Aave

Bitcoin price consolidation could give way to gains in TON, APE, TWT and AAVE

If Bitcoin rises through resistance at $17,622, TON, APE, TWT and AAVE could begin to tack on outsized gains.

The United States equities markets shrugged off the hotter-than-expected labor data on Dec. 2 and recovered sharply from their intraday low. This suggests that market observers believe the Federal Reserve may not change its stance of slowing the pace of rate hikes because of the latest jobs data.

Although the FTX crisis broke the positive correlation between the U.S. equities markets and Bitcoin (BTC), the recent strength in equities shows a risk-on sentiment. This could be favorable for the cryptocurrency space and may attract dip buyers.

*Crypto market data daily view. Source:* *Coin360*

The broader crypto recovery may pick up steam after more clarity emerges on the extent of damage caused by FTX’s collapse. Until then, bullish price action may be limited to select cryptocurrencies.

Let’s look at the charts of Bitcoin and select altcoins that may be getting ready to start an up-move in the near term.

BTC/USDT

Bitcoin has been trading near its 20-day exponential moving average, or EMA, of $16,963 for the past three days. This suggests a tough battle between the bulls and the bears to gain supremacy.

The major roadblock for the buyers on the upside is $17,622. If bulls catapult the price above this level, it will suggest that the downtrend could be over. The BTC/USDT pair could then race to the psychological level of $20,000. This level may again act as a resistance, but if crossed, the pair could rally to $21,500.

Conversely, if the price turns down from $17,622 and breaks below the 20-day EMA, it will suggest that the bears have not yet given up. The pair could thereafter consolidate in a large range between $15,476 and $17,622.

*BTC/USDT 4-hour chart. Source: TradingView*

Buyers are defending the 20-day EMA on the four-hour chart, but the failure to achieve a strong bounce indicates that demand dries up at higher levels. The bears may try to make the most of this opportunity and pull the price below the moving averages. If they manage to do that, the pair could drop to $16,000 and then to $15,476.

On the other hand, if the price turns up and breaks above $17,250, the likelihood of a rally to $17,622 increases. This level may again act as a significant resistance, but if bulls drive the price above it, the pair could rally to $18,200.

TON/USDT

Toncoin (TON) nudged above the symmetrical triangle pattern on Nov. 30, but the bulls could not sustain the higher levels as seen from the long wick on the day’s candlestick. However, the bulls defended the 20-day EMA ($1.73) on the downside, indicating buying on dips.

The upsloping moving averages and the relative strength index (RSI) in the positive zone indicate advantage to buyers. This improves the prospects of a break above the resistance line of the triangle. If that happens, buying could accelerate and the TON/USDT pair could soar to $2.15 and then march toward the pattern target of $2.87.

This positive view could negate in the near term if the price once again turns down from the resistance line and plummets below the 20-day EMA. That could increase the selling pressure and pull the pair to the 50-day simple moving average ($1.62) and later to the support line.

*TON/USDT 4-hour chart. Source: TradingView*

The bears are trying to defend the overhead resistance at $1.84 while the bulls are buying the dips to the 20-day EMA. The price is getting squeezed between the two levels and may be ripe for a range breakout.

If the price rises above the overhead zone between $1.84 and the downtrend line, it may attract further buying by the bulls. That could start a new up-move to $2. The important level to watch on the downside is $1.68 because a break below it could expedite the drop to the support line.

APE/USDT

ApeCoin (APE) turned down from the downtrend line on Nov. 30, but the bulls have not allowed the price to break below the 20-day EMA ($3.73). This is a positive sign as it signals demand at lower levels.

The 20-day EMA is gradually turning up and the RSI has jumped into the positive territory, indicating that bulls are attempting a comeback. The APE/USDT pair could pick up momentum on a break above the downtrend line. This could open the doors for a possible rally to $5 and thereafter to $6.

Instead, if the price turns down and breaks below the 20-day EMA, it will suggest that bears are active at higher levels. The pair could then drop to $3, which is likely to act as a strong support.

*APE/USDT 4-hour chart. Source: TradingView*

The 20-EMA on the four-hour chart has flattened out and the RSI is near the midpoint, indicating a balance between supply and demand. This uncertainty could shift in favor of the bulls if they push the price above $4.05. The pair could then rally to the downtrend line.

