$8 Billion Aave Loses Risk Manager

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Good Morning.

The crypto markets are flat but AI coins have been soaring. Thanks, Altman. On stablecoin land, Ethena’s had a successful launch but not without your standard CT criticisms. Meanwhile, Su Zhu is back with a perpetual DEX project. Oh boy.

In Today's Email:

• What Matters: Gauntlet leaves Aave 👋 

• Founders Highlight: Tekin of dao5 📈

• Deal Flows: EigenLayer $100M Series B 💰️ 

You read and share. We listen and improve. Send us feedback at [email protected].

TOGETHER WITH

Flare Networks

As the Flare team focuses on shipping everything in 2024, there are three important governance proposals for the Flare and Songbird networks.

If the community approves the three proposals, they will enable:

• The launch of FTSO Scaling on Flare and Songbird, which will support the use of up to 1000 data feeds on each network, and for next to no cost for dapps (just minimal gas).

• The implementation of the new Flare Systems Protocol on Flare and Songbird, which unifies the smart contracts for validation, data submission, rewards and more across all the native data protocols. This will pave the way for future updates including Fast FTSO.

• Strengthening the security and stability of the State Connector on Songbird to prepare for the launch of FAssets.

Head over to the blog post to delve deeper into these proposals, understand their potential impact, and discover the voting timeline 👇

WHAT MATTERS

Gauntlet Exits Aave

State of play: Gauntlet is ending its partnership with Aave, citing challenges with stakeholders' inconsistent guidelines and unwritten objectives.

• John Morrow, Gauntlet's co-founder, plans to stop the payment stream and help find a new Risk Steward as soon as possible.

• Since 2020, Gauntlet has been Aave's "Risk Steward," enhancing the platform's security.

• Risk management is crucial for lending protocols to select collateral and adjust to market changes. Aave outsourced this to Gauntlet and Chaos Labs, costing $3.2M annually.

Gauntlet faced strong opposition from Marc Zeller, the founder of Aave Chain Initiative (ACI), in its contract renewal proposal and a proposal to enable Gauntlet to distribute ARB rewards across Aave v3 on Arbitrum.

• Marc Zeller did not support the renewal of Gauntlet’s engagement, the reasons behind his opposition are Gauntlet’s slow reaction times to a fast-moving DeFi nature and perceived moonlighting for competition.

• Marc strongly criticized the proposal to enable Gauntlet to distribute ARB rewards across Aave v3 on Arbitrum while saying nothing in a similar proposal by ACI, Chaos Labs, and TokenLogic & karpatkey.

• Zeller recently proposed a controversial 'Merit program' for Aave, rewarding 'Aave-aligned' behaviors with protocol revenue while diluting rewards for 'non-aligned' users.

Gauntlet isn't alone in leaving Aave; ‘TokenBrice,' a member of the GHO Liquidity Committee, resigned due to inefficiencies, poorly defined scope, and potential conflicts of interest among "governance professionals."

Why it Matters: Aave is the largest DeFi lending protocol.

• The entities that are in charge of its risk parameters will play a key part in determining the safety of the broader DeFi ecosystem, especially as we enter a bull market.

For builders and investors: Working with DAOs isn’t easy.

• Although the notion of decentralization is intriguing, it often creates complexity when dealing with external service providers because the key decision-makers aren’t always clear.

BUILDER-INVESTOR HIGHLIGHT

Tekin Salimi of dao5

Intro: Tekin Sakimi is the founder of dao5, a $125M experimental crypto investment fund that will convert into a DAO. Tekin is also the co-founder of the Blockchain Association.

Previous background: Tekin started his career as a corporate lawyer at Torys LLP in Canada. From 2018 to 2022, he served as GP (general partner) at Polychain Capital.

• Tekin also served as an advisor in several non-profit organizations, such as the Blockchain Education Network and the Canadian Open Data Experience ("CODE").

• Tekin co-founded the Blockchain Association in 2018.

• Tekin studied at Ryerson University from 2006 to 2010 and earned his law degree from York University's Osgoode Hall Law School.

