2023.07.17–2023.07.23

Dear Reader,

Welcome to the June issue of Gryphsis Academy’s weekly Crypto Digest. We bring you pivotal market trends, insights into emerging protocols, and fresh industry updates, all designed to enhance your crypto and Web3 expertise.

Enjoy!

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Market and Sector Snapshot:

Layer 2 Overview:

The Layer 2 sector demonstrated resilience this week, with most key metrics remaining stable compared to last week. Starknet stood out as the high-flyer, registering an impressive 28% increase in total value locked (TVL) over the past seven days. Protocols that recorded the most significant growth in TVL include ICHI, Router Protocol, SkyDex, and StarkEx.

On the metrics of daily active addresses and transactions, zkSync has maintained a strong performance, outpacing its three major competitors.

LSD Sector Overview:

The Liquid Staking Derivatives (LSD) sector has maintained a steady pace of growth this week, with the total percentage of staked ETH holding firm at 18%, and the amount of ETH locked showing an increase to 24.6M.

In the market share dynamics of LSDs, Lido’s position has experienced a slight decrease and cbETH’s market share continues on its downward trajectory. On the other hand, swETH has consistently seen an upward movement in its market share, demonstrating an encouraging trend for the protocol.

AI Sector Overview:

This week in the AI sector, we’ve observed a downward trend in overall performance. The total market cap has dipped by 4.46% over the past week, accompanied by a significant contraction in the 24-hour sector volume. However, not all performances have been bleak. Standing out from the pack are $AMC, $JAR, and $BBANK, delivering gains of 49%, 36%, and 25%, respectively. Contrarily, $VAR, $TRV, and $AGI took the most significant hits, marking a less favorable period for these assets.

Main Topics

Macro Overview:

Big Story:

Protocol Spotlight:

Gryphsis Research Preview — HVMTL Forge

VC Funding Highlight:

Alpha Threads:

Macro Overview

This week, the stock market maintained a steady course, with no significant fluctuations from the previous week. In the coming days, investors should keep an eye on key market events, including the release of the S&P Global US Services PMI, CB Consumer Confidence, Building Permits, GDP (QoQ) (Q2), and the Core PCE Price Index.

Mirroring the stock market, the crypto market saw a period of relative stability this past week. Both $BTC and $ETH held their positions around the 30,000 and 1,900 marks respectively, with no drastic changes. Similarly, BTC dominance remained steady, hovering close to the 50% benchmark.

Story of the Week

Chainlink Cross-Chain Interoperability Protocol Launch

Chainlink has launched its Cross-Chain Interoperability Protocol (CCIP) for early access users on several blockchains, including Avalanche, Ethereum, Optimism, and Polygon. The protocol, which facilitates the creation of cross-chain applications and services, is being utilized by notable DeFi projects such as Aave and Synthetix. The CCIP is also playing a vital role in Chainlink’s partnership with SWIFT, an international money transfer network used by banks, as they are piloting the connection of various financial institutions to blockchain networks.

CCIP aims to become the ‘TCP/IP of finance,’ promoting efficient communication between diverse chains and granting traditional finance access to digital assets. Through this, the protocol may influence trillions of dollars in the cryptocurrency space. Notably, Chainlink is already in collaboration with major traditional finance stakeholders, including Swift, BNY Mellon, Citigroup, and BNP Paribas. The protocol’s potential in bridging DeFi with conventional financial institutions, such as multinational banks, is a groundbreaking development in global finance. Full developer access across five testnets is scheduled for July 20, which will commence the transition of the protocol to mainnet general availability.

Chainlink on Twitter: "1/ The Chainlink Cross-Chain Interoperability Protocol (CCIP) has officially launched on Avalanche, Ethereum, Optimism, and Polygon mainnets.#LinkTheWorld pic.twitter.com/SdLVyaapg3 / Twitter"

1/ The Chainlink Cross-Chain Interoperability Protocol (CCIP) has officially launched on Avalanche, Ethereum, Optimism, and Polygon mainnets.#LinkTheWorld pic.twitter.com/SdLVyaapg3

Our Take

The launch of Chainlink’s CCIP marked a significant milestone for multi-chain vision of blockchain ecosystem. Throughout the years, we’ve seen so many hacks and exploits due to ill-designed bridges or even things like CEO was arrested leading to the bridge being exploited. With CCIP, the cross-chain messaging is now more secure, laying a solid foundation for the multi-chain future.