If bears want to gain the upper hand, they will have to sink the pair below $3.77. If they manage to do that, the decline could extend to $3.50.

TWT/USDT

Trust Wallet Token (TWT) rebounded sharply off the 20-day EMA ($2.07) on Nov. 27 and broke above the resistance at $2.45 on Dec. 2. This suggests that the trend remains bullish and traders are viewing the dips as a buying opportunity.

The bears may again pose a strong challenge at $2.73 but if bulls overcome this barrier, the TWT/USDT pair could resume the uptrend. The next stop on the upside could be $3, and if this level is also taken out, the pair could soar to the pattern target of $3.51.

Contrarily, if the price turns down and breaks below $2.25, the pair could drop to the 20-day EMA. This remains the key level to watch on the downside because a break below it could pull the pair toward $1.81. A bounce off this level could suggest that the pair may consolidate between $1.81 and $2.54 for a few days.

*TWT/USDT 4-hour chart. Source: TradingView*

The 20-EMA on the four-hour chart has turned up and the RSI is in the positive zone, indicating that buyers have an edge. The bulls will attempt to drive the price above the overhead resistance zone between $2.54 and $2.73. If they succeed, the pair could start the next leg of the uptrend.

Contrary to this assumption, if the price turns down and breaks below the 20-EMA, the bullish momentum may weaken and the pair could slide to the 50-day simple moving average (SMA). The pair could then remain range-bound for some time before starting the next trending move.

AAVE/USDT

Aave (AAVE) recovered sharply from the psychological support at $50 and broke above the 20-day EMA ($63). Buyers are currently striving to strengthen their position by flipping the 20-day EMA into support.

The bears are trying to defend the 32.8% Fibonacci retracement level of $68, but a minor positive is that the bulls have not given up much ground. This indicates that buyers anticipate a move higher.

The 20-day EMA has flattened out and the RSI is near the midpoint, indicating that the bears may be losing their grip. If buyers thrust the price above $68, the AAVE/USDT pair could rally to the 50-day SMA ($71) and thereafter to the 61.8% retracement level at $80.

On the contrary, if the price turns down and breaks below the 20-day EMA, the pair could drop to the support line of the channel.

*AAVE/USDT 4-hour chart. Source: TradingView*

The pair is facing resistance near $66 and the RSI has formed a negative divergence on the four-hour chart, suggesting that the bullish momentum could be weakening in the near term. A break below the 50-SMA could pull the price to the $56 to $58 support zone.

Alternatively, if the price turns up from the current level and breaks above $66, the pair could rally to $71. This level may again act as a resistance, but if bulls push the price above it, the rally could extend to $80.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Compound Finance to impose lending caps in light of failed Aave exploit

Some illiquid altcoins will have their borrow limit reduced by upward of 99%.

Users of decentralized finance lending platform Compound Finance have passed a proposal to restrict the maximum borrowing of 10 tokens on the protocol. The proposal put forth by financial modeling firm Gauntlet passed Nov. 28 by majority vote, although the total turnout amounted to less than 7% of the COMP tokens in circulation.

Most notably, tokens such as Uniswap (UNI) and COMP had their borrow limits slashed from 11.25 million and 150,000 to 550,000 and 18,000, respectively. Other less liquid altcoins on Compound were also affected, such as Yearn.finance (YFI), which had its borrow cap reduced from 1,500 to just 20. Wrapped Bitcoin (WBTC), which previously had no borrow limit on Compound, has been slapped with a lending ceiling of 1,250.

Proposal 135 has passed with quorum. ✅

Proposal 135 sets borrow caps for ten Compound v2 markets.

The proposal will be applied in two days. https://t.co/JvlEPJZrgp

— Compound Governance (@compgovernance) November 28, 2022

According to Gauntlet, the proposal would prevent “insolvency risk from liquidation cascades,” “price manipulation Mango squeeze exploits,” “risk of high utilization” and “risk from shorting assets from a short position on Compound of significant size relative to the circulating supply of the asset.” Although the related incident was not directly referenced, Gauntlet also conducted modeling and risk assessment for DeFi lending protocol Aave.

