Founder Reveals the Rise and Fall of Waves: New L2 to Launch Soon, Currently Holds No Cryptocurrency
TechFlow Selected TechFlow Selected
Founder Reveals the Rise and Fall of Waves: New L2 to Launch Soon, Currently Holds No Cryptocurrency
Sasha Ivanov stated that if Waves fails, the world will lose a project truly committed to applying blockchain across various fields.
Navigating Web3 tides with focused insightsAuthor: Sasha Ivanov
Compiled by: TechFlow
On the evening of August 1, Sasha Ivanov, founder of Waves, published a personal article outlining the rise and fall of the Waves ecosystem. He announced plans to launch a Layer 2 network built on the Waves blockchain, with holders of USDN (now XTN) set to be the primary beneficiaries. Additionally, Sasha Ivanov revealed that he currently holds no cryptocurrency, including WAVES.
Full text as follows:
It's time I directly explained why I got involved in cryptocurrency, how I view its significance, and what has happened to Waves over the past year and a half. I've been involved in blockchain projects for nearly ten years now. Initially, I was drawn to the promise of cryptocurrencies enabling decentralized social consensus and elevating social interactions to the level of technical protocols. I certainly recognized the value of tokenization, price discovery, and the financial aspects of crypto—but I always saw these as part of a broader vision.
However, since 2017, cryptocurrency development has advanced far more rapidly in trading and finance than in real-world governance via DAOs, which have proven to be inefficient imitations. Around 2018, Waves began falling behind major cryptocurrency projects, especially as venture capital entered the market. After our ICO in 2016, we did not secure external investment—possibly due to our Russian background and perceived lack of "marketing." As incentivized liquidity pools and automated market makers emerged, crypto took a different direction, resembling highly leveraged forex trading.
Unfortunately, financial incentives have proven most effective at capturing people’s interest. To keep up with the market, Waves mimicked various features from Ethereum-based projects—on-chain pools, liquidity mining—and often tried implementing them differently. Despite our efforts, competing against well-funded VC-backed projects offering generous liquidity mining rewards remained challenging.
Our stablecoin USDN was designed to address this challenge by creating a product meant to attract liquidity into the ecosystem, following the Basis model, which incentivizes traders to maintain collateral levels. However, unexpected black swan events exposed flaws in this incentive-based model.
In 2022, Waves experienced significant external market-making activity, coupled with growth in USDN's market cap and subsequent heavy shorting of $WAVES, leading to negative press and a liquidity crunch across the Waves ecosystem. DeFi protocols like vires.finance and waves.exchange, along with staking products, were heavily reliant on USDN. To resolve this, USDN had to be liquidated, reducing its collateral within Waves, causing the price of Waves to drop, while efforts continued to maintain USDN’s value around $1. This crisis also affected wrapped tokens on waves.exchange, as their staking products were backed by USDN.
Although we successfully recovered approximately 90% of the staked funds on waves.exchange through USDN redemptions and by using our resources (all $WAVES remaining from the ICO), we couldn't keep pace with the declining price of WAVES. As a result, hundreds of millions worth of liquidity remain trapped in the vires.finance lending protocol, which is backed by USDN that lost its peg and effectively became an ecosystem index token.
As the world undergoes transformation, we are currently going through an extremely difficult period. People face instability and uncertainty. I don’t want to exacerbate this instability, and resolving the trapped funds situation is my top priority. At the same time, we need to drive progress by building new products that can increase the value of the Waves ecosystem—even if they don’t immediately attract new liquidity. We are preparing to launch a Layer 2 network based on Waves L1, where USDN (XTN index) holders can become primary beneficiaries. According to proposals accepted by Waves miners, XTN itself is being gradually repurchased through Waves inflation, meaning XTN holders or Vires users who choose not to convert into the new L2 token should eventually be compensated.
When I founded Waves, I vowed never to hold any cryptocurrency except Waves, seeing myself as a crypto anarchist avoiding ownership of any property. Today, I hold no WAVES or any other cryptocurrency—but that doesn't matter. I firmly believe blockchain transcends the concept of money and has deeper goals beyond simply creating a “better currency.” If Waves fails, the world will lose a project truly committed to applying blockchain across diverse domains.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@sasha35625
