Multichain (Previously Anyswap) (@MultichainOrg) December 20, 2021
DeFi infrastructure startup Interlay announced a $6.5-million Series A funding round led by venture fund DFG Capital with additional participation from Hypersphere and Nexo Finance, among others.
The funding is set to support the construction of DeFi applications cross-chain to Ethereum, Cosmos and Polkadot, as well as onboard new developers to the team.
Interlay was designed to enhance the interoperability of crypto assets such as Bitcoin (BTC) to networks that typically facilitate DeFi activity such as Ethereum and Polkadot, a vision that the Web3 Foundation understood when it invested in the platform via a grant in March 2020.
Interlay’s core product, a Bitcoin-backed digital asset titled InterBTC, can be utilized within the Polkadot ecosystem for various DeFi activities such as yield farming, lending and acting as a collateral asset. Tokenizing a Bitcoin derivative opens the possibility of greater utility for the asset in comparison to the functional capacity of the Bitcoin network.
Speaking on the funding raise, James Wo, founder and CEO of DFG, stated that Interlay’s solution would “expand the cross-chain possibilities for Bitcoin” before tweeting:
We are glad to lead the recent round of @InterlayHQ I believe what they do is very fundamental to the Polkadot ecosystem. If they gain 1% of BTC to use InterBTC, that’s $9 billion! @DFG_OfficiaI @inter_btc $DOT https://t.co/phFpVXeG0L
— James Wo (@realjameswo) December 21, 2021
DeFi protocol Grim Finance reported over $30 million in losses this week after an “external attacker” gained access to the protocol’s vault contract via five reentrancy loops. This made it the sixth platform to encounter a security breach in the month of December, following high-profile hacks such as BadgerDAO’s $120 million loss.
In a damning explanatory tweet thread, DeFi security service RugDoc stated that Grim Finance’s largest mistake was not implementing a reentrancy guard on the before-after pattern in the protocol’s smart contract coding. Another mistake was granting the user “more privilege than is necessary” in enabling them to choose the preferred deposit token. RugDoc further explained:
“Hopefully, all projects can draw lessons from this incident that there is much knowledge most experienced solidity devs have at hand. If you haven’t acquired this yet, don’t build multi-million dollar projects. Don’t get audits from companies which everyone knows are useless.”
Similarly, fellow DeFi platform Bent Finance, known for its capabilities of staking and yield farming, also suffered a malicious exploit this week to the tune of 440 Ether (ETH), or just above $1.6 million at the time of writing.
1/ There was an exploit from the bent deployer address, it added balance of cvxcrv and mim to an address on an unvierifed update 20 days ago. We just discovered this today. There are multiple members on this team and we will make this right.
— Bent Finance (@BENT_Finance) December 21, 2021
Analytical data reveals that DeFi’s total value locked has increased 15.74% across the week to a figure of $142.58 billion, engulfing the losses printed in last week’s market downturn.
Yearn.finance (YFI) registered two weeks of gains with 53.28%. Terra (LUNA) rose 36.6%, while Aave (AAVE) printed gains of 34.2%. Curve DAO Token (CRV) and Compound (COMP) claimed fourth and fifth places this week with 28.6% and 15.4%, respectively.
Interviews, features and other cool stuff
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us again next Friday for more stories, insights and education in this dynamically advancing space.
Tokeny, a Luxembourg-based tokenization platform, announced today a new partnership with Inveniam, a SaaS company delivering trust, transparency, and completeness of data to private market assets. Additionally, the partnership includes a €5m investment by Inveniam, Apex, and K20 Fund.
The partnership aims to fully unlock asset liquidity via tokenization, which will be facilitated by providing all technical solutions private asset owners need, covering the entire value chain of tokenized assets underpinned with trusted data regarding asset valuation and pricing.
Inveniam works with private market asset owners and managers to deliver trusted valuation and pricing data using distributed ledger technology. This data underpins private market digital assets and gives these assets integrity upon which market participants can establish price discovery.
While Tokeny’s solutions provide a compliance infrastructure enabling asset managers to easily bring nearly every kind of real-world asset to the blockchain, Inveniam allows their investors to access trusted data and asset valuation. Liquidity will be realized as investors can conduct peer-to-peer transfers using Tokeny’s compliance framework with a fair and transparent price reference provided by Inveniam.
“We’ve been watching the Tokeny team’s progress and product evolution for more than two years and know they’re building next-gen tokenization systems the efficient and compliant way. Totally altering the global trading of private market assets will only work on the institutional level if the experience is seamless, the technology is top-notch, and the right regulatory structures and business networks are in place. This partnership addresses all those requirements for success.”
– Patrick O’Meara, Chairman & CEO of Inveniam
Tokeny offers an institutional-grade white-label solution for digital assets that allows asset owners and managers to efficiently and compliantly issue, transfer, and manage digital assets. All processes, from the client onboarding process including KYC/AML checks to the administration required to manage investor subscriptions, capital tables, distributions, capital calls, etc., are streamlined on the Tokeny platform.
“Tokeny’s capabilities pick up right where Inveniam’s end and vice versa, addressing two biggest obstacles in private markets — pricing data and compliance — on a hyper-efficient infrastructure. In tandem with this very synergistic partnership, the investment by Apex, K20, and Inveniam will allow us to further improve our solutions and accelerate the adoption of tokenization with the best-in-class technology.”
– Luc Falempin, CEO Tokeny Solutions
Additional value to the market will accrue as the partnership will ultimately enable Apex Group, Inveniam’s fund administration partner, to deliver end-to-end -services to a broad ecosystem of private asset owners.
Privacy coins and zero-knowledge technology, which some use to obfuscate the identity of sends/receivers and transaction amounts, have gained enormous popularity in recent years due to mounting regulatory surveillance against the crypto sector. But despite their rapid rise in market cap, critics continue to scrutinize such class of assets as enablers for masking illicit activities.
