👀 Weekly Digest

Polygon 2.0 Protocol Architecture

Polygon Labs released a new article on 29th June, providing further details on Polygon 2.0 and proposing its architecture, aiming to address the scalability issues of Web3, achieve unlimited scalability and unified liquidity, and position Polygon as the value layer of the Internet.

The team stated that throughout the development journey of Polygon, they encouraged experimentation with various methods and technologies, resulting in an innovative and diverse blockchain infrastructure solution. Through a process of divergence and convergence, the Polygon protocol team and contributors gradually reached consensus on the technical stack, leading to the optimal architecture of Polygon 2.0 as the value layer of the Internet. This proposal will guide the development efforts of the Polygon protocol.

https://polygon.technology/blog/polygon-2-0-protocol-vision-and-architecture?utm_source=twitter&utm_medium=social&utm_content=polygon-2.0-protocol-vision-and-architecture

Protocol Architecture

The Polygon 2.0 architecture is formalized as a collection of protocol layers designed to operate together. The most prominent example of such layered architecture is likely the Internet protocol suite, with its four layers powering the Internet. Each protocol layer facilitates a specific sub-process, and this logical separation simplifies reasoning, implementation, and upgrades of the architecture.

Staking Layer

The Staking Layer is a Proof-of-Stake (PoS) based protocol that leverages Polygon's native token to provide decentralization to participating Polygon chains. It achieves this through a common, highly decentralized validator pool and an in-built restaking model.

[Key elements: Validator Manager & Chain Manager]

Validator Manager is a smart contract that manages the common validator pool accessible by all Polygon chains. It is responsible for maintaining the registry of validators, processing staking and unstaking requests, allowing validators to restake on multiple Polygon chains, and more.

Chain Manager, also a smart contract, manages the validator sets of individual Polygon chains.
Interop Layer

The Interop Layer facilitates secure and seamless cross-chain messaging within the Polygon ecosystem. It abstracts the complexity of cross-chain communication and makes the entire Polygon network feel like a single chain to users, providing shared access to Ethereum assets and supporting near real-time and atomic cross-chain transactions.
Execution Layer

The Execution Layer enables any Polygon chain to produce sequenced batches of transactions (blocks). It is a relatively commoditized protocol layer, similar to the execution layers of other blockchain networks.
Proving Layer

The Proving Layer is a highly-performant, flexible ZK proving protocol. It generates proofs for all transactions, including internal and cross-chain transactions, for every Polygon chain.

NFT Market Crash

Last week, the NFT market experienced a major crash, with Azuki leading the way with a nearly 70% drop in the weekly high. The cause of this downturn was the disappointing launch of the Azuki Element sub-project, where the similarity between the sub-series and the main series was too high. There were even instances of multiple Azuki Element NFTs using the same image. The community criticized the project team for being overly greedy with the sale price of 2E for the sub-series. As a result, not only did the Azuki Element NFTs immediately plummet below the sale price, but the entire Azuki NFT series experienced a cascading drop. Another NFT series, CAPTAINZ, also saw significant declines, primarily due to the unsatisfactory reveal as well. The Azuki incident, combined with the underperformance of blue-chip NFTs like Bored Ape Yacht Club (BAYC) this year, has prompted many to reflect on the actual value of NFTs.

Chain Reaction from the Crash

After Azuki Element's poor performance and dissatisfaction from the community, many whales directly utilized the liquidity of Blur's bid orders to dump large quantities of NFTs. Well-known NFT collector and the largest liquidity provider on the Blur Market, Machibigbrother, acquired over 300 Azuki during this market downturn. According to statistics on the Blur, Machibigbrother achieved a profit and loss breakthrough of 6000 ETH, approximately 11 million USD.

Source：https://twitter.com/BaerEvo_/status/1676245482174029824?s=20

Due to the impact of this rapid market downturn, the top three NFT lending platforms, Blur Blend, Paraspace, and BendDAO, have experienced varying degrees of floating bad debts. The main affected collateral is Azuki, and currently, all three platforms have entered the auction liquidation phase. Paraspace said they has already undergone debt settlement and auction phases, with losses being within controllable limits. If there are still bad debts after the auction, the platform's funds will cover them. BendDAO has initiated a community proposal to use treasury assets to settle the NFTs causing the bad debts.

Overall, while there are losses for the platforms, they remain within controllable limits, and the auction liquidation process is proceeding smoothly.

Source : https://twitter.com/Loki_Zeng/status/1675740170161917952?s=20

Benefiting from the growth of the NFT-Fi project , users have found ways to profit even during market downturns. This can be observed through the data provided by the NFT perpetual exchange, Tribe3. Despite the significant drop in the market, many users on the platform have engaged in short-selling/hedging NFTs. As an example, the long-to-short ratio for Azuki reached an astonishing 1:9. This indicates that a portion of astute traders continues to generate profits amid the market decline.

