A version of this article appeared in our The decentralized August 20 newsletter. Sign up here.
DG, Tim here.
Here’s what caught my attention in DeFi recently:
- Ethereum has never been cheaper to use.
- $63M AEUR stablecoin hit by bank explosion.
- Arbitrum DAO wants to solve its voter apathy problems.
Ethereum’s Low Fees
Ethereum transaction fees are the lowest they’ve ever been, which has some unwanted side effects.
Transactions on the top smart contract network now cost less than $0.10, while token swaps can be completed for less than a dollar.
This is in stark contrast to the $100+ fees that plagued users during the cryptocurrency bull run in 2021.
Fees are so low that Etherscan’s Ethereum Gas Tracker, a popular way to check transaction costs, has started reporting fees in decimals.
The reason for the low fees is that activity has moved to Layer 2 – separate blockchains built on Ethereum that offer much faster and cheaper transactions.
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Ethereum’s Dencun upgrade in March reinforced the cost savings that Layer 2s can offer, accelerating their adoption.
But there’s a problem: low fees break Ethereum’s economic model.
Ethereum no longer destroys — or “burns” — more Ether tokens than it creates.
In other words, its economy is now inflationary – a dirty word among cryptocurrency users who often vilify the money printing ingrained in the traditional financial system.
“The ‘ultrasonic money’ meme is broken,” said Ethereum lead developer Preston Van Loon DL News.
AEUR in difficulty
Anchored Coins AG, the Swiss company that issues the euro-pegged stablecoin AEUR, has suspended withdrawals, leaving holders in the lurch.
The reason? The bank where Anchored Coins held part of the reserves backing its $63 million stablecoin – FlowBank – went bankrupt.
It is not yet clear whether the stablecoin issuer can recover the collateral.
But if that is not possible, Anchored Coins said in a statement, the losses would be socialized among all AEUR holders, in accordance with Swiss law.
Anchored Coins did not respond to a request for comment.
For now, the funds are on hold until authorities appoint a liquidator to oversee the return of deposits to creditors – a process that could take time.
FlowBank’s bankruptcy isn’t the only crisis the stablecoin issuer has suffered in recent times.
Binance suspended trading of AEUR in December, four days after its initial listing on the exchange, as the token surged 200% to $3.25 ― an unusual occurrence for a stablecoin.
The cryptocurrency exchange attributed the token’s upward depreciation to factors such as “users who may not have realized its stablecoin status.”
DAO Voter Apathy
Arbitrum DAO members are voting on key changes to its native token, ARB, to protect its treasury from a hostile takeover.
These proposals aim to address voter apathy among DAO members.
These include making the ARB token staking and potentially diverting some of the blockchain’s profits to ARB holders.
According to Frisson, a pseudonymous delegate of Arbitrum DAO, a decline in participation in the DAO represents a very real danger.
“It becomes economically attractive for a malicious actor to launch a governance attack on the DAO treasury,” he said in a post on Arbitrum’s governance forum.
A governance attack occurs when a coordinated group buys a DAO’s token and votes to pass changes that benefit them, often to the detriment of the protocol’s users.
Other DAOs have been attacked this way before.
In July, Compound, an Ethereum-based lending protocol, was the target of a $25 million governance attack.
The DAO, which runs the Ethereum Name Service, a protocol that allows users to turn their crypto addresses into names and titles, is also fighting attacks.
Data of the week
Tron is the only blockchain to see an increase in trading volume over the past seven days.
Sunpump.meme, a copy of the Solana-based memecoin generator pump.fun, recently launched on the blockchain.
This Week in DeFi Governance
VOTE: CoW DAO Votes on Wintermute Liquidity Agreement for its COW Token
TEMPERATURE CHECK: Arbitrum DAO Considers New Conflict of Interest Policies
VOTE: Solana UXD stablecoin protocol is shutting down
Article of the week
Polygon’s Chief Information Security Officer Mudit Gupta discusses the serious problem of DeFi protocols unknowingly hiring North Korean developers.
What we are looking at
Deepak Thapliyal, the CEO of blockchain company Chain, sold the rare Cryptopunk alien NFT he bought for $23.7 million in 2022.
Thapliyal did not disclose the sale price.
Got any DeFi tips? Contact us at tim@dlnews.com.