In an exclusive interview with Cointelegraph, Oliver Gale, CEO, and co-founder of the Panther Protocol (ZKP), elaborated on the technology behind its privacy decentralized finance, or DeFi, solutions and why it’s necessary for today’s crypto space:
CT: How much did you raise from your recent token sale, and what does your roadmap look like from here?
OG: We’ve raised over $30 million in total. For Panther protocol, we did several private sale rounds, and then we did a public sale on November the 23rd, which was 90 minutes long, and raised over $20 million during that time. The second question is around the roadmap itself, so Panther Protocol is a multi-chain privacy protocol with several zero-knowledge, data disclosure tools built into it; what we’re delivering in January is our minimum viable product (MVP).
We have multiple deployments this month. And that will be delivering an MVP that allows staking on Polygon and transferability of the ERC-20 token to ZKP token. And then, I estimate 30 to 60 days later; we’re going to deploy the complete v1.0 MVP, which will have the multi-asset privacy pools and multi-asset staking pools that are the shielded tools in which Panther assets can use be transacted privately. And that will also come with a version of ZK reveals, which is the mechanism by which users can voluntarily disclose their transaction data for compliance purposes or tax reporting purposes, etc. So that’s what can be expected across Q1.
We have over five EVM compatible partnerships in place to deploy Panther v1 on Near, Flare, etc. These shielded pools are being deployed across different chains. And then, our team is building a ZK-driven interchange across other chains, and the goal is to allow these assets to be swapped securely, with low fees, low and high transaction throughput.
CT: What’s the underlying cryptography behind these assets?
OG: So the multi-asset shielded pools are based on ZK-SNARKS. So you have a combination. The shielded pools are, you know, a version of mixer technology with the ability to split join transfer assets. Then we use ZK snarks for proof of ownership. So essentially, transactions happen within the multi-asset shielded pools. And, and then the mechanism for data disclosure reveals is another ZK snark circuit, which is set up to allow Essentially a trusted provider to provide proof that can be verified on the planter network of some data condition being met. And that while it’s been applied to compliance is our first use case, and were put in ZK reveals into production with launched out, which is essentially a launch is launched out is what it sounds like.
CT: Skeptics would say that private networks using zero-knowledge cryptography could become enablers of illicit transactions. What are your thoughts on the matter?
OG: In my view, if you build technology and have no intention of facilitating aiding and abetting or enabling crime, you are not guilty of any crime. But why is privacy needed? Our white paper has this; the bottom line is that actors who are under surveillance behave differently from those who are not. In other words, the exact behavior of our societies is impacted by being watched. So inevitably, there are going to be bad actors.
But I’ve never seen a gun on trial. You don’t put tools on trial; you put people on trial. And the overwhelming consensus of our global society, for all of the tools and technologies we use, is that if the device is more beneficial for the majority than the minority who abuse it, then you use it. And if that weren’t the case, then I’m not sure we would have any kitchen knives because knives are used for criminal activity by a minority. So any attempt to put privacy technology or blockchain technology on trial because a minority abused the system is an argument that can be extrapolated to anything in life.
Blockchain-based metaverse experiences are a hot topic right now because they combine two of the technology industry’s biggest transformation drivers that have been around for a long time, attracting millions of users and participants — immersive digital experiences and stakeholder-based commerce.
Where the newer blockchain-based ecosystems have made a difference is in offering users an ongoing stake in the ecosystem. Yet, that’s very reminiscent of Second Life, another very successful immersive world that came to widespread attention a decade ago and compares to some of the blockbuster experiences that exist today.
Paul Brody is EY’s global blockchain leader and a CoinDesk columnist.
At the top level, there are two critical takeaways for companies looking to enter the metaverse.
The first is that community is powerful and remarkably durable. Though Second Life may not make a lot of headlines anymore, it has a remarkably consistent and loyal user base, even if it’s not enormous. It also has a robust economy that is driven by ongoing sales of real estate in that virtual world.
Credit: Second Life user data from Gridsurvey.com
The second takeaway is that while community is enduring, it is gameplay that drives usage into the tens of millions. The biggest immersive digital experiences all have the same thing in common: they’re all games. From Minecraft to Roblox to Fortnite and quite a few others, the difference between having monthly average users in the tens of thousands and tens of millions is the difference between a 3D world that’s built for socializing and one that’s driven by gameplay, with social connections integrated.
What hasn’t been tested — yet — is if a high-performance gameplay-driven experience can be built in one of the new emerging decentralized ecosystems taking shape now. There are technical challenges around how blockchains operate that don’t make this simple, but if it were done successfully, it would shake up the gaming and metaverse ecosystems substantially. The most successful games have tended to build strong dedicated communities from casual players to organized teams and hugely successful streaming personalities. Until now, those communities haven’t really had any stake in the game itself.
Stakeholder-driven gaming could have a big impact on the culture of gaming itself, which is not always known for being warm and friendly. Personalities in the gaming industry find themselves on a relentless treadmill with no safety net. On top of an already rough and tumble culture, women, minorities and members of the LGBTQ community often face relentless bullying in the comment feeds and online forums. (For a good primer on how rewarding though rough this ecosystem is, check out this excellent Washington Post article.)
A stakeholder-driven model that rewards big contributors with an ongoing share in the ecosystem as a whole — not just their own performance — might help balance the ups and downs of the business for individuals. And for community holders who have an economic stake in the ecosystem as a whole, the threat of economic confiscation for ugly behavior might have a powerful moderating effect as well. That would keep the fun in gaming, which is the point.
The views reflected in this article are Paul Brody’s and do not necessarily reflect the views of the global EY organization or its member firms.
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