Source：https://app.tribe3.xyz/trade/AZUKI

Vertex Project Introduction

Vertex is a hybrid (Orderbook and AMM) on-chain perpetual future exchange on Arbitrum. Compared to pure Orderbook exchanges, Vertex avoids the issue of illiquidity in extreme market conditions. Compared to pure AMM exchanges, Vertex also provides sufficient liquidity from market makers in normal market conditions. It combines the advantages of both mechanisms. Additionally, Vertex supports advanced features such as cross-margin and API trading, allowing users to have a trading experience close to that of centralized exchanges (Cex) while trading on-chain.

Vertex Team Background

Vertex was originally a derivative exchange focused on FX trading built on the Terra blockchain. However, with the collapse of Luna, the team decided to abandon building products on Terra and instead chose Arbitrum as the first blockchain for deployment to continue their product development.

The Vertex team has a strong background in the trading field. Both co-founders have extensive experience working in traditional large hedge funds. The majority of other team members also come from the Trad-Fi sector, making the team's background impeccable.

Vertex has attracted renowned investment institutions. In April of this year, Vertex Protocol completed an $8.5 million seed funding round, with leading investors including Hack VC, Dexterity Capital, Jane Street, and Hudson River Trading. Recently, in June, it announced a strategic investment from Wintermute Ventures, although the specific amount has not been disclosed.

Vertex Project Mechanism

Vertex has three products: Spot Market, Perpetuals Market, and Money Market. Users’ portfolio (i.e., multiple open positions’ liability) is shared across a single trading account to offset the margin between open positions. The goal is to provide users with a trading experience similar to centralized exchanges (CEX) while allowing users to custody their own funds on-chain. Vertex positions itself as a combination of Uniswap, dYdX, and AAVE, rather than just a Perp Dex.

Vertex's liquidity providers consist of two parts: off-chain market makers providing order book liquidity and retail users providing AMM liquidity. The participation of market makers ensures sufficient capacity for large assets, allowing users to trade with limit orders, while the AMM mechanism ensures diversification of trading pairs, enabling the listing of more long-tail assets.

Vertex Project Update

Vertex launched on the Arbitrum mainnet two months ago and has achieved a total trading volume of $2 billion in less than two months. Currently, there are 7 trading pairs available for users to trade, and the future goal is to have the top 50 tokens by market capitalization listed on the platform through partnerships with liquidity providers. There are also plans for cross-chain deployment to support long tail token in the form of AMM. Currently, Vertex is conducting trading mining, distributing 9% of the governance token $VRTX to traders from April to October this year.

Source : https://app.vertexprotocol.com/perpetuals

Tribe3 Project Introduction

Tribe3 is a gamified NFT futures exchange where users can trade NFT perpetual futures with leverage, allowing users to participate in the price movements of an NFT without owning the full asset. Users can also use leverage to hedge/short NFTs, and the gamified design makes the entire process more engaging. Users can engage in NFT tribe battles with others in the community and win in-game items to create personalized NFT avatars.

Tribe3 Project Mechanism

Tribe3 adopts a dual pricing mechanism of vAMM and oracles, incorporating oracle quotes obtained from multiple NFT markets (blur/Opensea pro) through TWAP (Time-Weighted Average Price) to control the calculation of funding rates. The price alignment multiplier check is carried out every 3 hours after the funding payment, and if the deviation is significant, the insurance fund will be used to adjust the vAMM price to align it closer to the market.

In Tribe3, liquidation can occur based on either the vAMM price or the oracle price. Under normal circumstances, if the absolute difference between the vAMM and oracle prices is less than or equal to 10%, liquidation will be based on the vAMM price. However, in rare cases where the absolute difference exceeds 10%, liquidation will be based on the oracle price, ensuring that liquidation occurs promptly when the vAMM price significantly lags behind the oracle price and users are not unfairly liquidated due to manipulation of the vAMM price.

Source：https://tribe3.gitbook.io/tribe3/protocol-explanation/system-design-and-overview

Tribe3 Project Update

Tribe3 announced on 4/27 that it has raised a funding of $2.1 million from several VC including Spartan Capital. The product officially launched in early May and is currently undergoing beta testing on Arbitrum. They are currently hosting a trading competition (until 7/16 9 am UTC) and Airdrop Season event, where participants have the chance to receive Tribe3 governance tokens in the future. Since its launch, Tribe3 has accumulated a trading volume exceeding $10 million and offers trading for up to eight blue-chip NFT projects.

Source : https://app.tribe3.xyz/

Datacheck

https://twitter.com/DodoResearch/status/1676064938962612224?s=20

🚄 Bullet News

The Financial Working Group Steakhouse of Lido DAO submitted a governance proposal TMC-0, suggesting staking all treasury ETH in Lido, and the proposal has been voted through.
Adventure Gold DAO launches the L2 network Loot Chain, built by Caldera using the OP Stack, where AGLD will be used as gas fees and Polygon will serve as the data layer (DA Layer), significantly reducing the costs of building, deploying, and operating the Loot Chain. Loot Chain will provide autonomy to Lootverse and prioritize the development needs of Lootverse.
The cross-chain bridge Poly Network is suspected to have suffered from a private key leak or a multi-signature service attack. Hackers used forged credentials to make withdrawal operations on the cross-chain bridge contracts of multiple chains. The hacker has currently gained approximately $10 million in actual profit, while the remaining forged tokens (about $260 million) may be difficult to liquidate due to low liquidity.