Industry review, Market news and BendDAO crisis

Industry review, Market news, and BendDAO crisis

Hey-hey readers, if you’re looking to keep up with the latest Web 3 news, this is the article for you. Keep reading to learn more about the industry’s current state, the latest market news, an in-depth analysis of the BendDAO liquidity crisis, and how their team got themselves out of it.

Industry review

Cryptocurrency

Good news for everyone involved! If we look at the overall market data, we can see that capitalization has hit US$1.041 trillion, 7D changes are at -6.57%, and the daily volume of trades is $US63.76 billion. The bitcoin market value ratio has risen by 39.6%, while Ethereum has only risen by 19.8%. 

Table 1. Last week’s top currencies
Source: CoinMarketCap

The global cryptocurrency market is on a steady incline, currently valued at US$1.040 trillion, and slowly but surely coming out of the decline we saw last week. Bitcoin, on the other hand, has decreased by 5% in comparison to its previous week’s value. Ethereum is seeing much of the same and has also seen a 7% drop in price. Bitgert keeps our hopes high as they remain on an uptrend, rising 32% this week.

NFT

Table 2. NFT Collections Listed By Sales Volume
Source: CoinMarketCap

The NFT market saw a huge drop as it fell by 74% which caused the market cap to decrease to US$2,186,948,165. On the other hand, sales volumes drastically increased by 139%, bringing the market to US$134,274,130. A new player has entered the top 10 NFT brands, ABC+, and it’s doing well for itself. All of the top 10 NFTs that are independent of the global market has seen no changes in prices.

NFTGO

Table 3. Top NFT collections as shown on NFTGO
Source: NFTGO

Based on NFTGO’s analytics we can see that BAYC and MAYC are still holding strong as the top trending collection on the market. As shown above, Otherdeed for Otherside has hit a weekly volume of 6.17 million with a floor price of only 1.67 ETH, so grab them while they’re hot! 

DeFi

Table 4. DeFi market TVL ranking
Source: DefiLlama

If we compare the statistics from last week, we can see that almost all DeFi Developers have a reduced TVL except for JustLend, which raised 0.31b more than last time. The top 10 have not changed either, despite the bear market.

Layer 2

Table 5. Layer2 protocols ranking and market share
Source: l2beat

No major changes can be seen when comparing this week’s report with the last. The top three greatest Layer2 protocols remain Arbitrum One, Optimism, and dYdX. TVL has decreased across the board except for dydX and Loopring. Market shares remain stable with changes of less than 0.1%.

Market news

Source: Business 2 Community

The big news is coming in from Ethereum as they finally give us a kick-off date for their upgrade to a proof-of-stake consensus mechanism. On September 6th, the Bellatrix upgrade is set to be implemented which will start off the merging process. The exact time of this release is on the 144896th epoch on the Beacon Chain. Once this happens, the Terminal Total Difficulty value that will trigger the merge will be 58,750,000,000,000,000,000,000. This can all be expected to happen somewhere between September 10 and 20. The Ethereum team once hinted at the official date being September 16.

Reddit unofficially joins the NFT market as it began airdropping “Collectible Avatars” for avid users. This started when a handful of active Reddit users were asked to pick an avatar out of a group of 4 categories, to be exact- “The Singularity”, “Aww Friends”, “Drip Squad” and “Meme Team”. These collectibles can now be found on sale on the NFT marketplace at a floor price of 15$ up to 42$. These NFTs are stored and managed using Reddit’s own “Vault” wallet system. We say ‘unofficially’ since Reddit does not call these avatars NFTs, yet they have previously referenced that they wish to join the web 3 market- maybe even turning their Reddit karma system into a DeFi market system.

Now for more on the Etherium merge. Coinbase introduces a Liquid Staking token that is planned to be released before the Merge. The Coinbase Wrapped Staked ETH token can be used to stake ETH through Coinbase. The goal is the mass adoption of the token for use in trade, transfer, and DeFi applications.

On the topic of investment and financing, the world’s largest crypto ATM operator, Bitcoin Depot, plans to merge with an acquisition company known as GSR II Meteora to go public with a listing on Nasdaq. The acquisition company is valued at around US$885 million. More than half of the world’s recent public offerings have gone through merging with SPACs.

As of late, web 3.0 developers have begun using new tools offered by the company Thirdweb. Thirdweb offers a template, pre-audited smart contracts which allow beginner developers to easily and cheaply start up blockchain applications with a safe and easy-to-use UI. Their target demographic is GameFi and NFT creators. Third Web technologies have seen action from more than 55,000 developers, with some honorable mentions being the buy now, pay later app Afterpay and New York Fashion Week. Thanks to all this influence on the market, the company was valued at US$160 million causing Haun Ventures, an investment firm led by Katie Haun, to invest US$24 million into the company. Thirdweb co-founder and CEO Furqan Rydhan say “It’s really exciting, whether it’s a bear market in terms of price or not, that we’ve continued to see strong growth and have been able to showcase that as part of raising this round.”