To better understanding CCIP, here is a brief introduction of CCIP’s core features:

1. Simplified Token Transfers: Chainlink’s CCIP offers a plug-and-play solution that simplifies token transfers across chains while maintaining security and control. It includes additional features like Rate Limits to further ensure security and composability.

2. Programmable Token Transfers: This feature allows tokens to carry additional instructions for their use on the destination blockchain, such as staking or swapping. All tokens and data are part of a single cross-chain transaction, ensuring seamless execution.

3. Active Risk Management (ARM) Network: The ARM Network is an independent system monitoring the primary CCIP network. It verifies cross-chain operations for potential erroneous activity, providing an extra layer of security.

4. Rate Limits: CCIP supports customizable rate limits for token transfers, ensuring every token’s rate limit cannot be maximally abused. This audited feature is exclusive to CCIP Token Transfers.

5. Smart Execution: Chainlink’s CCIP incorporates a gas-locked fee payment system, or “Smart Execution”, to secure the reliable execution of cross-chain transactions despite potential gas spikes on the destination chain.

6. Timelocked Upgradability: Critical on-chain updates to CCIP must pass through a timelock smart contract, allowing users to review changes before implementation. This feature enhances the decentralization and robustness of the Chainlink Network.

Leading DeFi protocols, such as Synthetix and Aave, have already adopted Chainlink’s CCIP to meet their cross-chain needs. Synthetix is leveraging it for cross-chain token transfers, while Aave is utilizing it for cross-chain governance. Given its robust security measures and potent mechanisms, it’s anticipated that CCIP will attract more protocols. This adoption is set to foster a more interconnected cross-chain ecosystem and further enhance the value of $LINK.

Source: Chainlink

MakerDAO Buyback Scheme Launch

The decentralized lending protocol MakerDAO, boasting a $5.3 billion valuation, witnessed its governance token, $MKR, soar to nearly a year-high price this past Friday. The price surge coincided with the commencement of a token buyback initiative, which saw $MKR briefly exceed $1,200. Despite some gains receding, the token remains up 28% over the week, easily outpacing the 4.6% decrease seen across the broader crypto market according to the CoinDesk Market Index.

The notable price movements transpired as Maker activated its ‘Smart Burn Engine,’ a token buyback mechanism designed to remove $MKR supply from the market. The engine uses surplus DAI stablecoins to buy $MKR from a UniSwap pool. Going live this Wednesday after the surplus buffer surpassed $50 million, the protocol has already repurchased around $230,000 worth of $MKR. If this pace continues, an estimated $7 million in tokens will be purchased within the coming month, decreasing the overall supply by 0.7% at current prices. Besides this, MakerDAO, one of the most prominent and seasoned DeFi lending protocols, is transitioning into an array of autonomous organizations or ‘SubDAOs,’ which might issue their tokens in the future.

Our Take

MakerDAO stands out as one of the leading protocols that has integrated real-world assets (RWA) into its product suite, with RWA contributing to over 50% of its revenue. As the RWA narrative gains traction in recent months, $MKR has shown robust performance. The introduction of the buyback scheme adds another optimistic facet to the protocol’s future and its token value appreciation.

However, it’s important to remember that the application of RWA is still in its infancy and potential issues are likely. A case in point is MakerDAO’s recent decision to halt lending to tokenized credit pools following a $2M loan default. For investors considering an investment in $MKR based on the RWA narrative and MakerDAO’s recent positive developments, a diligent risk management approach is recommended to avoid unforeseen negative price action.

MakerDAO Votes to Halt Lending to Tokenized Credit Pool After $2M Loan Default

Weekly Protocol Pick

Welcome to our “Weekly Protocol Pick” — where we spotlight a protocol that’s making waves in the crypto space. This week, we’ve picked HMX, next-gen decentralized perpetual exchange with a cross-margin and multi-asset collateral support on Arbitrum.

