Is your ETH and SOL working for you !?The crypto market never sleeps which means leaving your holdings stagnant could mean missing out on significant opportunities.
So it’s time to ask yourself:
Are your assets maximizing their potential, or are they just gathering virtual dust?
You wouldn’t leave all your money in a low interest savings account, so why do it with your crypto?
The idea is to put your investments to work, so they keep earning returns without you lifting a finger. I’ll walk you through exactly how to read it and use it to your advantage.
But that’s just the beginning, we’ll also be covering:
-Yield strategies: A breakdown of the strategies we use to generate yield.
-Pros and cons: The advantages and drawbacks of each strategy.
Not sure what options are best for you?
Are you letting your capital sit idle?
Worried about security risks?
This analysis is about to change that .I’ll show you how to maximize your returns and crush those security fears, so you can confidently put your assets to work
Let's dive right in and kick things off with the ‘crowd favorite’ of yield strategies: staking
Staking is exclusive to Proof of Stake (PoS) blockchains and their associated tokens.
Meaning you cannot gain staking yield from Bitcoin, for example, because it is a Proof of Work (PoW) blockchain. by staking your tokens like CRYPTOCAP:ETH or CRYPTOCAP:SOL , you receive a portion of newly minted tokens, effectively earning yield while playing a vital role in securing the network.
If you’re not staking, you could be missing out on significant gains, with potential returns ranging from 3% to 18% APY. that’s why many investors choose to stake their assets rather than let them sit idle
Staking has become a widely adopted strategy, with staking ratios (amount staked vs. unstaked) sitting between 20% and 80% on most POS blockchains In fact, a staggering $520 billion is currently staked across the top PoS blockchains, underscoring its popularity as a method for generating additional income.
Assuming an average 5% reward rate, that equates to $25 billion in staking rewards. That’s massive.
Despite the appeal of earning extra income through staking, becoming a solo staker can be technically challenging which is why staking providers like Lido, Rocket Pool, and Jito have emerged.
They handle network validation for the rest of us, while maximizing our staking yield.
Let’s break down the pros and cons of using a staking provider:
Pros:
✅ Security and efficiency: Our tokens are put to work securely and efficiently, contributing to the network’s security without us having to manage it all ourselves.
✅ Maximized rewards: We earn the majority of staking rewards without needing to handle the technical complexities, making it a hassle-free way to generate income.
✅ Liquidity retention: We receive liquid tokens as proof of our staked assets, allowing us to stay flexible and use them in other DeFi opportunities.
Cons:
❌ Fees: These providers typically charge a fee ranging from 8% to 25% for their validation services, which can slightly reduce your overall yield.
❌ Smart contract risks: There are inherent risks associated with smart contracts, such as bugs and/or vulnerabilities, that could potentially impact your staked assets.
By weighing these pros and cons, you can decide whether outsourcing your staking through liquid staking providers is the right strategy for you.
Ok, so if that’s the case how do we go about choosing the right liquid staking provider?
Here are some key factors to consider when selecting a provider:
1/ Reputation and security
Track record: Look for providers with a solid track record and a strong reputation in the DeFi space.
Security measures: Ensure the provider employs robust security measures, such as smart contract audits.
2/ Total volume locked
TVL: Check how much liquidity your chosen provider has attracted.
TVL is a quick and effective measure of the broader market's trust in a provider, as it reflects the total amount of assets currently staked or locked in their protocol, valued in dollars.
Feel free to use DefiLlama, which ranks all liquid staking providers by TVL.
Simply select the blockchain you’re interested in, and you’ll see the top players in the space, giving you a clear view of where the most assets are being staked and which providers are leading the market.
3/ Yield rates
Competitive yields: Compare the staking yields offered by different providers. While higher yields are attractive, they should not come at the expense of security or reliability.
Fee structure: Be aware of the fee structure. Liquid staking providers typically charge a small fee for their services, which can impact your overall returns.
4/ Liquidity and flexibility
Liquid staking tokens (LSTs): Check if the liquid tokens issued by the provider are widely accepted across DeFi platforms and have enough liquidity. The more integration and liquidity these tokens have, the better.
Redemption options: Some providers offer instant or flexible redemption options for your staked tokens, which can be crucial if you need quick access to your assets.
5/ Decentralization and governance
Decentralization: Providers that are more decentralized tend to be more resilient to risks such as regulatory actions or central points of failure.
Governance participation: Some providers offer governance rights with their tokens, allowing you to have a say in the protocol’s future direction. This can be an added benefit for those interested in being more involved in the ecosystem.
6/ Community and support
Active Community: A strong, active community can be a good indicator of a provider’s health and future prospects. Engage with the community to gauge the level of transparency and support.
so while you trading and trying to maximize your gains Its good to stake some of your HODL bag as well
DEFI
DEFI: UniSwap - ALL YOU NEED TO KNOW 🦄Hi Traders, Investors and Speculators of the Charts 📈📉
If you’ve been following me on TradingView for a while, you’ll now that I’m a believer – a believer in the promise of blockchain. One of the principals of this promise is to move away from centrally controlled banking systems. This would eventually include the act of saving and earning interest for the money that you leave in the capable hands of your banker (who also gets to decide whether or not you qualify for loans). Currently, you need to give up all of your personal information to open a bank account and furthermore you are seriously undercut in the returns / interest rate that you will be receiving (to name only two of many problems with the system). For example, where I reside, the most common interest on a savings account is 5% annually, whereas the interest on your credit card is 19.5% annually. And this is, in short, the common argument for Decentralized Finance.
