Make sense of the news and how it affects the blockchain space as a whole. Crypto trends is a collection of relevant news and insights to help you make an informed decision.
Decentralized finance (DeFi) has come a long way since it was first conceptualized. Now, the market has nearly $4 billion worth of assets locked up. And DeFi Money Market (DMM) is one of the most promising protocols that is gaining a lot of traction.
The DMM platform allows users to earn annual yields of 6.25 percent for holding Ethereum-based tokens like USDC and DAI. What makes it even more interesting is that it is backed by real-world assets that create passive income that is greater than the interest owed.
These real-world assets will be tokenized and launched on the Ethereum blockchain tracked by Chainlink’s decentralized oracle network.
Background: Who is the team behind DMM?
DeFi Money Market is a product of the DMM Foundation, which was established in the UAE. The members are a team of veteran experts hailing from academia, the legal and regulatory sector, and fintech.
It is one of the few projects backed by top Silicon Valley venture capitalist Tim Draper.
What is the DeFi Money Market (DMM) Ecosystem?
The DeFi Money Market Ecosystem (DMME) is a decentralized protocol that allows users to earn interest on any Ethereum-based tokens by lending them for real-world assets like real estate, jewelry, automobiles, etc. as collateral. The goal of this ecosystem is to enable anyone in the world to earn consistent and stable interest on their money. Furthermore, their rates are higher than traditional competitors. They currently have an APY (Annual Percentage Yield) of 6.25% for DAI and USDC accounts, which is above most traditional alternatives.
DMME aims to seize the trillion-dollar opportunity that is currently resting on centralized finance (CeFi) companies. And it does this by blending real-world assets with digital assets, which enables them to create a more robust and transparent system.
DMM Protocol: What is it and how does it work?
The DMM Protocol can be split into three parts: an array of Ethereum smart contracts, a treasury management system, and a data feed that allows off-chain data to stream into the smart contract.
These three components blend to form the DMM Ecosystem and allow the creation of DMM tokens backed by off-chain real-world assets.
The DMM protocol currently supports DAI and USDC. For this walkthrough, let’s use USDC. First, a user deposits USDC to the protocol. Then mUSDC is minted. The dollar amount will be used to provide loans collateralized with real-world assets.
And once the loan gets paid, the interest will be deposited back to the system. Then, users can convert their mUSDC to USDC plus interest.
DMG Governance ($DMG) token
$DMG is the governance token of the platform. It allows the community to regulate and grow the DMM ecosystem, as well as its protocol. As the DMM community grows globally, DMG is paramount to encouraging active participation and mitigating centralization risk.
DMG holders have the capability to govern the parameters of the protocol as well as decisions on asset allocation.
The token is a fork of Compound Finance’s governance asset $COMP but with extra functionality such as “native burn.”
DMG token distribution
The DMM ecosystem has a total of 250,000,000 DMG tokens. The supply distribution is as follows:
40% will be allocated to the DMM Foundation for future development, support, and other general functions
30% will be sold in several public token offerings
30% will be allocated as a reserve for paying developers, partners, as well as other protocols for integration and growth of DMM’s decentralized network
At present, 60% of the total supply of DMG has been time-locked in smart contracts with different locking periods.
DeFi Money Market Account
A DeFi Money Market Account (DMMA) is a new DeFi native asset class that enables any holder of Ethereum-based tokens to earn interest from real-world assets represented on the blockchain.
In other words, DMMAs are technically ERC-20 tokens that get created when we swap an Ethereum token into DMM tokens called mAssets.
DMM DAO
A DAO (decentralized autonomous organization) is an organization where the decisions regarding the rules of the system are written in code and voted on by its members.
One of the core ideas of the DMME is that every stakeholder in the network should be able to take part in the decision-making process regularly without the need for permission. Initially, the DMM DAO members will consist of the core team and community members. To be part of the DAO, you have to be a holder of $DMG tokens, which gives you voting rights to the system.
The DMM DAO is one of the few DAOs that is already generating revenue through its yield taken from real-world asset loans. The value of all assets amounts to roughly $8.7 million with active collateralization of 380%. Furthermore, the team anticipates that DMG tokens, not to mention the entire DMM protocol itself, to be totally distributed and decentralized a year from now.
DMM DAO collateralization (Image credit: Warlmertt)
Conclusion
In order to succeed, DMM ultimately needs to fully decentralize the traditional financial system. Bridging real-world assets to the Ethereum blockchain is no easy task, but DMM is on its way to successfully execute its goal by using the right tools and partnering with the right organizations. The tokenization of physical assets will bolster DeFi and entire crypto space and possibly take a huge bite from the trillions of dollars worth of capital from legacy financial systems.
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
PrimeXBT is based in the Seychelles and was launched in 2018 as a Bitcoin-based exchange platform offering various products such as leveraged trading in cryptocurrencies, Forex, indices and commodities. Today they are ranked no.24 of all derivatives exchanges with over USD$250 million in daily trade volume according to CoinGecko. They serve clients from over 150 countries and the platform is available in 16 languages: English, Malay, Chinese, German, Spanish, French, Hindi, Indonesian, Italian, Japanese, Korean, Portuguese, Russian, Thai, Turkish and Vietnamese. The Exchange was also recently recognised as the Best Bitcoin Platform for Margin Trading at the 2020 ADVFN International Financial Awards. In this review and guide we look at several features of PrimeXBT, our user experiences and give you a step-by-step guide on how to get started.
No KYC required: You only need to provide your email and country of residence to register for an account. No address proof is required.
Customisable trading interface: Users can enable, disable or move various information panels on their trading page. They can also add various widgets such as orders, watchlists or positions etc.
Annotate trading charts: On their Analysis page, you can overlay different trading pairs, insert up to 50 technical indicators, mark and save trading charts for further study.
Up to 1000x leverage: PrimeXBT offers up to 100x leverage for trading cryptocurrencies, stock indices and commodities. For Forex trades, up to 1000x leverage is available. (https://www.air-inc.com/
Wide range of products: PrimeXBT offers cryptocurrency trading, as well as trading indices, Forex and commodities. For fast results, traders can also try out Turbo, one of PrimeXBT’s unique trading features.
Let’s look at some of PrimeXBT’s features in detail.
PrimeXBT offers more than cryptocurrency trading
PrimeXBT offers cryptocurrency trading, as well as trading indices, Forex, and commodities. PrimeXBT supports trading in 5 cryptocurrencies: BTC, ETH, LTC, XRP and EOS; with trading pairs between these cryptocurrencies and USD and BTC only. Unfortunately, the Exchange does not seem to be jumping onto the DeFi train, unlike their competitors. So unless they start listing some DeFi coins and fast, we are concerned they may be overshadowed by more aggressive exchanges.
For Forex, the following 7 foreign currencies can be traded on PrimeXBT: USD, EUR, GBP, AUD, NZD, CAD, CHF and JPY. However the Exchange does also offer trading pairs with other currencies such as SGD, RUB and TRY. Traders can also trade the following 10stock indices: S&P 500, NASDAQ 100, FTSE 100, EURO STOXX 50, CAC 40, NIKKEI 225, DJI, ASX 200, GER30 (DAX30), IBEX 35 and HK-HSI.
Lastly, the Exchange provides commodities trading, this is done entirely digitally through the Exchange and its CFDs without having to physically handle gold bars and oil barrels etc. The following 5 commodities are available for trading on PrimeXBT: Gold, Silver, BRENT, CRUDE and NAT. GAS.
