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Big news: The Fed has cut interest rates by 50 basis points. This is the first rate cut since March 2020. And they’ve gone big with it.
It has been less than a day, and it has led to green candles in the crypto market. Oh god I haven’t had a Crypto dopamine hit in months.
Let’s see how long this goes for.
Here’s what we got today:
- Onchain Credit Scores. Can it unlock the $11.3 trillion market?
- Trump’s DeFi Project. Here’s what we know about WLFI.
- Around the web. EigenLayer started the season 2 stakedrop, Optimism partnered with Succint to enable ZK for OP chains, and more.
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Innovations
DeFi Credit Scores
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An OG DeFi builder has introduced a new DeFi primitive that can unlock a $11 trillion opportunity for DeFi.
DeFi primitives are fundamental building blocks of the crypto financial system. Uniswap enabled DEXes by creating AMMs. EigenLayer built an entirely new sector with restaking primitive. Now, Andre Cronje is introducing a brand-new primitive.
Who is Andre Cronje? He is the controversial founder of several top-tier crypto projects like Fantom, Yearn Finance, and Keep3r network. He also created the ve(3,3) model that has become a major meta across DeFi.
He’s no stranger to controversy. He’s got a reputation for launching products before they’re fully tested. Case in point: his project, Eminence, lost ~$15 million because of an early release. And he has “quit” DeFi multiple times only to return.
So, what’s the new primitive? Onchain credit scores!
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A credit score is like a report card for your financial habits. It’s a number that tells banks and lenders how likely you are to pay back the money that they lend you. The higher your score, the more trustworthy you are considered. High scores can help applicants get loans, credit cards, and even lower interest rates.
Your score goes up when you pay bills on time and manage debt responsibly, but it drops when you miss payments or take on too much debt.
Andre Cronje, alongside Blockchain Bureau, have now built the onchain version of the credit score. This is a similar scoring mechanism applied to wallet addresses.
This work started back in 2021. And so far, they’ve analyzed almost a petabyte of data. They are also actively monitoring 500+ million wallets with 15+ million recorded loans.
This scoring mechanism will eventually become available to any onchain applications.
Why is this a big deal? In TradFi, the introduction of the credit score has enabled a significant number of innovations like personal loans and secured credit cards. Globally, unsecured lending is a $11.3 trillion market.
All lending right now in DeFi is over collateralized.
With credit scores, DeFi should be able to access this $11.3 trillion market. We’ll likely see a wave of innovative dApps being built using this primitive as well.
While this sounds insanely bullish, we can’t blindly drink the Kool aid.
What are potential problems? Consequences. In TradFi, your credit score is tied to your legal identity. So, if you don’t pay back your loans, the banks are able to come after you with the help of the government.
In contrast, your onchain credit score is tied to your wallet. A bad actor can jack up their credit score across multiple wallets, take out massive loans, and then scoot. They can also more easily use privacy apps like Tornado to hide their assets.
Since wallets aren’t tied to legal identities, protocols can’t recover assets offchain.
So, in my opinion, even a credit score won’t be able to provide truly unsecured loans. They’ll likely act as a mechanism for active DeFi users to get lower interest rates and higher borrowing limits.
Or Andre might have come up with another innovate mechanism that can address that issue. But I doubt it. This isn’t the only primitive he has teased.
- Generalized onchain insurance primitive.
- Onchain leveraged spot with arbitrarily margin assets.
- AMM curve optimized for low volatility correlated assets (for example: USD and EUR).
How do you get exposure? Fantom is transforming itself into Sonic Network. Andre has said that onchain credit scores will be first available on the Sonic chain. So, $FTM ($S in the future) will be one way to gain exposure.
Aave, the leading borrowing protocol, is a strategic investor in Sonic Labs. So, Aave might become the next protocol to get access to this tool. So, $AAVE might benefit from this.
If you want to read the full article written by Andre, click here.
Edgy’s Take: It’s bold and I love seeing people try to innovate, but I don’t see this working. Under collateralized loans without KYC or heavy consequences seems impossible. People will find ways to game the system.
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News
Trump’s New DeFi Project
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A few months ago, the U.S. government was hunting down crypto projects. Fast forward to now, former U.S. President Trump is launching one.
Here’s the scoop.
What happened? On September 16th, Donald Trump unveiled World Liberty Financial (WLFI) in a two-hour long X-Spaces session.
The people behind it. Donald Trump’s sons, Donald Jr, Eric, and Barron, are the faces of the project. Zachary Folkman and Chase Herro, Dough Finance co-founders, appear to be heading the technical operations.
They’ve also roped in reputable names for the advisory board. Sandy Peng, co-founder of Scroll L2, and Luke Person, General Partner at Polychain, are on board.
What’s the project about? After sitting through two hours of talking, we still don’t know. They didn’t share many clear details about the project. But we can make an educated guess.
World Liberty Financial is creating a user-friendly interface for DeFi. They will collaborate with Aave to provide lending and borrowing services. There’s also talk of a dollar-pegged stablecoin.
