All of the biggest names in the crypto industry are gathered in Singapore for the Asia Crypto Week and TOKEN2049 Event in Singapore today! Boxmining is here today to witness the biggest web3 event in history, where blockchain innovators, major investors, and the crypto community discuss and decide the future of crypto.
Asia Crypto Week is Asia’s largest web3 event, involving a series of conferences, exhibitions, workshops, and meetups with some of the biggest names in the crypto industry. This week-long event offers the best networking opportunities for crypto investors and developers alike.
The last Asia Crypto Week event took place in March 2019 in Hong Kong. This year features a week of various independently organized side events around TOKEN2049, running from 26 September to 2 October 2022 in Singapore. TOKEN2049 Singapore is the main event of this year’s Asia Crypto Week.
What is TOKEN2049?
TOKEN2049 is the premier crypto event in the world, organized annually in Singapore and London, where founders and executives of the leading web3 companies share their insight on the market as well as crypto regulation and the institutional landscape.
Today marks the debut of TOKEN2049 Singapore, which will take place for two days (28 September to 29 September 2022) in the Marina Bay Sands. It brings together all of the largest web3 names, FinTech corporations, uniting entrepreneurs, investors, developers, industry insiders and global media. TOKEN2049 announced a record-breaking 7000+ attendees, 2,000+ global companies, 250+ exhibitors, and 200+ speakers for its Singapore debut, making it the industry’s most well-attended event in years.
TOKEN2049 Singapore has an impressive all-star lineup of speakers including Galaxy Digital CEO Mike Novogratz, Pantera Capital CEO Dan Morehead, Axie Infinity co-founder and COO Aleksander Leonard Larsen, and even Hanson Robotics social humanoid robot Sophia A.I. With in-depth presentations and panel discussions, these key decision-makers and thought leaders will chart the latest milestones in digital assets and define what is next in the crypto space.
TOKEN2049 Singapore will also be showcasing a grand NFT exhibition with immersive experience, titled the Op3n Whale NFT Exhibition. Developed by Op3n and Whale, two of the most popular NFT platforms, the NFT collection is reported to have a market value exceeding $100 million. This will be the first time such a collection owned by a single entity has ever been on display to the public.
In the crypto industry, discovering early-stage moonshot projects can be difficult. Investors who manage to enter early usually secure massive returns, and some of these projects end up becoming successful in the long run. However, there are many low-quality projects and scams looking to take advantage of early investors, resulting in pump-and-dump schemes. Therefore, the market needed a more secure mechanism to raise funds for crypto startups. This is where launchpads come in.
Before we take a look at what crypto launchpads are, it is important to learn about its predecessor — Initial Coin Offering (ICO) and why they are no longer practiced.
What is ICO and Why does it Matter?
Similar to all business ventures, crypto projects require capital to build their product and meet their objectives. They typically achieve this via crowdfunding, and the first fundraising model in the crypto industry is an ICO, where crypto projects would raise funds by selling a part of their total token supply to the community. This allowed investors to purchase tokens at the cheapest price possible before they are listed on a crypto exchange.
In 2017, ICOs began to take off thanks to Ethereum’s open-ended smart contract protocol. Developers can easily create new applications and tokens (ERC-20 tokens). Moreover, smart contracts can be executed to calculate raised funds and distribute tokens once crowdsale is complete. As a result, the majority of ICOs took place via the Ethereum network.
Numerous projects saw substantial gains of their token as high as 10,000x, making a lot of early investors very rich. By the end of 2017, an estimated $4.9 billion was raised through ICOs reported by the Wall Street Journal. However, ICOs quickly became a way for investors to gamble in hopes of making easy profit. As a result, project fundamentals became less important to would-be investors.
This led to many security issues. For example, since cryptocurrencies were unregulated at the time, anyone can launch an ICO anonymously. Many malicious actors took advantage of the hype and created false projects and ICOs. They would rug pull investors’ funds, or even just run away with the money, abandoning the project before it ever got listed on an exchange. It became so severe that the U.S. Securities and Exchange Commission (SEC) intervened, imposing strict securities laws on ICOs which subsequently led to ICO bans worldwide such as South Korea and China.
Crypto Launchpads – The Beginning of IEO and IDO
Because of the ICO bubble, faith in the crypto industry was lost. This made it very difficult for legitimate blockchain projects to raise funds and build products with real value. Fortunately, not long after, crypto launchpads came to the rescue. Launchpads are essentially platforms that help crypto projects raise capital while giving access to early-stage token sales for their group of investors.
There are two main types of crypto launchpads — Initial Exchange Offering (IEO) and Initial DEX Offering (IDO). The difference between the two is where the fundraising is being held. Let’s look at the first one, IEO.
What is IEO?
