Unchained - Pendle Ripped in Early 2024, But Usage Has Slowed Down. Can It Recover? - Ep. 693

Episode Date: August 23, 2024

Pendle Finance, an innovative protocol that lets users trade yield, surged in popularity earlier this year but is now grappling with a downturn in usage.  In this episode, founder TN Lee shares insights into Pendle's approach, the factors behind its recent success, and the challenges it faces in recovering user engagement and TVL. Plus, since Pendle’s rise was driven by the points narrative, TN talks about how the protocol can keep growing.  Show highlights: 00:00 Intro 01:24 What Pendle is, how the idea for it was born, and how it works 05:06 Why Pendle has exploded this year, even though it launched years ago 12:01 Whether Pendle is an app for sophisticated traders and the most common strategies in the protocol 15:46 How users are able to leverage their earned points in several protocols 19:20 Besides market risks, what the risks are of trading in Pendle and how they try to mitigate them 20:57 Pendle’s recent significant drop in TVL and plans to recover 24:13 If the points narrative ends, will Pendle remain relevant? 27:31 Crypto News Recap Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! iTrustCapital Polkadot Token 2049 Guestl TN Lee, Founder of Pendle Finance Links Previous coverage of Unchained on Pendle: DeFi Protocol Pendle Reaches All-Time High as Total Value Locked Tops $5.78 Billion Background Information on Pendle Introduction  Glossary Minting Advanced Yield Trading Strategies vePENDLE DeSpread Research report (Sept 2023) Cointelegraph Research: Deciphering Pendle Finance’s surge  Others: Crypto News: Major Changes Ahead: Pendle Ends Earn UI, Focuses on V3 Pendle reached its second largest maturity event on July 25 DeFi Llama: Pendle’s TVL Learn more about your ad choices. Visit megaphone.fm/adchoices

What we have to focus on at the moment is how we can regain the market share, because losing billions of dollars in TVL in a short period of time, no matter how predictable it was, does it feel good? Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptobians. I started covering crypto nine years ago, and as a senior editor at Forbes was the first Maytremeater partner to cover cryptocurrency full-time. This is the August 23rd, 2024 episode of Unchained.

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Today's guest is Tien Lee, the founder of Pendle Finance. Welcome, TN. Yeah, thanks for having me. Pendle's been around since 2020, but it exploded earlier this year to a total value locked of almost $7 billion. What is Pendle and how did you come up with the idea for it? Peddle is a protocol for the tokenization and the trading of yield. Simply put, I think it allows for APYs to be traded to people with different views. So some users, they want to speculate on the yield. Pedal is abandoned to do that. And then for some others who want to lock in their rates,

they can be the counterpart to those who want to speculate on the yield. As for the ideation of the concept, it started out in 2020. So basically, my co-founders and I, we were trading a lot of shit coins, the food coins, back in Dify Summer. And these food coins, they were not entirely different from the points that we were seeing today. they were printing tens and 20,000% of APYs. So as much as we like the idea of having high APYs,

we weren't able to lock in the rates. And that fundamentally motivated us to think about a solution or an instrument that allowed us to lock in the rates the way we wanted to. And also, I think, just going deeper into the psychology of human beings, including ourselves, right? We innately create for some form of certainty. So I think by and large, when we compared the state of crypto at the point in time to a matured financial sector, it was very obvious that an instrument that a loss of fixed income was absent. So we thought the addressable market was big and then went about going with the design of Tandle.