Margin trading is offered by PrimeXBT. The Exchange offers up to 100x leverage for trading cryptocurrencies, stock indices and commodities. For Forex trades, up to 1000x leverage is available. Obviously there are serious risks involved in doing this because if the position goes against what you traded your losses will be correspondingly magnified. Hence margin trading should be for very experienced traders only and even so, extreme caution must always be exercised.
Turbo trading: How to guide
PrimeXBT offers a unique product called Turbo trading, and as the name suggests it is basically trading on turbo mode. All you need to do is predict if a chosen asset’s price will be higher or lower than the current price after a specified period. Both the specified period (which will be between 30 seconds to 15 minutes) and the potential profit ratio will depend on the asset chosen and this will be calculated and displayed to you before you confirm your trade.
Taking the below image as an illustration, I predicted that BTC/USD prices would go up in 10 minutes (i.e. when the chart reaches the circular green arrow). I invested 0.0002 BTC and the potential profit was calculated for me at 0.000013 BTC, or 65% of what I put in if my prediction was correct. However if my prediction was wrong, I would lose the 0.0002 BTC I had put in.
We think this feature would be very attractive to novice traders, and even advanced traders who something quick and simple for a change. We tried out this feature and enjoyed knowing what the potential outcomes would be before we put in the trade and found ourselves excitedly fixated on the trading screen during the whole period.
Note that PrimeXBT Turbo trading is not available to citizens and residents of the following countries: USA, Canada, United States Minor Outlying Islands, American Samoa, Israel, Japan, Algeria, Ecuador, Iran, North Korea, Sudan, Syria and Crimea.
Supported currencies and payment methods
PrimeXBT only supports BTC deposits. For some locations, you can buy Bitcoin with your credit (Visa or Mastercard) or debit card and deposit this directly to your Exchange wallet. PrimeXBT only accepts payments in USD, EUR and GDP and a minimum purchase of 0.002BTC is required. You will be required to select your location beforehand and the Exchange will let you know if your location supports this feature.
For security reasons, to buy BTC on PrimeXBT you will need to provide the following personal details: email, country of residence and identification document (ID card, driver license or passport). The Exchange will also email you a code to enter at checkout to confirm your email.
PrimeXBT Fees
Deposit and withdrawal fees
PrimeXBT does not charge fees or deposits into your Exchange wallet or for transferring from one wallet to another on your own PrimeXBT account. The Exchange charges 0.0005 BTC for withdrawals.
Trading fees
PrimeXBT charges 2 types of trading fees: a trade fee and overnight financingfee. Trade fees are 0.05% for cryptocurrencies, 0.01% for stock indices and commodities, and 0.001% for Forex.
Overnight financing fees are charged if traders do not open or close their leveraged position within the same trading day (i.e. 0:00 UTC) and it is a percentage of the daily funding rate depending on the liquidity of the underlying asset. Taking BTC/USD for example, the overnight financing fee is 0.04166% of the daily funding rate for both long and short positions.
PrimeXBT has competitive fees compared to other exchanges if you are a casual or small volume trader. However most other exchanges have discounts for high volume traders by way of VIP tiers, or discounts for holders of an exchange’s native token. PrimeXBT does not have such discounts so there is little incentive for users who trade more, especially if other exchanges have comparatively cheaper trading fees for larger trade volumes.
PrimeXBT offers its services to over 150 countries except for citizens and residents from the following locations: USA, Canada, Seychelles and countries currently under economic sanctions by either the United Nations or the European Union.
Security: Is PrimeXBT safe?
PrimeXBT uses numerous security tools and measures. From our user experience, we can see on the front end that the Exchange uses 2-factor authentication (via. Google Authenticator) and sends a confirmation email letting us know we’ve logged in. We do see some additional security features not typically found elsewhere. One such feature is mandatory whitelisting of destination addresses for Bitcoin withdrawals i.e. users can only withdraw their Bitcoin to addresses they have previously whitelisted.
On the back end, PrimeXBT utilises cold storage of digital assets using multi-signature technology, DDOS protection and cryptographic hashing for all passwords and encryption of all other sensitive data, among others. They also conduct full risk checks after every order placement and execution, and regular testing and assessments by their technical team.
We also note that the Exchange currently has a good track record of no hacks or discovered vulnerabilities so far. Nevertheless users should still remain careful and vigilant with their security measures e.g. not leaving all their funds on the Exchange.
We found PrimeXBT to be very open and transparent about themselves and what they do. For example answers to any questions we had about them can be found on their website. Their website and tutorials are a detailed one-stop resource for how to use their platform and their explanations are very clear and well organised. This is very positive and it certainly points to the Exchange being reliable.
How to register for a PrimeXBT account
PrimeXBT claims their registration process only takes 40 seconds and indeed we found it to be very fast and convenient. No KYC procedures were required. To register, simply fill in your email and choose a password.
The Exchange would then send you an email asking you to confirm your email address. Confirm this and you will be brought back to the main page where you would be asked to select your country of residence. No address proof is required for this step.
Confirm your email and country of residence
Once you have confirmed these details you are all set!
Registration complete!
How to deposit and withdraw cryptocurrencies on PrimeXBT
Deposits
As a Bitcoin-based exchange, PrimeXBT only allows you to deposit Bitcoin. Users can either deposit Bitcoin directly from another cryptocurrency wallet or if their location is supported, purchase Bitcoin with their credit/debit cards.
To deposit Bitcoin from another wallet, click on “Account” on the top bar and “Deposit” on the sidebar. There you will find your Bitcoin wallet address.
For some locations, you can buy Bitcoin using your credit (Visa or Mastercard) or debit card. To do this click “Buy Bitcoin”on the Deposits page. You will then be required to input how much Bitcoin you wish to purchase. Confirm this by clicking “Buy”. Please note that PrimeXBT only accepts payment in USD, EUR and GDP and a minimum purchase of 0.002BTC is required.
Buy Bitcoin
You would then be asked to provide your email and country of residence. The email address is so that the Exchange can send you a code to enter at checkout as a security measure. You are required to choose your country of residence because some locations do not support Bitcoin purchases, and the page will instantly let you know if this is the case. If Bitcoin purchases are supported you would be required to provide photographs of your identification document (ID card, driver license or passport) and your payment details.
Provide details for payment
Afterwards you would be required to confirm your purchase and at checkout, enter the code previously sent to your email address. The Bitcoin you purchase would automatically be sent to your Exchange wallet.
We found depositing Bitcoin from another wallet to be very simple. As for buying Bitcoin, the steps were easy to follow but we found it excessive in terms of all the information you need to provide. After all, we are depositing Bitcoin into an account, not withdrawing. We don’t expect to require an ID copy AND a picture of us holding said ID when buying items from other online retailers. So in all honesty, unless you do not use any other exchanges and you are buying Bitcoin for the very first time, we foresee most people would just buy Bitcoin elsewhere and transfer it to the Exchange.
Withdrawals
Withdrawals from PrimeXBT require a few additional steps compared to other exchanges because they have a mandatory whitelist of destination addresses. Note also that the Exchange only supports Bitcoin withdrawals, so any other asset must be converted to Bitcoin first before withdrawing.
