DeFi & L1L2 Weekly (31/01/2024)

Ethereum Dencun upgrade goes live on the Sepolia testnet. New developments in liquid restaking ecosystem are underway; TVL reaches US$2B in Jan 2024. Immutable zkEVM launches, and its mainnet early access phase goes live.

Jan 31, 2024 DeFi Weekly

Weekly DeFi Index

This week’s market cap index was positive at +10.24%, while volume and volatility indices were negative at -27.82% and -18.32%, respectively.


Chart of the Week

Restaking is a service that aims to utilise Ethereum’s robust security. It allows Ethereum validators to restake their ETH in a new smart contract on the blockchain, with that stake now securing a new project. EigenLayer is the protocol pioneering restaking, adding a new layer of utility to the Ethereum ecosystem. EigenLayer-based protocols today have given way to a new primitive called liquid restaking, which enables the use of liquid restaking tokens (LRTs) across DeFi protocols.

There are currently several liquid restaking projects that have reached mainnet status, with, Kelp DAO, and Renzo, as well as EigenPie being the ones with the most ETH deposited. These restaking protocols have seen an increase in deposits going into 2024, further bolstered by activity from new entrants in the space. This has resulted in a spike in the total value locked (TVL) of LRTs from US$250 million in December 2023 to US$2 billion in January 2024. LRT Amount Deposited DeFI Index Token Performance

TVL of Top Chains TVL of Top Chains

Top DEX by Chain Top DEX by Chain

News Highlights

  • Ethereum’s Dencun upgrade has gone live on the Sepolia testnet and is set to go live on the final testnet, Holesky, on 7 February. The activation date of Dencun on the main blockchain will be confirmed following the final testnet deployment.
  • Immutable zkEVM, a Polygon-powered Layer-2 blockchain optimised for Web3 gaming, has launched its early access phase on the mainnet. Immutable zkEVM comprises an EVM-equivalent blockchain client secured by Zero-Knowledge (ZK) proofs and it provides blockchain gaming developers with building tools.
  • Starknet is collaborating with Celestia to implement Layer-3 chains within the Starknet ecosystem. It aims to utilise Celestia’s Blobstream technology to enhance data availability and scalability and has set a goal to enable off-chain scaling solutions on Starknet.
  • LayerZero Labs announced the launch of LayerZero V2, which introduces new key features such as Universal Messaging, Unified Semantics, and modular security.
  • dYdX has introduced liquid staking, allowing stakers to convert their DYDX tokens into liquid staking tokens which can be used in other DeFi applications. The new feature was launched in collaboration with liquid staking provider Stride. Other providers such as Persistence and Quicksilver are expected to launch it in the coming weeks.
  • Derivatives liquidity protocol Synthetix deployed V3 of its perpetual contracts protocol on the Ethereum Layer-2 blockchain Base. It aims to simplify the creation and trading of new derivatives products for developers and traders on Synthetix-powered exchanges like Kwenta, Polynomial, and dHEDGE
  • The Stellar Development Foundation decided to delay the upgrade of its blockchain to add Ethereum-style smart contracts after discovering a bug in the Stellar Core v20.1.0 software. The foundation plans to ‘disarm’ its own validators to prevent them from voting to upgrade the network. Additionally, a fix for the bug should be available within the next two weeks. 
  • DeFi platform Abracadabra confirmed that it has been hit by a security attack, resulting in a loss of approximately $6.4 million. According to blockchain security firm Blocksec, the attack involved a malicious actor draining funds from the project’s smart contracts by taking advantage of a rounding issue, which resulted in what is known as a ‘precision loss’. The incident also caused the MIM stablecoin to depeg briefly to $0.7, and has since recovered to the $0.97 range.

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