An IEO is a fundraising model where the project receives the backing of a crypto exchange like Binance or FTX. The fundraising event is administered by the exchange, in contrast to an ICO where the project team themselves conducts the fundraising on their website. With IEOs, users can buy tokens on the exchange’s launchpad directly from their exchange wallet.
IEOs generally have high security as most crypto exchanges are regulated to an extent. They actively follow stringent protocols to prevent fraud including know-your-customer (KYC) and anti-money laundering (AML) verifications. The projects are carefully scrutinized, vetted, and selected by the exchange team for their IEO. Project teams must at least have a white paper and minimum viable product (MVP) ready for the exchange to review. Thus, would-be investors are assured that the startups under IEO listings are legitimate. After all, the exchange is staking its reputation behind the projects on its platform, offering a higher degree of trust behind the project.
For crypto projects looking to raise funds, an IEO offers the promise of an immediate userbase that can see their product. In other words, IEOs help create exposure to the project. This also means that the project can reduce their outside marketing funnels for fundraising, enabling them to focus only on the development of their product.
Top IEO Launchpads
Some of the top IEO launchpads include Binance Launchpad, Huobi Prime, KuCoin Spotlight, Gate.io Startup, and many others. In fact, the first IEO in history was launched by Binance Launchpad in the first quarter of 2019. Moreover, these top IEO launchpads are more than a platform for offering tokens. They also provide full advisory service for projects, leveraging their insights and experience to help build better products.
Disadvantages of IEO
Though IEOs are generally secure, not all crypto exchanges are equal. Some may not be as strict in doing due diligence or implementing regulations. This means that there is still a risk of a pump-and-dump scam, as advanced scammers could pull a meticulous long con.
Moreover, listing fees may be quite high, especially on reputable exchange platforms. Startups may also be asked to pay commission from token sales. They can be considered as centralized gatekeepers about the types of projects that proliferate, meaning that only somewhat established projects can earn a spot.
What is IDO?
On the other hand, IDOs are approved by the community of a decentralized exchange (DEX) instead of a crypto exchange. Given the decentralized nature of these exchanges, anyone can become an approver. The community can vote on projects that they are interested in. This alleviates the gatekeeping bottleneck that IEO exchanges have, giving smaller legitimate projects a chance to shine.
Similar to ICOs, some DEX teams also provide advisory service to listed startups, offering them a tool for engaging their communities in an economy that enhances their products while allowing them to make smart business decisions regarding their assets. However, unlike centralized exchanges, most IDO launchpads have their own native tokens, which in some cases serve as an entry requirement for users to participate in crowdfunding.
Though IDOs are more transparent and accessible to everyone, there are also drawbacks. Since DEXes tend to be a lot smaller than centralized exchanges, new projects might receive substantially smaller traffic than IEOs. Moreover, because every one gets a say in the approval process, long-con projects can also sneak their way in with eye-catching proposals and marketing.
Key Takeaway
Investing in potential crypto startups can generate massive returns if successful. IEO and IDO launchpads are a great place for you to research upcoming innovations and learn more about what they offer. Though not completely risk-free, they offer far more security advantages than ICOs.
The newly launched Ethereum Merge has rendered mining obsolete. So what will happen to all Ethereum mining pools and its miners as well as the millions of dollars worth of hardware in the ecosystem?
What is Ethereum Mining?
Before Ethereum’s Merge on 15th September 2022, the blockchain used proof-of-work, the same consensus protocol as Bitcoin, to validate and record transactions. But unlike Bitcoin which solely uses application-specific integrated circuit (ASIC) miners, you could use graphics processing unit (GPU) of gaming computers to mine ETH. As a result, it was generally easier to mine ETH than Bitcoin since GPUs are more accessible and widely applicable than ASICs.
There were two main ways to mine ETH – pool mining or solo mining:
Pool Mining (working together)
Work with others to mine and share rewards
Get paid per share, on a hourly or daily basis
Less random / dependent on luck
Pools take some fees (0.5-8% depending on pool)
Solo Mining
You mine the entire block reward (differs based on mining difficulty changes) – no pool fees
Random chance and probability – you can go days or months without rewards
Not viable if hashrate is low – single GPU might take years to mine a block
Ethereum mining pools were the go-to options for most miners as solo mining took a very long time to earn rewards. However, this work drew criticism for its impact on the environment and its excessive electricity consumption. It is a highly energy-intensive process as miners around the world pool together large amounts of resources and power to mine ETH. But all of that has changed with the arrival of the Merge on 15th September 2022.
How does the Merge affect Ethereum Mining?
