🌻 GM

Happy Friday Everyone!

Welcome back to your weekly dose of web3 insights! Your go to source for everything DeFi, RWAs, and Zivoe.

Here’s what we’ve got for you today:

1. Market Movements

2. Bite-Sized Bits

3. Maker DAO → SKY? WTF is going on!

4. Zivoe In The News

5. Memes Of The Moment

📈 Market Movements

🟠 Bitcoin: $58,071.00 (+ 3.66%)

🔵 Ethereum: $2,360.44 (- 0.77%)

🟣 Solana: $133.36 (+ 1.96%)

🟡 Fear & Greed Index: 32 (Fear)

Anyone else over exposed to ETH this cycle? Vote in the poll below 👇🏽

🍪 Bite-Sized Bits

🧑‍⚖️ Legal

Caroline Ellison's lawyers plead for leniency
Caroline Ellison, the former CEO of Alameda Research, faces a possible jail sentence in connection with the FTX scandal. Her lawyers are pleading for leniency, pointing to her close cooperation with the government and her responsibility for exposing crimes linked to the collapse of the exchange. The verdict, expected on 24 September, could mark a departure from the 25-year sentence handed down to Sam Bankman-Fried.

SEC will have to explain why certain crypto are financial securities
Coinbase has scored a first victory in its battle against the SEC. The court has ordered it to turn over documents related to the classification of crypto as securities, documents Coinbase says are essential to its defense.

Gensler under investigation by members of Congress
Gary Gensler is facing an investigation by members of the US Congress. He is accused of hiring employees on the basis of political affiliation, in violation of the Civil Service Act of 1978.

Kraken seeks jury trial in SEC lawsuit
Kraken requests a jury trial in response to the SEC's lawsuit accusing the platform of failing to register as a broker or clearing agent in violation of securities laws.

eToro reaches settlement with SEC
Trading platform eToro will stop offering most cryptocurrencies to its US users following an agreement with the SEC. The company will pay a $1.5 million fine for acting as an unregistered broker.

💰 DeFi

Growth in crypto users not keeping pace with rising prices
A study by the Philadelphia Federal Reserve claims that the rise of cryptos is not leading to an increase in the number of users. Despite the rise in the price of bitcoin, the number of users in the US has declined.

cbBTC set to replace WBTC in DeFi?
Coinbase officially launched cbBTC, allowing users to automatically convert their BTC into cbBTC when transferring to Ethereum or Base. This version is backed 1:1 by BTC held by Coinbase. The news comes as SKY (formerly Maker DAO) launches a governance vote to off-board WBTC as collateral (following the custody of WBTC moving to a JV with Justin Sun). Other protocols like Aave are already in discussions to integrate cbBTC into the Aave V3 protocol. Could it be that cbBTC replaces WBTC almost overnight?

Trump teases launch of his sons' crypto project
Donald Trump will announce the launch of "World Liberty Financial" at a Twitter Spaces event scheduled for 16 September. The project, based on Aave and Ethereum, aims to promote the adoption of stablecoins.

PayPal and Venmo Integrate ENS
PayPal and Venmo have integrated the Ethereum Name Service, allowing US users to send crypto via simple ENS names such as "user.eth" instead of complex alphanumeric addresses.

🏗️ Infrastructure

VanEck closes its ETH Futures ETF
VanEck recently announced the closure of its Ethereum Strategy ETF (EFUT), a product based on Ethereum futures contracts. Less than a year after its launch, the decision comes as a result of poor performance, liquidity and limited investor interest in the fund, which had $21.24 million in assets under management. The ETF is scheduled to be liquidated on September 23, 2024.

Ethereum Foundation to publish expense report
The Ethereum Foundation plans to publish a financial report in response to the growing demand for transparency. Currently, it reportedly spends around $100 million per year, with a portfolio of around $650 million.

Brazil Launches New CBDC Test Phase
Brazil enters phase 2 of its CBDC project, Drex, with major companies such as Microsoft, Google, Visa and Santander. This new phase includes 13 test topics related to the tokenization of financial assets.

Maker DAO → SKY! How Did We Get Here?

On September 18th, MakerDAO will officially transition to Sky Protocol at Token 2049 🥳(event details here). While it may seem like a simple rebrand, this shift marks a profound transformation. In this section, we’ll unpack the groundbreaking changes behind this major evolution of the Maker Protocol and the effects it will have on DeFi, RWAs, and stablecoins for years to come.

What is MakerDAO?
Maker is the DeFi protocol behind the $5.4B stablecoin, DAI. The project originally launched in 2014 as an innovative approach to creating a stable, decentralized cryptocurrency. 3 years later, MakerDAO introduced Single Collateral DAI (SAI), which allowed users to mint DAI—a stablecoin pegged to the US dollar—by depositing ETH as collateral. The system was designed with a collateralization ratio of 150%, meaning you could deposit 1 ETH (say it was worth $150) to borrow 100 DAI. Back then, this was called a Collateralized Debt Position (CDPs).