To withdraw, go to “Account” on the top bar and “Withdraw” on the sidebar. Select “Add new address” and type in the address you wish to send your Bitcoin to together with a name for this address in the “Comment” field, then click “Add new address”.
The Exchange will send you an email asking you to confirm the new Bitcoin withdrawal address. To confirm, click “Confirm new address”.
Confirm new address
Back on the Exchange’s Withdraw page, the new address will show up on the list of destination addresses. Select the address you want to send your Bitcoin to and the amount you wish to send. On the right, you would be able to see details of the send i.e. the destination address, the transfer amount, transfer fee and the actual amount which would be sent. To confirm, click “Submit to withdraw”.
The Exchange’s limitation of only allowing Bitcoin withdrawals can be troublesome since you would need to first convert everything to Bitcoin, which may result in losses if prices fall. We also found the whitelist process to be a bit annoying at first, but as it is for security we consider it a fair tradeoff. It however won’t cause that much inconvenience in the long run if you usually only send Bitcoin to a few specific addresses e.g. your hardware wallet.
Trading on PrimeXBT
One thing we really liked about PrimeXBT is that when you log in to your account for the first time, each page will have a pop up tutorial covering topics such as how to fund your trading account, how to place your first order etc. For a subsequent refresher, you can always click the question mark “?” on the top right hand corner for more tutorial videos. So getting started with trading was relatively easy.
A feature that some traders might like is their one-click or double-click trading feature. This allows you to open and close positions, and cancel orders with literally one click i.e. bypassing the confirmation process. It is a really convenient feature for those who are impatient or need to lock in their positions quickly. On the flip-side you could suffer huge losses if you misclick since it is irreversible.
The main feature of PrimeXBT is its ability to customise. As mentioned above the Exchange lets users customise their trading interface and charts. For the trading interface, you can move, add and remove various widgets e.g. charts, watchlists and orders etc. You can also add new “workspaces” i.e. tabs by clicking “+”. Workspaces can be renamed, and you can add widgets onto them and customise their location.
This feature is very helpful for experienced traders who wants all their necessary information displayed in one place, or even more casual traders who want to customise their trading page so it is similar to other exchanges they may be more familiar with.
PrimeXBT also allows users to customise and annotate trading charts. Users can overlay different trading pairs on top of each other for comparison, e.g. in the below image we put together the charts for BTC/USD and ETH/USD. Users can also write notes, draw lines and choose from up to 50 indicators to put onto the charts etc. There are lots of features which will certainly keep technical analysts very occupied and finally, you can save a picture of your chart for a later date. This is certainly a feature designed by pro traders with other professionals in mind.
Welcome bonus
PrimeXBT currently has an enticing welcome bonus to encourage more users. New users who deposit more than 0.009 BTC into their trading account within the first 6 hours of registration are entitled to a US$50 trading bonus. The Exchange will automatically deposit the Bitcoin equivalent of this into your trading account.
USD$50 trading bonus for new users
Conclusion: Is PrimeXBT a good exchange?
Here’s some pros and cons of PrimeXBT based on our user experiences.
Pros
Good track record without any hacks so far. The Exchange has additional security features not usually found elsewhere such as mandatory withdrawal address whitelisting.
The Exchange is one of the most open and transparent we have come across. Almost any question we had on the Exchange is answered on their own website.
Customisable trading interface and charts. This feature is likely to be very attractive to seasoned traders.
Cons
Even with the Exchange’s helpful tutorials, there is still a steep learning curve if you want to make use of the many features the Exchange has to offer.
Very limited cryptocurrency support and only Bitcoin deposits and withdrawals are supported.
Requiring photo ID and KYC process just to buy Bitcoin is a bit excessive.
In conclusion, we find PrimeXBT definitely geared towards traders with a bit more experience, particularly those who trade the major cryptocurrencies and other markets such as stocks and commodities on the side. We also find Turbo to be a very novel and interesting feature which we may revisit in the future. The Exchange’s interface is very clear and intuitive, and in any event you can customise it to your needs and preferences. Users will need a bit of time exploring all of the customisation features that PrimeXBT has to offer which may seem overwhelming at first, but is certainly worth it in the long run. With this high level of customisation, we think once users overcome the initial learning curve, they are likely to come back to this exchange time and time again.
SIGN UP TODAY!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Congratulations Everyone – You’re officially a founding member of this Newsletter! We’ve already doubled our subscriptions in the past week due to increased interest (WOOT). At the same time, crypto is moving at light speed – with new projects getting created, traded, and listed on top exchanges in the space of 2-3 days. Here’s a rundown of all that’s happening:
Post-Bitcoin Rally
Bitcoin made some major moves on Monday, shooting up all the way to $11,000 after a long dormant period. Initially, this shocked many traders, with many scrambling and selling their altcoins to jump on the Bitcoin train. FOMO is the name of the game these days, and many were hoping Bitcoin would shoot as high up as $14,000 / $17,000. However, Bitcoin didn’t go there – instead she seemed to settle down at $11,000 without much volatility. With the big cat sleeping, the mice (altcoins) are out to play. We’ve seen some insane rallies for YFI (+225%), Elrond(+65%), and UMA (+60%) this week.
Yield Farming After $YFI blew up last week, yield farming is front and center on everyone’s discussion table. We covered YFI both on our website https://boxmining.com/yfi-yield-farming/ and in a video https://www.youtube.com/watch?v=eoz9CnX-52s. In a quick summary, liquidity mining is essentially saving money in different liquidity pools. Miners will then be rewarded with token distributions (such as YFI) that can yield up to 1000% APR. Obviously, with such rewards, it’s highly risky and experimental. We definitely recommend that you check out the video and Do Your Own Research (DYOR). Currently, YFI yield farming is taking a pause as a new contract is being deployed.
YFII Launches Nope, that’s not a typo. A new project called YFII has launched – forking the YFI project and allowing yield farmers to earn the YFII token. What’s unique about this project is that it distributes YFII tokens with a weekly “halving”, similar to Bitcoin. The release of this project comes at a very convenient time as $YFI mining is currently taking a break, so farmers are left with yCurve tokens wondering what to do. YFII allows the staking of yCurve tokens in a similar fashion and UI to $YFI (it is a fork after all) This is highly controversial due to it’s rushed nature of its release, with metamask, balancer, and etherscan users quickly flagging the project as a “Scam”. This is due to two reasons, as there was an initial “owner key” for YFII which allowed the owner to create infinite tokens. However, recently this key has been destroyed. This means it’s not really a “scam”, and the community for YFII is currently building up.
Zeus Capital Vs Linkchain Recently Zeus Capital has taken up a major campaign against Chainlink (LINK) calling it a “scam” and giving a valuation of $0.07 (1% of its current value). Not only have they released a long report, but recently they have been caught paying influencers to make negative price charts on LINK. It’s clear they have taken up a massive short position and will benefit from LINK’s price going down. I find this a more mature version of the FUD and HYPE cycles we experience in crypto – and highlights the importance of DYOR – you need to be prepared for both hype and FUD.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. (https://www.adarsus.com/) Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Ampleforth is a game changer that is claiming the spotlight on Decentralised Finance (DeFi) following the success of several lending platforms such as Compound ($COMP), Aave ($LEND), dYdX, etc. Ampleforth is a DeFi protocol that aims to reinvent money both within and beyond the cryptocurrency space. While centralized finance (CeFi) and DeFi as we know today have their own unique sets of problems, the Ampleforth protocol is here with the aim to address them.
