DeFi – ETHPow token hunt destabilizes lending protocols – CryptoActu

Decentralized Finance (DeFi)

07 Sep 2022 – 09:00

The consequences of moving fromEthereum at Proof of Stake are not necessarily the ones we expected to have. Because the step The Merge could well allow carry out juicy operations at lower costor not… With, on the one hand, investors betting on an explosion in the price of ETH, the logical consequence of which would be possible flipping with Bitcoin announced for years. But on the other hand, a strategy more certainly to be included in the collateral damage of the degenerate (degens) type of DeFi. The latter exclusively focused on a frantic hunt for future ETHPow tokens. To the point of destabilizing loan protocols like Aave and Compound

The ongoing transformation of the Ethereum blockchain fast approaching. With a Bellatrix stage validated since yesterday as the last upgrade before the initiation of The Merge. This historic passage to Proof of Stake (PoS) which questions the community about the future of this project and the value of its cryptocurrency ETH. But also on the effective position taken by its soon-to-be-orphaned minors in the face of the scheduled replacement by new validators.

Ethereum

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Reason why some of them want to operate a fork, in order to continue their activity on a forked ETH network. The latter is already almost useless, since most DeFi platforms and protocols have announced that they have chosen the side of its official version. But it doesn’t matter, especially because this exact copy will be at the origin of the creation of a new hybrid cryptocurrency of the ETHPow type. The latter having in theory no utilitarian or fundamental value. Reason why DeFi degens are trying to position themselves at all costs to get as much as possible…

ETHPow – Destabilization of DeFi protocols

The degenerates (degens) of DeFi had not really been talked about since the beginning of 2021. The latter largely replaced by the emergence of liquidity providers (LP), much more useful and a little less unstable. A transformation initiated following the appearance of many copied/pasted versions of Decentralized Finance on networks other than Ethereum. But without seeing these sterile hordes of investors disappear completely, waiting for the next useless opportunity to squeeze like a lemon. And now the defiance of Ethereum blockchain miners serves them an ETHPow token on a silver platter.

Ethereum

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A situation at the origin of the multiplication of loans on historical protocols such as Aave (AAVE) or Compound (COMP). This is in order to get as much ETH as possible before The Merge stage is triggered. And, by fork effect, to then be able to claim an identical quantity of each cryptocurrency created following a bifurcation of the official chain. Because some believe that there could be several. Even though that of ETH miners is for the moment only a kind of threat that is still quite theoretical. But that does not seem to curb their speculative enthusiasm, to the point of forcing certain emblematic DeFi players to stop this mad race.

The Merge – Stopping ETH lending

Because the main specificity of DeFi degens is that they have no limits. To the point of currently endangering the stability of certain loan protocols. The latter forced to organize themselves by taking unprecedented community provisions. That is to say, in the case of the Aave project, a vote acclaimed by an overwhelming majority (77.87%) on September 6 (yesterday). This in favor of stopping ETH lending altogether “in the interim period leading up to The Merge”. Because the pressure imposed by the number of these positions is beginning to seriously jeopardize its liquidity supply.

The risk of high usage in the ETH market is because users potentially benefit from ETHPow (ETHW) by borrowing ETH ahead of The Merge. High usage interferes with liquidation transactions, increasing the risk of protocol insolvency.

Aave

A management also topical, but a little less radical on the side of the Compound protocol. Because the latter only proposes, since September 5, to block a borrowing ceiling at 100,000 ETH. And that until the speculative excitement initiated around The Merge subsided. A vote for the blow 100% validated by the community of this protocol. With “a jump rate model with much higher rates after exceeding 80% loan utilization”. And the obvious hope that this will discourage some followers of the current frenzy, while “protecting the liquidity of cETH users”.

Ethereum

Coinbase is riding The Merge with the launch of a liquid staking token for Ethereum

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A real strategic organization is therefore being built around this change in the Ethereum network, possible from this weekend (between September 10 and 20). Even if the latter seems to take very different forms depending on the camp concerned. Because DeFi protocols are simply protecting themselves against a speculative hysteria that seems to be taking over some investors.

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DeFi – ETHPow token hunt destabilizes lending protocols – CryptoActu


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