Yeah, so explain how it works. Yes. So ultimately, I think Pedal works primarily with a yield-bearing asset. So yield-bearing assets, like, for example, SD-Eth, which functions as firstly a proof of deposit into a protocol. And then secondly, it functions as a receipt for yield that will be paid out by the underlying protocol over time. So Pendle wants a user, a pendle wants a user deposit a yield-bearing asset like STEth, for example, it gets split into a principal token and the yield token, represented by PT and YT respectively. So PT is the body that represents the principle, which is user's proof of deposit, and then the yield token functions as the component that accrues the yield that's paid out by

the underlying protocol. Now, by making these two parts independent, separated, right, they can be traded independently. And let's see, if I am a yield speculator, I can purchase the yield token without having to regard for the underlying itself. So I can purely focus on the yield. And because the yield is typically the smaller part of a yield-bary asset, the same amount of capital usually entitles me to an implied leverage. So it's more capital efficient to speculate on you. And then correspondingly, the other side, which is the PT, is where users want to lock in a fixed yield, they can, fix rate, they can acquire the PT and then hold it onto maturity for a fixed gain. Yeah, yeah, both of these have these maturities. And this, I guess, in a way,

allows people to kind of avoid some of the volatility and like, and, you know, just rely more on on that yield. So, you know, as you mentioned at the beginning, you started in 2020. So what do you think happened to suddenly drive up the increase in Pendles TVL this year to almost $7 billion? I think there were definitely many different reasons. So when we started on in 2020, the product was actually live in June 2021 through multiple phases of tested implementations and also just different feature introductions. So, main app was June 2021. It didn't have a lot of traction because the UIUX was complex and the learning curve

was steep for most users. And in 2021, it was actually a pretty good time for crypto. So there were so many options for users. Why go for a fixed yield when Anchor was offering something like 20% and they were the only one? So those were actually competitors for attention. So we actually took the time to study how users interacted with our product. And throughout the entirety of 2022, we reworked on the product and we improved on what we introduced back in 2021 and launched Pendle V2, which is the current implementation in December 2020.

So we launched into a bare market. So last year, there weren't a lot of activities. but we try many different things. And over time, I think we refine our approach in being really thematic in our strategy. So basically, I think as a venue that allows for yield trading, we have to be able to capture trends and narratives and it's need to pivot to these narratives in a very short span of time. So we identified several big trends last year, and we were very important. very aggressively

affiliating Pendle with these major trends, even though it might seem very forced in the beginning, but over time I think it

became a lot better. For example, we were very small when we started out in 2023 January. This was when not much was happening,

but we identified STE's and the whole staking ecosystem to be a very important one that we needed to be involved in. We reached out to Lido. They weren't interested in a partnership because they were already doing billions of dollars in TVL. We were, on the other hand, $5 million in TVL so that didn't work out for us. We reached out to the second largest, which was Rocket Pool. They were a lot

more receptive. And when we had conversations with Rocket, we also figured out a way to involve the other protocols like Ballison and ORA to get involved in a in a four-sum campaign. So that was, I think, the first time we leveraged on someone else's reputation to give us that awareness boost and gain relatively good impression on social media. So that strategy worked out and we replicated that across multiple different major narratives. So for example, arbitram was another one that we benefited from. When arbitram grew, we, as part of that ecosystem grew as well, because we were working with gLP, gains, network, and a few others to try to allow for rates to be traded.

But same story there, right? We reached out to the biggest one, GLP, they weren't very receptive. So we went to the second largest, which was gains. They were more receptive. And then we built a successful use case, and we reached back to the GMX and worked out something over there. This year is no different. We recognize Eiger layer to be a very important part of major trend for 2024. And the LIT protocols we were already connected with when we were building various different markets last year.

And because of our involvement with staking products in 2023, points weren't actually something that new to us. we had the experience of building a market for Swell-Eath, which was offering pearls. And I mean, these pearls were fundamentally points. So we had the first-hand experience in 2023. And then 2024, when we recognized we're sticking to be a major part of the crypto narrative and points to be a very central part of it, we were able to react quite quickly. but what we didn't expect was how much it would blow up. We topped at $250 million in TVL last year.

This year, the growth just surprised this in a very good way. And of course, the rest of it was really just identifying good protocols like Edina, Zirkit, and I worked with them to create the markets for users to speculate or optimist. fixed yields on Pendle. All right. So in a moment, we're going to talk more about some of the different strategies and how, you know, Pendle's success came together. But first, a quick word from the sponsors can make the show possible.