The protocol has a native token known as $AMPL. It is a stable currency that has both inflationary and deflationary capabilities designed to adapt to demand.
Table of Contents
Background
Ampleforth was created by Evan Kuo, an engineering graduate of UC Berkley. He was also the former CEO of Pythagoras Pizza, the first pizzeria to tokenize its franchise.
Evan Kuo (Image credit: Cody Pickens)
Kuo’s motivation for creating Ampleforth was twofold. The death of his father, which made him want to leave a legacy after his passing, and his passion for tech and finance which brought him into the cryptocurrency industry.
He recognised two things that cryptocurrency was trying to reinvent: money and banking. Of the two, money was a lot easier to work with and so that became his focus.
The Ampleforth Foundation was then funded by Pantera Capital, True Ventures, Huobi exchange and Brian Armstrong. Most of the members of the foundation consist of “engineers, academics, investors, and enthusiasts” from Ivy League universities.
Ampleforth raised a total of nearly $10 million USD in 2 Initial Coin Offerings (ICO) and an Initial Exchange Offering (IEO).
Ampleforth Protocol
Ampleforth Protocol is a cryptocurrency ecosystem built on the Ethereum blockchain. What makes it stand out is its adaptive supply, that is to say, Ampleforth adjusts the circulating supply according to demand.
When the demand for Ampleforth increases, the supply increases. Conversely, when demand decreases, the supply also decreases. This makes Ampleforth prone to being mistaken as a stablecoin since it does function quite similarly.
However, it is not backed by any cryptocurrency or fiat currency like most stablecoins are. And although the system attempts to keep the value close to $1 USD, sometimes it could go way past $3 USD depending on the demand.
As of press time, $AMPL is trading at $1.64 USD according to Coin Market Cap.
The Ampleforth Protocol is autonomous, but not decentralized. The Foundation still holds the keys to the system, and have the power to freeze all assets or change token supply arbitrarily. So for some decentralization purists, this is a red flag.
Ampleforth Monetary Policy
Kuo came up with Ampleforth’s economic design after examining the history of the U.S. Dollar. Back in the day, every U.S. Dollar bill was backed by gold bullions, which were stored in government vaults. Gold is a great store of value but it has an inflexible supply. Furthermore, going by the gold standard alone runs the risk of runaway deflation.
After World War II, the Dollar was in high demand globally and the U.S. couldn’t keep up. The amount of gold is fixed since mining can only introduce very small amounts of new gold in a given timeframe. Therefore, the U.S. government decided to abandon the gold standard to avoid stagnation of international trade.
And that became the birth of the fiat U.S. Dollar, which we now know has its own set of shortcomings. One problem with fiat money is that you could only print more of them but not destroy them. Therefore, the supply can only be partially controlled in a sense. Furthermore, the people in charge of the minting facility is also subject to greed and corruption.
Ampleforth’s monetary policy is a solution to both fiat and gold-backed currencies since it is designed to maintain a stable value by adjusting the supply to match demand.
As an illustration, say you have 1 AMPL worth $1 in your wallet. If the demand for AMPL rises and causes the price to jump to $2, the Amplforth Protocol will expand the supply of AMPL such that you’ll end up with two AMPL in your wallet worth $2. This process is called a “rebase”.
The rebasing process does not dilute existing token holders. You get to retain the same percentage of the total supply yet the value you held doubled.
Ampleforth use cases
Ampleforth divides its use cases based on its goals: near term, medium term and long term use cases. In the near term, AMPL aims to diversify cryptocurrency portfolios. Most cryptocurrencies are correlated to Bitcoin’s price pattern, which poses a risk. But because of AMPL’s rebase mechanism, it is decoupled from Bitcoin’s price pattern and allows cryptocurrency traders to have some diversity in their portfolio.
In the medium term, Ampleforth aims to work as a stable store of value or form of collateral for decentralised banks and DeFi applications. This is because unlike fiat-backed stablecoins, it does not pose the risk of devaluation of its underlying asset.
Ultimately, Ampleforth hopes to become a “A better Bitcoin”. It wants to be an alternative to central-bank money that can adapt to sudden shocks in the market. In that sense, it is competing with Bitcoin and XRP; not to mention national currencies. But as of the moment, it is being used primarily in the cryptocurrency space.
Another opportunity it offers is arbitrage. Arbitrage traders have the chance to reap profits during the time the supply is reduced when the price rises. On the other hand, they can increase their AMPL allocation before the supply is increased when the price drops.
How the Amplforth ($AMPL) rebase process works
The supply of Ampleforth adjusts daily every 1pm EST to match the demand via a smart contract. The system utilizes Chainlink’s oracle network alongside the Ampleforth oracle to siphon price data from KuCoin and Bitfinex.
The smart contract ensures that Ampleforth sticks within the designated equilibrium range, which is between $0.96-$1.06. If the price of AMPL hits beyond the two extremes, the smart contract will continue to “expand” or “contract” accordingly until the value of the token is in the equilibrium range again.
Ampleforth Geyser: What is it?
Ampleforth Geyser is a smart faucet that incentivizes liquidity providers to supply AMPL to a Uniswap pool. It is brought about through a collaboration between the Ampleforth Foundation and Uniswap.
Users are rewarded with AMPL tokens for depositing AMPL to Uniswap. The longer the tokens are held in the pool, the higher the returns.
Ampleforth geyser
To make money from Geyser, visit their web portal at ampleforth.org/geyser and connect either your MetaMask or Coinbase wallet. You will need to deposit equal amounts of ETH and AMPL to participate.
How do I get AMPL tokens?
Aside from getting AMPL tokens during the rebase process (though this requires you to stake some AMPL in the first place), people can also buy AMPL from cryptocurrency exchanges. Here are the major exchanges that offer AMPL tokens for sale: Uniswap (v2), KuCoin, FTX exchange and Bitfinex. Learn more about our picks for the top best cryptocurrency exchanges of 2020.
Conclusion
Ampleforth has to some degree successfully redesigned the way money works despite only being a few years old. Their influence has not penetrated a huge portion of the market as of yet but there is a lot of room for them to grow. And being part of the DeFi movement makes it a lot easier to gain more traction. As a matter of fact, over 36 million AMPL has been deposited in Geyser as of now. This is a great stepping stone for the protocol.
Ultimately, Ampleforth’s goal is to compete against national currencies, and perhaps against Bitcoin as well, to become the world currency. For now, Ampleforth should work on establishing its trust and legitimacy within the cryptocurrency community, which will be a stepping stone for it to achieve its use-cases.
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Before DeFi was even a thing, Maker was already popular. With the rise of decentralized finance applications (DeFi), the cryptocurrency space has seen a drastic growth in a short span of time and Maker is the primary pioneer of DeFi applications. Meanwhile, the world of cryptocurrency is dynamic, and every moment sees new use cases emerging for different purposes. The high volatility of cryptocurrency has also posed different challenges for users and crypto investors, leading to the creation of stablecoins which can hopefully ‘stabilize’ the volatility.
What is Maker?
MakerDAO is a Decentralized Autonomous Organization (DAO) founded by Rune Christensen in 2014. Maker ($MKR) serves as its governance token and is powered by the Ethereum blockchain.
The Maker ecosystem utilizes smart contracts to execute transactions in the protocol. Additionally, it uses the fractional reserve banking approach to ensure that its stablecoin ($DAI) remains stable.
