Recent Developments and Thoughts on the DeFi Ecosystem

sUSD Decoupling Issue Continues

Since the beginning of the year, sUSD has experienced a continuous de-pegging phenomenon, recently even dropping below $0.9. This is due to the "delegated pool" mechanism introduced by the SIP-420 proposal, which, while reducing collateral ratios and liquidation risks, has also led to an increase in the supply of sUSD. There are still concerns in the market regarding algorithmic stablecoins with endogenous collateral, and the impact of the LUNA incident is still felt. Although Synthetix is designed to be advanced, whether it can regain market trust remains unknown.

veCAKE Governance Controversy

A certain DEX platform accuses the Cakepie protocol of abusing governance power by directing CAKE emissions to inefficient pools. However, this behavior does not violate the principles of the ve mechanism. The reasonable use of governance power should be achieved through market competition rather than artificial intervention. A better solution might be to set incentive caps or encourage more participants to compete for veCAKE voting rights.

RWA business continues to grow

The tokenization of physical assets ( RWA ) business continues to grow, with the BUIDL index increasing by 24% within 7 days, approaching 2.5 billion USD. The new funds may come from the Spark protocol under MakerDAO. However, the RWA business has not yet integrated well into the DeFi ecosystem, showing a disconnect with retail investors.

The United States Cancels the DeFi Broker Bill

The United States has officially abolished the IRS DeFi cryptocurrency broker rules, which is seen as a significant boon for DeFi. The relaxation of regulatory attitudes may open the door for more innovative applications.

Unichain Launches Liquidity Mining

A certain DEX platform launched a liquidity mining program for its Unichain project, offering a $5 million token reward, involving 12 token pools. This is the platform's first large-scale liquidity mining activity in 5 years.

Euler Expands to Avalanche

The lending protocol Euler has launched on Avalanche, and its TVL has increased by 50% within a month, mainly due to incentives from Sonic, Avalanche, and EUL.

Cosmos IBC Eureka Launches

Cosmos has launched the Eureka upgrade based on IBC v2, supporting cross-chain interactions between Cosmos and EVM, and introducing a token burning mechanism for ATOM. Recently, cross-chain capital inflow to Cosmos Hub has reached $1.1 billion, which may enhance the value of ATOM.

Other Dynamics

• A certain DAO has started to buy back tokens.
• Pendle proposes to list PT token on the lending platform.
• Berachain updates POL reward distribution rules and introduces a new governance mechanism.
• Multiple projects actively layout the Berachain ecosystem

The DeFi sector continues to innovate but also faces numerous challenges. Market confidence in algorithmic stablecoins still needs to be rebuilt, and the improvement of governance mechanisms is still ongoing. The improvement of the regulatory environment and the development of cross-chain technology may bring new opportunities for DeFi.