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Visit token 2049.com for 15% off tickets with the code unchained. Link in the description. Back to my conversation with TN. What kind of traders and investors do you think are best suited to using Pendle? From our observations, I think traders are generally more sophisticated in nature.

So again, I think by design, Pendle is not the most straightforward product. In order to trade successfully, you have to understand how derivatives work. You have to understand the implications of rates on a protocol. So to be able to consolidate all these different components and then express a view through Pendle require some intellectual thinking. So typically, the more successful traders on Pendle are usually quite sophisticated. And then on the other hand, for those who want to lock and fix you, our observation is that they typically are either funds or individuals with big size. Because of these, again, I think in the early part of this year, right, because of the,

the very aggressive bid for yield tokens because of the high implied leverage. It created a very interesting opportunity for ETH stable coins like USDE for example, for users to log in rates at a very attractive API. We're looking at maybe 40 to 60% fixed API on ETH and then 100% for USDE. it was a result of the aggressive bidding on the YT side, and then for users who have size, like say millions of dollars in assets, fixed 40% APY on E is not a bad trade. For sure.

What are some of the more popular strategies that people have been using with Pendle? Yeah, so I think one of the most common ones that requires maybe managing multiple different positions on different protocols is the looping part. Because for users who want to increase their PT exposure, they are actually money markets that exist like silo dolomite, where users can utilize these venues to increase their PT exposure, typically by two to three times. So this is a relatively common strategy. Usually when these pools are set up, it gets filled very quickly. Yeah. Because the users would just deposit, let's say, PTSD collateral. They borrowed a counterpart, like they borrow the asset, and then they do the looping until they reach a sudden

threshold. And that usually fares quite well. And the maturity. Yeah. And it's, Just to make clear, by looping, you're saying they borrow, then they get this principal token, but then somehow it enables them to borrow again. I forget. Yes, correct. Yeah, just explain that. Yeah, so they deposit PT. They borrow, let's say, USDE, and then they mint PT again, and then they deposit the PT,

so they do that multiple times. Got it. And, yeah, like, how many times are people generally? really doing that? Oh, it depends on their risk appetite. I'd say like because the assets are highly correlated, right? Like two to three times are probably quite common. Okay. And is that how people are getting leverage? Yes. Okay. And then earlier when you talked about, you know, striking these deals with these various protocols, as far as I understand, they are also, you know, with their points program, I'm working with you to help, I guess,

pendle users obtain even more points. So can you talk about how that works? Yeah. So typically, I think with a lot of these points issuers, we would start the conversation by making a proposition to these protocols on how they could gain TVL. Because for a lot of these points issuers, their yield-bearing assets are not really they haven't really generated any kind of yield,

so they needed a utility for the yield-bearing asset that the protocol admits. So Pendle becomes a venue where these yield-bearing assets are utilized. So this is, I think, the angle to them. And in order to attract liquidity, right, typically Pendle requests for multipliers on behalf of users, usually two times, three times. And these numbers actually make a lot of difference because it translates to a higher implied leverage on the YT side.

So, for example, at one point in time, because of the multiplier that Ithina was offering to Pendle, YT has approximately 100 times in implied leverage. Now, what that means is, if you have one USDA, like typical condition, right, you would be earning one point an hour. But in the case of Pendle YT, USDE, because of the, let's say, the multiplier, which translates to higher implied leverage of perhaps 100 times, one dollar worth of YT will entitle you to approximately 100 times of points boosting

because of the implied leverage. So this is why I think some users prefer that because they see it as an accelerated way to accrue more points that would help them with their overall earnings. And the implied leverage, they are choosing the amount of leverage they're taking by the number of times they do the loop. Is that how that works? So this is entirely separated from the PT site. So because this is YT. Oh, right. Okay.

Yeah. So the implied leverage is, again, implied. So there's no liquidation risk. Because it's stripped out from the underlying, YT itself constitutes a very small percentage of the underlying. And because of that, right, the same amount of initial capital will entitle you to a much higher yield exposure. Okay. Okay.