On Nov. 22, it was revealed that Mango Markets hacker Avraham Eisenberg attempted to exploit the protocol by shorting high amounts of Curve (CRV), which was an illiquid token on Aave at the time, forcing the protocol to liquidate the position at a loss due to significant slippage. However, it turned out that the slippage was far less than expected, and Eisenberg reportedly lost an estimated $10 million in the attack after a CRV short squeeze.

Gauntlet then proposed to freeze a series of tokens on Aave v2 that may be at risk of an exploit due to lack of liquidity. Currently, the Compound Finance protocol has $654.7 million in total borrowings collateralized by $2.146 billion in assets.

Aave temporarily freezes lending markets to fend off further attacks

The temporarily frozen lending markets include 12 Ethereum-based tokens and five stablecoins.

Decentralized liquidity protocol Aave has temporarily suspended lending markets for 17 tokens to fend off volatility risks that could lead to further attempts at market manipulation.

Lending markets were frozen right after its governance members passed a vote that aims to temporarily freeze assets considered to be volatile and have low liquidity. The assets included in the list are Yearn.finance (YFI), Curve Finance (CRV), 0x (ZRX), Decentraland (MANA), 1inch (1INCH), Basic Attention Token (BAT), Enjin (ENJ), Ampleforth (AMPL), DeFi Pulse Index (DPI), RENFIL, Maker (MKR) and xSUSHI.

Apart from these, the protocol also suspended the following stablecoins: sUSD, Pax Dollar (USDP), Liquidity USD (LUSD), Gemini Dollar (GUSD) and RAI. With the assets frozen, users cannot take loans on the assets or deposit their assets to the protocol.

According to the proposal, the aim of the move is to reduce the risk for Aave v2 and promote the eventual migration to v3. The proposal also pointed out the lower risk tolerance of community members at the moment. However, the authors of the proposal also highlighted that the next course of action, which may be to either delist or relist the markets, would depend on liquidity and usage levels.

The governance proposal follows a failed $60-million attack on CRV using USD Coin (USDC) as collateral. The attack was unable to go through because of a wrong calculation of the decentralized protocol’s liquidity levels. Nevertheless, contributors within the project worked on the proposal to prevent further exploitation attempts on the protocol.

Despite the turbulence in the broader crypto market, a decentralized finance (DeFi) protocol was able to raise $10 million in investments from various investors, such as Bitfinex and Ava Labs. Last week, Cosmos-based ecosystem Onomy secured funds to develop its new protocol that combines DeFi and foreign exchange.

DeFi sparks new investments despite turbulent market: Finance Redefined

The last week of November remained turbulent for the crypto market as majority of the DeFi tokens struggled with the market volatility.

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.

The prolonged crypto winter aided by the collapse of FTX has kept investors from backing a new protocol that merges DeFi and the foreign exchange market. A new Cosmos blockchain-based DeFi protocol has caught the eyes of investors who have put $10 million behind the project.

Cardano-based leading stablecoin ecosystem Ardana abruptly stopped its development after several launch delays. However, the project remains open-source for others to add to it until they restart the development process.

Aave community has now proposed a governance change after a failed $60 million short attack. The short attack was later traced to the Mango Markets exploiter, as one of the wallets involved in the attack belonged to the same exploiter.

The crypto market remained turbulent throughout the week and the majority of the top 100 DeFi tokens traded in red, barring a few.

DeFi protocol raises $10M from Bitfinex, Ava Labs despite turbulent market

Onomy, a Cosmos blockchain-based ecosystem, just secured millions from investors for the development of its new protocol. The project merges DeFi and the foreign exchange market to bring the latter on-chain.

According to the developers, the latest funding round garnered $10 million from big industry players such as Bitfinex, Ava Labs, the Maker Foundation and CMS Holdings, among others.

Continue reading

Leading Cardano stablecoin project shuts down after excruciating launch delays

On Nov. 24, Ardana, a leading DeFi and stablecoin ecosystem building on Cardano, abruptly halted development, citing “funding and project timeline uncertainty.” The project will remain open-source for builders while treasury balances and remaining funds will be held by Ardana Labs “until another competent dev team in the community comes forward to continue our work.”

