Layer by Layer Issue 46: Cosmos, Solana, and NEAR

About one week has passed since Ethereum successfully transitioned to proof-of-stake (PoS) with The Merge, capping off a frenzied month of preparation and anticipation by users and developers alike across the crypto ecosystem. In our previous report, we looked at some of the most impactful changes to the Ethereum protocol, as well as the role of DeFi protocols in facilitating market activities on-chain during the weeks leading up to the upgrade. One of the popular trades surrounding The Merge was to borrow ETH on decentralized lending protocols such as Aave in order to claim ETHW tokens from the EthereumPow hard fork. 

This mechanism was utilized to the maximum extent possible prior to The Merge, as evidenced by the spike in supply and borrow rates on September 14th. The annualized interest rate for borrowing ETH on Aave rose to a peak of about 180% APY before falling quickly down to normal levels after The Merge. The utilization rate (i.e. total ETH debt / collateral) also rose to the maximum of 100% at the same time, effectively preventing users from withdrawing their ETH deposits for the roughly 24 hrs leading up to The Merge.