As an ERC-20 token, MRK is not mined. Its holders are given voting rights to the collateralization on the platform. As governments who have a stake in the protocol, they are incentivized to vote on changes that could benefit the Maker ecosystem. After all, poor governance would lead to the devaluation of MKR.
The Collateralized Debt Position (CDP) makes the provision for liquidity possible when dealing with crypto assets. The idea is to provide crypto investors and traders with a decentralized platform that is suitable for margin trading. Additionally, many users have found value in exploring offshore poker sites as part of their diversified investment strategies, leveraging unique opportunities and benefits these platforms offer. Some unique things about the Maker platform include lower prices compared to other margin trading platforms, flexibility, and improved security.
What is the difference between $MKR and $DAI?
Maker ($MKR) was created to function as a utility token for a blockchain-based platform for P2P transfers and international payments. To avoid the volatility of the crypto market, a stablecoin called “DAI” was created and connected to Maker.
Collateralized Debt Position (CDP) and its uses
The value is based on the ability of the investor or trader to get liquidity without giving out their ETH tokens. It is important to protect the DAI from loss of value by depositing more than 140% of the DAI coins.
MKR tokens are needed to perform the transactions with the aid of smart contracts. When the CPD gets closed, or if there is a repayment of the DAI, the stability fee gets paid as MKR.
Furthermore, after each transaction MKR gets burned. Which invariably means that the circulating supply of MKR tokens will reduce over time. An increase in MKR’s popularity will increase the demand and number of burned MKR tokens, and result in a price increase.
Uses of MKR
The MKR network has four major use cases, including usages by the participants within the network. It is important to note that MKR and DAI are the two tokens used within the Maker ecosystem. Here are the four major uses:
Traders can utilize MKR as leverage for the ETH they own
Crypto investors and traders can use MKR if they think that the price of ETH at that moment is undervalued. While anticipating the coin’s rise, they make some ETH deposits with MKR, have a CDP, and get DAI in return.
They can make other ETH trades with DAI. When the ETH they own is leveraged, it is kept locked-up to get more ETH and make profits from the increase in price.
A liquidity creation tool that helps avoid capital gains tax
Some crypto users may be subject to capital gains tax on their earnings from cryptocurrency trades and investments. Crypto traders that have made a fortune need to secure their profits from the high volatility of digital currencies like ETH.
MKR provides an effective solution through ETH deposited for DAI which is pegged with the exchange rate of the US dollar. The benefit is that you avoid paying tax because your money is available in a profitable and stable cryptocurrency.
A cheap way to facilitate the repayment of costly fiat loans, with crypto loans
A crypto trader or investor can deposit their ETH in order to get loans at favorable rates. This helps them boycott the expensive loan fees and interest rates of traditional banks.
For crypto investors without CDP
Another use case of the MKR token is by crypto investors who are interested in the token. However, their interest in the token does not involve creating a CDP; rather they own the tokens to sell later.
MKR tokens are created to promote financial freedom while eliminating volatility.
Markets that can benefit from MKR
MKR comes with some flexibility that makes it perfect for some markets, and these markets include:
Financial Markets
The introduction of smart contracts to facilitate the operations of derivatives and options helps collateralized stable prices. Decentralized trading tools are provided at zero interest rates, and are facilitated by the implementation of CDPs by MKR.
Transparent Auditing Frameworks
By default, the underlying blockchain technology promotes transparency. However, MKR’s platform takes transparency further with verifiable transactions. Organizations are provided with a framework that helps improve efficiency in their auditing and accounting operations. The transparency in the system mitigates corruption.
International Trade
One irregularity with performing international transactions is the high cost, which can be attributed to the presence of intermediaries. With MKR and DAI, intermediaries are taken off the equation in exchange for seamless person to person international transactions at reduced costs.
Gambling Markets
The volatility of the crypto market does not make long-term betting with crypto an advisable venture to try. The underlying risks involved include a drop in the rate and price of crypto assets.
Where to buy MKR
As opposed to some years ago when MKR was not available on popular exchanges, it is pretty much available almost everywhere. You can buy from Changelly, ShapeShift, OKEx, Nova Exchange, HitBTC, Binance, CoinBase Pro, BiBox, MXC, etc.
Getting signed up to start trading is easy and straightforward too.
Cryptocurrency is on the path to mass adoption, and unique blockchain-based platforms like Maker are strategically positioned for it. With more use cases of cryptocurrency and blockchain technology emerging, owners of the MKR token are likely to enjoy more profitability.
Maker MKR has the right framework and underlying technology to tackle the issue of high volatility within the crypto market. In comparison to regular cryptocurrency, MKR poses fewer risks because of its stability mechanism.
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Synthetix (SNX) is one of the top Decentralised Finance (DeFi) platforms in existence. According to Coinmarketcap their native token $SNX ranks no.7 in terms of market capitalisation compared to other DeFi tokens. Synthetix itself is primarily a decentralized exchange but also a synthetic asset issuance platform.
The platform enables users to issue and trade synthetic assets — digital assets that represent other real assets like stocks, fiat currencies, commodities, or cryptocurrencies. It also has a staking mechanism that incentivizes users to provide liquidity and maintain the platform.
The Synthetix Protocol was originally conceived as Havven back in 2017 by Kain Warwick. Warwick is currently also a Non-Executive Director of blueshyft- a network of over 1200 retail locations around Australia.
Simply put, Synthetix is an Ethereum-based DeFi ecosystem that functions as a deentralised exchange (DEX) and asset issuer that is maintained via a staking incentive scheme.
Users can speculate on any real-world asset by creating synthetic assets that track their prices in real-time via oracle feeds. And unlike traditional financial systems, Synthetix requires no KYC. You don’t even need to create an account.
Yet anyone could gain exposure to Tesla stocks, high premium bonds, real estate, and just about anything. This can be done simply by depositing SNX tokens into the platform.
Furthermore, those that mint synthetic assets can earn passive income from the fees generated by people buying the assets.
One of the most exciting aspects of the Syntethix system is that it can siphon a huge chunk of the trillions of dollars of assets from traditional markets and bring them to the Ethereum network.
Synthetix Network (SNX) Token
SNX is the utility token of the Synthetix ecosystem and is necessary to create synthetic assets called Synths. Users can buy SNX tokens from several crypto exchanges and deposit them in a compatible wallet in order to stake them.
Once they are locked up, new Synths can be minted. The token’s supply used to be deflationary until it was updated in March 2019. The update saw the implementation of an inflationary monetary policy to encourage stakers to create more Synths.
By 2025, a total of 250 million SNX tokens will be minted. SNX has surged drastically in the last couple of months. It went from $0.79 at the beginning of June to around $3.32 on the 25th of July 2020.
Synth Tokens
Synth tokens are synthetic assets that track the price of real assets. They are minted by locking up SNX tokens.
Synths can come in any form and they are denoted by ‘s’. For instance, fiat synths would look like these: sEUR, sUSD, SRMB. Other variations of Synths include sAAPL (synthetic Apple), sTSLA (synthetic Tesla), sAu (synthetic gold), sBNB (synthetic Binance Coin), sDEFI (synthetic DeFi Index), and many more. (https://www.furtenbachadventures.com/)
Whenever new Synths are minted, stakers create a debt. Therefore, they need to pay back the same value in Synths before they can withdraw their locked-up SNX tokens. And the value of Synth will likely change over time.
