Welcome to the latest edition of Cointelegraph's decentralized finance newsletter.
Despite the market posting bearish numbers for the second week in a row, the industry is not lacking in bullish fundamental news. Read on for the most shocking DeFi stories from the past seven days.
What you are about to read is a shorter and succinct version of the newsletter. For a full roundup of DeFi developments over the past week, please subscribe below.
Vitalik Buterin, co-founder of Ethereum, shared a candid assessment of the security limitations in implementing fully functional chain bridges within the blockchain industry. Buterin argued that storing assets on their native chain provides a 51% higher level of security against attacks than cross-chain activities, stating: "It is always safer to keep native Ethereum assets on Ethereum or native Solana assets on Solana than have native Ethereum assets on Solana or native Solana assets on Ethereum.โ My argument for why the future will be *multi-chain*, but not *cross-chain*: There are fundamental limits to the safety of bridges spanning multiple "sovereign territories." From https://t.co/3g1GUvuA3A: pic.twitter.com/tEYz8vb59b โ vitalik.eth (@VitalikButerin) January 7, 2022 Sharing a number of examples to prove his thesis, Buterin noted that if a malicious entity were to attempt to launch a 51% attack on Ethereum, a transaction made by an innocent party could be censored and/or reversed, but not blocked or lost. In the most extreme cases, user funds would remain secure even if 99% of the protocol were compromised because nodes would overwhelmingly support the remaining 1% of rule-following blocks and thus govern decision-making . By contrast, such an incident operating on a cross-chain bridge between Ethereum and Solana, for example, would result in irreversible losses, Buterin argues. The problem is complicated by the addition of strings. Suppose a 51% attack occurs on one of the 50 chains. In that case, everyone becomes vulnerable in what he describes as a "systemic contagion that threatens the economy of that entire ecosystem." dYdX, the layer two derivatives protocol, published the fourth iteration of its roadmap this week, unveiling plans to turn the platform into a fully decentralized, community-focused, open source operation later this year. The architecture operates on a dual model in which sections of the protocol, such as staking and governance, are decentralized, while core functions, such as the off-chain order book and matching engine, are controlled by a internal subsidiary, dYdX Trading Inc. and backed by centralized servers such as Amazon Web Services. "There will no longer be any central points of control or failures in the protocol," company representatives stated after the v4 update, assuring that "all aspects of the protocol that can be controlled will be completely controlled by the community." Amazon Web Service (AWS) from last month the technical outage highlighted the true vulnerabilities of a number of crypto firms, including dYdX, Binance.US, and Coinbase, and their inherent reliance on centralized servers to maintain the network. At that time, dYdX shared a heartfelt update on his official Twitter account and vowed to find an unambiguous solution to this matter, stating: โUnfortunately, there are still some parts of the exchange that rely on centralized services (AWS in this case). We are deeply committed to full decentralization, and this remains one of our top priorities as we continue to iterate on the protocol." Along with its decentralization aspirations, dYdX is also seeking improvements to its front-end trading platform, introducing spot, margin and synthetic trading opportunities, as well as appointing a third-party auditor to assess trading operations. Proof-of-stake blockchain Near Protocol raised $150 million in seed investment this week to improve awareness and adoption of Web3 applications within its network, with an inherent focus on expanding its audience and community base to the Latin American, Turkish and Indian regions. The capital raise was led by renowned hedge fund Three Arrows Capital and saw additional participation from Mechanism Capital, Dragonfly Capital and Silicon Valley-based Andreessen Horowitz's a16z fund. Individual angel investors included British billionaire hedge fund manager Alan Howard and Aave founder Stani Kulechov. In a Medium blog post, Near Foundation CEO Marieke Flament shared her optimism about the latest funding, around which the previous total of $65.9 million raised by the company happens: โWe are thrilled to have such a fantastic list of sponsors supporting NEAR's mission. We look forward to leveraging the funds to improve access to blockchain technology in a growing list of countries around the world." In October 2021, the smart contract platform allocated $800 million for new initiatives within the decentralized finance (DeFi) space, such as developer apps, startup grants, and geo-funds. Analytical data reveals that DeFi total value locked decreased slightly by 2.77% over the week to $128.15 billion, continuing the broader market decline. Data of Markets Cointelegraph Pro and TradingView reveals that the top 100 DeFi tokens by market cap have been mostly bullish for the last seven days. Secret (SCRT) took the lead for the second week with 15%. Earth (MOON) rose 6.32%, while 1 inch Network (1INCH) posted gains of 2.9%. Interviews, reports and other interesting things Thanks for reading our roundup of this week's most impactful DeFi developments. Join us again next Friday for more stories, insights, and education in this fast-paced breakout space.
Vitalik is optimistic for the multi-chain Web3 world, not cross-chain
dYdX strives to achieve full decentralization by the end of 2022
Near Protocol raises $150M to accelerate Web3 adoption
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