Weekly DeFi Index

This week, the market capitalisation and volume indices rose by +17.71% and +26.36%, respectively, while the volatility index decreased by -31.55%.

• Uniswap (UNI) surged after the introduction of the ‘UNIfication’ proposal, which aims to enhance its value proposition for investors. The plan features a protocol-level fee mechanism to burn UNI tokens, a Protocol Fee Discount Auctions system to boost liquidity provider returns, and the burning of 100 million UNI tokens from the treasury. Additionally, Uniswap plans to allocate 20 million UNI tokens to a Growth Budget to support protocol and ecosystem development.
• A US$5 million purchase of 1INCH tokens by the 1inch team fuelled a price surge and boosted network activity for the project.

Chart of the Week

Ethereum experienced its significant decline in daily active validators since the shift to PoS, with the count dropping about 10% since July and falling below 1 million for the first time since April 2024. This decline is attributed to a mix of cyclical and structural factors, including fluctuating ETH prices, reduced staking yields (from the peak of ~8.6% in May 2023 to 2.9% currently), and the prolonged validator exit queue, which now takes around 37 days to process withdrawals. Institutional staking services like Kiln exited due to security concerns, contributing to validator consolidation under Ethereum’s new MaxEB rule, which allows for more efficient management of staked ETH. While the trend may signal a maturing market optimising for efficiency, it also highlights challenges in maintaining decentralisation and network stability.

News Highlights

• Crypto.com partnered with Sui Foundation to provide secure, institutional-grade custody and liquidity solutions for SUI tokens, enhancing security and accessibility across the Sui ecosystem.
• Franklin Templeton launched a tokenised US-dollar money market fund in Hong Kong, marking its latest step into digital assets. This blockchain-based UCITS fund is the first end-to-end tokenised structure by an asset manager in Hong Kong, offering income and capital preservation through short-term US government securities, initially available to institutional and professional investors.
• Japan’s Financial Services Agency (FSA) launched the ‘Payment Innovation Project’ to support a joint initiative by major banks and corporations to issue yen-denominated stablecoins, aiming to modernise corporate settlements and reduce transaction costs. Participants include Mizuho Bank, Mitsubishi UFJ Bank, and Progmat, with issuance of payment stablecoins expected this month.
• Layer-1 (L1) blockchain Injective launched a native Ethereum Virtual Machine (EVM) layer, aiming to position itself as a leading platform for developers and institutions by combining Ethereum compatibility with high-speed infrastructure. Injective also plans to introduce a Solana VM, enabling seamless integration of Solana applications.
• DeFi liquidity provider Elixir decided to wind down its synthetic stablecoin, deUSD, after Stream Finance incurred a $93 million loss, triggering a chain reaction within the ecosystem. 
• • Stream Finance revealed that an external fund manager incurred this loss, prompting a suspension of withdrawals and deposits on its platform. 
  • Stream borrowed a significant amount of USDC, approximately 65% of deUSD's total backing, from Elixir by using its own stablecoin xUSD as collateral. This collateral subsequently collapsed following the public disclosure of a $93 million loss.
  • Elixir alleged that it has processed redemptions for 80% of holders, with Stream holding around 90% of total deUSD supply (worth $75 million). 
  • Elixir claims Stream will not repay the loan, forcing it to work with other decentralised lenders such as Euler, Morpho, and Compound to settle the debt.

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