But that's all determined by your partnership with the other protocol. Yeah. So we work with the protocol on the multiplier, but the implied leverage is a function of the market. So we have a effectively there's a baseline start, right? But over time, because of market sentiment, it can go up or grow down. Okay, so it's basically based on demand. Yes. Okay.

So, you know, it's funny that you said earlier, your competitors were like anchor. Oh, it terms of attention. Right, right. Okay, okay. But just listening to this, I'm, you know, I'm sure people can tell there's some risks here. So what would you say are the major risks? Yeah. So I think the most important one is still contract risk. So taking the market risk aside, right? Because for users who speculate, there's always a problem, like a possibility of making a net loss. But on the other head, like, I think the contract risk is, is, is, worthy of a mention? Because Pendle is a second-order derivative, and Pendle builds on top of other protocols. Now, a user can be trading the PT or YT of an asset, right? But if for whatever reason, the underlying protocol gets compromised or no longer pays out any kind of yield, then the PTYT will effectively become valueless. So this is, I think, a risk that users should be mindful of.

And then on our part, what we do with this particular risk is to work with protocols that are doxed only, so we don't work with a dox protocol. And then we will do a stringent due diligence to see to evaluate the protocol. Now, if we have any kind of, if we feel uncertain about a set of protocol, we would typically confine the maturity to a smaller tenure. So, for example, four weeks. So in the event that something happens, at least the damage is confined. Okay.

So as we mentioned, a pendle really took off earlier this year. But since that high of the TBL approaching closer to $7 billion, it's now dropped down to about $2.5 billion. And in ETH terms, it's dropped from almost 2 million ETH to about 1 million ETH. At least as of the time we're recording, which is 10 days before this episode comes out. So why is it that you think Pendle has seen as TVL drop? Yes. So I think it's multiple factors.

Firstly, because the pools have matured. So we had our biggest full maturity event at the end of June. And the TVL in consideration was about $3 billion. So long of the funds went out of the system. as stayed on the sideline. From our observation, it's really not, like, these funds are typically not deployed anywhere else. They're probably looking for opportunities of Pendle to deploy the assets back into Pendle again, or perhaps some other opportunities elsewhere.

But it's a function of the Peddle Protocol. So every time there's a maturity, there's always a withdrawal of liquidity. And then from a liquidity provider standpoint, once the assets withdrawn, then they will have to evaluate whether it makes sense to go. go back into the pool, depending on the APY. So I think the good side out of it was that we were able to facilitate a redemption of $3 billion with minimal hiccup. So the protocol functions as intended.

Now, what we have to focus on at the moment is how we can regain the market share, because losing billions of dollars in TVL in a short period of time, no matter how predictable it was, doesn't feel good. So we have plans in the pipeline. Like, for example, we think Bitcoin could be a new narrative that Pendle can be more involved in. So we're structuring campaigns that users could potentially find interesting. And then, of course, beyond that, we also, yeah. But actually, just to make clear and to understand, would that be wrapped Bitcoin?

Or how are you doing that? Not just rep Bitcoin, but for example, like Bitcoin L2s, they could be taking Babylon LSTs or other forms of, it could be red Bitcoin as well. But to my understanding, there are multiple different forms of Bitcoin, rep Bitcoin variations. So those are assets that we can work with. But ultimately, we think that there is a good opportunity there because Bitcoin is the single largest asset within crypto. and there are actually a lot of Bitcoins that are currently deposited into Avey and earning maybe 0.1% in APY, primarily used as collateral to borrow some other assets to farm somewhere else.