Before we continue, familiarize yourself with these key terms:
TVL – Total Dollar Value Locked in the platform
DEX - A decentralized exchange. DEXs don't allow for exchanges between fiat and crypto — instead, they exclusively trade cryptocurrency tokens for other cryptocurrency tokens.
Blockchain – A unique way of coding that is open for anyone to use, many believe that web3 will be built on top this kind of coding
DeFi – Decentralized Finance such as cryptocurrencies and stablecoins
dApp – Software like apps that work on the basis of blockchain code and thus apps that accommodate cryptocurrency such as UniSwap and NFT Market places
LP tokens - New liquidity pool tokens. LP tokens represent a crypto liquidity provider's share of a pool, and the crypto liquidity provider remains entirely in control of the token. For example, if you contribute $10 USD worth of assets to a Balancer pool that has a total worth of $100, you would receive 10% of that pool's LP tokens.
APY - Annual Percentage Yield, think of it as yearly interest in percentage
Smart Contracts — E lectronic, digital contracts coded to integrate with dApps. Automated financial agreements between two or more parties once the pre-determined terms of the contract is reached
Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts (liquidity pools) to execute trades on its exchange. It's an open source project and falls into the category of a DeFi product (Decentralized finance) because it uses smart contracts to facilitate trades. Built on Ethereum, Uniswap is the first and largest DEX in DeFi and one of the many places where you can participate in yield farming. To earn interest in their cryptocurrency holdings, investors contribute their funds to a Uniswap smart contract; these investors are known as liquidity providers. The smart contracts that hold their cryptocurrencies are known as liquidity pools. Liquidity providers are required for Uniswap to function since they provide liquidity for trading on the platform.
With the rise of Blockchain, Crypto and then Decentralized apps, yield farming was born to address some of the banking system's limits. Or at least, that would be in the perfect world.
Yield farming is the process of using DeFi to maximize returns . Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services. This works for both parties, because yield farmers provide liquidity to various token pairs and you earn rewards in cryptocurrencies. However, yield farming can be a risky practice due to price volatility , rug pulls, smart contract hacks etc.
Yield farming allows investors to earn interest which is called ‘yield’ by putting coins or tokens in a dApp, which is an application (coded software) that integrates with blockchain code. Examples of dApps include crypto wallets, exchanges and many more. Yield farmers generally use decentralized exchanges (DEXs) to lend, borrow or stake coins to earn interest and speculate on price swings. Yield farming across DeFi is facilitated by smart contracts.
Let’s take a closer look at the different types of yield farming on UniSwap:
Liquidity provider: You deposit two coins to a DEX to provide trading liquidity. Exchanges charge a small fee to swap the two tokens which is paid to liquidity providers. This fee can sometimes be paid in new liquidity pool (LP) tokens.
Lending: Coin or token holders can lend crypto to borrowers through a smart contract and earn yield from interest paid on the loan.
Borrowing: Farmers can use one token as collateral and receive a loan of another. Users can then farm yield with the borrowed coins. This way, the farmer keeps their initial holding, which may increase in value over time, while also earning yield on their borrowed coins.
Staking: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield.
Yield farmers who want to increase their yield output can also use more complex tactics. For example, yield farmers can constantly shift their cryptos between multiple loan platforms to optimize their gains.
Back to DeFi - In centralized finance, your money is held by banks and corporations whose main goal is to make money. The financial system is full of third parties who facilitate money movement between parties, with each one charging fees for using their services. The idea behind DeFi was to create a system that cuts out these third parties, their fees and the time spent on all the interaction between them.
Defi is a technology built on top of blockchain - it can be an app or a website for example, which means that is was written in code language by software programmers. It lets users buy and sell virtual assets (like crypto and NFT's) and use financial services as a form of investment or financing without middlemen/banks. This means you can borrow , lend and invest - but without a centralized banking institution. In summary, DeFi is a subcategory within the broader crypto space. DeFi offers many of the services of the mainstream financial world but controlled by the masses instead of a central entity. And instead of your information being filed on paper and stored by a banker, your information is captured digitally and stored in a block with your permission. Many of the initial DeFi applications were built on Ethereum (which is a blockchain technology, but the code is different to Bitcoin's, in other words it operates/works differently). The majority of money in DeFi remains concentrated there.
Lending may have started it all, but DeFi applications now have many use cases, giving participants access to saving, investing, trading, market-making and more. Another example of such a market is PancakeSwap (CAKEUSDT). PancakeSwap is also a decentralized exchange native to BNB Chain (Binance chain). In other words, it shares some similarities with UniSwap in that users can swap their coins for other coins. The only difference is that PancakeSwap focuses on BEP20 tokens – a specific token standard developed by Binance. The BEP20 standard is essentially a checklist of functions new tokens must be able to perform in order to be compatible with the broader Binance ecosystem of dapps, wallets and other services.
💭 Final Thoughts 💭
Is yield farming profitable? Short answer - Yes. However, it depends on how much money and effort you’re willing to put into yield farming. Although certain high-risk strategies promise substantial returns, they generally require a thorough grasp of DeFi platforms, protocols and complicated investment chains to be most effective. Is yield farming risky? Short Answer - Absolutely . There are a number of risks that investors should understand before starting. Scams, hacks and losses due to volatility are not uncommon in the DeFi yield farming space. The first step for anyone wishing to use DeFi is to research the most trusted and tested platforms.
