Casey Wagner

Waves founder Sasha Ivanov wants centralized exchanges to disable futures markets for the decentralized blockchain’s native token.&nbsp;



Ivanov took to Twitter to ask several centralized exchanges including Binance, Kraken, OKX and Bybit to disable the feature, which he called “a breeding ground for FUD,” crypto slang for fear, uncertainty and doubt.&nbsp;



<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"><a href="https://twitter.com/hashtag/Waves?src=hash&amp;ref_src=twsrc%5Etfw">#Waves</a> does not need <a href="https://twitter.com/search?q=%24waves&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$waves</a> futures markets. They are a breeding ground for FUD and making money off short positions, profitable because of it. I kindly ask all <a href="https://twitter.com/hashtag/cex?src=hash&amp;ref_src=twsrc%5Etfw">#cex</a>&#39;s to disable Waves futures markets.<a href="https://twitter.com/binance?ref_src=twsrc%5Etfw">@binance</a> <a href="https://twitter.com/kucoincom?ref_src=twsrc%5Etfw">@kucoincom</a> <a href="https://twitter.com/krakenfx?ref_src=twsrc%5Etfw">@krakenfx</a> <a href="https://twitter.com/HuobiGlobal?ref_src=twsrc%5Etfw">@HuobiGlobal</a> <a href="https://twitter.com/okx?ref_src=twsrc%5Etfw">@okx</a> <a href="https://twitter.com/Bybit_Official?ref_src=twsrc%5Etfw">@Bybit_Official</a>&mdash; Sasha.waves (@sasha35625) <a href="https://twitter.com/sasha35625/status/1605471820311732224?ref_src=twsrc%5Etfw">December 21, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The request is strange, said David Tawil, president of crypto hedge fund firm ProChain Capital.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“Futures markets increase liquidity and trading overall,” Tawil added. 
</blockquote>



Ivanov told Blockworks that some of the exchanges have responded and are considering the request. “We hope that they will be responsive, giving up on some short-term profits from fees and instead focusing on long term partnership,” he said.



The heavy shorting began in April 2022, fueled by, what Ivanov termed, FTX-connected manipulation.&nbsp;



“There are several shorter groups on Twitter which have been using the Vires liquidity crunch and USDN depeg to perpetuate FUD and further short WAVES,” he added.&nbsp;&nbsp;



USDN, an algorithmic stablecoin backed by WAVES, has <a href="https://blockworks.co/news/algorithmic-stablecoin-usdn-is-on-the-brink-of-failure" target="_blank" rel="noreferrer noopener">depegged several times</a> throughout the year — on Wednesday, it sat at around $0.50. Ivanov <a href="https://twitter.com/sasha35625/status/1605135291802451969?s=20&amp;t=EiIJ8zsUuwHD3tpsQyPVoQ" target="_blank" rel="noreferrer noopener">said Tuesday</a> he plans to launch a new stablecoin, although he did not give details about the token’s backing or structure. 



Vires is Waves’ analog to Aave on Ethereum and compatible chains. The protocol incurred <a href="https://blockworks.co/news/waves-founder-holding-500m-debt-to-avoid-usdn-depeg" target="_blank" rel="noreferrer noopener">millions of dollars in bad debt</a> in May, following the collapse of <a href="https://blockworks.co/tag/terra" target="_blank" rel="noreferrer noopener">Terra’s</a> stablecoin UST, which broadly undermined confidence in algorithmic stablecoins.



Bybit issued an investor warning against USDN and its potential to depeg, which has since been removed. Upbit and Bithumb issued similar warnings, citing concerns that WAVES price could become volatile due to USDN depeg.&nbsp;



“USDN is a separate project built on Waves blockchain that uses WAVES as collateral; it is not intrinsically linked to WAVES token,” Waves said in a <a href="https://blog.waves.tech/en/waves-statement-on-daxa-investigation-into-waves-token" target="_blank" rel="noreferrer noopener">statement</a> earlier this month. 



“The recent Bybit announcement regarding USDN gave a new impetus to the FUD, despite the fact that USDN has no direct impact on Waves price behavior (there&#8217;s a relatively small amount of Waves locked in USDN contract and currently Waves is not redeemable from it at all — Bybit consequently removed the warning on WAVES),” Ivanov added.&nbsp;



WAVES was trading at around $1.50 as of Wednesday morning ET, down about 98% from its all-time high of almost $55 in March 2022. The token is down about 30% over the past month.&nbsp;



If centralized exchanges do not agree to shut down the WAVES derivatives market, Ivanov said, his company will be fine, but investors will suffer.&nbsp;



Investors use derivatives for hedging spot WAVES positions, in addition to speculation. In theory, shutting down these traders leaves them without an opportunity to hedge risk.&nbsp;



“If they do not agree to delist, it would mean that they are putting their short term profits above long term longevity,” he said. “Waves will survive this, because there&#8217;s no fundamental reason for short positions, the network is 100% healthy. Our goal is to protect WAVES holders from unnecessary volatility.”



