Hello Defiers! Here’s what we’re covering today:
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🎙Listen to the exclusive interview with Zcash’s Zooko in this week’s episode:
Celsius files to reopen withdrawals for a minority of customers: CoinTelegraph
Ethereum Name Service Touts Third-Highest Monthly Revenue as Merge Approaches: Decrypt
We’re very excited to announce the Ethereum Foundation blog has had a major overhaul and is now available in 16 languages: Ethereum Foundation
Trending in The Defiant
Bitcoin Dominance Drops Under 40% For The First Time Since January
The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button below ($15/mo, $150/yr).
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🖼 A16Z’s Latest Bet on NFTs: Free Licenses for Everyone
Venture Capital Giant’s Move Signals Outsize Ambitions in NFT Market
By Owen Fernau
STOLEN Who owns what when someone owns an NFT? It’s not always clear. When Actor Seth Green’s Bored Ape was stolen, for instance, it brought plans for a show with the animated character into question.
CODE There’s the ambiguity of whether the metadata, the code that creates NFT images, is actually stored in a way owners can rely on. And then there is the more general mystery of how someone can “own” digital images or characters that are only a right-click away from duplication.
MORASS Now Andreessen Horowitz, the Silicon Valley venture capital firm that closed a $4.5B crypto fund in May, is wading into the NFT ownership morass. On Aug. 31, a16z, as the firm is known, launched six new NFT licenses under the brand “Can’t Be Evil” that purport to help artists monetize the new technology. The licenses have been released to the public gratis. According to the VC firm, the licenses aim to accomplish three goals:
👉READ THE FULL STORY IN THE DEFIANT.IO👈
📈 Crypto Markets Hold Up As Stocks Swoon
Ether Has Rallied 5.4% Since Monday
OUTPERFORMED Despite moving in unison for much of the year, Ether has outperformed major U.S. stock indices this week. The S&P 500 and the tech-heavy Nasdaq Composite were on track for five consecutive days of losses before rallying late Thursday, dropping 1.4% and 1.7% respectively since they opened on Monday.
GAINS Several major cryptocurrencies, meanwhile, have eked out gains over the week. Ether has rallied 5.4% since Monday, according to data from The Defiant Terminal. Cardano is up 1.1%, and Polkadot is up 0.4%.
LOWS Bitcoin, Binance and Ripple have also fared better than the stock market, having dropped 1.1% or less since Monday. While stock markets hit fresh weekly lows earlier today, major cryptocurrencies held above their Aug. 28 lows.
👉READ THE FULL STORY IN THE DEFIANT.IO👈
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🧐 What Is DAI?
A Step-by-Step Guide to One of DeFi’s Most Important Stablecoins
URGENT After the collapse of Terra’s UST stablecoin in May and the wipeout of $60B in market capitalization it has become increasingly urgent to see how stablecoins are backed. DAI, one of the earliest stablecoins, is one of the most important such tokens in DeFi.
RESERVES On a spectrum between fully algorithmic and backed by cash reserves, DAI stablecoin lies somewhere in between. Let’s learn more about DAI.
INTERMEDIARIES DAI stablecoin is supported by MakerDAO, a DeFi lender. Founded by Rune Christensen, the Maker Foundation launched open-source MakerDAO in 2014 to spearhead decentralized finance. Like other protocols, Maker runs on Ethereum’s smart contracts to replicate traditional finance without intermediaries such as banks.
LENDING As a lending protocol, MakerDAO was missing a key component — money that is digital but not as volatile as cryptocurrencies. This is where stablecoins come in.
👉READ THE FULL STORY IN THE DEFIANT.IO👈
🔗 Celsius files to reopen withdrawals for a minority of customers: CoinTelegraph
Celsius has motioned for $50 million worth of the total $225 million held in the Custody Program and Withhold Accounts to be released to owners.
🔗 Ethereum Name Service Touts Third-Highest Monthly Revenue as Merge Approaches: Decrypt
The Ethereum Name Service reported its third highest month of revenue in August, with 2.17 ENS domain names created on the service.
🔗 When White Hat Hackers Go Bad: CoinDesk
In most cases, cybersecurity can be achieved through ethical hacking – an established practice used to identify weaknesses and offer guidance on vulnerabilities.
