ON–031: DeFi

This is issue #31 of Our Network, the on-chain analytics newsletter that reaches more than 3000 crypto investors every week.

As much as I enjoy getting into the finer details of project health, sometimes it’s worth taking a step back and examining ecosystem health. Although it’s not a silver bullet, one of my favorite high-level metrics for the overall health of the DeFi ecosystem is Total Value Locked (TVL), popularized by the website DeFi Pulse.

TVL is calculated by taking the crypto asset balances of all DeFi-related smart contracts and multiplying them by their respective prices in USD.

At the time of writing, there is currently ~$3.5 billion worth of crypto assets locked in DeFi smart contracts. What’s astonishing is that we reached $3 billion only 3 days ago!

For investors like me, it’s impossible to overlook this type of growth. I am increasingly partnering with early-stage DeFi companies to build the future of finance.

This week our contributors cover DeFi projects: Instadapp, Opyn, Nexus Mutual, PoolTogether, and Keep Network & TBTC.

• With the new wave of Yield Farming taking over DeFi like never before, everyone in the space wants to leverage it for profits. Recently, Instadapp launched “DeFi Smart Accounts,” which acts as a robust foundation on top of which these tools are built.

  On June 16th, Instadapp provided users a tool to claim and maximize their COMP tokens with the “Maximise COMP” feature. It’s been two months since the launch of COMP and Instadapp has seen an all-time-high of TVL assets, a whopping ~296% increase from around $50 million in late June to an all-time high of $198 million in mid-July.

  

• More than 4000 DSAs have been created, and users are increasingly utilizing the platform to farm tokens for deposit into (high-yield smart contracts) on other DeFi platforms.

  

• Instadapp’s flashloan (InstaPool) is the powerhouse of the DSA ecosystem. Features like the Refinancing Tool, Leverage, and Debt Swap are powered by the liquidity in the flashloan. In the past two months, Instapool has facilitated approximately $320M in flash loans, mostly triggered by yield farming.

  

• Within the $320M of flashloan (transactions), ~$210M DAI was utilized, followed by ~$73M USDC and ~$25M BAT. On July 12, a ~$20M DAI flashloan was used, which was the highest amount of DAI taken in a single day.

  

• Opyn provides DeFi risk management built using option tokens called oTokens. With the advent of yield farming, there’s been demand for protection on farming tokens. Opyn launched a $150 7/3 COMP put option, which saw as high as $425k in daily notional volume, surpassing ETH put option daily notional volumes for the same time period. There is currently a $150 8/21 COMP put option available, and a new $9.50 8/21 BAL put option, which launched today. (Source)

  

• Aave recently partnered with Opyn today to launch an insurance option for users to protect their USDC deposits in Aave with liquidity on Balancer. There is already cover available for 24,604 aUSDC. (Source)

  

• Opyn’s total notional volume has grown in the past month with $46mm in notional volume since launch, $43mm of which coming from ETH put and call options, $1.7mm from COMP put options, and around $640k from protection for USDC and DAI deposits on Compound (put options on cDAI and cUSDC). Notional = oETH * ETH price at time of trade. This is how notional is usually calculated for options in traditional finance (option * price of asset at time of trade). (Source 1, 2)

  

• Finally, in the last month the number of unique Ethereum addresses interacting with oTokens has grown 27%, with 1018 unique Ethereum addresses interacting with oTokens and protecting themselves against DeFi risks. (Source)

• Pooled staking finally launched! Staking rewards increased from 20% to 50% of new smart contract cover premiums. Pooled staking also introduces leveraged staking, where you can stake on up to 10 different contracts and earn premiums from covers bought on all those contracts. As a result NXM staked on smart contracts increased nearly 6x from 480k to 2.8M (~$23.2M). (Source)

  

• DeFi yield farming has driven lots of demand for smart contract cover. Active cover amount reached an all-time high of $13M. Yet this is only 0.36% of TVL in DeFi that's insured so there is still a lot of room to grow. (Source)

  

• Several smart contracts are maxed out in covers – Aave, Balancer, Compound, Curve, and yearn.finance. The current max cover capacity per smart contract is $1.2M and increasing quickly. (Source)

  

• Increasing cover capacity is done through increasing the Minimum Capital Requirement (MCR) parameter. The Nexus community voted for a governance proposal to increase the MCR 6x faster until the mutual reaches 100k ETH in capacity. As a result, new cover capacity opens every four hours and gets bought immediately. (Source)

  

• Nexus also changed the premiums pricing formula to be more dependent on NXM staked per contract, which reaches a minimum of 1.3% APY premiums for contracts with more than 200k NXM staked. Below is what the market thinks as "safer" contracts. (Source)

  

• PoolTogether is a protocol for no loss prize savings on Ethereum. A key KPI is the total amount of prizes distributed. This week the protocol passed…