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Waves Founder Says Network Is ‘100% Healthy,’ Asks Exchanges To Disable Futures Markets

Jack Kubinec

<div id="highlights-block_62b61e64f1248" class="highlights">
 <ul>
 <li>Sasha Ivanov is searching for exit liquidity as his debt accrues interest</li>
 <li>USDN lenders will face withdrawal limits until the debt is liquidated</li>
 </ul>
 
</div>



With crypto crashing, many <a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/">decentralized lending platforms</a> are one major liquidation away from facing insolvency. 



Sasha Ivanov, the founder of the Waves blockchain ecosystem and its Neutrino (USDN) stablecoin, has dealt with the liquidity crunch in a unique way: by subsuming six overextended USDN loans into his own wallet. Ivanov has pledged to slowly liquidate the debt without causing the coin to depeg. The Waves founder currently has more than $530 million in debt.



Ivanov has spent the past month slowly liquidating his wallet’s supply of USDN. Waves has displayed confidence that the debt will be made whole, but lenders looking to withdraw assets encounter withdrawal limits and stiff competition for any available liquidity. Critics question whether the debt can feasibly be repaid.



Ivanov took on the bad debt in Vires Finance, Waves’ money market protocol. The episode is another instance of decentralized trading platforms centralizing during crises. Ivanov captured this sometimes-decentralized-sometimes-not sentiment in his tweet announcing the move.



<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"><a href="https://twitter.com/hashtag/Waves?src=hash&amp;ref_src=twsrc%5Etfw">#Waves</a> is decentralized, but, on the other hand, I assume full responsibility for what happens in Waves. Recently there has been a liquidity crunch situation on <a href="https://t.co/X8GtUDr6fT">https://t.co/X8GtUDr6fT</a>, several accounts overextended the protocol lending capacity and are close to default now&mdash; Sasha Ivanov 🌊 (1 ➝ 2) (@sasha35625) <a href="https://twitter.com/sasha35625/status/1529076417731997699?ref_src=twsrc%5Etfw">May 24, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The move was voted on by Vires token holders on May 31. Vires has limited withdrawals to $1,000 USD Coin (USDC) or Tether (USDT) per user per day, but users have struggled to withdraw their assets at all. The company sporadically adds liquidity to Vires that is withdrawn within minutes.



USDN defied speculation <a href="https://cms.blockworks.co/algorithmic-stablecoin-usdn-is-on-the-brink-of-failure/" target="_blank" rel="noreferrer noopener">the coin was near collapse</a> after depegging multiple times during the crash in crypto prices. Vires’ debt centralization and withdrawal limits have allowed USDN to restore its $1 peg and avoid a <a href="https://www.blockworksresearch.com/research/ust-death-spiral-recap/" target="_blank" rel="noreferrer noopener">UST-like death spiral</a>.



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Algorithmic Stablecoins and Duck NFTs" width="1024" height="576" src="https://www.youtube.com/embed/whuImQbdCOg?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



Ivanov’s debt accrues more than half a million dollars in daily interest, a balance he must pay on top of the principal. Still, the company believes Ivanov will find a way out.&nbsp;



“There’s 100% confidence that this will be resolved,” Coleman Maher, head of the Waves ecosystem, said. “It might take some time to be resolved, but eventually, it’s going to be resolved.”



Multiple sources within the company said Ivanov’s debt will be paid down within one or two months. Critics are not convinced.



“I don’t know where I’ve seen buybacks work,” Steven Paterson, CEO of Margin Syndicate, told Blockworks. “There is bad debt but that’s by the by. It’s not the debt that’s the problem, it’s the model.”&nbsp;



Paterson believes Vires’ liquidity drought could last indefinitely.



“They have no mechanism to return liquidity to the system,” Paterson said.



Waves is actively searching for outside lenders to inject liquidity into Vires and help Ivanov pay down his debt, a source within the company told Blockworks.



