DODO #Megascope brings you this week’s Highlights:

1. SEC Sues Binance and CEO Zhao for Breaking Securities Rules

2. f(x) Protocol Project Analysis

3. Bungee Bridge Project Analysis

4. Data Check：FairERC20

👀 Weekly Digest

SEC Sues Binance and CEO Zhao for Breaking Securities Rules

According to Bloomberg, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Binance and its CEO Changpeng Zhao (CZ), alleging violations of U.S. securities rules and disregard for investor protection. The defendants are accused of illegally promoting securities of digital assets to U.S. investors and conducting multiple unregistered offerings and sales of digital asset securities through the unregistered online trading platforms Binance.com and Binance.US. They are also accused of providing unregistered services such as lending and allowing investors to earn returns through pledging. The defendants are alleged to have generated billions of dollars in profits through these activities while exposing investors' assets to significant risks.

Binance's response to the SEC

Binance responded on June 6, stating that they have been actively cooperating with the SEC's investigation and making efforts to address their concerns since the beginning. However, they expressed disappointment that the SEC chose to file a lawsuit unilaterally instead of seeking a negotiated resolution. Binance believes that they should not be the target of the SEC's enforcement action and criticized the SEC for lacking clarity and guidance in the digital asset industry. They argued that the SEC's actions undermine the United States' position as a center for financial innovation. Binance emphasized the safety of user assets on their platform and opposed any contrary allegations. They pledged to defend themselves and continue working with regulatory agencies and industry partners, while also calling for congressional intervention and bipartisan legislation to create a viable regulatory framework for digital assets and promote cryptocurrency regulation and consumer protection.

Crypto Market Reaction

The news of regulatory actions or lawsuits involving a prominent cryptocurrency exchange like Binance can have an immediate impact on the market, particularly on the exchange's native token, BNB. BNB experienced a single-day drop from $305 to $272, representing a substantial decrease of approximately 11%.

In addition, the broader market sentiment can also be affected, leading to a temporary decline in prices for other major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). A decrease of around 5% for these mainstream cryptocurrencies is in line with the market reacting to negative news.

In the cryptocurrency field, many KOLs have taken to Twitter to condemn the SEC and express their support for CZ and Binance.

Tron founder Justin Sun tweeted that he would support CZ no matter the circumstances or challenges, praising his contributions to the cryptocurrency industry.

Cameron Winklevoss, co-founder of Gemini, tweeted: "Being sued by the SEC used to mean you probably did something wrong. Now it means you're probably doing something right."

Well-known NFT collector and influencer Machi Big Brother tweeted that he has transferred all his Bored Ape Yacht Club (BAYC) and Mutant Ape Yacht Club (MAYC) NFTs to Binance, showing his support.

SEC also sues Coinbase

After filing a lawsuit against Binance and its CEO, Changpeng Zhao, the U.S. Securities and Exchange Commission (SEC) has now taken aim at Coinbase, Inc. (Coinbase) and its parent company by filing a lawsuit in the U.S. federal court in New York. The allegations against Coinbase are similar to those against Binance, as the SEC characterizes cryptocurrencies as securities and accuses Coinbase of providing unregistered sales of securities by offering cryptocurrency-related services without proper registration. The SEC claims that Coinbase generated billions of dollars in revenue through these activities, while disregarding the securities nature of these assets and failing to disclose and protect investors, exposing them to significant risks.

DeFi

f(x) Protocol Project Analysis

f(x) is a new project launched by Aladdin DAO with the aim of creating a "Floating Stablecoin" asset backed by decentralized collateral assets such as ETH. The goal is to eliminate the risks associated with holding traditional real-world assets (RWAs) and centralized currencies, including the US dollar, by providing a low-volatility exposure option.

f(x) Protocol mechanism

f(x) Protocol allows users to deposit ETH into the protocol and mint two types of tokens: fETH and xETH. Here's an introduction to the properties of these tokens:

• fETH, the core concept of the project, is a "Floating Stablecoin" asset that aims to replicate approximately 10% of the volatility of ETH. When ETH price increases by 10%, fETH is designed to increase by approximately 1%, and vice versa. Holding fETH provides exposure to ETH price movements while mitigating some of the volatility. It can be seen as holding a combination of 10% ETH and 90% stablecoin in terms of exposure.

