GM, this is your Daily Bolt briefing.
Friday night was rough in the markets. Following the SEC’s action to sue Binance US and Coinbase, majors and alts alike have taken a dive. This is due to concern around tokens being considered securities. Big CEX players in the US are already taking action to remove risk. Robinhood announced they would delist SOL, ADA and MATIC. Crypto. com even announced they would simply cease institutional services in the US.
While the markets are grim, it's not time to shy away from the innovation happening in crypto. In today’s edition, we’re keeping you up to speed on two interesting DeFi developments:
Compound III, which isolates the risk of lending pools on the protocol as well as takes the project cross-chain.
frxETH V2, the upcoming update that aims to enhance the Frax LSD product. Learn more about what to expect with V2, what frxETH V3 will bring afterward, and the Frax team’s plans for zk-cross-chain swaps.
Stay alert in the markets.⬇️
TODAY'S EDITION IS BROUGHT TO YOU BY ARBITRUM JANIS DEX
Janis is a community-owned decentralized exchange on Arbitrum One.
WETH ownership dividends will be distributed through single-deposit Revenue Sharing pools!
The majority of the funds earned by the DEX through trading fees, B2B services, and launchpads will be distributed this way.
Community Fairlaunch running June 9-12, Protocol beginning June 13
Only at https://janis.capital
1/ Arbitrum x Compound - Compound III, Going Cross-Chain, and More!
Preview: In this Arbitrum Twitter Spaces, Hunter and Peter Haymond from Offchain Labs hosted Kevin Cheng and Scott Silver from Compound to discuss Compound III, expanding the cross-chain footprint. with Enhanced Security and more! Click here to listen to the full episode (45 mins).
Read our Note (8 mins) and save 37 mins.
Here are some key takeaways:
Scott explains that Compound III is the latest version of Compound protocol, designed with cross-chain deployments in mind. It's designed for launching independent markets on mainnet and L2s. The main difference from Compound V2 is that Compound III focuses on a single borrowable asset, and there are no cTokens in Compound III.
Kevin says that using a single borrowable asset makes borrowing safer and more efficient. This change reduced adaptability but has its advantages. Compound III provides a better market for single-borrow use cases.
Scott and Kevin elaborate on the shift from a pooled risk model to a base asset model. In the pooled risk model, the entire protocol is vulnerable to the weakest asset in the pool, while in the base asset model, only a single asset can be borrowed, which improves security. This also increases capital efficiency because the protocol can price risk more accurately, knowing in advance which asset is being borrowed and against what collateral.
Scott mentions that Compound III is built on a much smaller and simpler code base than Compound V2. This was done to reduce smart contract risk, making the protocol easier to maintain, understand, and audit.
Scott observes an increase in Layer-2 solutions with robust DeFi environments. He mentions that launching on Layer-2s lets more unique addresses interact with the protocol in smaller amounts, due to lower costs. High costs on the mainnet are often dominated by large players or "whales". He believes Layer-2s allow Compound to reach those with smaller positions (retailers).
Kevin says that Vitalik, sees Layer-2s as the default execution layer for anything crypto-related, with Ethereum acts as a settlement or consensus layer. Kevin believes this is the direction the ecosystem is headed, with more transactions happening on Layer-2s like Arbitrum and Ethereum being used for settling transactions.
Scott mentions that once the Compound contract is deployed, a proposal to launch the market is made. This usually means asking governance to initiate the market, possibly seeding the market's reserves, setting supply caps, and setting interest rate values.
Gauntlet gives recommendations on safe parameters for these values and assets.
The community then votes on whether they want the market initiated. If the vote passes, the proposal is sent to the new market and it is launched.
2/ Dora Hacks - Frax V2, $frxETH and the Future of Frax Finance
Preview: In this episode of Dora Hacks, host Gloria invites Sam Kazemian to discuss LSDs, Frax V2, $frxETH, and the future of Frax Finance. Click here to listen to the full episode (34 mins).
Read our Note (9 mins) and save 25 mins.
Here are some key takeaways:
Sam says that Liquid Staking Derivatives (LSDs) are a type of financial instrument in the cryptocurrency world. They're tied to staked assets in proof-of-stake (PoS) blockchain networks. He also says that in PoS networks, users can "stake" their tokens, locking them up in the network to help secure them, validate transactions, and earn rewards.
Sam says that frxETH is a specific type of LSD offered by Frax Finance. When users stake their ETH in the Frax protocol, they receive $frxETH in return. This $frxETH can then be traded, sold, or used in other DeFi protocols, providing liquidity that wouldn't be available if the $ETH were simply staked.
Sam says that the role of Frax’s stablecoin begins when users stake their $ETH in the Frax protocol. When users stake their $ETH in the Frax protocol, they receive an equivalent amount of $frxETH. This process is known as "minting". The minted FRX 0.00%↑ ETH tokens represent the user's staked ETH, plus any rewards they earn from staking.
Sam says that the next major update after Frax V2 will be Frax V3, which will introduce the concept of Bonding Algorithmic Mechanism (BAM).
He adds that alongside BAM, Frax V3 will also introduce a new version of the dollar-pegged stablecoin. This suggests that Frax Finance is looking to innovate and improve upon its existing stablecoin offering, potentially providing more stability, utility, or yield for its users.
Sam talks about the use of zero-knowledge proofs for the trustless movement of assets between different chains. This is part of the development of Frax Ferry V2. ZK proofs are a cryptographic method that allows one party to prove to another that they know a value, without conveying any information apart from the fact they know the value. In the context of Frax Ferry V2, he says that this would allow for secure, trustless cross-chain transactions.
If you read these 2 Notes on Revelo Intel you would have saved: 1 hour and 2 minutes!
TODAY'S EDITION IS BROUGHT TO YOU BY ARBITRUM JANIS DEX
Janis is a community-owned decentralized exchange on Arbitrum One.
WETH ownership dividends will be distributed through single-deposit Revenue Sharing pools!
The majority of the funds earned by the DEX through trading fees, B2B services, and launchpads will be distributed this way.
Community Fairlaunch running June 9-12, Protocol beginning June 13
Only at: https://janis.capital