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Waves Founder Holding $500M Debt To Avoid USDN Depeg

Macauley Peterson

<div id="highlights-block_624b4749c21c1" class="highlights">
 <ul>
 <li>USDN has been trading below $1 since Friday, April 1</li>
 <li>The TVL of the Waves DeFi ecosystem has dropped by $1.3 billion, more than 27%</li>
 </ul>
 
</div>



An emerging stablecoin with a recent market cap approaching $1 billion has diverged dangerously from its US dollar peg — calling its very existence into question.&nbsp;



USDN, the stablecoin of the Waves blockchain ecosystem, is supposed to be worth $1, but as of Monday at 5:15 pm ET, it traded for <a href="https://www.coingecko.com/en/coins/neutrino-usd" target="_blank" rel="noreferrer noopener">just 81 cents</a>.



USDN, or Neutrino USD, is considered an algorithmic stablecoin because its supply can expand and contract by burning or minting WAVES, the native token of the proof-of-stake Waves protocol.



WAVES was on an absolute tear as recently as Thursday, when it was trading up 600% in a little over a month. But now, smashed by USDN’s woes, WAVES is crashing down.


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#681FB2&#8243; assets=&#8221;WAVES-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



Most of the economic activity and total value locked (TVL) in the Waves ecosystem is linked to the use of USDN.



The ability of <a href="https://docs.neutrino.at/" target="_blank" rel="noreferrer noopener">the Neutrino protocol</a> to issue USDN is related to the price of WAVES, because USDN is backed in kind by staked WAVES tokens. The price also impacts the yield users earn on USDN in the <a href="https://vires.finance/" target="_blank" rel="noreferrer noopener">Vires Finance</a> dApp, Waves’ money market protocol — similar to Compound or Aave on Ethereum. As WAVES increases in value, so does interest earned by depositors.



But last week, a pseudonymous DeFi analyst, going by the username 0xHamz, alleged that Waves was using the USDN minting process, combined with Vires, to artificially inflate both the price of WAVES and the supply of USDN.



<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">I will walk you through how the WAVES team is folding leverage to engineering a massive supply squeeze Here is the flow -Deposit USDN on Vires -Borrow USDC on Vires -Transfer USDC to Binance -Buy WAVES with USDC -Convert WAVES to USDN -Start over This is trackable onchain&mdash; 0xHamZ (@0xHamz) <a href="https://twitter.com/0xHamz/status/1509581316689383425?ref_src=twsrc%5Etfw">March 31, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption>Crypto pseudonyms commonly begin with 0x — the first two characters of all Ethereum addresses</figcaption></figure>



Citing <a href="https://twitter.com/0xHamz/status/1509596635923427332" target="_blank" rel="noreferrer noopener">on-chain data</a>, 0xHamz outlined a pattern of depositing USDN as collateral to borrow other stablecoins, which were transferred to Ethereum and then to the Binance exchange, followed by commensurate withdrawals of WAVES, which go toward minting additional USDN.



A blockchain’s value tends to grow with increased usage, but as 0xHamz pointed out, transactions on Waves have been stagnant or declining since its 2019 peak.



<div class="wp-block-image"><figure class="aligncenter"><img decoding="async" src="https://lh5.googleusercontent.com/Z8j2PZ2KQGu26PbpqwUYExjiO26EK3RvwPNELtsCX-wuhiTbTWFm-gIm-nCciUPYmllntbfrILqcCmyhUpQacnhxjaUzxyV0GzclO82ah_j1l6PXycpDCL5yPEdURFZfLGtD_uWD" alt=""/><figcaption>Total weekly transactions on the Waves platform, with 2019 peak selected | Source: <a href="https://vis.pywaves.org/transactions/" target="_blank" rel="noreferrer noopener">vis.pywaves.org</a></figcaption></figure></div>



Wave’s TVL is almost entirely attributable to Neutrino — a reflection of staked WAVES — and Vires Finance, according to <a href="https://defillama.com/chain/Waves">DeFi Llama data</a>.



A recent “<a href="https://wavestech.notion.site/wavestech/Waves-is-Transforming-1-2-c57b90770e314a5cb3ee6d1d1e6710af">transformation plan</a>” notes that 80% of WAVES are deployed in staking. The roadmap calls for upgrading the blockchain consensus mechanism and adding compatibility with the Ethereum Virtual Machine (EVM).



Waves Founder and Lead Developer Sasha Ivanov is moving to an advisory role with development responsibility shifting to a new US company, Waves Labs, the company said.



Ivanov blamed Alameda Research, alleging price manipulation to profit from a short position in a <a href="https://twitter.com/sasha35625/status/1510589946926673920">Twitter thread on Sunday</a>, a claim Alameda founder Sam Bankman-Fried <a href="https://twitter.com/SBF_FTX/status/1510685533705547783">dismissed</a> as a “conspiracy theory.”



A spokesperson for Waves Labs did not respond to a request for comment.



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