TLDR Crypto 2022-06-16

3AC $400M liquidation 📉, Nansen's Discord killer 💬, Chainlink on Polkadot 🔗

Innovation & Launches

Dump Discord? Nansen Launches Messaging App for Web3 Communities (4 minute read)

Nansen Connect is a messaging app from crypto analytics platform Nansen that lets users log in with a crypto wallet and connect to groups based on their crypto holdings and NFTs. The service will use on-chain data to allow connected users to see each others' portfolios, including project treasuries. This will allow users to monitor accounts in real time and members may gain more status by being proven holders. Nansen Connect will help mitigate some of the security flaws seen across the crypto ecosystem through on-chain verification. The service will start with a limited base of users and will gradually onboard more communities.

Chainlink Price Feeds Are Live on Polkadot-Based Moonbeam (1 minute read)

Moonbeam has integrated Chainlink Price Feeds into its smart contract platform. Moonbeam is a smart contract platform that can natively interoperate with Polkadot's main blockchain and other parachains on the Polkadot network. The integration with Chainlink's price feeds will enable builders to source price information from many exchanges and build more sophisticated decentralized apps on the Moonbeam network.
Guides & Resources

Another #CelsiusNetwork bankruptcy (2 minute read)

Celsius loans are over collateralized and Celsius has rehypothecation rights. If it is unable to return collateral, Celsius can let borrowers keep the loans and then keep the collateral for itself. Borrowers should be hesitant to repay Celsius because there is a risk that Celsius takes the money without returning the collateral. Failing to repay risks a default that lets Celsius keep the collateral, but then borrowers would have a claim for the amount of over-collateralization in the case of bankruptcy. Celsius could choose to sell its loan contracts, so a borrower could end up with a new counterparty.

Why Celsius and 3AC going under should cause you to worry (2 minute read)

The Three Arrows Capital collapse is monumental because they borrow from every single major lender. Its collapse would transfer the economic risk to its lenders. These lenders aren't prepared for this and defaults will cause significant equity erosion. Lenders will protect themselves by withdrawing credit from the system, which will cause coin prices to drop. The overall credit in the system will shrink, leading to continued deleveraging.

Axie Infinity's value accrual to treasury vs. value extraction (or incentives paid)

This Twitter thread looks at how Axie Infinity allocated its SLP tokens and the return it received from the market. Axie gave away SLP in return for ETH from marketplace activity and AXS from breeding fees and DAUs. While the value accrual to value extraction per player ratio has been negative since late September, it has started to shift to a more extractive economy. Teams should use tokens to reward high value contributors and skilled gameplay. More lessons learned from the Axie Infinity data are available in the thread.

Current #3AC situation summarized (2 minute read)

Three Arrows Capital (3AC) has $245 million of ETH deposited on Aave. Liquidation of this ETH occurs when ETH hits $1,016. 3AC can choose to deposit more funds or try to pump the price of ETH. The fund has been paying back its loans in small amounts, suggesting that it is having a liquidity crisis. 3AC held stETH and nine figures of locked LUNA.

Some ways to use ZK-SNARKs for privacy (16 minute read)

ZK-SNARKs are a powerful cryptographic tool that allows systems to prove that they know something is true without revealing the secret itself. This article discusses how ZK-SNARKs can be used to preserve privacy. ZK-SNARKs can be used to prove membership without revealing the identity of the member, for privacy-preserving currencies, to create a privacy-preserving anti-denial-of-service protocol, for on-chain reputation, and much more. The article also discusses what can't be made private, for example, global state information.

What happened between 3AC and us and what we know so far (2 minute read)

In November 2020, 8 Blocks Capital (8BC) entered into an agreement with Three Arrows Capital (3AC) in which 8BC would pay 3AC a fee to use its trading accounts. The agreement allowed 8BC to withdraw whenever it wanted to and keep 100% of the profit and loss. 3AC was to never move 8BC's funds without permission. 8BC recently discovered that around $1 million was missing from its accounts with 3AC. 3AC had used the funds to answer its margin calls. It also ghosted its clients.

Three Arrows Faces Possible Insolvency After Unforeseen Liquidations (1 minute read)

Three Arrows Capital is facing possible insolvency after incurring at least $400 million in liquidations. The firm is currently in the process of repaying lenders and other counterparties. It is selling its existing crypto positions to lower collateral requirements for other positions. 3AC had invested in ETH, SOL, and LUNA, which have dropped by 77%, 90%, and 99.7% respectively since all-time highs.

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