DeFi Saver Newsletter: May 2022

DeFi Saver Newsletter: May 2022

After many months of work and significant user anticipation, we delivered on our promise last month and launched DeFi Saver on Ethereum Layer 2 networks Arbitrum and Optimism.

Although we launched on L2’s in quite turbulent market conditions, at the end of one of the most intense months since crypto’s inception, we are thrilled that our initial release went smooth. More importantly, the reception from our users, community, and CT has been joyous and widely shared.

Initial Layer 2 launch reactions

First, let’s review the most important news in our tumultuous ecosystem. Hopes and dreams of a short bear market were killed off at the very start of the month, with Fed chair Powell’s announcement of a 0.5% interest rate increase bringing ever more uncertainty about crypto’s direction and leaving little doubt about the correlation with the overall market. Fear crept in, leading to a generally negative market sentiment all around.

Fed chair Jerome Powell

Rumors of a potential catastrophic liquidation cascade in crypto started swirling around the CT without anyone knowing the actual scope and size that would hit the markets. Terra blockchain stablecoin terraUSD aka UST began showing signs of a potential depeg in the first week of the month. It quickly led to a neverending exchange cycle between its native LUNA token and stablecoin UST in the coming days, dropping the value of UST from $1 to 7 cents in a few days. The more tragic part of the story is the value of LUNA, which went from $82 to 1 cent in a week.

Events surrounding the Terra collapse have significantly reduced faith in crypto in the retail environment and have exacerbated the bearish sentiment leading to another market crash we will remember. Effects and risks brought about by the collapse spread across the market and with significant downtrend movement raised the issue of another potentially problematic event occurring around the stETH/ETH depeg. Having many users in such positions, we also addressed these matters.

May 2022 DeFi TVL, courtesy of DeFi Pulse 

The famous founder of Terra Do Kwon even started joking on the topic of depeg. Probably not the best reaction, given the number of disappointed and devastated LUNA holders losing their faith and life savings writing in the Terra subreddit.

Whatever the initial cause - Fed’s announcement of the hike, extreme volatility, or perhaps a malicious, Soros-esque attack on Terra, which is still a topic of debate, the fact remains that many of the new experiments in tokenomics have still to prove their viability. We still have not seen an algorithmic stablecoin with a functioning mechanism. Whether Terra brought about a systemic risk to crypto remains to be seen. However, it has brought a surging interest from regulators worldwide and even led to criminal probes in South Korea. Talks of similar systemic risks are brewing, with Celsius being mentioned as involved in Terra's demise.

"A stablecoin known as TerraUSD experienced a run and declined in value," Yellen said.

"I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability, and we need a framework that’s appropriate."

Everyone interested in the timeline of events can check one provided by Coindesk.

Other notable May news worthy of mention:

DeFi Saver news and updates

We launched on Arbitrum and Optimism 🥳

From our humble beginnings in 2019, when DeFi wasn’t still a thing, and the ecosystem we’re a part of was starting to develop we were adamantly devoted to Ethereum mainnet and remained so. However, as many know, with the growth of DeFi and the number of products being built, the mainnet became congested and got to a point where regular folk and new users started feeling left behind. Crypto and DeFi in the last year gave a sense of a walled garden requiring significant resources for anyone looking to experiment and join.

We were not interested in going multi-chain due to several constraints, but first and foremost, the security and centralization risks present in many of these new blockchain solutions. We never saw the level of development, decentralization, security, and network effect evident in the case of Ethereum. Somewhere along the way, Layer 2 networks in the form of Optimistic rollups and zero-knowledge rollups were getting announced as EVM equivalent Ethereum scaling solutions, essentially built on top of mainnet, inheriting its security by design while providing additional throughput for a much lower transaction cost. We had our road paved.

Last month we were super excited to launch on two leading Optimistic rollup solutions - Arbitrum and Optimism! In terms of activity and TVL, these networks stand out, which was a part of our reasoning and decision to expand our service there. We believe these solutions will greatly help in scaling Ethereum and providing this new wave of decentralized financial services to the masses.

Check out the official announcement and blog post:

Initial launch

Our initial rollout to L2’s brought our signature services to the Aave v3 protocol first. We have supported Aave since the earliest days on the mainnet. Since the end of last month, users can also rely on DeFi Saver signature Boost and Repay features for managing their Aave positions, which allow for 1-transaction asset leveraging, now with substantially lower fees.

The DeFi Saver Aave dashboard, with our signature leverage management options, and custom action combining available.

The Aave V3 version presents Aave’s most ambitious attempt to solve some of DeFi space and the protocol’s pain points. Better capital efficiency, better risk management, interchain interactions, and gas optimizations in the context of L2 expansion are some of the new version's most significant improvements.

