Sebastian Sinclair

Decentralized exchange trading activity has begun to pick up steam, with some of the DEX sector’s biggest players booking a notable bump in trading volumes this week.



Ethereum-based Uniswap was leading the pack toward the end of the work week in New York, hovering around the 50% mark of total DEX volume, equating to a week-over-week double-digit jump to around $12 billion, data from <a href="https://defillama.com/dexs" target="_blank" rel="noreferrer noopener">DeFiLlama</a> shows.



Its closest rival, PancakeSwap was holding steady around 8% via the same market cap metric — up about 20% since the week prior, clocking in around $2.1 billion. The DEX still leads on <a href="https://twitter.com/Blockpour/status/1623668554137751552?s=20&amp;t=ihhtwohhnDZvzdZcS-9Kjw" target="_blank" rel="noreferrer noopener">trader count</a> on Binance’s BNB Chain.



Notable DEXes Curve and SushiSwap have also seen significant increases in trading volumes,  jumping 12% and 63% respectively, in the last seven days through early Friday morning in New York. 



Average increase for volumes across all DEXes popped 16% or so on the week. 



Unlike centralized exchanges, which are run by a single entity, decentralized rivals are built on decentralized infrastructure — including smart contracts — allowing traders to swap assets directly with one another, eliminating the need for an intermediary.&nbsp;



Their popularity has continued to grow following the fourth quarter collapse of the centralized FTX — leaving the funds of retail and institutional investors alike frozen to this day.



Decentralized exchanges that were battle-tested last year, have come out on top, according to Toby Chapple, head of trading for the Australian trading firm Zerocap.



“The use of smart contracts on public blockchains cures a large part of counterparty-related issues related to centralized single-point entities,” Chapple told Blockworks. “The smart contracts themselves handle the crisis exactly as the rules that govern them said they would — they liquidated market participants as per the terms of the DEX.”



That’s now especially true for some market participants up in arms over the SEC’s move against centralized entity <a href="https://blockworks.co/news/kraken-settles-sec-crypto-staking-program">Kraken to shutter its US staking operations</a>. Hester Peirce, a long-tenured SEC commissioner, went as far as to <a href="https://blockworks.co/news/sec-commissioner-speaks-out-kraken">blast her own agency as “paternalistic” and “lazy”</a> in terms of Gensler’s most recent crypto crackdown. 



The centralized exchange settled with the SEC without confirming, nor denying fault, and agreed to pay a $30 million fine in the process.  



“Staking is never going away,” Bill Hughs, senior counsel and director of global regulatory matters at ConsenSys, told Blockworks in a statement. “Access to it will only grow because that is what people all around the world will demand.”



Staking remains crucial to scores of <a href="https://blockworks.co/news/proof-of-work-vs-proof-of-stake-whats-the-difference">proof-of-stake networks</a>, providing a mechanism for reaching consensus — and providing reward-based incentives to validate transactions and ensure a blockchain’s stability and security. 



DAO governance participants — and other individuals looking to accrue cryptocurrencies outside of the scope of regulatory scrutiny — have continued to tap DEXes in large numbers as an alternative to centralized routes. 



The sentiment appears to be increasing, according to Chapple, as exchanges continue to roll out offerings designed to win over user trust, even considering current complications.



“Going forward, the growth of DEX&#8217;s will need to address the smart contract vulnerabilities to hacking risk that seems to still plague the industry from time to time, before mainstream adoption by TradFi can be contemplated,” Chapple said.



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DEX Trading Activity Picks Up Steam as Markets Spurn Centralization

Ornella Hernandez

FTX customers just can’t get a break.



In the latest twist from the crypto exchange’s fallout, NFTs minted on the FTX exchange now show a blank image instead of the original art. Any direct links to an NFT redirect to a restructuring page with information on the bankruptcy.



The lesson learned is one of Web3 companies relying on centralized services like Amazon Web Service (AWS) or the Google Cloud Platform, as Solana engineer jac0xb.sol signaled on Twitter. Collectors are unable to view their FTX-hosted NFTs because those collections are still hosting metadata on AWS.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Oh look FTX hosted all the NFTs minted on their platform using a web2 API and now all those NFTs have broken metadata and the links go to a restructuring website. <a href="https://t.co/hsQgVru4BL">pic.twitter.com/hsQgVru4BL</a>&mdash; jac0xb.sol (@jacobdotsol) <a href="https://twitter.com/jacobdotsol/status/1600526700982710273?ref_src=twsrc%5Etfw">December 7, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



This includes the Coachella NFT collection, a Solana-based collection of lifetime passes to the music festival that generated $1.5 million at launch via the FTX US NFT marketplace. For weeks, holders have been left without the option to withdraw or transfer them while the site has been disabled. Even on Magic Eden, the image displays <a href="https://magiceden.io/item-details/HBTZiCag5f2b5eceBUsu31EYdpehSFTagTJH7EwXtpZX" target="_blank" rel="noreferrer noopener">an empty gray box</a>.



The NFTs no longer point to their original images because the FTX exchange hosted their NFT metadata on FTX US Web2 servers that have since been deactivated. This issue isn’t unique to FTX, and it underscores the need for permanent decentralized storage solutions.



More often than not, NFTs are not actually built “on-chain.” NFTs may host their smart contracts on the blockchain, but their media or metadata is off-chain. The metadata — name, description and author details — is often saved in the InterPlanetary File System (IPFS), a peer-to-peer system for preserving multimedia files. The image itself — usually a jpeg file — is then linked to the NFT’s metadata.