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CryptoCheck
Chainlink Educational Post - Finding Support And ResistanceMany of you have been asking me how I timed my NASDAQ:LINK trade so well. Purchasing at $7.63 on October 20th and now seeing it up to $16.20, I will say it was slightly lucky, but it was not random.
In this video I go over a few of my basic strategies for getting major price points out of an asset in less than 15 minutes.
Follow for more trading content. Exclusive videos will be released weekly.
Sorry about the AUDIO quality - Dont have a mic with me right now.
- Joshua
Helios Capital Investment
Decoding DeFi MetricsIn Decentralized Finance (DeFi), deciphering the wealth of new projects can be akin to navigating uncharted waters. However, amidst the chaos, fundamental analysis stands as a beacon, guiding investors and traders towards discerning the true value of DeFi assets.
1. Total Value Locked (TVL):
TVL, the sum of funds nestled within a DeFi protocol, provides a vital glimpse into market interest. Whether measured in ETH or USD, it illuminates a protocol's market saturation and investor confidence.
2. Price-to-Sales Ratio (P/S Ratio):
In DeFi, just like traditional businesses, evaluating a protocol's value against its revenue stream offers a unique perspective. A lower P/S ratio suggests undervaluation, indicating a potential investment opportunity.
3. Token Supply on Exchanges:
Monitoring tokens on centralized exchanges unveils market dynamics. While a surplus may hint at sell-offs, complexities arise due to collateralized holdings, necessitating nuanced analysis.
4. Token Balance Changes on Exchanges:
Sudden shifts in token balances on exchanges signal imminent volatility. Large withdrawals hint at strategic accumulation, underscoring the importance of tracking market movements.
5. Unique Address Count:
More addresses usually imply widespread adoption. But beware! This metric can be deceptive. Cross-reference with other data for a clearer picture.
6. Non-Speculative Usage:
A token's utility is paramount. Assess its purpose beyond speculation. Transactions occurring outside exchanges signify genuine use, a testament to its value.
7. Inflation Rate:
While scarcity is a virtue, a token's inflation rate demands attention. Striking a balance between supply growth and value preservation is crucial, emphasizing the need for a holistic evaluation approach.
In the intricate DeFi landscape, these metrics serve as the foundations of strategic decision-making. Each data point unravels a layer of complexity, empowering investors to make astute choices. As you delve into the world of decentralized finance, armed with these insights thrive in the boundless universe of DeFi possibilities! 🚀💡
🌟 DeFi vs. CeFi: Unraveling the Financial Revolution 🌟The financial landscape is undergoing a seismic shift, and at the heart of this transformation lies a heated battle between two contrasting ideologies: Decentralized Finance (DeFi) and Centralized Finance (CeFi). 🚀
In this post, we're diving deep into the world of DeFi and CeFi, unravelling their key differences, advantages, and implications for the future of finance. Buckle up as we navigate through the decentralized wilderness and the fortified citadels of traditional finance.
Decentralized Finance (DeFi) and Centralized Finance (CeFi) represent two distinct paradigms within the world of finance, each with its unique characteristics and features. Here are the key differences between DeFi and CeFi:
🕵🏻♂️ Control and Intermediaries:
DeFi: DeFi operates on decentralized networks, typically blockchain platforms like Ethereum. It eliminates the need for traditional intermediaries such as banks and financial institutions. Users have full control over their funds and transactions without relying on a centralized authority.
CeFi: CeFi, on the other hand, relies on centralized intermediaries like banks, brokerage firms, and financial institutions. These entities facilitate and oversee financial transactions, acting as custodians of users' assets.
👨🏻💻 Access and Inclusivity:
DeFi : DeFi is accessible to anyone with an internet connection and a cryptocurrency wallet. It promotes financial inclusion by allowing individuals worldwide to access financial services, regardless of their location or background.
CeFi: CeFi services are often subject to geographic restrictions and require users to meet certain criteria, such as identity verification and residency, which can limit accessibility.
🧑🏻🔬 Transparency:
DeFi: DeFi transactions and smart contracts are recorded on public blockchains, providing a high level of transparency. Users can independently verify transactions and contracts.
CeFi: CeFi transactions typically occur within closed systems, making it harder for users to scrutinize or validate the underlying processes.
🙅🏼♂️ Censorship Resistance:
DeFi: DeFi platforms are resistant to censorship since they operate on decentralized networks. Transactions cannot be easily blocked or censored by governments or third parties.
CeFi: CeFi platforms may be subject to government regulations and can comply with requests for transaction censorship or freezing of assets.
👮🏼♂️ Risk and Security:
DeFi: While DeFi offers increased control, it also comes with risks related to smart contract vulnerabilities, hacks, and scams. Users are responsible for their security measures, such as managing private keys and selecting trustworthy DeFi platforms.
CeFi: CeFi platforms often have established security measures, including insurance, regulatory compliance, and fraud prevention. However, users may still face risks associated with centralized data breaches and third-party vulnerabilities.
💼 Financial Services:
DeFi: DeFi provides a wide range of financial services, including lending, borrowing, trading, yield farming, decentralized exchanges, and more. Users can access these services directly from their wallets.
CeFi: CeFi offers traditional financial services, such as savings accounts, loans, investment products, and trading services. These services are managed by centralized institutions.
🧐 Regulatory Oversight:
DeFi: DeFi operates in a largely unregulated space, which can offer innovation but also risks. It may face increased regulatory scrutiny in the future.