As a result, users may need to pay a different amount of Synths by the time they withdraw their locked up tokens.
Fortunately, users are not required to pay the same type of Synth that was initially minted. As long as the Synth used to pay has the same market value, the system will accept it. For instance, a Tesla share Synth can be used to pay in the place of a Bitcoin Synth as long as they have equal value.
One thing to note is that Synth tokens are not exactly the same as the assets they represent. They are known as synthetic assets for a reason.
For instance, if you hold an sAAPL token, you will be exposed to the volatility of Apple shares. However, unlike owning real AAPL shares, you won’t be receiving dividends like real Apple shareholders enjoy.
Collateralization
The Synthetix system requires a collateralization rate of 750%. For instance, if you want to mint 100 sUSDT, you need to deposit $750 worth of SNX tokens as collateral.
This rather high collateralization rate is imposed in order to hedge the platform against extreme market price swings.
Staking SNX
Staking is currently where most people are making money out of the Synthetix protocol. But like any money-making schemes, staking Synthetix bears some degree of risk.
How to stake SNX
If you truly want to make money staking SNX, there are a few easy steps involved.
First, you need to buy Synthetix in any exchange and connect to a web3 wallet.
Visit Mintr, the best portal interface for minting and managing Synths.
Connect your web3 wallet to Mintr.
Click ‘Mint’ and choose what type of Synth you want to mint.
Remember the collateralization ratio of 750%
Input the number of Synths you want to mint.
Click ‘Mint Now’.
Confirm the transaction in your web3 wallet.
Afterward, your SNX token will automatically be staked. You will now be able to enjoy rewards generated from trading fees. Furthermore, you are also subject to inflation rewards.
These rewards, however, come with a price. When you mint Synths, you get to own a portion of the platform’s debt pool — the total value of all Synths. And this debt can increase and decrease regardless of the original value of your minted Synths.
Synthetic DEX
Synthetix has a built-in DEX interface that enables users to trade without an account. The DEX currently offers 19 assets to trade and 31 trading pairs.
All you need to do is visit the Synthetix exchange and connect any web3 wallet like MetaMask. It has a slick but simple interface that eases users’ experience while trading.
Synthetic exchange charges both maker and taker fees with 0.30% which is higher than the industry standard of 0.05-0.25%. The fees will be used to reward the stakers for providing liquidity to the platform.
Furthermore, users will also be charged Gas fees by the Ethereum network. For now, all these fees could add up which might be a hindrance from the greater market to fully adopt DEXes for all their trading needs.
In time, when Ethereum finally scales, gas fees should be low enough to become negligible.
DEXes like Synthetix don’t require withdrawal fees (except for Gas) since trades are conducted directly from wallet to wallet.
The Takeaway
As a leading DeFi protocol, Synthetix has a lot of potential. It has enabled users across the world to create and trade synthetic assets more than any platform to date. However, nothing is guaranteed to last in the crypto space.
DeFi protocols like Synthetix have seen enormous growth in the last couple of months. Whether or not this is sustainable, only time will tell.
But considering the trillions of dollars floating in Centralized Finance (CeFi), it is not far-fetched to assume that DeFi’s disruption is far from over.
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
I’ll be interviewing Bobby Ong, Co-Founder and COO of Coingecko this week!
In the interview we will be discussing:
DeFi Wave – Is Coingecko going big on DeFi?
Cleaning up fake volumes on exchanges – How do we identify fake volumes in the exchange space?
Coingecko research – what are they finding with recent trading trends?
What is Coingecko?Coingecko was launched in 2014 and is one of the world’s leading cryptocurrency data aggregator and tracking over 7,000 different cryptocurrencies. Coingecko also provides distinctive metrics such as user scores which survey users’ outlook on the coin. (Ativan) Another distinctive metric is “Trust Score”- Coingecko’s rating algorithm which holistically ranks a cryptocurrency exchange based on factors such as liquidity, trading activity, cybersecurity etc. so as to combat fake exchange volume data.
This video is aimed at all levels of cryptocurrency enthusiasts so feel free to ask Bobby your burning questions about DeFi, cryptocurrency projects, exchanges and this space in general. I’ll personally be giving out prizes for:
Most Creative Question;
Most Insightful Question; and
Funniest / Weirdest Question.
To ask a question, leave a comment in this post below!
China’s hotly-anticipated nationwide effort to integrate blockchains – the Blockchain Service Network (BSN) – has split into two entities over a disagreement to integrate public blockchains. BSN will now be split into two separate entities:
BSN-China: a private consortium led by the State Information Center. This chain will be China’s core chain with support from the Government. BSN-China will consist of nodes that fully comply with local Chinese laws and regulations
BSN-International: A public consortium led by Red Date Technologies. This chain will allow international co-operation and integration of crypto protocols such as Ethereum (ETH), EOS (EOS), Nervos (CKB), NEO (NEO), Chainlink (LINK) and Tezos (XTZ)
BSN was originally envisioned as a project that would allow any blockchain, be it public chains (eg. Ethereum (ETH)) or corporate private chains to communicate with each other. Following the original plan, any public blockchain can integrate itself into the BSN, a network that will help cross-chain communication and value transfer.
Recently there has been pushback against the use of Public blockchains in China, as it would mean the State would not be able to control these Chains. As a result, the incorporation of public chains into BSN has been a hotly contested subject as the state would not be able to ensure that all aspects of the chain will comply with local laws. In fact, public blockchains are decentralized meaning that they are immune to centralized control and governance. This has lead to the State declining to allow any public blockchains into BSN-China.
It is expected that BSN-China will receive most of the state’s attention and funding. Private projects developed by major tech giants in China, such as Tencent and Baidu are expected to be integrated into BSN-China. This will be the major spearhead develop for China’s nationwide push for blockchain development.
Will Decentralized Protocols be left out?
International efforts to develop and integrate into BSN-International will be expected to continue ahead as planned. Original creators of BSN, Red Date Technologies, will spearhead the development and continue to push the international effort to create a communication network for the entire blockchain ecosystem.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Balancer ($BAL) is an automatic market maker (AMM) protocol that reduces the cost and slippage between trades of different cryptocurrencies. Balancer is a decentralized replacement for the traditional market-maker, a 3rd party entity that provides liquidity to traded assets. Balancer protocol can be called upon by different decentralized trading platforms to automatically figure out the best rates and trading prices using Smart Order Routing (SOR). The protocol also provides the funds necessary to complete the trade, using the funds from available Balancer Pools. Balancer Finance was Launched in September 2019 by Mike McDonald and Fernando Martinelli, since then the Company had a successful seed round with $3 million invested.
Balancer Exchange Interface
Balancer uses the N-dimensional invariant surface that is built upon the Uniswap dapp. They also use Automated Market Makers (AMMs), much like UniSwap, which are built off computer algorithms to regulate the market. Their Pools are doing away with portfolio management fees with users instead of collecting fees from traders, who re-balance the portfolio by “following arbitrage opportunities”.