So if we can give Bitcoin meaningful utility to generate wealth, then I think there is a pretty high probability that it will see decent adoption. Okay, and as we've been discussing, the success of Pendle has really blossomed with this whole points trend. So if the points trend goes away, then, you know, what else are things that you might do with Pendle? Yeah, so I think points are, so my opinion is a little different. I think points will be here to state, but it will normalize to the sentiment of the community towards protocol. So I think like in the first half of the year, protocols use points because there is a premium attached to the points program. But over time, this premium will gradually erode. And then

the performance of the points program will largely depend on how people perceive a protocol. Like, let's say if the protocol is backed by good, good funds and has good founders, then naturally it will have, it should have meaningful traction. So in terms of positioning, Pendle will have to identify these protocols to work with because Pendle mostly operates as a way

to amplify the traction growth prior to the token event. So that becomes, I think, a play that we have to adapt to. But of course, at the

same time, we're also developing a new implementation that becomes, that is a pure form of interest rates for. Because if we go back to our vision, the point where we started out was to tokenize yields and allow these yields to be traded. But as we see it, there are actually quite a lot of, quite a lot of rates that exist in crypto at the moment, but not tradable yet. For example, borrowing rates on something like Ave and compound, these are actually good opportunities, but not the easiest to work on. So we are currently building Penel V3, which offers leverage yield trading for users,

and we're expecting that to come out targeting Q1 next year. So it should give users, hopefully with this product, we can unlock new use cases and new strategies. All right. Well, it has been a pleasure learning about Penton. Thank you so much for coming on Unchained. Well, thank you so much for having me. Don't forget. Next up is the weekly news recap. Today, presented by Wondercraft AI.

Stick around for this week in crypto after this short break. Pocodot is the original and largest layer zero blockchain with over 2000 plus developers. The anticipated Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem. Upgrading the infrastructure with eight times higher transaction throughput and twice as fast block times, tailored court time for the needs of every protocol, trustless bridges to multiple chains, and revise tokenomics with a token burn to reduce inflation. Perfect for GameFi and Defi to build, grow, and scale. Get your Web3 ideas to market fast.

Think big, build bigger with Pocod. Join the community at Pocodot.network slash ecosystem slash community. Welcome to this week's crypto roundup. In today's recap, we cover BlackRock's Ethereum ETF, passing $1 billion in net inflows, Ryan Salami's legal battle over a plea deal involving his partner, Prometheum's controversial move to classify uniswap and Arbitrum tokens as securities, and Binance facing a new money laundering lawsuit. We also touch on the U.S. Treasury, withdrawing a proposed rule on unhosted wallets, the Democratic Party's silence on crypto in its new

platform, and Pump. Dot funds record profits despite user struggles. Lastly, we discussed the SEC's rejection of Solana ETF filings and optimism's upcoming hard fork, along with a fun bit about Trump's growing crypto income. Thanks for tuning in to the weekly news recap. Let's begin. Ryan Salami's legal battle deepens with indictment of partner Michelle Bond. Former FTX executive Ryan Salami's legal troubles have escalated following the indictment of his partner, Michelle Bond, on charges of unlawful campaign contributions. Bond, a former congressional candidate, and prominent crypto advocate is accused of using $400,000 from a sham consulting agreement with FTX to finance her 222 campaign for a U.S. House seat in New York. The indictment, unsealed by

the U.S. attorney for the Southern District of New York, alleges that Bond falsely reported the funds as consulting income, concealing their true origin. Salame, who pleaded guilty last year to campaign finance violations and operating an unlicensed money-transmitting business, claims his plea deal was based on assurances that the government would drop its investigation into bond. However, prosecutors have resumed their probe, leading Salami's lawyers to request either the dismissal of Bond's indictment or the vacating of his own conviction. Prosecutors deny any wrongdoing, stating they clearly communicated that Salami's plea would not shield bond from further investigation. The case has drawn significant attention due to Salome's ties to FTX, and the court is set to hear arguments on September 12th.