CeFi: CeFi entities are subject to financial regulations and oversight by governmental authorities, which can provide legal protections but also limit flexibility.
In summary, DeFi and CeFi represent contrasting approaches to finance, with DeFi emphasizing decentralization, accessibility, and transparency, while CeFi relies on central authorities and established financial institutions. Each has its advantages and disadvantages, and the choice between them depends on individual preferences and risk tolerance.
As we conclude our journey through the realms of DeFi and CeFi, one thing is clear: the financial world is evolving, and the choice between these two paradigms isn't just about technology—it's about how we envision the future of finance. Whether you opt for the autonomy and transparency of DeFi or the stability and familiarity of CeFi, always remember that the power to shape your financial destiny is in your hands.
Stay tuned for more insights, trends, and analyses here at TradingView, your compass in the ever-changing world of finance.
PS Remember, your likes are my inspiration! 💖 Don't hesitate to tap 🚀 if you find my content valuable. Together, we are shaping an incredible financial future. Let's grow and thrive together!
Your Kateryna
Crypto101 - What is DeFi & Blockchain ?Hi Traders, Investors and Speculators📈📉
Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year.
Whether you've just gotten into crypto trading or you're trying to expand your knowledge on what this space has to offer; this post is for you!
Decentralized finance or DeFi, is a financial ecosystem based on blockchain technology. So lets recap, what Is a blockchain exactly?
Blockchain is a software technology, it is basically computer coding that creates a usable service like an app or website for the public. Most blockchains are entirely open-source software. This means that anyone and everyone can view its code. The first-ever implementation of Blockchain was originally written in C++ (coding language). Blockchain and it's possible use cases was first introduced to the world in the Bitcoin Whitepaper, written by the infamous Satoshi Nakamoto (the pseudonym used by the creator or creators of BTC).
A blockchain is an online database that is shared to many computer networks. This means that if one computer in the network fails, the data is unaffected and transactions carries on. It is not dependent on one single data storage facility. As a database, a blockchain stores information electronically in digital format. A blockchain collects information in groups, known as blocks, that holds many sets of information (like time of transactions, amounts etc.). Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. An online database usually structures its data into tables, whereas a blockchain, as its name implies, structures its data into "3D chunks" (blocks) that link to each other. For easy reference and transparency, each block in the chain is given an exact timestamp when it is added to the chain. The revolutionary innovation idea behind blockchain is that it guarantees the truthfulness and security of data and generates trust without the need for a government/private institution to validate it.
Back to DeFi - In centralized finance , your money is held by banks and corporations whose main goal is to make money . The financial system is full of third parties who facilitate money movement between parties, with each one charging fees for using their services. The idea behind DeFi was to create a system that cuts out these third parties, their fees and the time spent on all the interaction between them. Defi is a technology built on top of blockchain - it can be an app or a website for example, which means that is was written in code language by software programmers. It lets users buy and sell virtual assets (like crypto and NFT's) and use financial services as a form of investment or financing without middlemen/banks. This means you can borrow, lend and invest - but without a centralized banking institution. In summary, DeFi is a subcategory within the broader crypto space. DeFi offers many of the services of the mainstream financial world but controlled by the masses instead of a central entity. And instead of your information being filed on paper and stored by a banker, your information is captured digitally and stored in a block with your permission. Many of the initial DeFi applications were built on Ethereum (which is a blockchain technology, but the code is different to Bitcoin's, in other words it operates/works differently). The majority of money in DeFi remains concentrated there.
Lending may have started it all, but DeFi applications now have many use cases, giving participants access to saving, investing, trading, market-making and more. A prime example of such a market is PancakeSwap (CAKEUSDT). PancakeSwap is a decentralized exchange native to BNB Chain (Binance chain). In other words, it shares some similarities with established platforms like UniSwap in that users can swap their coins for other coins. The only difference is that PancakeSwap focuses on BEP20 tokens – a specific token standard developed by Binance .
The BEP20 standard is essentially a checklist of functions new tokens must be able to perform in order to be compatible with the broader Binance ecosystem of dapps, wallets and other services.
PancakeSwap uses liquidity pools instead of counterparties/orders from other traders. A liquidity pool in this context refers to funds deposited by investors – which can be anyone from around the world – into smart contracts for the aim of providing liquidity to traders. With this system, buyers do not have to wait to be matched with sellers, or vice versa. Whenever someone wants to trade one token for another, they simply deposit the token they have into the pool and withdraw the other token they wish to receive. That said, PancakeSwap is not just for swapping coins. You can also take up the role of a liquidity provider (that is, you can deposit tokens in a liquidity pool for the chance of earning a share of trading fees paid by those trading against the pool in question).
Yield Farming is another income-generating opportunity available on PancakeSwap. With this, you can farm for a token called CAKE. So why would you want a token? Tokens are like the money video-game players earn while killing monsters, money they can use to buy gear or weapons. I personally love collecting my Glimmer in Destiny 2. But with blockchains, tokens aren't limited. They can be earned in one way and used in lots of other ways. They usually represent either ownership in something or access to some service. For example, in the Brave browser, ads can only be bought using basic attention token (BAT). I think I'll cover more on this in another post, otherwise this will become a too long read.