HMX is a decentralized protocol designed to maximize yield and capital efficiency through its unique product and fund management mechanism. The protocol allows users to deposit collateral, which is then used to provide liquidity in various markets. By using leverage, the protocol can potentially earn higher returns for users.

HMX has two main features:

1.leveraged market making

The HLP vault is the core component of the leveraged market making feature, aiming to maximize yield for liquidity providers (LPs) by rehypothecating liquidity from the GMX’s GLP token. HLP is like GLP, acting as the liquidity for traders on HMX. The vault is built on top of GMX’s GLP token, which means the liquidity deposited into the vault will be used to market make for traders both at GMX and HMX. This dual functionality allows depositors to earn 100% of the yields from GMX while also earning additional yields from fees generated on HMX. By depositing into the HLP vault, users enjoy four sources of income: ETH rewards, 65% of HMX’s fees in USDC, Trader’s PnL, and HMX’s incentive rewards.

Technical Architecture of Leveraged Market Making:

Source: HMX

2. Leveraged Trading with Cross-Margin Multi-Collateral

HMX’s unique approach to collateral management sets it apart from others in the sector. The platform adopts a cross-margin collateral system, which lets users distribute margin balances over various positions, optimizing capital efficacy and flexibility. The protocol supports a broad spectrum of assets as collateral, eliminating the need for users to convert their holdings into specific assets for trading. HMX also offers diverse trading pairs in four asset classes: crypto, equities, forex, and commodities.

Source: HMX

The platform’s fee structure is another enticing feature. With trading, borrowing, funding, and liquidation fees all set below average market rates, HMX aims to keep costs competitive for its users. The platform’s Adaptive Pricing Mechanism applies a premium or discount on the oracle price depending on the skew after a transaction, promoting balance between long and short open interest for each traded asset.

Source: HMX

To safeguard both traders and market makers, HMX employs rigourous risk management process and liquidation procedure, utlizing mechanisms like Initial Margin Requirements (IMR), Initial Margin Fraction (IMF), Maintenance Margin Requirements (MMR), and Maintenance Margin Fraction (MMF).

Overall, HMX’s products present a unique opportunity for LPs to maximize their yield and offer a smooth trading experience, enhancing capital efficiency and enabling increased trading flexibility.

Our Insights

HMX’s HLP vault is certainly its standout feature, providing users with the opportunity to earn similarly to holding GLP, but with additional returns. Given the popularity of earning yields through providing liquidity to Perpetual DEX’s liquidity pools among DeFi users — a trend made evident by GMX’s success and the ecosystem developed around GLP — HLP has the potential to emerge as another prominent yield instrument in the DeFi space. Many users, who typically DCA $BTC & $ETH, are showing interest in DCA-ing GLP. With the introduction of HLP, it’s likely we’ll see a shift in their portfolios to include HLP as a means to increase returns. As HLP adoption grows, we could witness an ecosystem similar to that of GLP developing around HLP, leveraging DeFi’s composability. Thus, HLP is certainly a product to watch closely.

In terms of leveraged trading, it remains to be seen if HMX can stand its ground against other Perpetual DEXs, especially those with strong brand identities and substantial user bases. While HMX’s multi-collateral cross-margin system is unique, it will take some time to gauge whether users truly value this feature. It’s also worth noting that HMX is still in its early stages, with its launch planned in four phases, and it currently being in the first one. Therefore, it’s still uncertain if HMX’s offerings will find a true product-market fit, making it a protocol worth keeping an eye on.

Four Stages of HMX’s Launch:

Source: HMX

Spotlight on Gryphsis Research — HVMTL Forge

Welcome to this week’s ‘Spotlight on Gryphsis Research,’ where we share the latest insights from our team. Our dedicated research team constantly explores cutting-edge trends, developments, and breakthroughs across the crypto landscape. This week, we’re excited to share with you a preview of our research on HV-MTL Forge, designed to deepen your understanding and fuel your curiosity about the ever-evolving world of crypto.

HV-MTL is Yuga Labs’ latest P2E game, which revolves around the HV-MTL NFT collection. With the first season of the game concluding on July 20th, we’re poised to publish an in-depth report on the game in the coming weeks. To keep a close track of the game’s operational status, we’ve developed a dedicated Dune dashboard. Before we delve into the full report, let’s preview some of the key metrics from the game’s inaugural season.