Oh, and they’ve also announced the WLFI token. It has a few key features:
- Only accredited investors can buy $WLFI in the upcoming token sale. So, if you’re not rolling in the big bucks, tough luck.
- Token distribution: 63% of the token supply will be available through the public sale. 20% will remain for the team. And the remainder, 17%, is for user rewards.
- The token will be non-transferable. It’s purely designed to be a governance token. Theoretically, buyers shouldn’t expect financial returns. Huh?
What’s my take? My first thought? “Why is Trump doing this now? Doesn’t he have a campaign to run?” I mean, he already has all the crypto votes he can get.
The Biden administration was on a witchhunt against crypto. Kamala, Biden’s successor, has barely even mentioned the word “crypto,” let alone address any of the industry’s concerns.
At the same time, he potentially has a lot to lose. BTC Maxis also hate that Trump is creating another altcoin. Some in crypto are viewing this as just another cash-grab attempt.
The project is also rumored to be a fork of Dough Finance. The technical team is also filled with Dough members. As Dough was hacked for $2.1 million in July, this has raised some security concerns.
Then there’s the whole “communication issue.” The team hasn’t done a great job of explaining what this thing actually does. Seriously, how do you launch a project and forget the “What exactly is this?” part?
And if the protocol gets hacked or rugged, it’s going to damage crypto’s reputation significantly. Hopefully, all those concerns will be addressed as the project matures.
On the positive side, this might attract a lot more people to crypto. Most people don’t know about onchain financial services. This will introduce DeFi to a whole new audience.
Also, if Trump gets elected, this project can align the incentives of the US President and crypto founders. It might be the biggest bullish catalyst for crypto.
Right now, there isn’t enough information about the project. We don’t even know when it’ll launch. We wanted to let you know early about this protocol in case it takes off.
If you want to follow the project, their X account and Telegram channel are probably the best sources.
Anyways, I’m pretty suspicious of the protocol. I’ll keep you guys up to date if anything interesting happens.
🚀 DeFi Catalysts
TON Foundation is collaborating with Curve Finance to create a stable swap project on TON. Michael Egorov, Curve Finance Founder, will be an advisor.
Ethena released $sENA. It’s a liquid receipt token for locked ENA. It’ll earn the largest daily multiplier for rewards at 40x in Season 3.
Sky, formerly MakerDAO, has shipped $USDS and $SKY on Ethereum. You can access features like Sky Savings Rate as well.
Vertex Protocol has expanded to the Base chain. Vertex is an orderbook-based decentralized exchange.
Lens Protocol will use Avail as the data availability layer. Lens Protocol is a highly marketable consumer for Avail as well.
EigenLayer added $tBTC as an asset that can be restaked through EigenLayer. Notably, WBTC isn’t allowed on EigenLayer.
EtherVista has expanded to Arbitrum and Base. It’ll launch on Sony’s L2 as well. Also since the launch mania, the activity on the platform has decreased.
Silo Protocol has expanded to the Base network. It is a risk-isolated lending market that aims to enable lending, capital efficiency, and yield opportunities.
Treasure DAO is discussing launching Treasure L2 as part of ZK Sync’s Elastic Chain. Previously, they were planning to launch as an Arbitrum Orbit Chain.
Succinct introduced OP Succinct. Now, OP Stack rollups can convert into zk rollups in an hour. This improves their position among competing zk rollup ecosystems like ZK Stack and Polygon.
🪂 Airdrop Alpha
EigenLayer has opened the claims for season 2 stakedrop. The claim window will close on March 16th, 2025.
WalletConnect introduced the Wallet Connect Token (WCT). 18.5% of the token supply will be used for airdrops from the end of 2024.
Synnax launched Synquest. You can earn points by answering trivia and opinion-based questions. It’ll be eventually converted to $SYANI.
Sonic Labs released Series 4 of the “Road to Sonic” campaign. Users can complete the quests via Galxe.
🚀 New Launches
Manifest will launch its mainnet on Solana soon. It is described as an open-source order book. It’s designed as a modular liquidity primitive.
Chaos Labs introduced Edge Oracle Network. It is a decentralized, risk-aware oracle protocol. It is Jupiter Finance’s primary oracle.
Beyond introduced their Bitcoin interoperability solution powered by LayerZero. Users can securely bridge any token to, from, and within Bitcoin L1.
Polaris, the token portal, will launch on September 21. Its vision is to allow users to trade and track assets freely across all chains.
📰 Industry News
DeltaPrime Blue was attacked and drained for $5.98M on Arbitrum. The hack was through a compromised private key.
SWIFT, the global messaging network for international payments, is upgrading its system to support real-time transfers of tokenized assets.
Solana Labs is planning to ship its second crypto phone in 2025. The new version will be called “Seeker”.
Azuki introduced anime.com as their new website for the virtual Anime Universe that they are building.
🐦⬛ X Hits
- Review of major upcoming airdrops.
- EigenLayer mechanism explanation.
- BlackRock released a pro-Bitcoin report.
- Ignas’s take on the current crypto market.
- Five DeFi metas to track.