Balancer has shifted itself into a prominent position within the Decentralized Finance (DeFi) hierarchy, as it’s BAL token caught the coattails of Compound Protocol’s governance tokens rise at the start of 2020. This saw increased attention on the exchange and has been earmarked as a competitor in the DeFi field. This perception coincides with an increase in popularity for DeFi projects and their mining qualities, something highlighted in a recent Forbes report on “DeFi Yield Famers”. So, if you are a budding or curious yielder or someone looking to understand the emerging DeFi market, this is the guide for you. In this article we provide a full breakdown of the project, what it is and explain the benefits of using this DeFi exchange and protocol.
To learn more about Balancer including its strengths and weakness, check out our video:
Balancer Finance: What you MUST know about this DeFi platform
Balancer’s Pools Explained: What are they?
Balancer pools are collections of user supplied funds that are used to provide liquidity to trades and transactions. These pools can total up to more than $11 Million USD (eg, the USDT, BAT and COMP pool). This collection of funds will be called upon during cryptocurrency trades as the as the counter-party to the transaction, thus providing liquidity to traders.
Controlled/Private Pools: These are when a fixed state is over the pool and the creator can set out the tokens and weights. This is usually done for private actors who don’t want outside liquidators, for example third party liquidators working with large quantities.
Finalize/Shared Pools: These pools are open for all actors to add liquidity and is a one way transition. They can not be amended and have a fixed parameter, unlike controlled pools and are usually for the general public to liquidate and make profits.
Alongside the two main subcategories of pools, there are other more specific smart pools that you can use. For example, Liquidity Bootstrapping Pools (LBPs) give the opportunity for teams to release a project token while at the same time building deep liquidity. Other examples include stablecoin pools with zero impermanent-loss, which founder Martinelli wrote an extended explainer here.
Balancer’s Pool creator tool
$BAL Token
In its initial launch, Balancer didn’t have their own native token but this changed this year, with the company revealing their governance token $BAL. The Company began distributing the token on June 23rd 2020 and will be distributed on a weekly basis for liquidity providers on the site.
However, there is no economic value to BAL tokens, rather they are currency for governance rights on the protocol. These rights allow the holders to have a say on the structure of Balancer protocol, with weight in terms of implementing new features, protocol fees, and larger structural changes like layer 2 scaling as well as contracts on other blockchains.
There are 100 million tokens created but 25 million of them have already been allocated to the founding members, core developers, advisers, and investors. The rest though are free to be mined by Balancer users who add liquidity.
According to Balancer’s website: “Every week 145,000 BALs, or approximately 7.5M per year, are distributed to liquidity providers. This means in the first year of BAL’s existence there would be 30% supply inflation off the initially allocated supply of 25M tokens.” So, how can you earn the weekly BAL allocation? This is done through BAL liquidity mining, which is discussed below.
BAL Liquidity Mining: How to earn $BAL tokens?
Liquidity mining has become one of the most popular topics of conversation in the space of decentralized finance (DeFi) in recent weeks. At its core, liquidity mining is essentially when users supply liquidity of assets to a DeFi protocol in exchange for some kind of reward. That reward may be various tokens, including governance tokens of the underlying DeFi protocol (which may end up having monetary value – like COMP). It basically offers a way for users to earn money on assets that they hold.
The main way to earn $BAL tokens is through Liquidity Mining. Essentially, Balancer rewards liquidators who pay into their pools in the form of $BAL tokens. The Company’s proposal is to give out BAL tokens in proportion to the amount of liquidity each address contributes relative to the total liquidity on Balancer.
Another way to make BAL is through creating a pool and reaping the benefits of trading fees. These are handed out in the form of $BAL. This system also incentivises the pool creator to lower fees as the lower the fees are, the more BAL they receive. Balancer’s fee gives pool creators a short term or a long term option, and they hope it will encourage lower fees so that traders are lured onto the exchange.
Speaking on the issues concerning distribution of BAL and governance rights, founder Martinelli said: “By far the most important factor or reason why we are doing that is because we want this thing to be decentralized. We believe in a decentralized, trustless future, and we want Balancer to do that. We need the distribution to be in a healthy way.”
Balancer Yield Farming & Best Pools
Top liquidity pools on Balancer are currently returning up to 30% APR on Return on Liquidity. These rates have drastically improved after the Cap Factor update on July 5th 2020.
In order to quality for airdrops of $BAL Balancer Governance token, pools need to have at least two coins that are on the whitelist. Coins are added to the balancer whitelist on a weekly basis. The amount of $BAL being distributed depends on the trade volume and total liquidity, with a maximum of $
Trading on Balancer’s Exchange
Alongside their liquidity and pools, Balancer is first and foremost a decentralized exchange. With no KYC or signups, the anonymity and privacy is upheld. All you need to start trading on there is a wallet like MetaMask. Learn how to set up a Metamask account here.
The Exchange has a number of tokens available to trade. These include: Ethereum (ETH), DAI, MKR, USDC, REP, BTC++, WBTC, WETH, BAT, SNX, ZRX, LINK, DZAR, UMA, LRC, REN, LEND, KNC, COMP, OCEAN. The Exchange also has a number of tokens without pools such as tBTC, ANT, cUSDC, cDAI, imBTC, pBTC, sBTC, sUSD, PNK, AST and RPL.
Balancer: are there any risks?
Decentralized exchanges are often associated with high risks. This sort of ability to trade so easily with high interest rates is a concern. This was highlighted more recently by Ethereum founder, Vitalik Buterin, who cautioned that they were “flashy DeFi things” which sometimes come with “unstated risks attached”.
Honestly I think we emphasize flashy defi things that give you fancy high interest rates way too much. Interest rates significantly higher than what you can get in traditional finance are inherently either temporary arbitrage opportunities or come with unstated risks attached.
Balancer has acknowledged the risks, with their website warning users that: “Balancer is a very new protocol. Although we are taking every precaution and doing extensive audits, this is still very much a beta product. Use small amounts of funds to start.”
Conclusion
Overall, Balancer has position itself as a powerful tool to automate marketing making and reduce transaction fees for different cryptocurrencies. It’s leading the liquidity pool market with the ability to create n-dimensional liquidity pools which is a market first. With their unique formula which negates and actively discourages large fees, Balancer has created a decentralized project that could potentially be a self-sufficient system with a community emphasis.
For now though, the main target for Balancer is to create stiff competition for UniSwap and make themselves the industry leaders in the AMM field on Ethereum. Many believe this is possible as the DEX functionality on Uniswap is the same as Balancer, as one Uniswap token-for-token pool is equal to the Balancer pool with two tokens set to 50/50, or 1:1, value.
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Compound Finance is a leading decentralised finance (DeFi) protocol which allows users to deposit and borrow cryptocurrencies, and earn interest whilst doing so. How Compound does this is by creating liquid money markets for cryptocurrencies by setting interest rates with the use of algorithms. They are popular mainly because they are cryptocurrency exchange Coinbase‘s first ever investment into a crypto project and prices for their $COMP token had more than doubled in the past week. In this Compound guide we cover topics such as what is Compound, how to use the platform profitably and how to earn more of their $COMP token.
For an overview, check out our explainer video on DeFi and Compound:
What is Decentralised Finance (DeFi)?
Decentralised Finance (DeFi) was designed to “cut out the middle man” i.e. banks and reduce the cost of traditional financial operations such as taking out a loan or buying property. The aim of DeFi is so that people, particularly the unbanked can have open access to every financial service on the internet with their smartphones, without needing the banking system. Smart contract platforms such as Ethereum opened the door to DeFi, whereby programs running on the blockchain can self-execute when certain conditions are met. Developers can make use of these smart contract platforms to build decentralised apps (Dapps) with various functions. Developers brought the concepts of Dapps and DeFi together by bringing functions traditionally served by banks onto smart contract platforms. Compound is an example of a DiFi app, it is a blockchain-based Dapp which allows deposits and taking out loans of cryptocurrencies on its platform.