The HV-MTL NFT collection boasts a total supply of 30,000, of which 93.5% has been minted, leaving 6.5% unclaimed.

A closer look at the holder distribution reveals that 33.1% of the NFTs are held by the top 100 holders, while the majority of holders (6,222 out of 9,752) hold only one NFT. The record holder, excluding Yuga’s address with 4,295 NFTs, possesses 383 NFTs.

Source: Dune Analytics (@gryphsis)

As hype has gradually subsided, both the floor price and trading volume have consistently trended downwards, with the floor price now hovering around 0.6–0.8 ETH.

This decline in interest is mirrored in the dwindling number of daily recharging addresses.

The accumulated $APE used barely exceeded 240,000 by the conclusion of the first season — a surprisingly low figure considering the circulating supply of $APE, suggesting the token’s utility in the game hasn’t been sufficiently attractive to players.

Overall, the inaugural season didn’t offer many highlights. Whether the second season can reignite player interest and hype remains to be seen.

This section offers a concise preview of our detailed research on HV-MTL. We will publish the full report soon, stay tuned!

VC Highlights: Top Funded Crypto Protocols This Week

Welcome to our weekly Investment Spotlight, where we shine a light on the most significant venture capital moves in the crypto space. Each week, we’ll focus on protocols that have attracted the most funding.

Futureverse

This week, Futureverse, a company pioneering the integration of AI and metaverse technology has successfully raised $54 million in a Series A funding round led by 10T Holdings and with significant participation from Ripple. Futureverse, an amalgamation of 11 metaverse infrastructure and content companies, is bolstering developers’ ability to create and enhance applications within the metaverse through its proprietary AI content generation tools. These tools are instrumental in improving the music, objects, characters, and animations within the metaverse ecosystem.

The funding will further propel the development of the Futureverse Platform and The Root Network, which is an integrated blockchain and suite of protocols for building the next generation of metaverse applications. Futureverse’s vision to blend AI, blockchain, and the metaverse reflects continued investor enthusiasm for multi-disciplinary projects, despite the bearish digital asset market conditions.

Futureverse on Twitter: "We are incredibly excited to announce that we've closed our $54M Series A round led by @10Tfund, with participation from @Ripple to scale our AI and metaverse technologies. pic.twitter.com/zOUI65c2X8 / Twitter"

We are incredibly excited to announce that we've closed our $54M Series A round led by @10Tfund, with participation from @Ripple to scale our AI and metaverse technologies. pic.twitter.com/zOUI65c2X8

RISC Zero

RISC Zero, a leading developer in zero-knowledge (ZK) virtual machine technology, has successfully closed a $40 million Series A funding round. The round was spearheaded by Blockchain Capital, with noteworthy contributors including Galaxy Digital, Alchemy Ventures, Fenbushi Capital, and Delphi Digital. The funds will aid RISC Zero’s mission to provide developers and infrastructure providers with novel cryptographic tools, supporting the growth of trustless, scalable, and decentralized computation for both on-chain and off-chain solutions.

The company’s ZK Virtual Machine (zkVM) plays a pivotal role in this initiative. It grants developers the ability to construct ZK-powered applications utilizing popular programming languages such as Rust and C++. This innovative machine can handle programs of any complexity while using standard computing platforms. The new capital will drive the launch of RISC Zero’s Bonsai computing platform, which aims to offer massively parallel ZK-proving functionality to all developers, irrespective of their language or chain preferences. This development marks a significant step for RISC Zero, highlighting its commitment to fostering swift application creation and deployment across cloud and decentralized settings.

RISC Zero on Twitter: "We're thrilled to announce that we've raised a $40 million Series A! / Twitter"

We're thrilled to announce that we've raised a $40 million Series A!

Protocol News

Rodeo Finance relaunching on July 24.

Gearbox Protocol introduces Gearbox.

Metamask plans to lauch Snaps protocol by the end of 2023.

Unibot introduces Unibot X.

Y2K Finance intordues new vault.

Gains Network Q3 Tokenomics update.

Solana introdues Solang.

