Welcome to the latest edition of the decentralized finance newsletter from Cointelegraph.
Read on to find out why almost half of the cash providers on Uniswap v3 lose capital due to temporary losses.
What you are about to read is the reduced version of this newsletter. For the full breakdown of DeFi’s developments over the past week, subscribe below.
Acala wins Polkadot’s first parachain auction
Decentralized Funding Protocol Acala was announced as the winning project in Polkadot’s first parachaine auction this week, beating competitor Moonbeam to the finish line with a seismic total of DOT 32.5 million (1 , $ 28 billion) raised from 24,934 contributors.
Acala is a Polkadot-based multifunctional DeFi platform that allows developers to build smart contract applications with cross-chain capabilities, while being compatible with Ethereum. Its main investors include Digital Currency Group, Polychain Capital, and Alameda Research, among others.
In Acala’s case, all proceeds from the initial equity loan offering are classified as “crypto debt” and, therefore, must be repaid by the project after the lease is concluded.
With over 32 million DOT contributed by over 81,000 community members, Acala won the first parachain auction on @Peas!
Thank you to everyone who participated in this historic event. (1/3) pic.twitter.com/CL2jCwA9Re
– Acala – Polkadot DeFi Hub (@AcalaNetwork) November 18, 2021
Related: DFG invests $ 12.6 million in Astar Network’s Polkadot parachain offer
Iota Foundation to Launch Staging Network and Reward Token
The Iota Foundation, a nonprofit open source entity that works to support the Iota ecosystem, this week announced the upcoming launch of a staging network, Shimmer, alongside an associated symbolic asset, SMR.
Shimmer is a layer-one sandbox platform that will allow OEMs and developers to test the efficiency and compatibility of their decentralized applications in the DeFi and NFT space, prior to deployment to the Iota backbone.
Scheduled to launch in early 2022, the network will also facilitate community governance confirmations for Iota’s large-scale network upgrades, including the next programmable multi-asset ledger, smart contracts, full decentralization and the sharding.
Related: Iota launches beta smart contracts to drive interoperability
Almost 50% of Uniswap v3 liquidity providers are in the red
A research report released this week by Topaz Blue and the Bancor Protocol found that nearly half, 49.5%, of liquidity providers on Uniswap v3 experienced financial loss due to impermanent losses, a common occurrence among Automated market makers when providing double-sided, volatile liquidity pairs.
An example of this would happen if, for example, a user provided equal values of Tether (USDT) and Ether (ETH) in US dollars to a cash pool and the price of ETH rises.
This would mean that arbitrageurs – investors who often work in agreement with financial institutions to take advantage of price differentials in the market – will remove ETH from the pool to sell at a higher price. This results in a decrease in the US dollar value of the user’s position and, therefore, a temporary loss.
The report suggested that, based on current statistics, it may well be more profitable to simply hold the market, rather than actively participate in liquidity services, stating:
“A user who decides not to provide liquidity can expect to increase the value of his portfolio at a faster rate than one who actively manages a liquidity position on Uniswap v3. “
Related: Bancor releases loans without liquidation with Vortex as AMMs continue to diversify
Analytical data reveals total locked-in value of DeFi has declined 7.89% on the week for a figure of 160.47 billion dollars.
Cointelegraph Markets Pro and TradingView Data Reveals Top 100 DeFi Tokens By Market Cap executed indifferently through the last seven days.
Avalanche (AVAX) secured the first place on the podium with 30.11%. Curve DAO Token (CRV) came in second with 0.67%, while Maker (MKR) came in third with 0.34%.
Analysis and hot topics from last week:
Thanks for reading our roundup of this week’s most significant DeFi developments. Join us again next Friday for more stories, ideas and education in this dynamic evolving space.