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1) Why are there fewer and fewer bitcoins held by exchanges?
The number of Bitcoins held on exchanges has been falling since Black Thursday in March, and the number has reached its lowest point in almost a year, with a decrease of 320,000 BTC since Black Thursday, a drop of more than 12%.
A common narrative is that this outflow of funds stems from optimistic long-term sentiment, as users withdraw their assets in anticipation of a future bull market. The increasing number of large BTC holders and the accumulation of Hodler in the past two months prove this point.
But not all exchanges showed this trend of capital outflow: Bitfinex’s BTC holdings decreased by 66% to about 133,000, BitMEX’s decreased by 35.6% to nearly 105,000, and Huobi’s decreased by 24.6% to nearly 97,000; Coinbase, on the other hand, only decreased by 0.2%, and currently holds nearly 968,000 coins. Other major platforms such as Binance and Bitstamp have even slightly increased their holdings.
This shows that Hodling behavior cannot fully explain the outflow of BTC held by the exchange, and the reason must also come from the specific exchange itself.
2) Expose the significant difference between renBTC and tBTC
RenVM and tBTC are recent hot spots in the DeFi circle, and both are committed to introducing Bitcoin into the Ethereum DeFi ecosystem. This article compares the significant differences between renBTC and tBTC in terms of "node selection method" and "economic guarantee model". The author believes that competing with different solutions is positive for the entire crypto world.
tBTC: In order to become a tBTC node or signer, a node needs to become a member of the Keep network by staking 100,000 KEEP (work token in ERC-20 format) and ETH as collateral. The Keep network implements a source of randomness called a "random beacon" and a secure multi-party computation (sMPC) protocol, among others. Every time a user requests a BTC deposit, the Keep network will select members with N nodes to form a group and become signers together. They then run a multi-party threshold signature algorithm. That is, they generate a bitcoin address that no one member of the group can use alone: instead, it takes M of N nodes (a subset) to work together to sign messages or spend bitcoins from that address. for transactions. In the original version of tBTC, M = N = 3 (note: select three nodes as a group, and the three nodes can sign together to carry out the transaction).
REN: Similarly, Ren nodes (named Darknodes) need to stake 100,000 REN tokens. Contrary to tBTC/Keep, the network is an independent peer-to-peer network with its own network and consensus rules. Also, nodes are organized very differently: Ren nodes are divided into groups of 200 nodes called shards. Each shard runs the sMPC algorithm to generate bitcoin addresses. Assuming there is only one shard at the beginning, this wallet will be used for user deposits. It cannot be used unless more than 2/3 of the nodes in the shard are working together. This is done by combining the sMPC algorithm with a Byzantine Fault Tolerant consensus algorithm in a new mechanism called RZL MPC.
3) DEX trading volume is growing rapidly, and the field is becoming more and more diverse
In this article, Lucas Campbell reviews the volume data and market share of Ethereum's mainstream DEXs.
Total volume on Ethereum DEXs exceeded $3 billion in the first six months of 2020, compared to $2.4 billion for all of 2019. Additionally, since the beginning of the year, trading volumes on DEXs have risen significantly. In January, the average weekly cumulative volume of major DEXs was around $61 million. Just three months later, the average volume in March has increased by 213% to approximately $193 million.
The biggest increase came on Black Thursday, when the price of crypto assets plummeted by nearly half-in that week alone, the volume of mainstream DEXs totaled more than $400 million. Trading activity has remained steady since then, with Ethereum DEXs averaging around $184 million in weekly volume as of May 2020.
On a positive note, the DEX landscape has changed dramatically since 2019. The DEX space is becoming more and more diverse as more players take a larger market share.
4) Liquidity War of DeFi
More and more DeFi projects distribute their own tokens through "liquidity mining", such as Compound and Balancer. Currently, the largest liquidity pool on Balancer is $4.2 million. Starting from June 1, 145,000 Balancer native tokens will be distributed to liquidity providers every week. Through native tokens to motivate participants and grab market share, liquidity mining may become the norm in the DeFi field.
Chris Powers pointed out in this article that "liquidity is a network effect", and the liquidity war has broken out. This year we will see competition from Uniswap and Balancer, and Compound and Aave in the lending space.
What sets DeFi (and cryptocurrencies) apart is an Uber-style incentive program that can be built to “reward early liquidity providers.” Some refer to this as liquidity mining, referring to the inflationary incentives that blockchains use to reward miners for providing security to the network early on.
Uber needs to subsidize riders and pay drivers more to create a network effect, while Bitcoin requires many people to run the Bitcoin software and secure the network. For DeFi, it's liquidity....
Some have also referred to this as a “liquidity black hole that sucks up all idle assets,” and the newly minted synthetic Bitcoin on Ethereum is an example of this. Adding WBTC as collateral to Maker unlocks additional economic value of Bitcoin as an asset class, while Curve.Fi offers attractive yields to those who deposit WBTC or RenBTC into their liquidity pools.
In a centralized world, the Grayscale Bitcoin Trust has become a popular way for large investors to gain exposure to Bitcoin. Investors want to invest in Bitcoin "as an asset" and are not particularly interested in storing Bitcoin "as a digital currency".
Gold is similar; most investors gain exposure to gold through ETFs, which may be why liquidity pioneer Synthetix's latest plan is to attract gold believers. It provides liquidity rewards for users who deposit funds into Uniswap v2's USDC-sXAU pool, with a view to creating a liquidity portal for anyone to invest in gold. Expect yield mining schemes for other synthetic assets to bring real-world assets to Ethereum.
5) Our Network reviews data on Chainlink and BAT
This issue of Our Network focuses on the on-chain data of lossless lottery PoolTogether, decentralized insurance Nexus Mutual, oracle protocol Chainlink, decentralized leveraged trading platform Opyn and BAT. Relevant points include:
Lossless lottery PoolTogether unique users increased from 423 on January 3, 2020 to 8,296 on May 28, 2020
Among the Nexus Mutual platforms, Flexa ($550K), dYdX ($455K), Uniswap ($421K) and Compound ($405K) had the most coverage
When the main network was released, Chainlink only had 1 price stream (ETH/USD) and 3 nodes, and the daily bandwidth consumed at that time (that is, the block capacity consumed by the protocol—Gas) accounted for 0.33% of the daily available bandwidth of Ethereum . During 2019 there were two price streams (ETH/USD and BTC/USD), each with 21 nodes, and their bandwidth consumption increased 10x to 3.5%. And during Black Thursday, the highest consumption reached 6%
The Chainlink network has grown from an initial three nodes to over 30 active nodes; over time, the LINK payments to nodes of the Chainlink core team have also decreased significantly, from an initial 33.3% of the total daily payment amount to 1.34%
BAT monthly on-chain transaction volume has recently returned to the 1 billion BAT level, with an average on-chain transaction of around 10,000 BAT; the Brave network is working hard to achieve new highs in network activity in the coming months
This is the end of this issue of Satoshi Mamoto's Notes, see you next time.
