Consensys's Bold Moves Signal Potential ETH DeFi Expansion Amid Liquidity Risks

Founded in 2014 by Joseph Lubin, one of the co-founders of Ethereum, shortly before its launch where he served as Chief Operating Officer. Lubin's career began with ten years as a programmer before joining Goldman Sachs in 1998 as a Vice President in the private equity management division. Later, he worked as a director at Blacksmith Technologies' NY division and took a decade with investment activities, eventually contributing significantly to Ethereum network development—long before Vitalik's idea took shape. Consensys' primary products include Metamask, Infura, and Linea. While Metamask and Infura have dominated their respective fields for years, many users believe they are outdated and lagging behind competitors. Nevertheless, as pioneers, they retain user preference due to the Lindy effect. In May, Lubin became the chairman of the board at SharpLink Gaming, a lesser-known company with $5 million in revenue, specializing in traffic transfer to online games and casinos. Inspired by Microstrategy's leverage with Bitcoin, Lubin seemingly seeks a similar approach with ETH via SharpLink, which is currently a declining NASDAQ-traded company, with shares x10 since May. Currently, SharpLink holds 438,017 ETH, earning 567 ETH through staking since its initial purchase. The company plans further billion-dollar ETH acquisitions, prompting other firms to create similar funds that buy ETH from the market, locking it in staking and DeFi strategies. Unlike BTC, ETH can be staked and used in DeFi strategies—such as liquidi staking (LSD), PENDLE, and lending on AAVE—potentially earning 3-20% annually. While Saylor aims to leverage BTC through Microstrategy, SharpLink might profit from its ETH holdings through various DeFi avenues. However, Wise about the risks, Joseph Lubin hints that ETH from SharpLink might be deployed in farming on Linea, which had a difficult year and where further development is contemplated. Linea's network can be halted or rolled back in case of hacks or issues—an advantage over other Layer 1 or Layer 2 solutions—and allows for innovative privacy features. Consensys also acquired a significant NILE token share—ve3,3 DEX tokens—on Linea and relaunched Etherex, a fork of Ramses DEX. No major new features are expected immediately; instead, a modern ve3,3 DEX tailored for the Linea ecosystem is anticipated, with launch and TGE slated for the coming weeks. Yet, the Linea ecosystem faces liquidity issues, with Etherex lacking activity and few protocols other than AAVE for depositing SharpLink ETH. Limited liquidity makes ETH deposits riskier due to minimal yield. It is speculated that post-TGE liquidity incentives might be introduced to create a vibrant market for SBET ETH, though there is significant uncertainty about the outcome. Overall, while the initiatives seem to aim at leveraging Ethereum and DeFi's potential, their success hinges on broader ecosystem development and liquidity growth, which remain uncertain.