The move came as a shock to many due to the sudden nature of the announcement. However, it appears that issues were already present for some time. Beginning July 4, Ardana has held an ongoing initial stake pool offering, or ISPO, to fund its operations. Unlike traditional fundraising mechanisms, developers do not receive the Cardano (ADA) delegated by users but instead the staking rewards.

Continue reading

Aave proposes governance changes after failed $60M short attack

On Nov. 23, one day after Mango Markets’ exploiter Avraham Eisenberg attempted to use a series of sophisticated short sales to exploit decentralized finance protocol Aave, project contributors put forth a series of proposals to deal with the aftermath. As told by protocol engineering developer Llama and financial modeling platform Gauntlet, both of whom are deployed on Aave.

Llama wrote that the user had been liquidated but at the cost of $1.6 million in bad debt, likely due to slippage. “This excess debt is isolated only to the CRV market,” the firm wrote. “While this is a small amount relative to the total debt of Aave, and well within the limits of Aave’s Safety Module, it is best practice to recapitalize the system to make whole the CRV market.”

Continue reading

Crypto awakening: Researcher explains ETH exodus from exchanges

Nansen research analyst Sandra Leow posted a thread on Twitter unpacking the current state of DeFi with a specific focus on the movement of Ether (ETH) and stablecoins from exchanges.

As it stands, the Ethereum 2.0 deposit contract contains over 15 million ETH, while some 4 million Wrapped Ether (wETH) is held in the wETH deposit contract. Web3 infrastructure development and investment firm Jump Trading holds over 2 million ETH tokens and is the third largest holder of ETH in the ecosystem.

Continue reading

DeFi market overview

Analytical data reveals that DeFi’s total value locked plunged below $40 billion. Data from Cointelegraph Markets Pro and TradingView show that DeFi’s top 100 tokens by market capitalization had a volatile bearish week due to the FTX saga, with the majority of the tokens bleeding throughout the week.

Curve DAO Token (CRV) was the biggest gainer among the top 100 DeFi tokens, registering a surge of 23.8% over the past week, followed by Chainlink (LINK) with an 8% surge. The rest of the tokens in the top 100 traded in red on the weekly charts.

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.

Ether tests $1,200 but bears better positioned for $1.13B options expiry on Nov. 25

Bears are better positioned to profit roughly $215 million during November’s Ether options expiry, putting pressure on ETH’s price near a critical resistance level.

No matter if one analyzes Ether’s (ETH) longer-term or weekly time frame, there is little hope for bulls. Besides the negative 69% year-to-date performance, a descending channel has been pressuring the ETH price while offering resistance at $1,200.

*Ether/USD 4-hour price index. Source: TradingView*

Regulatory uncertainty continues to weigh down the sector. For example, Starling, a digital bank based in the United Kingdom, announced on Nov. 22 that it would no longer allow customers to send or receive money from digital asset exchanges or merchants. The bank described cryptocurrencies as “high risk and heavily used for criminal purposes.”

Other concerning news for the Ethereum ecosystem involved the decentralized finance (DeFi) platform Aave, which suffered a short-seller attack on Nov. 22 aimed to profit from under-collateralized loans.

Curiously, a similar exploit happened on the Mango Markets DeFi application in October. Albeit not a direct attack on the Ethereum network, the attacker has shown critical flaws in some major decentralized collateral lending applications.

Furthermore, the Singapore-based cryptocurrency lender Hodlnaut is reportedly facing a police probe over allegations of cheating and fraud. The issues started on Aug. 8 after the lending firm cited a liquidity crisis and suspended withdrawals on the platform.

Lastly, on Nov. 22, United States senator Elizabeth Warren correlated the demise of the FTX exchange to subprime mortgages of 2008 and penny stocks used for pump-and-dump schemes. Warren said the FTX collapse should be a “wake-up call” to regulators to enforce laws on the crypto industry.

That is why the $1.13 billion Ether monthly options expiry on Nov. 25 will put a lot of price pressure on the bulls, even though ETH posted 11% gains between Nov. 22-24.