<a href="https://blockworks.co/tag/arweave" target="_blank" rel="noreferrer noopener">Arweave</a> is the leading Solana-focused alternative, <a href="https://twitter.com/baalazamon/status/1600672243268620288?s=20&amp;t=LzbkbCKgBebq_DI89jHy0w" target="_blank" rel="noreferrer noopener">recommended</a> by Solana developers, but it was not used for FTX’s NFT mints. As a result, the URLs that retrieve the smart contracts&#8217; storage and links to the ID of the related NFTs are now broken.



Some examples of popular on-chain NFT projects that do ingrain their metadata into the Ethereum blockchain, include Nouns DAO, Chainrunners and OnChainMonkey.



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FTX NFTs Are MIA: A Lesson on Centralized Risk

Bessie Liu

<div id="highlights-block_634dba27c3ba7" class="highlights">
 <ul>
 <li>SUAVE has been in the works for over a year, according to Flashbots developers</li>
 <li>Further details about the project will be announced this week</li>
 </ul>
 
</div>



Flashbots, a research and development organization <a href="https://cms.blockworks.co/new-flashbots-upgrade-could-revolutionize-crypto-markets-after-the-merge/" target="_blank" rel="noreferrer noopener">with the goal to reduce</a> the potential harms of Maximum Extractable Value (MEV), revealed a new project to address centralization and censorship concerns on MEV extraction for Ethereum and Ethereum virtual machine-compatible blockchains.



The project, <a href="https://twitter.com/hasufl/status/1580983853824765952" target="_blank" rel="noreferrer noopener">code named SUAVE</a> which stands for “Single Unifying Auctions for Value Expression,” will be an open-source MEV-aware, privacy-focused, encrypted mempool for users and wallets, Philip Daian, a Flashbots steward said at Devcon Bogotá.



“We’re going to provide optimal user execution that harnesses MEV,” Daian said. “So we’re going to use MEV as this decentralized engine in the long term, to make sure the users get really the best execution on their trades in a way that’s really going to make TradFi look embarrassing very shortly.”



<h3>What is the SUAVE vision for MEV?</h3>



MEV refers to the maximum amount of income that can be extracted from block production after validators include or reorder transactions on a block.&nbsp;



If the MEV available in a block exceeds standard block rewards, validators could then reorganize the blocks to capture the value of the income generated by MEV for themselves, making it a risk for exploitation and centralization.



Flashbots has been actively working on reducing these problems through MEV-Boost, software that enables builders to auction blocks to validators and prevent MEV centralization by allowing each party to earn a contribution for their efforts.&nbsp;



SUAVE’s goal is to decentralize and democratize MEV-Boost by making it open source and widely available, even to competitors and users.



The overarching goal is to avoid entrenching centralized forces, such as private or exclusive order flow into the way relays and block builders do business, Daian said, “because these will destroy the system that we love, as a whole.”



<h3>Risk of centralization and a decentralized solution</h3>



After the <a href="https://cms.blockworks.co/tornado-cash-sanctions-expose-potential-defi-achilles-heel/" target="_blank" rel="noreferrer noopener">Tornado Cash sanctions</a>, Flashbots, a US entity, began omitting transactions related to the <a href="https://cms.blockworks.co/crypto-mixers-and-privacy-coins-can-they-resist-censorship/" target="_blank" rel="noreferrer noopener">cryptocurrency mixer</a> to remain OFAC-compliant. That’s led to a new worry — censorship.



As one of the largest MEV-Boost relays, Flashbots has the power to delay the incorporation of sanctioned transactions into Ethereum blocks — or slots as they’re now known, following the proof-of-stake consensus switch.



Flashbot’s avowed obligation to follow regulatory requirements has caused concern <a href="https://twitter.com/koeppelmann/status/1580893089077809153" target="_blank" rel="noreferrer noopener">among some</a> in the Ethereum community. But the consensus among developers seems to be that the concerns are <a href="https://twitter.com/basilesportif/status/1581906143538221058" target="_blank" rel="noreferrer noopener">mostly overblown</a>.



The Flashbots team is well aware of the potential pitfalls, and Daian said Flashbots “[does] not intend to impose our utility functions, or our legal risk analyses, on the Ethereum network, full stop.”



Indeed, the launch of SUAVE — a project that the Flashbots team has been working on for over a year — is expressly aimed at distributing the power of MEV, even if that means helping Flashbots’ competitors.



Further details about SUAVE are expected this week.



Macauley Peterson contributed reporting.



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Flashbots Has a New Plan: ‘Make TradFi Look Embarrassing’

On this episode of &#8220;<a href="https://youtu.be/MeKA74KOqls" target="_blank" rel="noreferrer noopener">On the Margin</a>,&#8221; Blockworks Co-founder Mike Ippolito is joined by Blockdaemon CEO and founder, Konstantin Richter, to discuss the rise and fall of crypto culture. When sentiment shifts in crypto markets, founders build conviction. Konstantin reminds us of previous cycles and shares why he has never been more optimistic on the future of crypto than right now.



Mike and Konstantin debate the pros and cons of centralization vs. decentralization, and they discuss the outlook for a multichain future.



They also cover:



<ul><li>the founding and future of Blockdaemon</li><li>forming new systems of governance</li><li>PoW vs PoS</li><li>and so much more</li></ul>



Watch the full episode below! 👇



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</div></figure>



&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts. At the end of the week, he is joined by a co-host where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.



Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/on-the-margin/id1558223079" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://open.spotify.com/show/2yFL2nSsQucf1rzdEKbFZY" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.



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