Trending in The Defiant
Bitcoin Dominance Drops Under 40% For The First Time Since January Bitcoin dominance (BTC.D), which is the market capitalization of BTC relative to that of all digital assets, has fallen below 40% for just the second time since 2018 and stands at an eight-month low, according to data from CoinMarketCap.
Moonbirds Fly High On $50M Round and New Collections Institutional investors continue to place bullish bets on NFTs despite the current bear market in digital assets.
Christensen Calls For MakerDAO to Float Stablecoin In what would mark a dramatic strategic reversal, Rune Christensen, the founder of MakerDAO, is calling for the DeFi stalwart to reduce its exposure to real-world assets and freely float the value of its stablecoin, DAI, against the dollar.
🧑💻 ✍️ Stories in The Defiant are written by Owen Fernau, Aleksandar Gilbert, Samuel Haig, and yyctrader, and edited by Edward Robinson, yyctrader and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
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🤑 Seven Traders Raked in $114M in Profits via MEV Stratagem
Trading Bots Quietly Make a Killing in a Market That is Supposed to Be ‘Democratizing’
By Samuel Haig
ANALYSIS Just a handful of players are profiting handsomely from Maximal Extractable Value at the expense of ordinary Ethereum users, an analysis of Dune Analytics data shows. In the last 12 months, six transactions account for half of the $163M extracted by bots through MEV, an arcane trading strategy in the crypto market.
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Moreover, only seven MEV bot operators, known as “searchers”, raked in 70% of the profits, according to Umberto Natale, a researcher at Chorus One, a staking service provider, who analyzed the data. And two of the searchers pocketed more than a quarter of MEV profits in 2022, tweeted Eigenphi, an MEV-focused data platform.
MEV is an esoteric trading strategem that takes advantage of one of the least understood workings of cryptocurrencies — the order in which blocks of data are added to chains to form the backbones of networks such as Ethereum.
MEV emerged as a trend in 2020 as opportunistic bot operators extracted hundreds of millions of dollars from unsuspecting Ethereum users while hiding from public view.
According to Flashbots, a MEV research team, about $675M worth of MEV has been extracted since Jan. 1, 2020, including $290M in just the past 12 months.
The profits are extracted by bots and validators that manipulate the order of on-chain transactions submitted to the mempool; this creates arbitrage opportunities for traders.
MEV is siphoned away from ordinary DEX users without their knowledge. As a consequence, most DEX trades are executed at their worst possible price, with a small number of bot operators quietly profiting in the background.
In a recent appearance on The Defiant Podcast, Will Warren, co-founder of the 0x decentralized exchange protocol, described MEV as “trading God mode” due to the sizable, risk-free profits that can be extracted using MEV techniques.
“The bots are on top of every single transaction where it’s possible to pull this off,” Warren said. “If your transaction can be sandwiched, there’s gonna be a bunch of bots competing to sandwich it every time.”
Flashbots launched in late 2020 in response to address the escalating “MEV crisis” and shine a light on the practice. The idea was to “democratize” its extraction by empowering ordinary investors to execute MEV trades. Dune Analytics estimates that more than 71% of MEV profits were gleaned using Flashbots’ software and channels over the past year.
“Before Flashbots, only groups skilled enough to modify the client code and collude with miners could extract MEV and there were no dashboards or ways to detect and monitor it,” Hudson Jameson, a former member of both the Ethereum Foundation and Flashbots, told The Defiant.
Flashbots distributes the profits from MEV between searchers and validators in a bid to prevent rival teams from congesting the network.
But with data showing just a handful of players are collecting most MEV profits, some in the community are questioning how democratic the sector truly is, which contradicts Flashbots’ branding.
DEXs work by quoting the price of trade execution based on a snapshot of the network’s most recently mined block. But there is typically variance between the price an asset traded for during the last mined block and the final price in future trades.
As such, DEX traders select a threshold of allowable slippage — the permissible difference between the price a trade is quoted and finalized at — when submitting transactions to ensure their trades are included in the next block.
Validators operating MEV bots take advantage of the slippage threshold by reordering the pending transactions or submitting their own transactions in a ‘sandwich attack’ to extract the maximum slippage as profit for themselves.