Most of the bullish bets were placed above $1,400

Ether’s rally toward the $1,650 resistance on Nov. 5 gave the bulls the signal to expect a continuation of the uptrend. This becomes evident because only 17% of the call (buy) options for Nov. 25 have been placed below $1,400. Consequently, Ether bears are better positioned for the monthly expiry of the upcoming $1.13 billion options.

*Ether options aggregate open interest for Nov. 25. Source: CoinGlass*

A broader view using the 1.44 call-to-put ratio shows a skewed situation with bullish bets (calls) open interest at $665 million versus the $460 million put (sell) options. Nevertheless, with Ether currently hovering around $1,200, bears have a dominant position.

For instance, if the Ether price remains below $1,250 at 8:00 am UTC on Nov. 25, only $40 million worth of these call (buy) options will be available. This difference happens because there is no use in the right to buy Ether at $1,250 or $1,500 if it trades below that level on expiry.

Bears could pocket a $215 million profit

Below are the four most likely scenarios based on the current price action. The number of options contracts available on Nov. 25 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:

Between $1,050 and $1,150: 800 calls vs. 20,200 puts. The net result favors bears by $215 million.
Between $1,150 and $1,250: 3,300 calls vs. 15,100 puts. The net result favors bearish bets by $140 million.
Between $1,250 and $1,300: 4,700 calls vs. 13,200 puts. The net result favors bears by $100 million.
Between $1,300 and $1,400: 8,700 calls vs. 8,900 puts. The net result is balanced between bulls and bears.

This crude estimate considers the call options used in bullish bets and the put options exclusively in neutral-to-bearish trades. Even so, this oversimplification disregards more complex investment strategies.

A 7-year-old dormant Bitcoin wallet could complicate matters for Ether bulls

Ether bulls need to push the price above $1,300 on Nov. 25 to balance the scales and avoid a potential $215 million loss. However, Ether bulls seem out of luck since a Bitcoin wallet related to the 2014 Mt. Gox hack moved 10,000 BTC on Nov. 23.

Ki Young Ju, the cofounder of blockchain analytics firm CryptoQuant, has verified the findings, noting 0.6% of the funds were sent to exchanges and may represent sell-side liquidity.

If bears dominate the November ETH monthly options expiry, that will likely add firepower for further downside bets. Thus, at the moment, there is no indication that bulls can turn the tables and avoid the pressure from the two-week-long descending triangle.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Aave proposes governance changes after failed $60M short attack

The exploit failed due to a miscalculation of Aave’s liquidity levels.

“Over this past week, the user 0x57e04786e231af3343562c062e0d058f25dace9e [wallet associated with Eisenberg] opened a short position on CRV [Curve] using USDC as collateral. At its peak, the user was shorting ~92M units of CRV (roughly $60M USD at today’s prices). The attempt to short CRV on Aave has been unsuccessful, and the user lost ~$10M USD from the liquidations.”

Going forward, Llama’s proposal calls upon the Gauntlet’s insolvency fund and Aave Treasury to make whole the bad debt. Another separate proposal put forth by Gauntlet calls for temporarily freezing a list of token markets, including Curve DAO Token (CRV), on Aave v2. The day prior, Eisenberg attempted to induce a liquidity crunch on Aave by shorting large amounts of CRV, which was illiquid on the platform, and forcing the smart contracts to buyback the positions at a loss due to very high slippage (upward of 90%). However, the trade failed when Eisenberg was liquidated with much lower slippage levels than expected.

Mango Markets hacker allegedly feigns Curve short attack to exploit Aave

It appears that shorting of CRV tokens was a distraction shot to exploit a sophisticated loophole on DeFi platform Aave.

As described by analysts at Lookonchain on Nov. 22, tokens of decentralized exchange Curve Finance (CRV) appear to have suffered a major short-seller attack. According to Lookonchain, ponzishorter.eth, an address associated with Mango Markets exploiter Avraham Eisenberg, first swapped 40 million USD Coin (USDC) on Nov. 13 into decentralized finance protocol Aave to borrow CRV for selling.

The act allegedly sent the price of CRV falling from $0.625 to $0.464 during the week. Fast forward to today, blockchain data shows that ponzishorter.eth borrowed a further 30 million CRV ($14.85 million) through two transactions and transferred them to OKEx for selling. The team at Lookonchain hypothesized that the trade was conducted to drive down the token price “so many people who used CRV as collateral will face liquidation.”