The big idea: Tekin through dao5 aims to enable portfolio founders to co-manage a treasury of strategic assets, with further actions governed by DAO5 tokenholders.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇

INSIGHTS

Arthur Hayes: Narrative > Tech

Credits to Arthur Hayes for the original piece.

Arthur Hayes published a piece discussing which factor is more important in making investment decisions. He argues that stories are more important than tech in crypto.

Here is the summary of his piece and his thought process:

The essence of the narrative is that in the crypto market, the power of storytelling often outweighs technical merits.

• Hayes argues that investment success in crypto frequently hinges on the narrative surrounding a project rather than its tech foundation.

• He emphasizes that investors are more influenced by the stories told by others about a project's potential and the team's capabilities than by an in-depth understanding of the technology itself.

• It happens because most of the time investors do not have the ability to evaluate the tech at a fundamental level solely, but a story is easier to comprehend.

Hayes discussed the role of macro and micro stories in influencing the perceived value and success of crypto tokens, using hypothetical examples to illustrate how narratives can drive the market.

• The macro story highlights a trend's potential impact. At the same time, the micro story speaks to why this particular project will be the best in class out of all.

• An example of a macro story: The shift in retail derivatives trading from CEXs to DEX. BitPerp’s token will pump because its macro story is currently not well known but has viral potential.

• An example of a micro-story: BitPerp is advised by perpetual swap co-inventor Arthur Hayes, thus it gains a competitive edge through his expertise, boosting confidence in its success.

DEAL FLOWS

a16z Invests $100M in EigenLayer

Deal flows remain steady this week, we saw $195M+ in deals 💼

Andreessen Horowitz has invested $100M in EigenLabs, the team behind the Ethereum restaking project EigenLayer. The venture capital firm led the Series B round, as announced by Ali Yahya, the GP of a16z crypto.

• EigenLabs closed a $50M Series A in March 2023, led by Blockchain Capital, with Coinbase Ventures and Polychain Capital participating.

• Yahya believes EigenLayer could accelerate innovation in consensus mechanisms and more by decoupling crypto-economic security from the EVM, akin to Ethereum's leap with smart contracts.

• EigenLayer is close to hitting $8B in TVL right now, following a peak of $6B earlier this month as its deposit window closed.

Deal flows in the past week:

• Clave, $1.6M Pre-Seed Round

• Citrea, $2.7M Seed Round

• ZeroLend, $3M Seed Round

• INIT Capital, $3.1M Seed Round

• Startale Labs, $3.5M Seed+ Round

• Nest Wallet, $3.6M Seed Round

• Inco, $4.5M Seed Round

• Crystal Fun, $5M Seed Round

• Beoble, $7M Seed Round

• Meso, $9.5M Seed Round

• dePHY, Undisclosed $ Seed Round

• Helika, $8M Series A Round

• Helius, $9.5M Series A Round

• EigenLayer, $100M Series B Round

• Superfluid, $5.1M Strategic Round

• Ethena, $14M Strategic Round

• AltLayer, $14.4M Strategic Round

• OX, $4M Unknown Round

• Renzo, Undisclosed $ Private Round

QUICK BITES

• Block sold $2.5B of BTC in Q4.

• FalconX expands into Hong Kong.

• Kraken seeks to dismiss SEC lawsuit.

• Sky Mavis Co-Founder hacked for $9.7M in ETH.

• Trump said Bitcoin probably needs some regulation.

• Texas Blockchain Council sues the Department of Energy.

• Uniswap partners with ENS to roll out uni.eth subdomains.

• Lido adds 1inch for faster withdrawals of stETH And wstETH.

• Reddit adds BTC and ETH to its balance sheet ahead of its IPO.

• Yuga Labs Co-founder Greg Solano to take over the CEO role.

• Judge approves FTX plan to sell $1B stake in AI startup Anthropic.

• StarkWare opts to gradually release STRK following user feedback.

• Coinbase urges SEC to approve listing of Grayscale's spot ETH ETF.

• Wormhole collaborates with AMD to make hardware accelerators.

• Frankfurt was chosen as HQ for EU AML authority overseeing crypto.

NOTEWORTHY READS

• Ash’s read on Blast L2 ecosystem.

• Paul Veradittakit’s read on Ondo.

• Regan Bozman’s read on where are we in the market cycle.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.