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FTX Exchange, Not Coinbase, Has Been DeFi's Greatest Proponent

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Can FTX trounce Coinbase to become DeFi's favorite centralized on-ramp?

Crypto Divergence Improves As Investors Do Their Homework

Key Takeaways

  • FTX's market maker, Alameda Research, has made an investment in DeFi project mStable.
  • Alameda Research is one of the most active participants in Compound's governance modules and helped Balancer fix an loophole in its token incentive.
  • FTX could become an important exchange for DeFi liquidity in spot and futures markets

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As various market participants throughout the crypto space attempt to ride the coattails of DeFi, few have played the same role as derivatives exchange FTX. 

Though Coinbase has helped prop up prices, the team behind the Antigua-based exchange have pointed out critical bugs and strategic investments to help DeFi flourish.

FTX Adopts Innovation and DeFi

As DeFi gained steam through 2020, several exchanges took notice and have tried to capture some of this hype. They promoted simple token listings and offered traders high leverage vehicles to double down on the frenzy.

Though quick, these rollouts were far from innovative. 

Long before DeFi picked up traction, FTX developed a reputation for its quick rollouts and innovative products.

These developments included unique tokens with built-in leverage, adding oil derivatives shortly after the commodity hit went negative, and creating a social platform where traders could share and monetize their strategies. FTX has actively adapted to one of the most chaotic markets in history.

The FTX’s entrance into the DeFi space has been no less innovative.

Not only has the exchange’s primary market maker, Alameda Research, invested in mStable, a stable asset swapping protocol, but the company and its CEO, Sam Bankman-Fried, are also active participants in the DeFi ecosystem.

For example, Alameda has proposed and voted on several Compound governance proposals. Alameda also played a crucial role in enhancing Balancer’s distribution mechanics. 

Initially, users were eligible to earn BAL, Balancer’s native token, for providing liquidity in the form of any token listed on CoinGecko. Alameda gamed this by setting up a 50-50 pool with $100 million of USDTHEDGE (a hedge against the risk of USDT breaking its peg) and USDTBEAR (a bet on the price of USDT decreasing).

Though CoinGecko technically lists these two tokens, they are not popular beyond a specific use case. Thus, they enjoy little activity on a platform like Balancer. Still, Alameda earned 2,000 BAL tokens (~$16,740) according to the liquidity mining provision. 

In response, Balancer’s informal governance promptly kicked in. It introduced a whitelist of assets that would be eligible for weekly BAL rewards. 

Bankman-Fried also announced that the tokens earned from exploiting the loophole would be donated to Balancer Labs’ charity of choice.

Few exchanges, let alone their founders, have been this engaged in the nitty-gritty of DeFi. Investments and token listings can spike a token’s valuation, but helping projects identify vulnerabilities is priceless. 

Coinbase is another example of a DeFi-friendly exchange. They have several DeFi tokens available for trading and other services that complement the fast-growing niche. Coinbase also makes up one half of the CENTRE consortium that governs the USDC stablecoin, second only to USDT in terms of volume on Ethereum.

This support is where the collaboration ends, however. In this regard, FTX distinguishes itself by creating both an on-ramp to DeFi and interacting with nascent protocols.  

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