In response to the heavy selling activity, a wallet associated with Curve’s founder added 20 million more CRV in collateral. On Aave, the wallet addresses’ health factor was 1.65 at the time of publication, indicating an excess of collateral against borrowed assets.

But as told by blockchain analytics firm Arkham, the trades “may simply be bait,” with Aave being the primary target instead. Arkham claims that Eisenberg built up an over $100 million position on Aave for a sophisticated trading scheme.

It first involves a distraction short of CRV tokens on Aave, which is illiquid on the platform but also has very low margin requirements, both of which are important factors for the exploit. The ensuing attention would prompt users to buy the dip en mass to defend the price of CRV and, for others, to try to squeeze the short-seller to cover their position for a loss.

However, the real conspiracy appears to be exploiting the possibility that Aave cannot cover Eisenberg’s CRV short positions, as the platform allegedly does not have enough liquidity to buy back more than 20% of the short. This would then favor bets against Aave and the price decline of its native token:

“The real target here was AAVE’s vulnerable looping system, which Avi mentioned last month. Using $40 million to borrow almost $50 million of CRV could leave AAVE with severe bad debt.”

“To liquidate Avi’s position, Aave liquidators will have no way to buy back all the CRV he borrowed. AAVE will have to sell significant amounts of tokens from the safety module to cover this loss,” wrote Arkham. A screenshot of a swap quote provided by the firm shows an 89.8% potential swap impact between USDT and CRV for the estimated $100M position.

he put in a fuck ton of usdc. can borrow at 90% ltv

borrowed heaps of $CRV. psyop short.

pump curve ridiculously.

aave has to liquidate the “usdc” and buy back enormous amounts of $CRV, literally 50-100% slippage on orders of that size

— Fraxgener 200x (@napgener) November 22, 2022

At the time of publication, CRV is up 15.47% to $0.5742 in the past 24 hours, while the price of Aave has declined by 6.33% to $53.54 during the same period. On Oct. 11, Eisenberg drained $117 million from the Mango Markets protocol and kept $47 million as bug bounty before returning the rest, calling it a “highly profitable trading strategy.”

Time to switch from LinkedIn to MetaMask? Not yet, but soon

Thanks to NFTs, crypto wallets will soon enable users to prove their credentials without using third-party background checks.

The function of crypto wallets has changed significantly over the last few years. They initially secured token holdings or served as art galleries with nonfungible tokens (NFTs). Today, they’ve become like bank accounts for many, and soon, they will offer even more functionality by enabling digital curriculum vitae (CVs).

In a May 2022 paper, Ethereum co-founder Vitalik Buterin and others introduced the concept of “Soulbound tokens” (SBTs). Buterin and his co-authors argued that credentials on a blockchain offer many advantages to establishing provenance and reputation.

Nonfungible tokens will serve as essential building blocks

SBTs are like PoAPs, but they are non-transferable and, therefore, bound to a wallet. That’s because people should not be able to buy credentials that do not represent their own accomplishments. Thus, those tokens should not have a direct monetary value. Binance announced in September that it would introduce the Binance Account Bound (BAB) token as proof of identity for Binance users.

Increasing the utility of DeFi lending

Another interesting project is the Lens Protocol, which was built by the Aave team. Lens is a composable and decentralized social graph that allows the hosting of various social media applications. Users receive a Lens handle in the form of an NFT, which is their user account for all decentralized applications (DApps). Every interaction with the Lens account is saved and linked to the handle.

One might wonder why a decentralized finance (DeFi) giant like Aave is suddenly starting a social media platform, but it makes sense. Aave, like all DeFi lending and borrowing platforms, only allows overcollateralized loans. The reason for this is that there is a lack of information from the users compared to loans in traditional finance (TradFi), which do not have to be overcollateralized because banks have more information about their clients.

By creating Lens and a trusted reputation mechanism for user wallets, Aave can start offering uncollateralized loans as in TradFi once reputations have been established. This is just one of the many benefits of on-chain reputations.

The gig economy will drive adoption

While many are skeptical that this usage will become popular, it makes perfect sense. The number of people who work in the so-called gig economy, such as freelance coders, designers and bloggers, is constantly growing. Projects have to pick the right talents for their needs.

