DeFi & L1L2 Weekly (24/01/2024)

BIS to focus on tokenisation & CBDC in 2024; tokenised treasuries market cap up 657% YoY. NEAR Data Availability integrates with Polygon CDK. Frax Finance completes V3 rollout, launches Frax Bonds.

Weekly DeFi Index

This week’s market cap, volume, and volatility indices were negative at -12.58%, -17.13%, and -24.84%, respectively.

Chart of the Week

The Bank for International Settlements (BIS) unveiled its strategic priorities for 2024, with a particular emphasis on central bank digital currencies (CBDCs) and tokenisation. The 2024 roadmap points to a continuation of its engagement with digital financial technologies, including the development of Project Promissa, an initiative that aims to revolutionise financial instruments by digitising promissory notes using blockchain technology.

This signals a continued growing interest in RWA and tokenisation, which is further bolstered by a sizeable increase in tokenised treasuries in the past year. Data suggested that tokenised US Treasuries experienced a 657% yearly growth rate in terms of market cap, rising from US$113 million to US$866 million as of 20 January. The expansion is likely to be attributed to existing platform growth as well as an increase in the number of companies entering the tokenised treasury space.

News Highlights

• Polygon‘s Chain Development Kit (CDK) received a significant boost from NEAR Protocol, which has integrated its data availability layer with the Polygon CDK. It boasts data storage costs that are much lower than the Ethereum mainnet.
• Stablecoin protocol Frax Finance completed its V3 rollout with the launch of Frax Bonds (FXB). FXB is a utility token that can be redeemed for FRAX at par upon maturity. FXB will be usable across DeFi protocols, including Curve Finance pools, trading pairs in search of leverage, and trustless debt repayment.
• Restaking protocol EigenLayer announced its plans to adopt a ’shared security’ system. It aims to enhance security by enabling the amount of ETH re-stakes on EigenLayer to be supplied to all services developed on the network simultaneously for the sake of a common security mechanism. This makes it economically impractical for attackers to target any single service or protocol.
• The Cosmos Hub community rejected a proposal to decrease the ATOM inflation parameter from 7% to 0%. 48.6% of validators voted against the proposal, and have raised concerns about its implication regarding the impact on the Hub’s security.
• A bug in Ethereum’s Nethermind client software took down a significant portion of the blockchain’s key operators during the weekend. Nethermind is a tool validators use to interact with the network, which powers around 8% of Ethereum validators. The incident was resolved within hours. However, it was critical enough to force the validators offline. It also reignited community discussions around Ethereum’s problem with ‘client diversity’, which posits that a network becomes more resilient if it’s not dependent on a single client software.
• Manta Network, a ZK proof-powered Layer-2 blockchain, was hit by a distributed denial of service (DDoS) attack a day after it issued its MANTA token. A DDoS attack is a common attack vector in which a server is flooded with internet traffic to prevent user access to connected online services and sites. This resulted in longer-than-expected withdrawal times and low network speeds for Manta.
• Aevo, a derivatives platform built on its own Ethereum-based rollup, has migrated to use Celestia as its data availability layer as part of its roadmap to support other protocols and expand its ecosystem.

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