The Evolution To Multi Collateral DAI (MCD)
As DeFi evolved and became more popular, DAO community members realized that they could use other cryptocurrencies (beyond just ETH) as collateral to mint and borrow DAI. Maker rebranded CDPs to Vaults and introduced tokens like BAT as collateral for DAI. Over the years MakerDAO evaluated and added dozens of more tokens as collateral for DAI including stETH, WBTC, and USDC.

But Multi Collateral DAI Didn’t Scale…
Multi Collateral DAI found great product market fit particularly among speculators who would borrow DAI against their crypto assets to get leveraged long exposure. But Maker DAO Founder, Rune Christensen, and other members of the DAO quickly found that MCD, and overcollateralized stablecoins in general, DO NOT SCALE. In fact, they contract significantly in bear markets. And in order for a stablecoin like DAI to be useful as a global currency, it needed to scale.

To make matters worse, DAI was losing market share to other stablecoins like USDC and USDT, who as of today, have combined market caps orders of magnitude higher than DAI. In order for DAI to survive, Rune and other DAO Members knew something had to change. They needed to borrow from Tether and Circle’s playbook: Real World Assets.

Adding Real World Assets (RWA) As Collateral?!
By this time, the Maker community had already been conducting experiments with RWA protocols like Centrifuge. They were using Maker Protocol Revenues to offer DAI loans to Centrifuge pool managers like New Silver to fund real world mortgages with DAI. But in 2022, shit got real!

Maker realized that they could do more then just lend existing DAI, they could actually just print DAI out of thin air, use it to buy Real World Assets like mortgages, and then turn those RWAs into collateral to back the DAI they just printed. Who needs a central bank when you can print your own money 🤯 This set off a whole wave a new proposals to onboard all kinds of RWA projects as collateral for DAI like this $100M loan to Huntingdon Valley Bank.

The Division That Led To Sky
As Maker DAO onboarded all these different types of collateral for DAI, community members felt they were taking on too much risk. In favor of growth, Maker had drifted significantly from the original vision to create a fully decentralized and censorship resistant stablecoin.

This internal division led to the conceptualization of Sky Protocol, a bold initiative to split the Maker ecosystem into two distinct tracks, accommodating both philosophies. Sky Protocol aims to bridge the gap between the two factions by introducing two separate stablecoins: Pure DAI and USDS.

Pure DAI (to be released in a few years…) will be an overcollateralized, decentralized stablecoin backed exclusively by ETH and stETH, catering to those who prioritize decentralization and censorship resistance. Meanwhile, USDS will be a growth-focused stablecoin backed primarily by RWAs, aiming to scale beyond $100 Billion in market cap and to comply with regulatory standards.

This dual approach allows MakerDAO to continue evolving without compromising its core principles or stifling its potential for growth.

What Does This Mean For RWA Protocols
Sky plans to onboard a diverse basket of RWA assets to back USDS and have target weights for each category of RWAs including Treasuries, “Clean Money” RWAs, “Physically Resilient” RWAs, and others. And many protocols are bidding for a spot, including Zivoe! If you are involved with onboarding RWA collateral at Sky or know someone who is, we’d love to chat about how we can contribute to the growth of USDS! You can reach me at [email protected]

While USDS will onboard many different RWA assets, I personally speculate that tokenized treasury protocols like Ondo and Open Eden will be the biggest winners from this whole thing. Just think about it, DAI is tens of billions of dollars behind USDC and USDT in terms of market cap. Over the next few years with USDS, Sky could print billions of USDS out of thin air to buy US Treasuries through DeFi protocols. A $100B market cap isn’t too crazy to image. In theory USDS is infinitely scalable. And perhaps it will grow bigger than USDC or USDT ever could.

Long story short, I’m hella bullish on Sky! 🐂 📈

What’s Next?
September 18th isn’t the end for Sky protocol. It’s just the beginning of a 5 Phase rollout of Rune Christensen’s Endgame Plan for Sky. Unfortunately, I was only able to unpack a very small piece of what’s really going on with Maker DAO and the transition to Sky.

There is so much much more that I couldn’t cover in this week’s newsletter including the new tokenomics and incentives, subDAOs, Active Voter Committees (political parties), AI governance tools, and the fact that MKR and DAI will continue to exist alongside Sky and USDS!? 🤯

If you’re interested and want to dive deeper into the rabbit hole like I did, I encourage you to start with this forum post from Maker DAO Founder himself, Rune Christensen.

Zivoe In The News

There’s just 8 days left to participate in Zivoe’s Initial Tranche Offering. Earn $ZVE Points for helping people escape 300% APR debt. Deposit at https://app.zivoe.com

🐸 Memes Of The Moment

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