A boat in a container shipyard

The DEX Brief No. 7

Written by

Mark Lurie

Published on

April 4, 2022

Top of mind at Shipyard

The Ukraine situation continues to command headlines worldwide — and for good reason. The West has implemented sanctions against the Russian government, oligarchs, key companies, banks, and specific properties. In practice, this means expanding the OFAC blacklist, which US businesses and anyone who wants to trade USD must screen customers and counterparties against. Centralized exchanges can easily do so because they do KYC. DeFi is less able to adhere because it is noncustodial and thus generally forgoes KYC. Instead, some US DeFi projects have blocked all Russian IP addresses. We have not taken this approach because it’s easy to get around with a VPN and it isn't currently US policy to prohibit transactions with all Russians — just with specifically listed individuals/entities. 

What would help is if OFAC expanded its list of sanctioned wallet addresses as well so Clipper can block transactions from those addresses. We are left wondering why OFAC hasn't done so. The reason is probably threefold. First, it's so easy to create new addresses that they may consider keeping up an impossible task. Two, it doesn't seem like the concern that crypto could be a backdoor for evading sanctions has materialized. Crypto outflows from Russia have not risen materially since Russia's invasion, and are trivial in size relative to Russia's $1.4 Trillion GDP. Three, Cryptocurrency has proven useful to Ukraine, with $100M+ in crypto donations and daily use within the war-stricken country. The war is a terrible human tragedy, but perhaps it will ultimately both weaken Putin and help change the narrative about Crypto.

Shipyard insights

Blockchain technology hasn’t yet evolved to the point where all DAO decisions can be constrained and enforced by smart contract-enabled checks and balances. That’s why Shipyard recently incorporated its DAO in the Marshall Islands — to mitigate core members’ liability, but also to obligate the DAO leadership to abide by community decisions. Here’s how legally recognized DAOs can protect DeFi communities by holding crypto founders accountable.

DeFi projects that fail to achieve decentralization are unlikely to succeed in the long run. Oftentimes the most effective path to decentralized governance is to issue a governance token to the community, but it’s difficult to do so without running afoul of existing regulations. However, we’ve come up with some guideposts on how DeFi projects can navigate the complex transition to full decentralization.

The latest episode of Shipyard’s “WTF Crypto?” podcast is out! In this installment, Mark discusses the crypto space’s talent bottleneck with Pantera Capital’s Paul Veradittakit, including where crypto projects are looking to source and attract promising new team members.  And in case you missed Abe Othman’s deep dive into DEXs, be sure to tune in today!

DEX headlines that caught our attention

What we're reading

Ethereum’s lack of scalability has caused a mass migration to a new generation of layer 1 (L1) blockchains, and it’s getting increasingly difficult to keep track of all your options — and how they stack up against each other. This amazing article benchmarks the throughput and latency of some of the most popular L1 networks in the crypto space, and manages to translate its quantifiable, no-frills approach into an intuitive read.

We love this in-depth analysis of time-weighted average market makers (TWAMMs) and their unique ability to enable large trades by distributing them in time, unlike the atomic (one block) trades happening on most AMMs today. This ability potentially frees market participants from slippage woes of the Constant Product Automated Market Maker (CPAMM) bonding curve. The report is a bit technical and focuses on understanding and optimizing TWAMM gas usage, but is a great read for those of you who like peering under the hood.

Clipper Updates:

Clipper is now live on Moonbeam! This integration grants Clipper users full access to Polkadot’s on-chain ecosystem, and marks a major milestone in Clipper’s transition into a more interoperable DEX. 

OpenOcean has integrated with Clipper on Polygon. OpenOcean is an aggregation protocol for crypto trading that sources liquidity from major exchanges (both DEXes and CEXes) across Ethereum such as Polygon, Binance Smart Chain, and more — while also enabling cross-chain swaps!

Written by

Mark Lurie

Published on

April 4, 2022

August 12, 2022

The possibilities for derivatives are nearly endless, but the design space for DeFi derivatives remains largely unexplored. Shipyard is working on a solution.

August 4, 2022

A breakdown of the recent Nomad attack, the future of crypto funding, and other ongoing developments within the DeFi space.

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