Last week was marked by the China FUD – the fear, uncertainty and doubt that spread among crypto investors following the further crackdown on cryptocurrency transactions and trading by China’s central bank. While the total cryptocurrency market capitalization dropped by almost 5% to reach a low of $1.82 trillion in the day following the release of the news, cryptocurrencies and the blockchain technology once again proved that they cannot simply be banned. Although week 39 started with red numbers, at the end of the week the total market capitalization has already climbed to $2.18 trillion. It seems that China’s restrictive measures only led to further decentralization of the space as Chinese investors and traders simply switched to decentralized trading platforms that are not operated by centralized entities and do not implement know-your-customer (KYC) checks. It is therefore not surprising that this week’s selection consists of 3 DeFi protocols.
3. Rocket Pool (RPL)
Rocket Pool is a fully decentralized Ethereum 2.0 staking protocol that allows holders with less than 32 ETH to participate in the staking process. Rocket Pool users can stake as little as 0.01 ETH. For dedicating their holdings to the staking pool, they receive rETH, which is a tokenised staking deposit token. rETH can be held or traded from the moment of ETH deposit and it will still generate staking rewards, which are also paid out in rETH. It is also possible to offer staking node services to the pool. Users who run their own full node and stake 16 ETH can benefit from higher rewards, but will have to deal with node set-up, monitoring, and maintenance. RPL serves as the governance token for the Protocol DAO. Nevertheless, it is also used for incentives and to insure the value behind rETH in case of penalties or slashing events.
Rocket Pool to Release its Mainnet on October 6
The Rocket Pool team recently announced that the Rocket Pool mainnet will see the light of day on October 6, 2021 00:00 UTC. After many beta releases over the last few years and multiple protocol audits, Rocket Pool will soon claim the title of the first ever decentralised staking protocol for Ethereum 2.0. The team noted that the staking site will be available at https://stake.rocketpool.net/, but beware – Rocket Pool’s mainnet launch will take place in 4 4 short to medium length stages. At each stage there will be a limited number minipools and the size of the rETH deposit pool. Once the rETH deposit pool has reached its limit, stakers will not be able to swap ETH for rETH. The same goes for the number of minipools – once the limit is reached, node operators will not be able to join the pool. The limits will be increased as the protocol will progress to the next launch stage. The purpose of the staged launch is to ensure everything is functioning properly before increasing the total value locked in the protocol. RPL has recently seen a small 7% correction and is currently trading at around $33. Nevertheless, RPL is up by more than 1400% YTD, which can be attributed to the popularity of ETH staking and the excitement around ETH’s next big upgrade. More information regarding Rocket Pool mainnet launch can be found here.
2. Uniswap (UNI)
UNI is the governance token of the automated market maker (AMM) protocol Uniswap. UNI tokens are ERC-20 tokens that allow holders to decide on the future of Uniswap by voting on proposals. Uniswap – the platform, which facilitates quick swaps between various Ethereum-based tokens, has recently been struggling to keep its users and market share because of high fees on Ethereum. In March this year the project released Uniswap V3, a new and impoved version of the AMM protocol on Ethereum mainnet. In July 2021 Uniswap made an effort to reduce the costs of trades by launching on two Ethereum Layer 2 networks: Optimistic Ethereum and Arbitrum. Nevertheless, both Uniswap’s Layer 2 deployments are still in beta.
Chinese traders are flocking to decentralized exchanges after Chinese Government imposed a ban on cryptocurrencies
On September 24, two documents concerning cryptocurrency regulation issued by the China’s central bank were made public. The documends, which reveled the next steps in China’s cryptocurrency crack down, stated that “providing cryptocurrency-related services like trading, token issuance and derivatives is illegal”. Furthermore, the bank emphasized that this applies to Chinesse exchanges as well as overseas crypto bussiness offering their services to Chinese residents. In the day after the news have spread like fire through the crypto communities all around the globe, the cryptocurrency markets were hit hard. While Bitcoin dropped for 6.5%, exchange tokens issued by Huobi and OKEx, i.e. exhcanges with a large number of volume deriving from China, suffered much greater losses. Huobi token (HT) and OKB prices more than halved. Interestingly, the news of crypto ban in China had an opposite effct on DeFi and especially DEX tokens, which posted high gains in the days following the event, as iinvestors anticipated that Chinese traders will flock to DEXs now that centralized exchanges are not accessible. And they were right. Data shows that users have withdrawn massive amounts of crypto holdings from centralized exchanges. The increase in total value locked in various DeFi protocols and the increase in trading volume on several DEXs indicates that Chinese crypto has been put to work in the DeFi protocols. Since Uniswap is the biggest DEX, it stands to benefit the most from the recent shift to decentralized trading platforms. In addition, Uniswap is making an effort to continuously improve its services. The recently introduced Auto Router function optimizes the end price by splitting the order route across multiple pools. Furthermore, Uniswap added support for EIP-1599 and improved user experience (UX) for Uniswap on Layer 2 networks in September.
1. dYdX (DYDX)
dYdX is a non-custodial decentralized cryptocurrency derivatives exchange. The same named DYDX token is a governance token for the dYdX exchange protocol. Token holders govern the dYdX Layer 2 protocol to align incentives between traders, liquidity providers, and partners. Aside from governance, traders are eligible for trading discounts of up to 50% when trading on dYdX provided they hold the required amount of tokens. dYdX governance token, which launched in early September, was airdropped to protocol users retroactively based on their trading volumes on the platform prior to its full decentralization. 25% of the initial token supply will be distributed to users who trade on the dYdX in the form of trading rewards while liquidity providers can benefit from the reward pool that consists of 7,5% of the initial supply. In addition, a community treasury has been put in place in order to grow the ecosystem through grants and liquidity mining programmes.
Crypto derivatives exchange dYdX hit a daily trading volume of over $10 billion
While the reasons behind DYDX being on the top of this week’s Coins to Watch list are largely similar to those listed under Uniswap, DYDX is arguably even more attractive for new users, since it offers lower fees and rewards both traders and liquidity providers with its DYDX governance token. The fact that the daily trading volumes on the dYdX exchange increased almost exponentially following the China ban supports this prediction. In fact, dYdX’s 24-hour trading volume surpassed $10 billion on September 28 according to the exchange’s own metrics. Because of the increased trading volumes on dYdX and decreased volumes on centralized trading platforms, dYdX is routinely surpassing the trading volumes of crypto derivatives on its centralized counterparts. This will likely translate to higher gains and returns on the DYDX token as compared to UNI in the short term, which is why we list DYDX higher on the list that UNI. In addition, DYDX technical indicators are indicating a continuation of the bull run. At the time of writing DYDX is changing hands at a price of over $24. This means that the token almost doubled its price since the documents about the Chinese crypto ban surfaced.
Andrew is a writer that does most of his work on cryptocurrency-related topics. While he’s primarily interested in Bitcoin, he also follows major altcoins and the innovative ideas that new cryptocurrency and blockchain projects are bringing to the table.