Ethereum ETF surpasses $1 billion milestone. On Tuesday, Black Rock's I-Shares Ethereum Trust, ETHA, became the first U.S. spot Ether ETHEREF to exceed $1 billion in net inflows. The milestone follows a notable $26.8 million surge in inflows on Tuesday, solidifying Black Rock's leading position in the Ethereum ETF market. ETHA's success highlights BlackRock's dominance, far outpacing competitors like Fidelity's F. ETH, which has garnered $375 million in inflows, and Bitwise's ETHW with $310 million. In contrast, Grayscale's Ethereum Trust, ETHE, has faced challenges experiencing substantial

outflows totaling $2.5 billion, leading to a net negative inflow of $458 million, most likely due to Grayscale's high management fees. Also, Black Rocks surpassed Grayscale in total assets under management for its crypto ETFs. holding over $22 billion, making it the largest crypto fund manager, according to Arkham. Prometium sparks controversy by classifying Uniswap and Arbitrum tokens as securities. Prometheum, an SEC-registered crypto platform, has ignited debate by declaring its intent to classify Uniswop's Uni and Arbitrum's ARB tokens as securities, alongside Ether. The move, which aligns with the SEC's contentious stance against crypto, is seen as a

bold step amid widespread industry pushback. As Prometheum prepares to fully launch its custodial services in September, critics argue that the firm's strict adherence to the SEC's position could stifle innovation. Many in the crypto community view the SEC's classification of these tokens as overreach, but Prometheum defends its approach as essential for providing a secure, regulated environment for digital asset investors. This decision places Prometheum at odds. with much of the industry, where legal battles continue over whether such tokens should be treated as securities. Crypto lawyer Austin Campbell posted on X.

Uni should pass a community governance proposal to burn all U&I tokens traded through or in custody with Prometheum. Egin Labs employees bypass Airdrop Bans. Eigen Labs, the developer of EigenLayer, is facing scrutiny after a coin desk report showed that its U.S.-based employees bypassed restrictions to claim tokens. from projects like Renzo and Ether.Fi. Despite these projects explicitly barring U.S. residents from participating in their air drops due to regulatory concerns, blockchain data indicates that wallets linked to several

Agin Labs employees, including top executives, successfully claimed substantial amounts of tokens. The revelation has sparked ethical questions within the industry, as Aigen Labs itself has employed geofencing and other measures to block U.S. users from its own airdoll. drops. Binance and former CEO CZ face new money laundering lawsuit. Binance and its former CEO, Changpeng Zhao, are at the center of a new class action lawsuit facing allegations of negligent compliance practices that allegedly enabled money laundering on the platform. Filed in the U.S. Western District Court of Washington, the lawsuit is spearheaded by three crypto investors who claim

their stolen assets were laundered through Binance. The plaintiffs argue that the plaintiffs argue that that Binance's lax approach to anti-money laundering and know-your-customers made the platform a favored tool for criminals. They alleged that Zhao prioritized rapid growth and profits over legal compliance, turning Binance into a hub for illicit activities. U.S. Treasury withdraws proposed rule on unhosted crypto wallets. The U.S. Treasury Department has quietly withdrawn a controversial proposed rule that would have imposed strict reporting requirements on unhosted crypto wallets.

Originally introduced by the Financial Crimes Enforcement Network in 2020, the rule sought to mandate that banks and money service businesses report transactions involving digital assets held in self-hosted wallets. Crypto advocates criticized the proposal as an overreach, arguing it would infringe on financial privacy. The rule's withdrawal, announced in the Federal Register, was welcomed by the crypto community as a significant victory for user privacy and the industry's regulatory efforts. Democratic Party platform omits crypto-emid industry concerns. The Democratic Party's newly released platform has raised eyebrows in the crypto community for its complete omission of cryptocurrency, Bitcoin, and digital assets. This silence dashes hopes for a potential crypto reset under Kamala Harris, the party's presidential candidate. Many in the industry had anticipated a shift toward more favorable policies,

particularly after years of stringent regulation under the Biden administration. Despite efforts by some Democratic lawmakers, such as Representative Rokana to push for pro-crypto policies, the platform was silent on the issue. In contrast, the Republican Party, led by Donald Trump, has openly supported crypto, highlighting the stark difference between the two parties as the 2024 election looms.