Final Thoughts 💭
Even though banks are slow and inefficient (to name only a few of the problems), there is still something that comes with using a bank that crypto cannot (yet fully) offer - guarantees and peace of mind. At least at this point. I believe in a future where blockchain is easily accessible, open but at the same time protects user privacy, transparent, decentralized and safe. But the truth is, we're still far away from that. Blockchain is in its infancy, being used by too many opportunists and crooks. So be careful when you invest in DeFi. The beautiful dream of blockchain still contains too many scammers that have no intention of cutting out banks; instead they want to get to the bank FIRST.
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Hit like & Follow 🔔
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CryptoCheck
Cryptocurency - Coin & Token Types: The Ultimate GuideIt’s important not to confuse the terms “cryptocurrencies” , "Coins " and “tokens,” Different type of them ,as there are fundamental differences that distinguish them.
Summary:
To put simply ,The two most common blockchain-based digital assets are cryptocurrencies and tokens. The biggest differentiation between the two is that cryptocurrencies have their own blockchains, whereas crypto tokens are built on an existing blockchain.
What Is a Digital Asset?
Broadly speaking, a digital asset is a non-tangible asset that is created, traded, and stored in a digital format. In the context of blockchain, digital assets include cryptocurrency and crypto tokens.
What is a cryptocurrency coin?
Cryptocurrency coin, like Bitcoin , is essentially a digital form of money that is backed up by a native blockchain The functions of a coin are strictly monetary — you can use it as a mean of payment, store of value, or as a speculative asset to trade, and essentially that’s it. The features of a coin are also similar to fiat money — it is fungible, divisible, and the supply is limited.
By definition, a cryptocurrency coin serves only as a digital form of money. The most distinctive feature of a coin is that it is native to the blockchain it’s made on and operates independently from any other platform.
Okay, then what is “altcoin”? This is essentially any cryptocurrency coin that has its own blockchain but is not Bitcoin . Some altcoins are just forks to Bitcoin , meaning that they base on Bitcoin’s open-source protocol but still have their own blockchains, like Litecoin. Others, like Monero or Ethereum , are completely independent blockchains.
What is a token?
The token is a non-native blockchain asset and its value goes beyond only monetary functions. Tokens also require another platform to exist and operate.
For example, ETH is a cryptocurrency that is native to the Ethereum blockchain, which makes it a coin. However, one of the primary features of the Ethereum network is the ability to create new tokens within the network. The cryptocurrencies that are created on this network will be called tokens. For example, USDT — the most popular stablecoin pegged to the value of $USD is a token, which operates on the Ethereum blockchain.
A cryptographic token is a digital unit of value that lives on the blockchain. There are four main types:
1-Payment tokens
2-Utility tokens
3-Security tokens
4-Non-fungible tokens
Fungibility :
All crypto tokens break down into two broad categories — non-fungible and fungible, with the latter being the most common type. Fungibility is a feature of a token which essentially means that one token is indistinguishable from another.
In simple words, a dollar is always a dollar, and Bitcoin is always Bitcoin . You can exchange the $10 bills with your friend and each of you will still have the same value in the wallet.
but Non-fungible tokens, or NFTs, are a type of cryptographic token — a digital representation of value that lives on the blockchain.
NFTs can represent the value of physical assets. A painting, for instance. But they can also represent the value of digital assets, such as a short story that is only available online.
NFTs have three characteristics that set them apart from other types of token: 1. THEY’RE UNIQUE -2. THEY’RE VERIFIABLE- 3. THEY’RE TRADEABLE
-Utility Tokens:
Utility tokens are a popular type of fungible tokens that you can think of as the chips at the casino. In the same way that you need to buy chips to play blackjack or poker, you need utility tokens to power the operations on the protocol.
The most famous utility token example is Ether which powers all the transactions and smart contracts on the Ethereum network. As we just said before, ETH can be used as a means of payment, however, its primary purpose is to be utilized in the blockchain.
Social Tokens (fan tokens):Social tokens can be a very interesting type of crypto utility asset that recently gained a lot of popularity among the crypto space and also presented the concept of tokenization to the broader public. In simple words, social tokens are backed by the reputation of an individual, brand, sports club, or just any community
-Security Tokens vs Equity Tokens
In simple, security tokens are common stock on the blockchain. These tokens are similar to the company shares held by the investors and companies usually issue voting rights through a blockchain platform. The tokens are liquidated to create an Equity Tokens. In other words, these tokens contribute an investment contract, where the Investors typically purchase in anticipation of future profits in the form of dividends, equal sharing of revenue generated and the normal appreciation process.
Security tokens bridge the gap between the traditional financial sector and the blockchain framework; it’s one of the reasons banks have initiated the integrated Blockchain frameworks in their system. Issuing security tokens allows investors to raise funds through a thoroughly regulated digital share of its equity, asset or part of the revenue.
The key difference between Security Token and Equity Token is that in the security token, an asset like real estate, gold etc. are used as collateral. However, in the case of Equity tokens, the shares of the company are diluted into tokens.
We can place coins and tokens in different categories as you can see in the chart above, and some of them are common to other categories.
As digital currencies are emerging, various other categories may be added in the future.
-Governance token
Governance token is the type of crypto asset that grants its holders decision-making rights over the project’s protocol, its product, and its features .it represent voting power on a blockchain project. They represent the main utility token of DeFi protocols since they distribute powers and rights to users via tokens. Governance discussions on Yearn Finance. With these tokens, one can create and vote on governance proposals.
-Also Metaverse tokens are a unit of virtual currency used to make digital transactions within the metaverse. Since metaverses are built on the blockchain, transactions on underlying networks are near-instant. Blockchains are designed to ensure trust and security, making the metaverse the perfect environment for an economy free of corruption and financial fraud.