Establishing a culture of confirming credentials on-chain and holding them in a wallet will help such people build up a reputation faster and allow employees to check on the CV, as trustworthiness can easily be verified. For this, the concept of SBTs makes much sense, as those NFTs should not be tradable.

Many Web3 projects have small teams without a professional HR department to check candidates’ credibility. But with digital CVs, it will become much easier to verify credentials. One could even imagine automatic employment becoming feasible if a candidate’s wallet holds the required credentials.

It’s unclear if Web3 CVs will win mainstream adoption, as that also depends on the general adoption of crypto-related infrastructure and improvements in UI and UX. But we can predict with great confidence that, at least within crypto, they will become the norm.

Darius Moukhtarzadeh is a cryptocurrency entrepreneur focused on decentralized social media applications. He previously worked as a researcher for Sygnum, a digital asset bank. He also worked for Ernst & Young in blockchain consultancy and for several startups in the Swiss Crypto Valley.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Degens borrowing ETH to get fork tokens create headaches for DeFi platforms

Aave has halted ETH lending until the Merge has gone through, while Compound Finance has opted to cap the number of loans and introduce a “jump” interest rate model.

The growing number of speculators taking out Ether (ETH) loans to maximize their potential to earn forked Ether proof-of-work tokens (ETHPoW) has been causing headaches for decentralized finance (DeFi) protocols.

The issue has been gaining traction over the past month or so, given that a significant number of Ether miners are expected to continue working on a forked PoW chain or possibly even multiple chains post the long-awaited Merge.

In the event of a fork, on-chain ETH hodlers such as those using noncustodial wallets or those holding on exchanges that are supporting ETHPoW will be airdropped the equivalent amounts of the new tokens to their ETH holdings.

This is because your ETH balance on the existing chain will be duplicated on the forked PoW chain.

On Tuesday, the Aave governance community overwhelmingly voted in favor of halting ETH lending “in the interim period leading up to the Merge.”

This proposal was initially put forward on Aug. 24 as a result of the demand for Aave ETH loans surging to levels that were starting to put pressure on the liquidity supply.

Aave has a complex structure for issuing interest rates and utilizes algorithms to determine percentages taking into account the liquidity and demand for borrowing on the platform.

“Once the ETH borrow rate reaches 5%, which happens shortly after 70% utilization rate (we are at 63% right now), stETH/ETH positions start becoming unprofitable,” the proposal stated as of Aug. 24.

It was added that if these positions do start to become unprofitable, users would likely race to “unwind their positions up until the ETH borrow rate reverts to a stable level where the APY [Annual Percentage Yield] becomes tolerable.” As such, this would put even more pressure on the liquidity supply of ETH on Aave.

The vote yesterday polled 77.87% in favor (528,290 people) and 22.13% against (150,170 people), and the proposal was executed on the same day.

Earlier this week, another DeFi lender, Compound Finance, also had a forked Ethereum risk mitigation-related proposal that was voted through and notably had zero votes in opposition to the 347,559 in favor.

Compound’s idea, which went live as of Monday, was to set the borrowing cap at 100,000 ETH until the dust from the Merge has settled.

Additionally, the protocol updated its interest model to a “jump rate model with much higher rates after exceeding 80% borrow utilization,” which bumps to a maximum rate of 1000% APR if 100% utilization is reached.

The hope is that this will deter users from overwhelming Compound with borrowing and withdrawals from the platform.

Proposal 122 prepares for the Merge and a potential POW fork by protecting cETH user liquidity.

It imposes a borrowing cap of 100,000 ETH, and introduces a new interest model with very high upper bounds.

Voting begins in 2 days.https://t.co/7LvUk1lOk7 https://t.co/krTBxFUQEe

— Compound Labs (@compoundfinance) September 2, 2022

ETH outflows on exchanges

Users are certainly positioning themselves to get free tokens, despite numerous stablecoins and projects distancing themselves from a PoW chain.

Delphi Digital’s latest report notes that despite the declining price of ETH of late, exchanges saw outflows totaling 476,000 on Aug. 29.

