MEV by transaction type and Dai reaches for higher yield
Plus Odds & Ends and Thoughts & Prognostications from the last week
I’m headed to Bogota next Tuesday for Devcon. If you’re around, get in touch!
Chart of the week: MEV transaction data
Nice dashboard from EigenPhi that provides a comprehensive overview of the MEV market along with a fire hose of recent MEV transactions. The main chart shows how the MEV opportunity is split amongst arbitrage opportunities, sandwich attacks, and liquidation from a lending platform. Liquidation is the most profitable but the fewest opportunities (and highly dependent on a volatile market). Sandwich attacks, meanwhile, require huge amounts of capital (often acquired through a flashloan) to trade before and after an order to take advantage of a traders slippage tolerance. The MEV market continues to mature. EigenPhi also has a nice newsletter, which has slowed down the last week.
Tweet of the week: The return of the DSR?
Currency blogger JP Koning commenting on MakerDAO’s announcement to diversify $500m of the USDC in the PSM into liquid treasury and bonds. This doesn’t necessarily help Maker solve its regulatory risk of off-chain custodied collateral, but it does help provide yield on the large balance sheet that is backing Dai.
Higher interest rates have arrived everywhere but DeFi, where stablecoin yields barely break 1%. That is because DeFi yields are driven by the demand for leverage, but there are still ways that the changing interest rate environment will affect DeFi. Stablecoins are now sitting on tons of assets that are no longer zero-yield assets. Circle, BUSD and USDT can easily tap into these higher yields as their assets are already in the traditional financial system. Maker is playing catch up here, but it faces the same question as all the other stablecoins: whether to pass on the higher yield to users. Dai is the only major stablecoin with a native system for yield: the Dai Savings Rate.
Other interesting stablecoin news: Since the start of September, the market cap of USDC is down -11%, USDP is down -5%, and TUSD is down -17%, while BUSD is up 10% thanks to Binance auto-converting stablecoins to BUSD (ht: Delphi Digital)
Odds & Ends
DXdao* Month in Review Link
Sushi votes Jared Grey as new Head Chef Link
Olympus DAO cuts annual yield for OHM staking to 7.35% Link
Assorted research on the Flashbots forum Link
Uniswap Labs in talks to raise $200m Link
TradFi asset manager Golden Tree reveals $5m stake in Sushi Link
Thoughts & Prognostications
Constraining block producers without heavy burdens on proposers [Vitalik/ETHresearch]
Ethereum’s new staking model does not make it a security [Rodrigo Seira, Amy Aixi Zhang, Jake Chervinsky/Paradigm]
A detailed report on GMX [DeFi Cheetah]
The State of the Network Q3 2022 Wrap-Up [Kyle Waters, Matías Andrade, and Nate Maddrey/Coin Metrics]
Lido Governance [Hasu & Sam Kozin/I Pledge Allegiance]
That’s it! Feedback appreciated. Just hit reply. Written in Nashville, where the leaves are beginning to change but there’s still a lot of sunshine.
Dose of DeFi is written by Chris Powers, with help from Denis Suslov and Financial Content Lab. Caney Fork, which owns Dose of DeFi, is a contributor to DXdao* and benefits financially from it and its products’ success. All content is for informational purposes and is not intended as investment advice.