-DeFi tokens represent a diverse set of cryptocurrencies native to automated, decentralized platforms that operate using smart contracts. These provide users' access to a suite of financial applications and services built on the different blockchains.
If you liked this and would like more you can visit us online Hodl & Shill we also have a private Discord Server
Let's See The Power of Triple BottomThere is a MainNet and it planned to launch until 15 December 2020!
Stacks 2.0 is coming at the same time as MainNet. Stakers will earn BTC while stacking STX after Stacks 2.0. You can confirm it from Blockstack's official announcements.
Now, let's look at the chart. I'm observing triple bottom formation. Also STX in oversold zone. Indicators which in oversold zone are Bollinger Bands %B , Relative Momentum Index, Relative Strength Index.
My discourses, my analysis and my drawings are definitely not investment recommendations. Cryptocurrency trading involves high market risk. Please take care of your transactions. My analysis is for educational purposes, I am not responsible for your losses.
Everything you need to know about auto Market Making in DeFiAn Introduction To Automated Market Makers
I wanted to explore the token economics of ZRX and Kyber for this issue of the newsletter but given the rising interest in “yield”, I just thought it would be good to summarise how non-lending platforms are beginning to leverage idle capital to offer a return. In particular, we will explore Curve, Balancer and Uniswap for this piece. The three holds one thing in common - they are critical infrastructure to exchange one digital asset to another without requiring a centralised custodian. To understand their role, we will need to know why they matter first.
Note : This piece is written with people may not have historical context to DeFi or why any of this matters in mind. You may skip to the parts starting with Uniswap if you don’t need all that context building.
The Why And What
The trade of digital assets from one to another has been heavily reliant on trust. Remember the guy who sold his pizza for 10,000 Bitcoins? He had to ensure the person he was transferring Bitcoins to would not vanish with his coins. One way this used to happen in Bitcoin forums and IRC channels was by trusting the reputation scores of an individual engaging in a trade. This is common in all P2P trading. Factors like the age of the account and frequency of transactions are a core part of platforms like Craiglist and LocalBitcoins. It came with the risk of individuals scamming once the trust was earned. With the arrival of exchanges like Coinbase and Mt Gox, the need for trusting reputation scores vanished. Individuals could deposit on a centralised account and trade with one another. However, custodial risk came along with it. As we saw with Mt Gox, the custodial risk of depositing with a central party is quite high.
As the number of digital assets in the ecosystem rose with developers increasingly issuing their tokens, centralised exchanges became gate-keepers of liquidity. It used to be common for exchanges to demand over a million dollars to list a token. “Value-added-services” like market-making for the asset or sending e-mails to their user-base used to be sold. The challenge with this is that it put teams with lesser resources at a disadvantageous position. While centralised exchanges have played their role, it became impractical over time to rely on them for go-to-market. As the number of digital assets in our ecosystem increases in the form of NFTs, personal tokens and other representations of value on-chain, it will become necessary to have infrastructure that enables the exchange of one asset to another without a central party. This is where automated market makers and liquidity pools play a role. It is about replacing the gate-keepers with lines of code.
An automated market-maker makes it possible to list and exchange digital assets without the help of an order-book. Unlike decentralised exchanges - there is nobody putting in ask and bid orders for an asset. A formulaic approach is used to determine the price of an asset. What this means is the price of the assets in an automated market-maker product moves only when a trade occurs and as such may be less susceptible to external manipulation. For assets such as Ethereum that are also listed on centralised exchanges, occasionally the prices may diverge from what it is on an exchange. In these instances, it becomes profitable to arbitrage and bring the price on the AMM to parity. Automated market-makers are crucial as one could bootstrap liquidity with fewer resources at play and as the name suggests - without a market-maker. Products like 0x and Kyber work as there are incentives for people to make trades on them. Automated market-makers on the other hand incentivise those that commit to providing liquidity (as idle assets) with yield that comes as a result of trading fees and token rewards.
Jargon Explainers
In the context of exchange-related yield solutions, there are three primary projects to know about - Uniswap, Curve.fi and Balancer. Each of them has its incentive mechanisms as we will see shortly. But before we dive into that, there are two concepts to be aware of.
1. Liquidity Pool - Consider this the total of assets that have been provided to a platform like Uniswap to enable users to trade one asset to another. It is the combined balance of user-deposits from individuals looking to create yield. The larger the size of a liquidity pool, the more likely that it can absorb large trades in short periods. This matters as one of the key criticisms of decentralised finance today is the inability to exchange over $100,000 worth of a digital asset to another without what is referred to as slippage. Slippage can be described as the difference in the price you were hoping to receive and the one you actually paid for an asset while trading it.
2. Impermanent Loss - In providing digital assets to platforms like Uniswap, there is the risk that your asset is unable to trade back to its initial value and that means you take a loss by partaking in the liquidity pool. The reason for this is explained further below in the context of each platform. But here’s what you need to know for now. Impermanent loss emerges from a situation where traders have no incentive to take a trade - leading to those that provided an asset to a liquidity pool in hopes of generating a yield losing money. They are primarily the result of a situation where an asset trades at a discount on a decentralised platform in comparison to what it is being traded at on a centralised exchange. For more on the concept of liquidity pools, I suggest reading this article by Pintail.