DeFi Saver launch on these networks is based on the same modular architecture that we rolled out on the mainnet in early 2021, with the release of the Recipe Creator. Users can expect the transaction building UI to appear on Layer 2 networks very soon, too, as we start to expand the number of integrated protocols.

Since all of our users were on the mainnet, it made sense to provide a bridging solution from the get-go. Courtesy of LI.FI, a bridge and DEX aggregation protocol, users can now also find a new bridge dashboard in our app.

The new Bridging dashboard powered by LI.FI.

L2 users also have at their disposal our Exchange for which we don’t take any fees and perhaps, more importantly, our now quite famous Simulation mode, there to test everything out prior to committing any actual funds. It is available on both networks.

Future plans

Although we initially launched solely with support for Aave on L2’s, needless to say, we won’t stop there. The first thing team is already working on is expanded protocol support, with some new native L2 lending protocols being added soon. We will also add traditionally supported protocols such as MakerDAO and Compound, as those become available on L2s. Users can also expect to see an L2-focused Smart Savings dashboard in the coming months, providing aggregated and simplified access to yield farming options.

To address the question in everyone’s mind - where’s the automation? We decided to go with a fairly limited initial release to test everything out, but you can rest assured that automated strategies and options for DeFi on both Arbitrum and Optimism are coming, most notably automated liquidation protection for Aave v3 users. New automated features such as limit orders or automated DCA strategies are also coming in the following months.

stETH / ETH depegging announcement

We are big fans of Lido, hence the integration with our app. However, the market conditions were such that we had to take special notice, especially having in mind the number of our users and their positions being affected.

Mid-May, due to Terra collapse and extreme volatility, the market rate between stETH and ETH has deviated slightly from the expected 1:1 parity, and stETH began trading at a discount to ETH. We shared an announcement that we felt was necessary due to the number of users stETH/ETH positions opened and managed via our app. We advised close monitoring of these positions, as we still do.

UX master Sterlu added one nifty and vital addition to the Aave dashboard - the current and estimated liquidation ratio for all active stETH/ETH positions.

New MakerDAO Lido Vault went live

The Maker governance decided to add a new WSTETH-B vault type with a 0.75% stability fee and max debt ceiling of 150M DAI. The vault has a minimum 185% ratio.

When choosing to stake with Lido via Maker users can therefore pick between:

WSTETH-A: 2.25% Stability fee, 160% min. ratio

WSTETH-B: 0.75% Stability fee, 185% min. ratio

Users with already open positions can easily switch to the new type using our Loan Shifter feature.

The crew visited BlockSplit!

Last month we also got to visit the beautiful Croatian town of Split for the 2022 edition of the now-famous BlockSplit web3 conference! ⛱️

With the incredible Adriatic location being quite near our HQ, we accepted the organizer's invitation to visit but also to share some of the inside info on how we built Automation.

Sterlu, our frontend/UX lead talked about some of our early days and ideas, problems we faced, and solutions we came up with along the way.

We’re looking forward to the next year’s edition but also more web3-oriented conferences in our region.

Frontend lead Nikola Vukovic aka Sterlu giving a talk on Automation at BlockSplit 2022

May Stats

With May’s extreme market conditions also comes a different picture of our stats. Significant drop and fluctuations imposed quite a reliance on our app.

Users made $220M of actual trade volume during May, with over 2600 unique leverage management transactions and custom recipes done at DeFi Saver.

In terms of Automation, at the end of May, there were 254 MakerDAO, 48 Compound, and 57 Aave automated positions — an overall mixed situation among protocols.🤖

The total amount of managed collateral at the end of May was 113,000 ETH, 1120 WBTC, 55,000 LINK, and 43,000 MANA, among other collateralized assets. DeFi Saver Automation managed around $229M of collateralized assets in different user-created positions at the end of the month.

We also did a post-crash stats check:

Community Shoutouts

With last month being all about the crash, downturn, and Terra fiasco, there were slightly fewer shoutouts than usual. Still, our L2 launch didn’t go unnoticed, with lots of love sent our way. 🥰

The3D praised other teams and us for doing our part in protecting stETH borrowers:

Stani celebrating our support for Aave v3:

Then there was Hasu with advice to rely on DeFi Saver in dire times:

DeFi Dad also shared some delight after the launch:

Lastly, there were our friends from LI.FI welcoming us to the bridging family:

Stay connected:
🌍: DeFiSaver.com
💬: Official Discord
📢: Official Twitter
🗣️: DeFi Saver Forum