This marks the third largest amount of ETH withdrawals since March, and the firm attributed this to Merge and investors repositioning to collect ETHPoW tokens:

“To collect the most amount of ETHPoW tokens, users are likely withdrawing ETH balances from centralized exchanges to non-custodial wallets, leading to an increase in the net outflow of ETH from exchanges.”

While it is unclear if the forked chains will attract strong enough interest to develop a lasting ecosystem and community, in the short term crypto degens at least seem keen to gobble up free forked tokens.

Experts weigh in on the Ethereum vulnerabilities after Merge: Finance Redefined

The top 100 DeFi tokens recorded a bearish price action over the past week, with the majority trading in the red, barring a few tokens that have shown even double-digit growth.

Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you significant developments over the last week.

The past week in the DeFi ecosystem saw major developments centered around the Ethereum Merge.

Aave (AAVE) community proposed temporarily suspending Ether (ETH) lending before the Merge, citing the potential issue of high ETH utilization that may result in liquidations being hard or impossible and annual percentage yields (APYs) reaching negative figures. An industry expert shared his opinion on possible censorship vulnerabilities that the Ethereum network could eventually face in the wake of its transition to a proof-of-stake (PoS) blockchain.

Moving ahead of the Ethereum Merge developments, some other major events that made headlines include Babylon Finance’s eventual shutdown after months of trying to recover from the negative momentum caused by the Rari Fuse exploit. The United States Federal Bureau of Investigation (FBI) has issued a fresh warning for investors in DeFi platforms, which have been targeted with $1.6 billion in exploits in 2022.

The top 100 DeFi tokens recorded a bearish price action over the past week, with the majority trading in the red, barring a few tokens that have shown even double-digit growth.

Will Ethereum 2.0 be vulnerable to censorship? Industry professional explains

The Ethereum network will be able to withstand censorship risks both in the short and long term, according to Ethereum community member and investor Ryan Berckmans.

The ban of Ethereum-based privacy tool Tornado Cash by United States authorities earlier this month left many wondering whether Ethereum transactions could also be at risk of censorship, especially after Ethereum’s imminent transition to a proof-of-stake system.

Aave community proposes to suspend ETH lending before the Merge temporarily

With the Ethereum Merge on the way, the risk research and analysis team Block Analitica proposed a temporary pause in ETH borrowing to mitigate the risks that may lead to a DeFi implosion in the Aave lending protocol during the Merge.

The team pointed out the potential issue of high ETH utilization, which may result in liquidations being hard or impossible and the APY’s reaching negative figures. Furthermore, the uncertainties surrounding the Merge and a potential Ethereum proof-of-work (PoW) fork may cause liquidity providers to start a bank run, pushing utilization to even higher levels.

DeFi protocol shuts down months after the Rari Fuse hack

Babylon Finance has finally announced that it will shut down after months of trying to recover from the negative momentum caused by the Rari Fuse exploit.

In a statement, founder Ramon Recuero explained that the platform experienced an insurmountable negative streak despite their team’s efforts to endure the domino effect caused by the hack. According to Recuero, the protocol lost $3.4 million. Following this, the total value locked within the platform went from $30 million to $4 million. To make matters worse, the Fuse pool was abandoned, taking out a lending market worth $10 million, Recuero noted.

FBI issues alert over cybercriminal exploits targeting DeFi

The U.S. FBI issued a fresh warning for investors in DeFi platforms, which have been targeted with $1.6 billion in exploits in 2022.

In a public service announcement on Tuesday, the FBI’s Internet Crime Complaint Center said the exploits have caused investors to lose money — advising investors to conduct diligent research about DeFi platforms before using them while also urging platforms to improve monitoring and conduct rigorous code testing.

DeFi market overview

Analytical data reveals that DeFi’s total value locked registered a minor change from the past week. The TVL value was about $61.97 billion at the time of writing. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had a mixed week. Even though the majority of the tokens are trading in red on the weekly charts, the price change has been minimal compared to the last week.

Lido DAO (LDO) was the biggest gainer among the top 100 tokens, registering a weekly gain of 5.31%, followed by PancakeSwap (CAKE), with a rise of 1%. The rest of the other top100 tokens registered a single-digit decline over the past week.

Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education in this dynamically advancing space.