3. Liquidity Mining - The act of providing assets to a market to receive rewards that may be denominated in the platform’s tokens. The individual providing the liquidity takes on the risk of the assets provided fluctuating in price but has the benefit of selling reward tokens for dollars and maximising yield. This was common in certain Asian exchanges in 2018. Sadly, since the immediate response of anyone receiving these reward tokens is to sell, the price trends downwards over time.
With those three in context - let’s look at how the prominent automated market-makers of the industry work and what incentives users have.
Uniswap
Uniswap runs on a simple equation that follows the model of x*y=k. Where K is a constant. In a hypothetical situation, consider a pool that has been seeded with 50 Ethereum and 10,000 USD and K to be constant at 10,000. Y here will be the price of the asset.
Assuming x is the supply of Ethereum (50), Y will be the price at which ETH is traded.
In this case that will be 10,0000/50 = 200 as we have k=10,000 as a constant. If someone comes and buys Ethereum, they will remove Ethereum (x) and add to the dollar amount in the pool.
Assume they purchased two Ethereum at 200. This will make the x value 48, and change the value of y. Since the value K here is a constant, the price of Ethereum will need to change for it to be the same. To calculate this - we consider 10,000 / 48 = $208 to be the new price.
Similarly, in the next trade, if someone decides on selling a huge amount of Ethereum, the supply of Ethereum in the pool will increase. Assume someone wishes to sell 7 Ethereum after a while. Total ETH on the pool will be 48 (from previous balance) + 7 = 55 ETH. Since x here is now 55, there will need to be a change in the value of y (price) to reflect the new supply and demand.
Since k is 10,000 , we divide it by 55 to receive the new price. In this case that would come to $181. The supply of dollars in the pool now would be 10,400- (7*181) = $9133
As you can see, an algorithmic approach to price discovery has its advantage in the sense that it can discover price without an order-book in the way a centralised exchange does. It also makes manipulation less likely as you cannot see the orders of other traders in these instances. The challenge here is that price swings wildly if the amount of ETH or dollars in a liquidity pool is not high enough. The high volatility is part of what makes Uniswap risky. More importantly, those providing liquidity to a pool can stand to lose their yield in a pool if a large order moves the price in one direction and new trades don’t replenish the pool. I suggest exploring this paper for more on arbitrage opportunities on Uniswap. The critical difference between Uniswap and Curve is that in the former, liquidity is split across a wide variety of assets which can often lead to pricing inefficiency. On Curve in contract, it is concentrated on a handful of assets that are primarily stablecoins at price-points that are within a few percentage points of $1. Tokens like UMA protocol have begun issuing directly on Uniswap as it allows the market to determine the price of an asset without the centralised exchanges getting involved for hefty fees.
Incentive Mechanisms in Uniswap: Uniswap charges a 0.3% fee on all trades that occur through the platform. When an individual redeems their pool tokens, they receive a part of the fees generated in proportion to the amount of the pool they seeded liquidity with. The challenge here is fees generated are entirely reliant on the number and size of trades that occur through the automated market-maker. If there is a shortage of trades occurring on the platform, there may be no incentive for individuals to provide liquidity to the platform itself.
Curve. fi
If you could remove the high volatility of assets on Uniswap and exchange solely between stable currencies, then you could stand to benefit from the fees while reducing the probability of impermanent losses. Curve.fi focuses specifically on this philosophy. Individuals can add liquidity in stable dollars, enable the trade of different pairs of USD (eg: DAI, USDT, USDC) and swap between them. Since they all trade more or less around $1, the losses that occur are lower due to impermanent losses are lower due to lower volatility. The ‘brilliance” here is on focusing on the stability of the asset and volume. Curve is routinely able to absorb volumes in the hundreds of thousands of dollars with relatively low slippages due to the large liquidity pools it has. More importantly, since the platform primarily focuses on stablecoins, it needs to give liquidity only around a few percentage points of $1 and concentrate much of its liquidity on dollar-denominated assets. As you can see, the bulk of the volume has come from stablecoins and more recently between different variants of wrapped Bitcoin.
www.curve.fi
You can read more about how Curve works in their whitepaper or this well-written FAQ . Kerman Kohli has a brief explanation of how Curve functions in the video shown below.
www.youtube.com
Incentive Mechanism in Curve: Curve has a 0.04% fees associated with each trade on it. This is distributed to those that provide tokens to offer liquidity on the platform. Unused tokens in Curve are also converted to cTokens (compound tokens) to receive yield from providing loans on the platform. This ensures users receive a base interest fee (from Compound) and an additional return from market-making that occurs on Curve itself. There have been mentions of a token launching, but the specifics are not released yet.
Balancer
Balancer is more interesting as it allows individuals to have a mix of tokens allocated to a pool. They describe themselves as an ETF turned on its head. Instead of paying traders a fee to manage a pool, Balancer makes it possible for individuals to earn on providing liquidity to a pool. In other words - they determine the amount and mix of assets they would like to hold and receive a fee for providing it to a pool. While the formula behind Balancer is slightly complicated to summarise in this piece, here’s how it differs fundamentally.
- Instead of just two assets, Balancer is able to take on a mix of assets. This means a portfolio that has been constructed by someone looking to hold can be absorbed by the system. According to their FAQ , the maximum of the mix is at eight as of now.
- Balancer allows custom pool balances. What this means is someone with a substantial amount of token “x” looking to provide liquidity in ETH, can make a pool that is balanced 80% in token x and 20% in ETH . Making it easier for altcoins to offer a liquidity mechanism without requiring a centralised exchange.
