Another stablecoin disaster coming?

July 13, 2023 Stan

There’s a lot of smoke around TrueUSD this week.

Remember, there’s always a risk when using a centralized stablecoin. (I still remember the fear and panic when USDC depegged to $0.90)

Here’s what we got today:

Is TUSD Crashing? What you need to know about TUSD depegging.
Zk Stack – a module, free, and open-source framework for building zk L2s and L3s
Around the Web. The Digital Euro from the European Union, Optimism’s renaming, and more.

Here’s your Edge!

📉 THE MARKETS

“Wall Street sells stocks and bonds, but what it really peddles is hope.” – Jason Zweig

News

🔵 Is TUSD Crashing?

Stablecoins are the Jekyll and Hyde of the crypto universe.

On the one hand, it is the most successful crypto product with usage. On the other hand, the Luna crash gave us permanent PTSD.

And we now have another stablecoin issue where some traders are opening multi-million dollar shorts against TUSD.

Let’s see what’s going on.

Fall of Prime Trust

Prime Trust is a custodian company. They held the assets backing TUSD. They also managed the minting and redeeming of TUSD.

The problem? Prime Trust is insolvent. They have shut off all fiat and crypto deposits and withdrawals.

The problems with Prime Trust can be traced back to 2021. So, there’s a high probability that some of the funds that backed TUSD will be lost.

However, according to Nic Carter, the TUSD’s exposure to Prime Trust is only $26k. It is a small amount that can be covered easily.

So, the fall of Prime Trust did cause a huge panic about TUSD. However, we’re not sure how much exposure TUSD had.

Where Can I Redeem?

TUSD claims they have no exposure to Prime Trust. They claim to have “multiple USD rails.”

But they are not doing a great job at convincing people about these “multiple USD rails.”

Many people who tried to redeem TUSD weren’t able to do so.
They can clearly outline their banking partners in public. But they haven’t done so.
No third party could directly off-ramp any significant amount into fiat USD. A $1000 bounty is waiting for you if anyone can prove it.

Sketchy Auditor

I’m sure you remember FTX. But you might not remember Armanio: the accounting team that audited FTX. After the disaster, their digital assets team started a new company: The Network Firm.

And who was attesting to the $TUSD audits in Prime Trust? Yup. You guessed it right. It was the ex-FTX auditors. We were expecting a squirrel to safeguard a nut factory.

TUSD used to claim that their reserves were shown on-chain. But it was nonsense. Their oracles were pulling data from ex-FTX auditors.

Again, Nic Carter does object to the characterization of The Network Firm as Armanio relaunch.

Falling Liquidity

As the story spread, people began to dump TUSD.

Liquidity on Curve fell rapidly.
In Binance.US, it depegged to 80 cents.

In the TUSD-FRAX Base Pool, there was over $20 million earlier this year. It has now fallen to ~1.5 million.

The TUSD + USDC/DAI/USDT pool also had the same story.

All TUSD on-chain liquidity is vanishing faster than water in the desert. For more on-chain data on TUSD, follow this dashboard.

The Binance mystery

Meanwhile, the world’s largest crypto exchange is heavily promoting TUSD.

Binance’s reckless support of TUSD is kinda sus. But again, I don’t want to make any judgments.

If I had any TUSD, I would’ve swapped it out a while back. I’ve learned it’s better to be safe than sorry in this space.

Anyways, this is an ongoing and developing story.

New Tech

⚔️ ZK Stack and L2 Wars

In the last two days, the geekdom of Ethereum has been buzzing enthusiastically. What’s been happening?

zkSync introduced the ZK Stack.

Let’s explore.

What is the ZK Stack?

It’s the developer toolkit released by zkSync. It can be used to create Zk-rollups on top of Ethereum. Similar to how Legos can be used to create different things.

And all the rollups built using ZK Stack will be part of an ecosystem of L2s with seamless connectivity.

ZK Stack has several features:

Modular
Composable
Future-proof
Open-source
Battle-tested

So much can be said about each of these features. If you want to nerd out the details, you can do it with this link.

A more interesting aspect is the emergence of L2-as-service.

L2 Wars Out, Ecosystem Wars In

Until now, everyone has been talking about L2 wars. Initially, they were seen as PvP battles, as individual rollups like Arbitrum and OP Mainnet battling.

However, this isn’t the case anymore.

All major rollup players are also providing L2-as-service. They are not fighting as individual rollups anymore. They are competing as ecosystems.

It also changes the rules of the game. The goal isn’t to increase the TVL on your chain. It is to build the best ecosystem for L2s and L3s. And it means that

Make it easy to deploy new chains.
Create interoperability b/w the chains.
Attract teams to build on the tech Stack.
Build network effects through unified liquidity.
And many more.

There is an argument to be made as to whether Arbitrum has lost the advantage. And Optimism is giving Arbitrum a run as they establish themselves more. Eight OP Chains have already been announced.

