Crypto Twitter Debates Over L1 Blockchains

Monday, November 22, 2021

Quick Take

  • Crypto Twitter debates over leading L1 chains amid rising transaction fees.

  • DeFrag launches a lending protocol for NFT loans backed by put options.

  • Polygon submits a proposal to deploy Uniswap on the Polygon PoS network.

  • Rarible launches a messaging feature that lets users communicate directly on the marketplace.

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Contention Over Ethereum Gas Fees

Over the weekend, outrage was expressed on Crypto Twitter amid controversy over Ethereum gas fees. Notably, Three Arrows Capital co-founder Su Zhu sent a tweet claiming that he was abandoning Ethereum over rising transaction costs and falling network usability. He accused Ethereum developers of “sitting around” while “zero newcomers can afford the chain.”

Zhu is a backer of smart contracts blockchain Avalanche which has soared in recent weeks. He has actively promoted the growth of Avalanche’s native AVAX token as it briefly surpassed Dogecoin in the top 10 cryptocurrencies by market cap. Balance Wallet developer Ric Burton called out Zhu for his lack of contributions to the Ethereum ecosystem apart from exit narratives. Burton added on to say that Zhu is known among creative circles as an unhelpful investor.

Others criticized Zhu for his remarks about transaction costs as fees on Avalanche have also risen to double digits alongside the chain’s demand. Zhu later apologized saying that great teams are working on scaling Ethereum through L2s. Zero-Knowledge and Optimistic Rollups based scaling solutions offer users similar transaction fees to Avalanche, but with the added security of being backed by L1 Ethereum. 

Defrag Launches NFT-Backed Loans

Nodar Janashia, a former co-founder of Zapper Finance, has launched DeFrag, a lending protocol for NFT loans backed by put options. The protocol gives holders access to instant liquidity by using their NFTs as collateral. Creditworthiness of NFTs is ranked based on rarity among several other factors to determine collateral ratios.

In order to receive a loan against an NFT, the protocol purchases insurance on the users behalf via Put Options. The use of a liquidity pool allows borrowers to get instant liquidity on their NFTs without having to wait for a counterparty to enter into a contract. Underwriters provide liquidity and earn premiums through the insurance fees collected from the sale of Put Options.

The project has also launched Metamatician randomly generated NFTs to jump start the liquidity pool. Minting proceeds will be deposited into the initial NFT underwriting pool. The NFT will also generate fees that are collected from the sale of Put Options. The Metamaticians NFT will also serve as an entry ticket into DeFrag NFT collateralized loans.

Polygon Proposal For Uniswap V3 Deployment

Polygon has submitted a proposal to deploy the Uniswap protocol on the Polygon PoS network. Polygon is currently the most adopted scaling solution having processed over 1 billion transactions from 100 million unique user addresses. Over 3,000 decentralized applications are also hosted on the network.

The integration would provide users with significantly lower transaction fees compared to L1 Ethereum. Aave, Curve, SushiSwap, Balancer, and Matcha are among the protocols that have already launched on Polygon. Aave’s 700k active Polygon users have saved an aggregate of $42 million in transaction fees within its first 5 months of launching.

Polygon says they will consider allocating a significant amount of capital from its treasury to incentivize liquidity on the exchange. The proposal currently holds a 99% approval rate, though $UNI holders still have until November 25th to submit their vote.

Rarible Launches Messaging Feature

NFT marketplace Rarible has revealed the launch of Rarible Messenger, a messaging feature that lets users communicate via their wallet addresses. The tool is available now on Rarible, enabling buyers and sellers to communicate about transactions directly on the platform. The marketplace plans to launch Rarible Messenger as a standalone Web 3 communication tool. The messenger also includes a privacy feature that allows users to block others if needed.

Competing NFT marketplaces will likely launch their own messaging features. Coinbase has mentioned its upcoming NFT marketplace will have a social layer. Rarible is a smaller NFT marketplace focused on community building via it’s RARI token. The marketplace holds less than 1% of NFT market share having only processed $20 million worth of trading volume over the last 30 days.

StarkNet On Track For Release This Month

Ethereum ZK-rollup scaling solution StarkNet is on track for its alpha mainnet release this month. During this week’s community call, developers mentioned they plan to launch Volition, a hybrid on-chain/off-chain data solution, in January 2022. Sequencing and proving is also set for some time next year. It’s likely the StarkNet will launch a governance token given the project's commitment to full decentralization.