Jump recovers $140m, Platypus hacker arrested, Venus Protocol avoids $200m liquidation, Q&A with Hexonaut,...
Issue #30 of The State of DeFi Lending newsletter
Welcome to issue #30 of The State of DeFi Lending, a newsletter covering the highlights of lending markets in DeFi.
In this issue we cover
Jump takes back $140M stolen by Wormhole hacker via proxy contract upgrade done by Oasis and under instruction of court order
Platypus hacker gets arrested
Venus Protocol avoids a $200m BNB liquidation
Q&A with Hexonaut from Spark Protocol, MakerDAO’s new lending protocol
Read below for more…
News
Jump Crypto recovered $140m from the Wormhole exploit. Jump together with Oasis (a MakerDAO front-end) upgraded a contract on behalf of a court order in order to retrieve stolen funds the exploiter deposited.
This sets a precedent as it shows that upgradeable contracts can be changed by the admin key holder/MultiSigs and that court orders (or governmental intervention) can be executed in smart contracts.
This action has raised questions about censorability of MakerDAO.
In another success for law enforcement against crypto hackers, French police arrested the Platypus hackers.
This follows hot on the heels of last week’s successful freezing of stolen assets as reported last week. On-chain sleuth ZachXBT & Binance contributed materially towards identifying the attackers.
Over on BSC, there was a significant BNB liquidation threat on money market Venus. Had BNB crashed to $220, $200m in liquidations would have happened.
In order to mitigate the selling pressure, the protocol’s community had voted to appoint BNB chain and Binance as the sole liquidator of these BNB.
https://app.venus.io/governance/proposal/79
Interestingly enough, the BNB ended up on Venus also as a result of another hack deposit.
Announcements and short news
Q&A with Hexonaut
Short description:
SparkLend is part of Spark Protocol, which is wholly-owned by Maker governance and is expected to become one of Maker’s first SubDAOs. Spark Lend is building on Aave’s v3 code-base and will pay 10% of gross profits to Aave in return. Spark Lend will integrate with Maker’s D3M and have a debt ceiling of 200m DAI. The launch date is expected for April 2023. Spark Lend also integrates with Element Finance and Sense Protocol to offer fixed rate lending.
Name: Hexonaut
Role: Protocol Engineer - I develop and maintain smart contracts for the Maker protocol
The lending market space is already relatively crowded. Why did you decide to launch Spark Lend?
DAI users do not currently have first-class access to all the desired features of an advanced lending market. This includes things such as higher LTVs, crypto short positions and cross collateralization. Spark Lend wants to change this by combining the predictable low rates of Maker with the feature set and UI of an advanced lending engine.
As one of MakerDAO’s first Sub-DAOs, how is the DAO helping you to bootstrap? Are you sharing resources with MakerDAO and are there plans to become fully independent from an operational perspective?
To be clear Phoenix Labs is not a SubDAO, it is an independent research and development company building the Spark Protocol. When the SubDAOs go live Phoenix Labs will negotiate with the SubDAOs to sell the Spark Protocol in exchange for SubDAO tokens.
As part of the Endgame Ecosystem Scope to be voted on in March, Incubating Ecosystem Actors will be provided resources from Maker Core. Phoenix Labs plans to submit as an Incubating Ecosystem Actor.
Spark Lend starts with a debt ceiling of 200m DAI. Is this a limit to growth? How do you plan to scale?
$200m is just a start to prove product-market fit before scaling up. Scaling is as simple as increasing the debt ceiling.
DAI exists on several chains but MakerDAO is only on ETH mainnet. Do you have a multi-chain strategy? And if so, what would be your main criteria to pick the chains to grow into?
Phoenix Labs plans to expand Spark Protocol to have deployments on every popular chain. Spark Protocol will use Maker Teleport when it’s ready to move DAI between chains near instantaneously. Eventually the UI will abstract the blockchains away and you will perform high level actions without specifying the chain.
The main criteria is to go where the users are, but there may be other qualifiers for a business case.
Spark Lend is launching with ElementFi and Sense Protocol for fixed rate lending. What is your market outlook for fixed vs variable interest rates? Why have fixed interest rates not become a DeFi standard (yet)?
A couple of reasons. We found fixed rate borrows were very much in demand during the last bull market, but did not exist at scale. Fixed rates are not desired in bear market conditions, so building these features are forward-looking.
Second, there is no capital-efficient solution to do this. By combining Maker’s liquidity, Spark Protocols Leverage and Fixed Rate Protocols, we can overcome these limitations to deliver a product people will actually want to use. It requires all three to work.
Do you think DeFi lending will eventually become a winner-takes-all-market with one big platform having a significant share of the market?
Liquidity tends to consolidate into one place, and if you have the best security available then yes I foresee a power law distribution of lending markets with Maker taking the top position.