Below are the leading teams in the L2 ecosystem wars.

Optimism & OP Stack
zkSync & ZK Stack
Polygon & 2.0 vision
Arbitrum & Orbit L3s
Starknet & Slush L3s.

Granted, all these projects are in their infancy. They still have a long way to go. But these will flourish into 100s of rollups that’ll permeate all corners of the internet.

This war isn’t just about becoming the biggest L2. The goal is to become the best L2 ecosystem.

🚀 DeFi Catalysts

dYdX plans to launch the public testnet of its Cosmos-based blockchain on July 5th. This is ahead of schedule.

Solana, Polygon, and Cardano face sell pressure from Robinhood and Celsius. Robinhood had to delist due to SEC remarks, and Celsius is liquidating their assets.

Velodrome v2 is live. The V2 includes many features, including concentrated liquidity pools, customizable pool fees, and automated veNFT management.

Tezos Blockchain released its fourteenth upgrade, “Nairobi.” It introduced a new fee mechanism, making tx speed eight times faster.

Lybra Finance announced their v2 competitive audit. The v2 contract hasn’t been deployed yet. In v2, they are going omni-chain with LayerZero.

Osmosis is revamping its tokenomics. Some changes include reducing inflation, extending the emission timeline, and shifting emissions to stakers.

Vela Exchange is now live for the public. It is a decentralized perpetual trading platform that gives up to 250x leverage across crypto, forex, and equities.

Maverick Protocol announced its ecosystem incentive program. It is designed to incentivize activities and contributions that advance the Maverick ecosystem.

Umami DAO’s Deconstructed $GLP vaults will be released next week. In the testing phase, they seemed to show ~35% APR for all assets.

Fantom is close to their next two milestones: Carmen & Tosca. Both are technical improvements that will enhance the performance of the blockchain.

Yearn Finance proposal to activate veYFI rewards with oYFI gauges is live. It rewards investors who stake and lock YFI tokens for longer periods, locking the token out of circulation and rewarding the holders at the same time.

Lido and Mantle are considering a partnership to bootstrap Mantle’s DeFi Ecosystem with a revenue share model.

Oasis did a full rebrand. Now they’re Summer Finance. With a new scope for User Experience and Interface. More simple, fresh, and friendly.

PlutusDAO announced a v2 tokenomics upgrade. The new token, $bPLS, is clo

🌎 What’s Happening?

📰 Industry News

zkSync introduced ZK-Stack. It is a modular framework for building sovereign ZK-rollups. It is their foray into the L2-as-service war between different L2 ecosystems.

Optimism L2 changed its name to OP Mainnet. The aim is to clarify the distinction between the OP Layer2 chain and the Optimism Ecosystem.

MasterCard is launching the “Multi-Token Network.” It will begin by exploring tokenized bank deposits, which will be available in the UK in beta mode by this summer.

Coordinape is rolling out CoSoul. It is a free-to-mint NFT that will track your Web3 work history. On-chain resumes are here.

unshETH proposed that their LSD token be included in LSDs that can be restaked via EigenLayer. This will drastically increase the utility of unshETH.

Maple Finance is expanding into direct lending. The team will underwrite loans from their lending desk, Maple Direct.

Singapore’s central bank, the Monetary Authority of Singapore, published a report proposing a framework for designing open, interoperable networks for digital assets.

SEC approved the first leveraged Bitcoin futures. This is very different from the Bitcoin Spot ETF, which tracks the price of Bitcoin.

Coinbase won a lawsuit. It reinforced the ability of the companies to channel customer and employee disputes into arbitration.

European Union outlined the vision for the Digital Euro. It will be free to use, both online and offline, across the bloc.

🧠 Twitter Alpha

People don’t really understand what Blackrock is, or what they do.

So let’s go inside… pic.twitter.com/WBanjGVhe2

— Ξ huf (@hufhaus9) June 25, 2023

[🧵@CurveFinance is printing money🧵]$crvUSD is now charging on average >7.5% interest rate on borrowers, but still they are willing to do so, as a way of holding the leveraged long blue-chip – $BTC/ $ETH, without suffering from the risk of hard liquidation

More details👇👇 pic.twitter.com/vpt34vrIPz

— DeFi Cheetah 🐆 ¤🫐🦇🔊🌿 (@DeFi_Cheetah) June 26, 2023

How I turned 150k into almost 2M in just over 3 weeks of trading options 🧵👇 pic.twitter.com/3HRkuXwtBY

— 0xWenMoon (@0xWenMoon) June 25, 2023

i’d be willing to make a bet that liquidity mining in DeFi will be forever changed after the release of Premia Blue and options liquidity mining

it’s a game changer.

previous model (liquidity mining v1):
1. 👨‍🌾 deposits liquidity to farm gov token
2. 👨‍🌾 accumulates large amount… pic.twitter.com/4piskLpAJF

— froggie.eth 🐸🦉 (@brypto_) June 23, 2023