- Fees on Balancer can be set as per the liquidity provider’s provisioning. It ranges from 0.0001% to 10%.
The incentive mechanism that is at play in Balancer is the yield that comes from the trading pool. All of the fees that is set by the pool goes back to the liquidity providers on Balancer as of now. This means individuals inherently have a predisposition towards having higher fees since it is a variable that can be set by the pool. If a pool has a very high fee individuals have no incentive to trade on Balancer as centralised exchanges will have a better fee offering. Therefore lower fees are incentivised in terms of token rewards given. The entire specification of their liquidity mining can be read here .
cdn.substack.com
The traders on Balancer jumped over 20 times (~70 to 1400+) due to the token based incentives that kicked in. Balancer has over $40 million in volume so far.
Why is Balancer all over the news? : Apart from the fact that Balancer is one of the projects that have shown traction and gradually tokenised themselves, there is the fact that the first tranch of balancer rewards have just gone out. Of the 100 million Balancer tokens that will be in existence, 25 million are allocated to founders and investors. Balancer has raised $3 million at an initial price of $0.6 per token. As of writing this, it trades at $13. Roughly 7.5 million Balancer tokens will be released over a year. In the past week ~435k tokens were issued to those providing liquidity over the past 3 weeks. High token price for Balancer means individuals can benefit from the tokens they resceive as a reward (sold on the market) and the yield on the underlying assets they provide. As we saw with Compound, this will be interesting as long as the price of the reward assets stays high.
What could be the future of AMMs?
Automated market-makers have been perfected slowly over multiple years and the recent push to decentralise governance through tokens has pushed for new levels of interest in them. A common theme we are seeing is the gradual push to releasing a token and allowing the community to have governance of the project itself. This works as long as the returns of governance (eg: fees) themselves are worth more than the opportunity cost of not doing so. What does this mean? Currently being a LP on Balancer would make sense considering the risks involved because of the high price of the token today ($13). However, as it goes lower - if the volume on the platform itself does not surge high enough to create sufficient revenue from the fees, it won’t be long before liquidity providers lose interest. As of writing this, cumulative revenue on Balancer is at $140k on a total volume of $40 million so far. If that figure does not grow over time, incentivised liquidity providers may leave the platform. The counter-argument to this is that since incentivised reward on AMMs like Balancer is proportional to the share of the pool an individual is providing liquidity to, the rewards one receives increases as other liquidity providers leave. The higher amount in Balancer token rewards will justify LPs to stay.
For now, it is safe to say that the interest in the underlying token itself is what is driving interest. For more established platforms like Uniswap, the volume has reached a large enough number to justify continued interest. For context Uniswap alone had $169 million in volume over the last seven days. That is over $570,000 a week to be distributed in fees. Since the figure is relatively high, individuals will be interested in how the governance of the platform will function. In other words - decentralised projects like AMMs will need high amounts in revenue to be able to justify premiums for their governance tokens. I would argue that this is a better model than traditional venture capital as it ensures dead projects with no revenue to show don’t last around as zombies on private money infusion for years. The fluidity of capital in DeFi would mean large liquidity providers move capital around to platforms with the highest yield at all times.
I am excited for the innovation this space could bring. The idea that you can mix in a bunch of assets and have a market running for it with just code and formula could be used in a mix of ways. For one, personal tokens are already being traded on Balancer. In the future, I won’t be surprised to see tokenised intellectual property rights and income share agreements being listed on platforms like Balancer. They are fundamentally kicking out the middlemen that historically connected issuers to markets. Almost like how Wordpress made a publication as easy as a few clicks and took power away from newspapers. Will this be abused? Yes. People stand to lose money. However, as with most innovations that disrupt the middle-men, this may do more good than evil over time. I wait observing patiently for proof of the same.
Thank you very much for the information:
Joel John
Matteo Leibowitz
Daryl Lau
Kerman Kohli
Best regards EXCAVO
Kyber Network - Defi ThemeIt is clear and apparent by now that the current theme in crypto is DEFI.
Looking at all the biggest gainers, that include Aave, Compound, Synthetix and others. it doesn't matter, eventually everything RELATED to defi will go up.
This is the current theme in the crypto market.
So far this "bull market" is not broadening whatsoever. Bitcoin is still sleeping. Ethereum is still sleeping. And that is a GREAT NEWS. People are still bored and not interested in coming back.
We are still far far away from even 2017 type of hype. We are more like 2016 type of hype where some altcoins did crazy but it has not yet gain the attention of mainstream yet.
Enjoy the gains in defi while you can, this will be a bubble and by the peak of the bubble, there will be lots of blodshed and most retails, including your mom and pops will be holding the bags. It is always the same pattern over and over again.
Humans never learn their mistakes.
Financial market are means to transfer wealth from the impatient to the patient. Those who say patient are now being rewarded and will continue to be rewarded.
It is still long away to go and Kyber Network is not even reaching its prior all time high yet. I will just buy all the breakouts and continue to ride the trend and may go into another altcoins that are about to begins its parabolic. I don't fall in love with anything. I will just make money where I can. I don't care.
This is the world you are living in, you are nothing if you don't have money. Make some money legally and then do what the fuck you want to do. But stop blaming others or rich people for your miserable life. Nobody is putting guns and tell you not to invest or trade.
Regards.
I don't read messages and comments, don't waste your time reaching out to me. I don't care. Sorry.