Source: GJEL Accident Attorneys

Last but not least, some bad news for Coinbase as they failed to provide proper security for their customers’ accounts. A large string of class action lawsuits is being filed by the Northern District of Georgia, New Jersey, and several other investors as they have allegedly been causing financial harm due to users who were either locked out temporarily or permanently from their accounts. Another offense is the listing of securities on the trading platform, violating federal law. Will Coinbase make it out of this scenario in time to profit from the Ethereum merge? Let’s hope so. 

BendDAO

If you’ve been keeping up with crypto and GameFi news, then you’ve probably heard of a DAO before. If not, here’s a quick rundown. A Decentralized Autonomous Organization is an automated deciding body that operates on preset rules determined by the organization’s voting parties. DAOs have been seen executing smart contracts for GameFi projects and the like, but now a new form of DAO has arisen. 

Source: BendDAO

BendDAO is the repurposing of traditional DAO tech for the function of automating the liquefaction of an NFT in exchange for an Ethereum loan. This is how the system works in layman’s terms: the person who deposits ETH, known as the Depositor, earns passive income for the provision of ETH liquidity. 

A borrower can then instantly borrow ETH from the pool by using an NFT as collateral. This process collateralized the lending and borrowing of NFTs, making the market a more accessible place to start investing safely while also granting fine APRs for those willing to invest in Ethereum for a prolonged time.

So the main functions of said system are:

• NFT Liquidity
• Instantaneous crypto loans
• Automation of lengthy purchasing procedures

Safety Net

Source: Istock

We all know that NFTs are not nearly as stable as gold; their prices fluctuate so heavily that the value could drop to a mere 10% of what it was once worth. To negate said threat, a smart contract was put into place by the name of the “Health Factor” tracker. If the HF of an asset drops below one, the asset is liquified. A health factor is calculated using the simple formula:

HF=(Floor Price * Liquidation Threshold) / Debt with Interests.

The health factor

The health factor serves not only as a digit for a computer to track but also as a general grading tool we can use to analyze the safety of our deposited NFTs in comparison to the equivalent borrowed ETH. 

Source: BendDAO

The only time a lender should feel safe about their NFT not getting liquidated is when the HF is above 2, otherwise, the loan should be paid off bit by bit in a timely manner to reduce the gap between money owed and NFT value. However, the HF is not the main deciding factor as to whether or not your NFT will be liquified since even at an HF of 0 the asset will remain until the smart contract is executed. 

Reasons for liquidation

Since the NFT market is, as we all know, in bear territory, it cannot be trusted as a dependable way to maintain value in assets. With the number of traders at an all-time low, the trading volume also drops, causing prices to slump as well. 

This is one of the reasons why BendDAO could be very helpful in surviving these weak market states. Instead of a massive NFT withdrawal due to a lack of confidence,  NFTs could be loaned rather than sold in exchange for the inflated price of tokens. This provides partial price protection to the NFT mentioned above, and liquidity of assets without the need to mass-cash NFT prices. 

Source: Brex

BendDAO only provides their loaning services if blue-chip NFTs are used as collateral, more specifically BAYC, CryptoPunks, MAYC, Doodles, CloneX, and Azuki. Among these, the most frequently traded are BAYC and MAYC NFTs.

Liquidity Crisis

BendDAO is a hot topic as of late due to its liquidity crisis based on a lack of ETH within the fund. More specifically, the system’s lending utilization rate reached 99% while only having 90 ETH of liquidity available. 

This means that ETH depositors who wish to withdraw their investments from the protocol will be unable to do so for the foreseeable future. Luckily, this crisis seems to be coming to an end thanks to a creative hotfix from the developers.

Proposed Solution

Now, let’s talk about BIP#9, a solution offered by the BendDAO community that attempts to solve the crisis by changing specific parameters in how the DAO operates. Most changes concern the tweaking of numbers such as:

• Increasing the liquidation threshold to 70%
• Changing the auctions to cycle every 4 hours
• Decreasing the prime interest rate to 20%

One of the main changes that would allow communities to fret less over future incidents if they ever occur, is the implementation of a community voting system that would allow members of the BendDAO community to vote on solutions and actions in critical scenarios. Another act of transparency is the addition of an element in the user interface that showcases floating ETH debt. One last layer of safety is the addition of a support team that would assist members during critical moments such as these.

If this proposal passes, the clearing threshold of NFTs would lower thus speeding up the liquidation of NFTs. While auctions would become more active, and those who have yet to invest in blue chip NFTs would have many more opportunities to do so and educate themselves, a downside would be the immense amount of NFTs that would be liquified even though their health factor is above 1. As calculated, if the threshold is set to 70%, an HF of only 1.28 would be needed to justify the sale of an NFT.