Welcome to the latest edition of Cointelegraph’s decentralized finance newsletter.
Despite the market posting a second consecutive week of bearish numbers, the industry is not lacking in bullish fundamentals. Read on to learn more about the most influential DeFi stories over the past seven days.
What you are about to read is a shorter, more concise version of the newsletter. Subscribe below for a comprehensive round-up of DeFi developments over the past week.
Vitalik is bullish on the multichain, not cross-chain, Web3 world
Vitalik Buterin, a co-founder of Ethereum, shared a candid assessment of the Security Constraints When Implementing Fully Functional Cross-Chain Bridges within the blockchain industry.
Buterin argued that storing assets on their native chain provides a higher level of security against 51% attacks than cross-chain activity, stating, “It’s always safer to stack Ethereum-native assets on top of Ethereum or Solana-native assets Holding Solana than it is holding Ethereum-native assets on Solana or holding Solana-native assets on Ethereum.”
My argument for why the future will be *multi-chain* but not *cross-chain*: There are fundamental limits to the security of bridges hopping across multiple “zones of sovereignty”. from https://t.co/3g1GUvuA3A: pic.twitter.com/tEYz8vb59b
– vitalik.eth (@VitalikButerin) January 7, 2022
Buterin shared a number of examples to prove his thesis, noting that when a malicious entity attempted to launch a 51% attack on Ethereum, a transaction performed by an innocent party was censored and/or reversed, but not blocked and could not be lost.
In the most extreme cases, users’ funds would remain safe even if 99% of the protocol were compromised, as nodes would overwhelmingly support the remaining 1% rule-following blocks and therefore control decision-making.
In contrast, such an incident operating, for example, on a cross-chain bridge between Ethereum and Solana would result in irreversible losses, Buterin argues. The problem gets worse with the addition of chains.
Let’s say a 51% attack hits a single chain out of 50. When they do, they all become vulnerable to what he describes as “systemic contagion that threatens the economy of this entire ecosystem.”
dYdX aims for full decentralization by the end of 2022
dYdX, the Layer Two Derivative Protocol, released the fourth iteration of its roadmap this week, and presented plans to evolve the platform to an open-source, community-centric, and fully decentralized operation later this year.
The architecture is based on a dual model where parts of the protocol such as staking and governance are decentralized while core functions such as the off-chain order book and matching engine are controlled by an internal subsidiary, dYdX Trading Inc., and by centralized servers as supported by Amazon Web Services.
“There will be no more central control points or protocol bugs,” company officials said after the v4 upgrade, assuring that “all aspects of the protocol that can be controlled are fully controlled by the community.”
Amazon Web Service (AWS) for the last month A technical outage has exposed the true vulnerabilities of a number of crypto companies, including dYdX, Binance.US and Coinbase, and their inherent reliance on centralized servers to maintain the network.
At the time, dYdX shared a sincere update on its official Twitter account and promised to seek a definite resolution to the matter, stating:
“Unfortunately, there are still some parts of the exchange that rely on centralized services (AWS in this case). We are deeply committed to full decentralization and this remains one of our top priorities as the protocol continues to be iterated.”
In addition to its decentralization efforts, dYdX is also pursuing improvements to its interface trading platform, introducing spot, margin and synthetic trading capabilities, and appointing an external auditor to evaluate operations.
Near Protocol raises $150 million to accelerate Web3 adoption
Proof of Stake Blockchain Near Protocol raised $150 million in seed investment this week to increase awareness and adoption of Web3 Applications within its network, with an inherent focus on expanding its audience and community base into the Latin America, Turkey and India regions.
The fundraising was led by renowned hedge fund Three Arrows Capital and was further joined by Mechanism Capital, Dragonfly Capital and Andreessen Horowitz’s Silicon Valley-based fund a16z. Individual angel investors included British billionaire hedge fund manager Alan Howard and Aave founder Stani Kulechov.
In a Medium blog post, Near Foundation CEO Marieke Flament shared her optimism about the latest funding, which follows the previous $65.9 million total raised by the company:
“We are delighted to have such a fantastic list of supporters supporting NEAR’s mission. We look forward to using the funding to increase access to blockchain technology in an ever-growing list of countries around the world.”
In October 2021, the smart contract platform committed $800 million to new decentralized finance (DeFi) initiatives such as: B. Developer applications, startup grants and geographic funds.
token performances
Analytical data shows that DeFi’s total locked value fell slightly by 2.77% over the week to a value of $128.15 billion, continuing with the overall market decline.
Data from Cointelegraph Markets Pro and TradingView reveals that DeFi’s top 100 tokens by market cap were mostly bullish the last seven days.
Secret (SCRT) took the lead for the second week with 15%. Earth (LUNA) rose 6.32%, while 1inch Network (1INCH) was up 2.9%.
Interviews, features and other cool stuff
Thank you for reading our roundup of this week’s most influential DeFi developments. Join us next Friday for more stories, insights and information in this dynamically evolving space.