Pump. Dot Funds record profits highlight users, struggles with meme coins. Pump. Fun, a Salana-based protocol that enables users to create and trade meme coins, has generated nearly $100 million in revenue since its MayNet launch earlier this year. Despite the platform's impressive earnings, most of its users are not seeing similar success. According to data from Dune Analytics, over two-thirds of wallet addresses on pump. dot fund are unprofitable. Out of the 1.2 million tokens launched on the platform, only 32 have reached a market cap of

over $1 million, highlighting the slim chances of success for most tokens. This disparity underscores the reality that while Pump. Fund thrives, its users often face significant losses, reinforcing the notion that the House always wins. SEC rejects Sibo's filings for Solana ETFs, citing security concerns. The SEC has rejected 19B4 filings submitted by Cebo Obizyx for two proposed Solana ETFs, according to a source familiar with the matter. The rejections followed discussions in which the SEC reiterated its position that

Salana should be classified as a security. As a result, the filings were withdrawn from Cebo's website before they could be placed in the federal register, halting the approval process. Despite this setback, issuers like 21 shares in Vannick remain committed to, to pursuing Solana ETFs with the possibility of refiling their applications with stronger arguments against the security classification. Mango Markets moves toward SEC settlement over securities violations. Mango Markets, once a leading decentralized exchange on Solana, is preparing to settle with the U.S. SEC over allegations of securities law violations. The governing body, Mango Dow, has proposed a settlement

that includes paying a $223,228 fine, destroying its MNGO token holdings, and delisting MNGO from trading platforms. This comes after the protocol was severely impacted by a 2022 exploit orchestrated by Avraham Eisenberg, leading to significant financial losses. Also this week, Solana-based UXD protocol with $7.5 million in deposits, is shutting down due to a lack of liquidity and insufficient excitement, among defy users, with plans to return funds to investors pending a Deo vote. Meanwhile, Solana experienced a record outflow of $39 million last week, attributed to a decline in meme coin trading, marking its largest outflow on record according to coin shares. Optimism plans, hard fork after security audits.

Optimism, an Ethereum Layer 2 network, has announced a significant upgrade called Granite, following security audits that uncovered vulnerabilities. OP Labs, the team behind optimism, assured that no user assets were at risk, despite the discovery of some high severity issues. As part of the response, the Optimism Foundation temporarily reverted its permissionless fraud-proof system to a permission state to prevent potential instabilities. The granite upgrades scheduled for September 10th include smart contract improvements and a layer two hard fork to enhance the network's security features.

While the proposal has broad support, some community members have expressed concerns about proceeding without further audits. Time for fun bits. Trump's crypto wallet out-earns the apprentice royalties. Forget reruns of The Apprentice. Trump's real passive income is coming from the blockchain. Thanks to NFT royalties and meme coin taxes, the former president is raking in more eth than ever.

Trump digital trading cards are bringing in a steady stream of crypto with his wallet-pocketing cool 782-Eth in secondary sales alone. And that's not all. Unificial Trump-themed meme coins are adding to the hall, dropping fractions of ETH into his wallet with every transaction. Who knew sitting back and watching the crypto world go wild could be more lucrative than TV royalties? And that's all. Thanks so much for joining us today. If you enjoyed this recap, go to unchainedcrypto.substack.com. That is unchangedcrypto.substack.com and sign up for our free newsletter so that you can stay up to date with the latest in crypto. Unchained is produced by Laura Shin with help from Matt Pilchard, Juan Aronovich, Megan Gavis, Pam Majumder, and Margaret

Curia. The weekly recap was written by Juan Aronovich and edited by Nelson Wang. Thanks for listening. Unchained is now a part of the Coin Desk Podcast Network. For the latest in digital assets, Check out markets daily, five days a week, with host Noel Atreson. Follow the Coin Desk Podcast Network for some of the best shows in crypto.