Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.
Although the market is posting bearish numbers for a second straight week, there is no shortage of bullish fundamental news in the sector. Read on to learn about the most impactful DeFi stories from the past seven days.
What you are about to read is a shorter, more succinct version of the newsletter. For a full roundup of DeFi developments over the past week, subscribe below.
Vitalik is bullish for the multi-channel, not cross-channel Web3 world
Vitalik Buterin, co-founder of Ethereum, shared a candid assessment of the security limitations in implementing fully functional cross-chain bridges within the blockchain industry.
Buterin argued that storing assets on their native chain provides a higher level of security against 51% of attacks than cross-chain activity, stating, “It is always safer to hold native Ethereum assets on Ethereum. or native Solana assets on Solana than to do so. hold native Ethereum assets on Solana or native Solana assets on Ethereum.
My argument for why the future will be *multi-chain*, but it won’t be *cross-chain*: there are fundamental limits to the safety of bridges that cross multiple “sovereign areas”. From https://t.co/3g1GUvuA3A: pic.twitter.com/tEYz8vb59b
— vitalik.eth (@VitalikButerin) January 7, 2022
Sharing a series of examples to prove his thesis, Buterin noted that if a malicious entity attempted to launch a 51% attack on Ethereum, a transaction undertaken by an innocent party could be censored and/or reversed, but not blocked or lost. .
In the most extreme cases, users’ funds would remain safe even if 99% of the protocol were compromised, as nodes would overwhelmingly take over the remaining 1% and therefore govern decision-making.
In contrast, such an incident operating on a cross-chain bridge between Ethereum and Solana, for example, would lead to irreversible losses, Buterin argues. The problem gets worse with the addition of strings.
Suppose a 51% attack occurs on just one of the 50 chains. In this case, all become vulnerable in what he describes as a “systemic contagion that threatens the economy of this entire ecosystem”.
dYdX aims for full decentralization by the end of 2022
dYdX, the layer-two spin-off protocol, released the fourth iteration of its roadmap this week, laying out plans to develop the platform into an open-source, community-centric, and fully decentralized operation later this year.
The architecture operates on a dual model in which sections of the protocol, such as staking and governance, are decentralized, while core functions such as the off-chain backlog and matching engine are controlled by an internal subsidiary , dYdX Trading Inc. and supported by centralized servers such as Amazon Web Services.
“There will be no more central points of protocol control or failure,” company representatives said following the v4 update, assuring that “every aspect of the protocol that can be controlled will be entirely controlled by the community”.
Last month’s Amazon Web Service (AWS) technical outage exposed the true vulnerabilities of a number of crypto firms, including dYdX, Binance.US, and Coinbase, and their inherent reliance on centralized servers to maintain the network.
At the time, dYdX shared a heartfelt update on their official Twitter account and pledged to seek an unequivocal solution to this matter, stating:
“Unfortunately, parts of the exchange still rely on centralized services (AWS in this case). We are deeply committed to fully decentralizing, and this remains one of our top priorities as we continue to iterate on the protocol.
Alongside its aspirations for decentralization, dYdX is also continuing to improve its interface trading platform, introducing spot, margin and synthetic trading opportunities, as well as appointing an external auditor to assess the commercial operations.
Near Protocol raises $150 million to accelerate Web3 adoption
Proof-of-stake blockchain Near Protocol raised $150 million in seed investment this week to improve awareness and adoption of Web3 applications within its network, with an inherent focus on growing its audience and reach. its community base to regions of Latin America, Turkey and India.
The capital raise was led by renowned hedge fund Three Arrows Capital and was also participated in by Mechanism Capital, Dragonfly Capital and Silicon Valley-based Andreessen Horowitz’s a16z fund. Individual angel investors included British billionaire hedge fund manager Alan Howard and Aave founder Stani Kulechov.
In a Medium blog post, Near Foundation CEO Marieke Flament shared her optimism about the latest funding, around which follows the previous total of $65.9 million raised by the company:
“We are thrilled to have such a fantastic list of funders supporting NEAR’s mission. We look forward to leveraging funding to improve access to blockchain technology in an ever-growing list of countries around the world.
In October 2021, the smart contract platform allocated $800 million for new initiatives in the decentralized finance (DeFi) space, such as developer apps, seed grants, and geographic fundraising pots.
Analytical data reveals that the total value locked in DeFi declined slightly by 2.77% over the week to a figure of $128.15 billion, continuing with the broader market decline.
Data from Cointelegraph Markets Pro and TradingView reveals that the top 100 DeFi tokens by market capitalization have been mostly bullish over the course of the last seven days.
Secret (SCRT) took the lead for a second week with 15%. Terra (LUNA) rose 6.32%, while 1inch Network (1INCH) posted gains of 2.9%.
Interviews, reports and other cool stuff
Thanks for reading our roundup of this week’s most impactful DeFi developments. Join us again next Friday for more stories, ideas and education in this dynamically evolving space.