Latest Trends and Thoughts in Decentralized Finance Ecosystem

sUSD Pegging Issue

Since the SIP-420 proposal was passed at the beginning of the year, sUSD has experienced a decoupling phenomenon, recently even dropping below $0.9. This proposal introduces the "delegated pool" mechanism, aiming to encourage users to mint sUSD, with the following characteristics:

• The collateralization ratio has dropped to 200%
• Debt can be transferred linearly to the protocol
• After the complete transfer, users do not need to repay.
• The protocol resolves debt through profits and the appreciation of SNX.

Although the SNX minting efficiency has been improved and liquidation risks have been eliminated, it has also brought some issues:

• The market still has doubts about the SNX-sUSD endogenous collateral.
• The increase in sUSD supply has led to a significant deviation in the Curve pool.
• Users no longer actively manage debts and cannot arbitrage through the market.

The ability of sUSD to return to its peg largely depends on how the project team enhances demand or incentives. From a design perspective, Synthetix's solution is relatively advanced, but the market's acceptance of algorithmic stablecoins remains to be seen.

veCAKE Governance Attack Incident

The recent veCAKE governance attack incident has sparked controversy. Pancake believes that Cakepie has directed CAKE emissions to inefficient pools through governance power, harming the interests of the platform. However, this behavior does not violate the operating principles of the ve mechanism.

The relationship between Pancake and Cakepie is similar to that between Curve and Convex. The ve model design does not directly link fees and emissions; the issue pointed out with Cakepie is actually a result of insufficient governance competition. A more ideal approach is to wait for or promote market competition rather than intervene directly.

The founder of Curve proposed a quantitative evaluation method:

• Measure the amount of veCAKE locked through Cakepie
• Compare the effect of using equivalent veCAKE to support "high-quality pools" and repurchase and burn CAKE.
• Determine whether Cakepie's actions are more effective than directly burning CAKE.

According to experience, the efficiency of the veToken model in reducing token circulation is about 3 times that of direct destruction.

BUIDL continues to grow

• 24% growth in 7 days, nearing a breakthrough of 2.5 billion USD
• The recent $500 million growth did not come from Ethena.
• May have attracted a new group of investors
• On-chain data may come from the Spark protocol under MakerDAO.

The RWA business continues to grow, but the integration with the DeFi ecosystem is not high, presenting a state of "disconnection from the market, unrelated to retail investors."

Repeal of the DeFi Broker Bill

The President of the United States has signed a bill to officially repeal the IRS DeFi cryptocurrency broker rules. This is a significant boon for the DeFi sector, indicating a relaxation in regulatory stance, which may provide room for more innovative applications.

Unichain Launches Liquidity Mining

Uniswap has restarted liquidity mining after 5 years to guide liquidity for Unichain. This event involves a reward of 5 million USD in UNI tokens, covering 12 token pools, including mainstream assets like USDC, ETH, COMP, and others.

Euler Expands to Avalanche

• TVL increased by 50% in a month
• The growth mainly comes from incentive measures such as Sonic, Avalanche, and EUL.
• Has entered the top ten in lending protocol TVL

Cosmos IBC Eureka Launches

• Based on IBC v2 protocol
• The gas consumed by each transaction, ATOM, is burned.
• Support cross-chain between Cosmos and EVM
• Currently supports Ethereum mainnet and mainstream assets of Cosmos.
• In the past week, Cosmos hub has seen a cross-chain inflow of 1.1 billion US dollars.

This update introduces a new value driver for ATOM, which is expected to improve the disconnection between ATOM and ecological development. However, the sustainability of the capital inflow still needs to be observed.

Other Dynamics

• AaveDAO officially starts repurchasing tokens
• The Pendle proposal will launch the PT token on Aave.
• Berachain updates the POL reward distribution rules and introduces a new guardian committee.
• OlympusDAO adjusts its strategy to cope with new regulations.
• Yearn's yBGT listed on Berachain

After experiencing rapid growth, Berachain has entered a period of adjustment, and the official team has made modifications regarding incentive distribution. Although there has been some outflow of TVL recently, it remains one of the main Decentralized Finance ecosystems. It is worth paying attention to the integration of more protocols and the trend of TVL in the future.