How does Compound work?
Compound operates similar to a bank. You can deposit various cryptocurrencies and earn an annual interest on your deposits, similar to depositing your money into the bank. However, Compound’s main difference is that it does not have custody of your cryptocurrency deposits. Instead, you are actually sending your crypto to and interact with a smart contract, rather than another company or user. This feature is important because it means that no person or authority can control or take your funds.
What makes all of this so interesting is that since Compound is a DeFi platform, it does not have to follow the Federal Funds Rate. It can do something completely different and cannot be shut down since there is no central authority.
How to supply (deposit) cryptocurrencies onto Compound and earn interest
On Compound’s website you can earn interest when you deposit (Compound refers to this as “supply”) cryptocurrencies onto their platform. To do this, first load an Ethereum account with any of the cryptocurrencies supported by Compound. Then on the Dashboard, choose which cryptocurrency you wish to supply to the platform by clicking on it.
Choose which cryptocurrency you wish to supply to the platform
In the below image you can see that we will be depositing USD Coin (USDC) which generates an Annual Percentage Yield (APY) of 0.12%. So you can earn 0.12% per year if you supply USDC to the platform. Input the amount you wish to supply and confirm by clicking “SUPPLY”. A metamask window will pop up where you will interact with the smart contract and confirm the transaction. You will be charged gas fees for interacting with the smart contract. In our case we were charged USD$1.
Supplying cryptocurrencies to the platform generates interest
Once you have supplied cryptocurrencies onto the platform, you would be able to use Compound’s other features such as using these supplied cryptocurrencies as collateral to take out loans.
An important point to note is that Compound has floating interest rates which are subject to change. How Compound determines the interest rate is similar to the Federal Reserve, Compound would analyse the supply and demand for a particular cryptocurrency and then set a floating interest rate that will adjust based on market conditions. Compound also takes a 10% cut off your earned interest. Users can take back their cryptocurrencies at any time with a 15 second lag between executing the instruction and receiving their crypto.
How do I take out loans/ borrow cryptocurrencies on Compound?
You can use your deposited cryptocurrencies as collateral to borrow other cryptocurrencies. Compound requires users to put up 100% of the value of your intended loan. There are risks of doing this though which will be explained below where we look at Compound’s liquidation clause.
Borrowing cryptocurrencies does also require you to pay fees. For example in the below image you can see that taking out a loan of BAT will cost you a whopping 29.4% per year.
Borrowing cryptocurrencies requires you to put up collateral and pay fees
You can also see from the above image how Compound makes money, since there is a spread between the amount of interest generated from depositing, say BAT and the amount of fees you need to pay for borrowing the same.
What is $COMP token? How can I earn $COMP?
Since May 2020, Compound has transitioned to community governance. This means holders of Compound’s token, $COMP can make proposals and vote on decisions relating to how Compound is to be developed or run, e.g. what kind of collateral should Compound support, or what the interest rates should be.
There is a total supply of 10 million $COMP, of which 42.3% is reserved for distribution to users to earn when they use Compound e.g. by supplying or borrowing cryptocurrencies. For every Ethereum block, 0.5 $COMP is distributed across Compound’s 9 markets in proportion to the interest accrued in the market. And within each of these markets, the amount of distributed $COMP is divided 50:50 between suppliers and borrowers of that particular cryptocurrency. Hence the cryptocurrency which is earning the most COMP per day is always changing. Users should check Compound’s User Distribution page, where they can see the amount of interest paid per day as well as the amount of $COMP distributed to suppliers and borrowers.
You can also earn $COMP by voting on various governance proposals concerning how Compound should be run.
$COMP can be traded on various exchanges, such as Coinbase or FTX Exchange. And there was certainly a lot of attention focused on $COMP since prices for the token recently shot up from USD$60 to over USD$300 in a matter of days.
$COMP prices
How are people using the Compound platform to earn 100%+ APR?
Users earn COMP when they supply or borrow cryptocurrencies on the platform. So in the below image we deposited 500 USDC and borrowed 300 USDT to get a net effective interest of -12.27% which on the face of it does not look profitable.
In our case, depositing USDC and borrowing USDT generated a net interest of -12.27%
BUT at the same time we are also earning $COMP. This calculator shows you how much $COMP would be distributed depending on the type and amount of tokens supplied or borrowed. So as seen in the below image, whilst the net interest was -12.27% per annum, we EARNED 13.94% APY of $COMP. Basically, you are being PAID to take out a loan.
$COMP mining: Another way to potentially earn more $COMP
$COMP mining goes beyond simply supplying cryptocurrencies and profiting off the interest rates on Compound. Rather it is about getting as much $COMP rewards as possible in the shortest amount of time. Some methods even allow you to multiply your earnings by folding your position 4x.
In a nutshell, people have have been finding ways to do this by first depositing USDC, borrowing USDT and then converting the USDT to USDC. Then depositing the USDC onto the platform, leveraging it, withdrawing USDT and depositing it onto the Compound platform several times over.
What cryptocurrencies does Compound support?
Compound currently supports 9 cryptocurrencies, namely: Ether (ETH), USD Coin (USDC), Basic Attention Token (BAT), Tether (USDT), 0x (ZRX), Wrapped BTC (WBTC), Dai (DAI), Augur (Rep) and Sai (Legacy DAI) (SAI).
Available markets on Compound
What are the risks of DeFi platforms?
DeFi, and any such platforms such as Compound has the main feature of being decentralised. Yet, it is decentralisation that brings associated risks. This is because instead of trusting a central authority to supervise the transactions, we are trusting the code which the smart platform was built upon. If there is a mistake in the smart contract e.g. the conditions for release of funds are set incorrectly, there is no overriding body which can correct this mistake or any customer service representative that can help. And the biggest risk of all is if the developer did not code the contract correctly making it vulnerable to hackers. An example of this was the dForce hack where hackers exploited a well-known exploit of an Ethereum token, resulting in losses of USD $25 million worth of customers’ cryptocurrencies.
Risks of using Compound: Compound’s liquidation clause
For Compound, there are risks associated with trying to earn $COMP through borrowing on the platform. Compound has a liquidation clause that kicks in when borrowing on the platform. For instance if the cryptocurrency you are borrowing increases in value and exceeds the value of your collateral, your borrowing account will become insolvent. In such case, other users can step in and repay a portion of your outstanding loan in exchange for a portion of your collateral at a liquidation incentive. This liquidation incentive is the discount at which other users can receive your collateral. So if the liquidation incentive at the time is 8% (subject to change through voting on Compound’s governance system), then other users can receive your collateral at 8% off the market price when they help repay your loan. Hence there are serious incentives for users on Compound to liquidate others and this will result in the person being liquidated to potentially suffer huge losses.
What is Compound’s aim for the future?
Currently, Compound only deals in cryptocurrencies on the Ethereum blockchain. However the Company eventually wants to expand and move into carrying tokenised versions of real-world assets, for example the US Dollar, Japanese Yen or stocks in companies such as Google.
Decentralised Finance (DeFi) series: tutorials, guides and more
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Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