• xETH is responsible for absorbing the remaining volatility of ETH beyond what is covered by fETH. It can be considered as a leveraged token on ETH. When ETH price increases by 10%, fETH only increases by approximately 1%, and the remaining price movement is absorbed by xETH, resulting in a potential increase of approximately 19% for xETH.

In order to maintain system stability, the protocol follows four stages when the leverage coefficient of xETH becomes too high, indicating a high proportion of fETH. These stages aim to help stabilize the system.

• Stability Mode: When ReserveETH falls below 130% of fETH,

  The minting fee for fETH increases, the redemption fee for xETH increases, and fETH holders must pay stability fees to xETH holders.

• User Rebalance Mode: When ReserveETH falls below 120% of fETH,

  In addition to the mechanisms in the previous stage, the redemption fee for fETH is reduced to 0, and the redemption fees are paid by existing fETH holders.

• Protocol Rebalance Mode: When ReserveETH falls below 114% of fETH,

  The above two mechanisms continue, and the protocol can use Reserve ETH to repurchase fETH from the secondary market for burning.

• Recapitalization Mode: When ReserveETH is almost equal to fETH,

  As a last resort when the system is on the verge of collapse, the protocol can directly issue governance tokens to raise ETH for capital restructuring. The funds raised can be used through the minting of xETH or repurchasing and burning fETH.

The aim of these four protocol mechanisms is to reduce the proportion of fETH and increase the proportion of xETH in the system. After all, if the proportion of xETH becomes too low and the leverage becomes too high, the condition of fETH only bearing 10% of ETH fluctuations will not be sustainable.

f(x) Protocol Concerns

• Without providing incentives for holding fETH, how many real users would choose to hold fETH? The protocol would need to allocate a significant amount of funds to offer high rewards in order to attract users.

• The nature of xETH as a leveraged token is not favorable for long-term holders. If the price experiences a significant drop, minting xETH will result in a larger proportion, causing the value of previously held xETH to decrease even if the price of ETH returns to its original level.

• Considering the above points, if xETH lacks sufficient attractiveness, it could lead to the protocol entering a protection mode for an extended period. fETH holders would have to continuously pay fees to xETH holders. To maintain user attraction, the protocol would need to allocate more funds for fETH incentives, potentially leading to a vicious cycle within the protocol.

Bungee Bridge Project Analysis

Bungee Bridge is a cross-chain aggregation bridge supported by Socket Network, providing technical support. It currently supports up to 10 EVM-compatible public chains.

Bungee Bridge Protection Function Introduction

Bridge Protection is a new feature introduced by Bungee Bridge. Through the design of its own underwriting pool, it ensures that users can obtain their target assets within a certain period of time, without experiencing asset "fall-off" or receiving intermediary tokens such as anyUSDC, hUSDC, when the liquidity of the underlying bridge target chain is depleted. Currently, this feature is still in the testing phase, and the following points summarize the updates of Bungee Bridge.

• Ensures funds are obtained within 30 minutes.

• Guarantees the receipt of the target asset tokens.

• In the event of a hack, Bridge Protection will intervene and compensate for the lost funds by sending quoted funds to users from the underwriting pool.

• Currently, it only supports transfers of USDC to USDC conducted on Multichain & Hop on Polygon, Arbitrum & Optimism.

• Currently, the maximum amount allowed is 1000 USDC. ****

The introduction of Bridge Protection by Bungee effectively safeguards the security of users during cross-chain transactions, especially considering recent incidents where well-known cross-chain bridges like Multichain had cases of users' assets being stuck on the bridge for more than two weeks. If the Bungee Bridge Protection feature can operate flawlessly, it will successfully capture a significant user share in the highly competitive field of cross-chain bridges.

Datacheck

Last week, @jackygu2020 designed and launched Fair ERC-20 (FERC20) on Ethereum. Inspired by BRC20, FERC20 is implemented using smart contracts on Ethereum and other EVM chains. These FERC20 tokens smoothly integrate into the DeFi ecosystem, including features like purchase lock-up periods, holding conditions, and crowdfunding payment attributes. These features help prevent front-running and bots. Today, #Datacheck will review the performance data of FERC20 since its launch.