Pendle Finance introduces new product, Pendle Earn.

Industry Updates

Celsius Network reaches settlements that could clear path to return customer funds.

Coinbase to Wind Down Lending Program Over Coming Months.

FTX Sues Bankman-Fried, Associates Over $1 Billion in Bad Deals.

Coingecko new categories: Telegram Bots.

Polychain raises $200 million for fourth crypto VC fund.

Telegram Has Issued $270M in Bonds to Fund Growth.

Binance completes integration of Bitcoin Lightning Network.

Alpha Threads

Alpha is abundant on Crypto Twitter, but navigating thousands of threads in Twitter can be hard. Each week, we spend several hours researching, handpick threads packed with insights, and curate a list of weekly selection for you. Let’s dive in!

DeFI Saint 🦇🔊 on Twitter: "What will onboard the next billion waves of users to Web3?Account Abstraction is a good one, but has been talked about for a while; Here's a new concept, "Chain Abstraction." I found one project that leverages this and is backed by @BinanceLabs.Let's fish this gem: pic.twitter.com/rXCA2IdU6z / Twitter"

What will onboard the next billion waves of users to Web3?Account Abstraction is a good one, but has been talked about for a while; Here's a new concept, "Chain Abstraction." I found one project that leverages this and is backed by @BinanceLabs.Let's fish this gem: pic.twitter.com/rXCA2IdU6z

The DeFi Investor 🔎 on Twitter: "BTC has barely moved lately.It's not a good time to overtrade IMO.My current strategy: * if BTC breaks $31.4K with strength - max long* if it breaks down below 29.8K- close all short-mid term positions pic.twitter.com/gn8UJkr2nH / Twitter"

BTC has barely moved lately.It's not a good time to overtrade IMO.My current strategy: * if BTC breaks $31.4K with strength - max long* if it breaks down below 29.8K- close all short-mid term positions pic.twitter.com/gn8UJkr2nH

Finish 🏁 on Twitter: "The narratives are popping up more and more 👀The best tool to track them is @alphascan_xyz and it just got even better!Let's discover the latest news 🧵👇 pic.twitter.com/Je1BGfBPUx / Twitter"

The narratives are popping up more and more 👀The best tool to track them is @alphascan_xyz and it just got even better!Let's discover the latest news 🧵👇 pic.twitter.com/Je1BGfBPUx

Cyril - DeFi on Twitter: "Discover the golden opportunity of LayerZero, opBNB, and Polyhedra airdrop! 🪂In just 3 simple interactions, unlock a potential profit of $5,000 or more within 5 minutes. Exciting, right? ✅Find out how to qualify in the following thread 👇🏻 pic.twitter.com/GVrFCSkeFd / Twitter"

Discover the golden opportunity of LayerZero, opBNB, and Polyhedra airdrop! 🪂In just 3 simple interactions, unlock a potential profit of $5,000 or more within 5 minutes. Exciting, right? ✅Find out how to qualify in the following thread 👇🏻 pic.twitter.com/GVrFCSkeFd

DefiDog 🍌 on Twitter: "The Hidden fruit is the juiciest🍑Markets are mainly efficient as they run off all the data available. But, what if some of the data is incorrectly reported...That is called ALPHA my friend. Give me 2 minutes to show you some hidden alpha behind @muxprotocol's data.🌌1/15🧵 pic.twitter.com/CkoI7autP7 / Twitter"

The Hidden fruit is the juiciest🍑Markets are mainly efficient as they run off all the data available. But, what if some of the data is incorrectly reported...That is called ALPHA my friend. Give me 2 minutes to show you some hidden alpha behind @muxprotocol's data.🌌1/15🧵 pic.twitter.com/CkoI7autP7

Upcoming Events

That’s it for this week. Thank you for reading this week’s edition of our Gryphsis Academy Newsletter. We hope you found our insights helpful and our updates informative.

To stay up-to-date with Gryphsis Academy, follow us on Twitter and Medium. See you in the next edition!

This newsletter is meant for informational purposes only. It is not meant to serve as investment advice. You should conduct your own research, and consult an independent financial, tax, or legal advisor before making any investment decisions. The past performance of any asset is not indicative of future results.