Why Ethereum’s faithful argue the $318bn asset is money

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GM, Tim here.

• The ‘ETH is money’ debate pitches devs against investors.
• Sky, formerly MakerDAO, is coming to Solana.
• SEC settles with a DeFi project two years after it shuts down.

Identity crisis

Debate is raging over whether Ethereum’s native token — ETH — should be viewed as money.

Proponents list several reasons why ETH resembles money:

• Ethereum requires users pay for transactions with ETH.
• Ethereum rewards stakers with newly-created ETH.
• ETH is commonly used as a unit of account in the Ethereum ecosystem.

But not everyone agrees.

“ETH was never meant to be money,” Ethereum developer and team lead Péter Szilágyi said on X. “None of the OGs wanted ETH to be money, ever.”

The debate has created a rift between some of Ethereum’s developers and its community.

Some worry that the lack of focus on ETH’s value will result in it being overshadowed by other crypto projects whose developers and community are more aligned.

Ethereum has struggled to define itself in recent years. While Ethereum’s faithful argue ETH is a store of value, many investors and financial institutions favour Bitcoin as a store of value instead.

At the same time, newer blockchains like Solana beat Ethereum on transaction costs, speed and capacity.

Crypto VC Paradigm co-founder Matt Huang hit back against Szilágyi.

“I think the deep beauty of this is that Ethereum is a complex organism that can take on a character that its creators did not necessarily intend,” he said in reply to Szilágyi’s post.

Sky meets Solana

Sky, the recently rebranded DeFi protocol MakerDAO, is coming to Solana.

Sky founder Rune Christensen confirmed the move at the Solana Breakpoint conference in Singapore.

He said Sky will use crypto bridge Wormhole to tap into Solana’s $5 billion DeFi ecosystem.

“There will be a large liquidity incentive program that will offer SKY tokens to people who use all the different DeFi protocols in Solana that integrate USDS and SKY,” Christensen said.

Christensen proposed Sky use the Solana codebase to launch a dedicated blockchain last year.

He cited Solana’s technical superiority, the Solana ecosystem’s resilience having gone through the FTX blow-up, and the success of previous Solana code forks to back up suggestion.

It’s one of many DeFi products that have expanded from Ethereum to Solana.

PayPal’s PYUSD stablecoin launched on Solana in May. There’s now more PYUSD on Solana than Ethereum.

Solana expansions don’t always work out. Liquid staking giant Lido discontinued its Solana version last year.

SEC vs Rari Capital

The US Securities and Exchange Commission has settled with the founders of DeFi project Rari Capital, almost two years after it shut down.

The settlement is subject to court approval. If approved, Rari Capital’s founders will pay an undisclosed fine and be banned from serving as executives and directors for five years.

Rari Capital was a lending protocol and yield aggregator. It was hacked for $80 million in April 2022. It shut down in October that year.

The SEC claimed Rari Capital’s founders engaged in unregistered broker activity, falsely represented how the protocol worked, and misled investors on how much they could earn through it.

The episode highlights the sluggish pace of SEC enforcement against DeFi projects.

The case also sets a positive precedent for future instances where DeFi projects suffer hacks and choose to shut down.

“Because they did the right thing post exploit — gave all the profits the platform made back to users — they’re letting them off with a very very strong warning,” pseudonymous crypto investor DCF GOD said on X.

“This is a good thing — I’ve seen plenty teams use legals as a reason they are unwilling to return whatever assets are left back to holders.”

This week in DeFi governance

VOTE: GFX Labs petitions Optimism to open governance to token holders

PROPOSAL: Should Aave adjust Wrapped Bitcoin parameters over BitGo transition?

VOTE: Sky to initialise USDS stablecoin and transition MKR governance token

Post of the week

Crypto Twitter once again shows off its dark sense of humour.

What we’re watching

Coinbase’s new DeFi-compatible version of Bitcoin — cbBTC — isn’t as transparent as many had hoped it would be.

Got a tip about DeFi? Reach out at tim@dlnews.com.