1/ Overview of FERC20

FERC20 allows tokens to be deployed by any address and distinguishes them using a four-letter identifier (first-come, first-served for the names). Additionally, any address can mint the corresponding FERC20 tokens.

• Since its launch on May 31st, a total of 14,939 unique addresses have participated in the minting process. These addresses have initiated 139,551 successful minting transactions, averaging 9.3 transactions per address.

• Currently, there are 184 deployed FERC20 tokens, as shown in the screenshot. Most of these tokens have not been minted by anyone.

2/ FERC20 daily fluctuation data

• On June 1st, the second day after the launch, we observed peak values for various metrics. A total of 13,519 addresses participated in the minting process, initiating 106,310 minting transactions. During this period, 116 FERC20 tokens were minted.

• However, following the peak on June 1st, the activity experienced a significant decline. On June 5th, only 180 unique addresses participated throughout the day, generating a total of 1,804 minting transactions.

• It's noteworthy that on the peak day, the number of minting addresses, minting transactions, and deployed tokens accounted for 90%, 76%, and 63% of the respective totals.

3/ About $FERC

• $FERC is the first token deployed based on Fair ERC20.

• Since June 1st, the price of $FERC has surged from $0.1 to the current value of $1.15, representing a more than 10x increase.

• Currently, liquidity for $FERC is provided on Uni, with the Total Value Locked (TVL) in the main pool reaching nearly $900,000.

• Both June 1st and June 5th witnessed substantial trading volumes for $FERC, surpassing $10 million. June 1st recorded the highest trading volume, nearing $18 million.

• On June 1st, there was a peak in trading addresses and transaction volume, with over 4,000 addresses and 14,000 transactions. However, trading activity significantly decreased afterwards, with daily trading addresses not exceeding 2,000, and transaction counts fluctuating between 2,500 and 5,000.

4/ About the minting of $FERC

• Among the top 15 addresses with the highest minted tokens, 13 addresses have completely sold out their holdings, while the remaining two addresses have sold 95% and 50% of their tokens, respectively.

• The top 2 addresses with the highest minted tokens have minted a total of 4.18% and 2.2% of the overall token supply. Additionally, there are over 100 addresses that have minted more than 0.1% of the supply (minting more than ten times).

5/ Addresses with Profits

• The top 10 profitable addresses have earned over $500,000 each, with the highest address making $5.52 million in profit.

• Interestingly, these addresses currently hold relatively few FERC tokens, suggesting their intent to exit the market and cash in on their profits.

6/ All FERC20 trading statistics

• On June 1st, the total trading volume of all FERC20 tokens was $33.64 million, with $ferc accounting for nearly half of the total volume. However, from June 2nd to June 5th, $ferc captured nearly 80% of the trading volume, while other FERC20 tokens gradually weakened.

• In terms of trading addresses, the addresses trading $ferc accounted for around 70% of all FERC20 trading addresses. However, on June 4th, this percentage dropped to around 50%.

• In terms of transaction counts, the number of transactions involving $ferc accounted for approximately 60% of all FERC20 transaction counts. Similarly, on June 4th, this proportion significantly decreased to below 40%.

7/ Based on the data, FERC20 token trading activity peaked on the second day post-launch, declining notably thereafter. Participation addresses and deployed FERC20 tokens were limited, with speculative trading of $ferc dominating the majority of funds.

🚄 Bullet News

DeFi

• According to the analysis by 0xScope, Multichain's ZKsync Era and KAVA cross-chain bridge have restored functionality. Previously, the KAVA USDC, which had become de-pegged and reached 0.5 USD, is now re-pegged. Currently, there has been no official response from Multichain regarding this matter.

GameFi

• Illuvium has completed a $10 million funding round, with full participation from Framework Ventures. The new funding will be used to accelerate game development and support their distributed contributor team. Tokens involved in this funding transaction will be locked up for two years, excluded from staking, and therefore will not participate in profit distribution.

• Pancake has officially launched its GameFi project Pancake Protectors, supported by the PvP GameFi protocol Mobox. The game ecosystem will exclusively use the CAKE token as its currency. Currently, the first season of the reward program is underway, with a total of 10,000 CAKE rewards to be distributed to players by June 12th.