On 15th September 2022, Ethereum switched its consensus protocol to proof-of-stake as part of an update known as the “Merge” that links Beacon Chain and the Ethereum Mainnet. The Beacon Chain is what allows users to stake ETH, which has been operational since the end of 2020. Many people have staked their ETH to support the transition as well as earn rewards on their stake. Here’s the kicker, after the Merge begins, mining difficulty will soar due to the “difficulty bomb”. It is a kind of self-destruct mechanism meant to make proof-of-work calculations almost impossible, incentivizing the move to an environmentally-friendly proof-of-stake model.
What will happen to Ethereum Mining Pools and Miners?
There is a divide in the Ethereum mining community between the organizations that have helped coordinate the resources of individual miners (mining pools) and the individual miners themselves.
Good for Ethereum Mining Pools
For mining pools, the transition does not affect them at all. Since these organizations never did the actual work of generating computing power themselves, they are not affected by the sunk cost of the eventual obsolete mining rigs. Instead, these pooling companies have human capital and infrastructure necessary to organize the pooling of resources, source new clients, and overall manage and maintain the operation and its security.
For this reason, leading Ethereum mining pools like Ethermine or f2pool can simply transition to staking pools. They do not rely on the actual mining itself. It is not a matter of product, only business model. These companies operate on a fee structure, charging individuals for participating in their pools, and it will be unaffected by the move from mining to staking. They only require business development, customer service, and communication with core developers, softwares, and client teams.
Bad for Individual Ethereum Miners
However, for the miners who make up these pools and other independent Ethereum miners, the transition could mean the end for them. People who have benefited from mining ETH, either by managing large mining farms or by contributing moderate amounts of GPU power to mining pools, may be left stranded. They have invested large amounts of money in expensive GPUs or specialized mining rigs that are useless in staking. Some will not even be able to recoup their initial investment as they hoped to profit from mining.
Although validating via proof-of-stake only requires a home PC with stable internet connection, it would require a minimum contribution of 32 ETH, which is a sum far greater than most people’s savings. Essentially, in order to fully cover the hole of lost mining revenues via staking, individual miners would have to establish and operate their own staking pools, which would be a considerably more difficult task than maintaining their own mining rigs.
Potential Solutions for Ethereum Miners
There is really no good option for ETH miners. They can still salvage their GPUs by selling them in the market as gaming computers are still popular products, but it is safe to say that there is certainly no demand for ASICs in the market. They could use them to mine other cryptocurrencies that are compatible with their processors such as Ethereum Classic, Ravencoin or Ergo, but they are also much less in demand than Ethereum. The profit margins are substantially lower.
However, there are certain staking pools that encourage bringing current miners into the fold. According to Bitfly, EtherMine’s parent company, their goal is to “onboard current miners from proof-of-work to proof-of-stake.” They also noted that most deposits to EtherMine’s new staking platform have come from existing miners. But whatever the case is, there is still no easy answer as to how Ethereum miners will ever again come close to generating the revenue produced by mining ETH.
A hard fork is a major change to the blockchain’s protocol that results in the splitting of the blockchain, creating a seperate blockchain that inherits all of its history with the original, but is on its own towards a new direction.
Hours after Ethereum’s successful merge on 15th September 2022, a group known as ETHW Core launched a proof-of-work hard fork of Ethereum known as ETHPoW or ETHW. The hard fork’s purpose is to preserve PoW and keep ETH mining alive beyond the Merge.
The Problems with ETHW
Although ETHW could be a safe haven for ETH miners, there is not a lot of optimism about its success. In fact, there are a lot of underlying issues that the core team has yet to address.
ETHW Post-Launch Network Error
ETHW is getting off to a bad start. Shortly after the ETHW mainnet debut, users began experiencing issues accessing the network. It became clear that the problem was that ETHW had chosen a chain ID already in use by a Bitcoin Cash testnet. If ETHW fails to change its network’s chain ID from the Ethereum mainnet, users could be susceptible to a replay attack — an exploit in which the attacker intercepts and then replicates a valid data transmission going through a network. Given the transparent nature of blockchains, this means that hackers can duplicate your transactions, allowing them to withdraw your funds.
No Backing for Forked Stablecoins
The two leading stablecoins USD Coin (USDC) and Tether (USDT) have officially confirmed to exclusively support Ethereum 2.0. This results in a smooth transition that is essential for the long-term growth of the decentralized finance (DeFi) ecosystem and its platforms.
However, that leaves ETHW high and dry as lack of stablecoin support means insufficient liquidity. This is because 1:1 backing will only exist for the officially recognized blockchains, thus USDC and USDT balances cannot be duplicated onto a new blockchain. This is further amplified by the fact that ETHW announced they would temporarily freeze tokens in certain liquidity pools to “protect user funds.” This did not go well with many as this move is done without their consent and the community did not vote on such change.
No Oracle Support
Apart from facilitating transactions, decentralized applications (DApps) also interact with external data which requires off-chain computing. This is where blockchain oracle technology like Chainlink comes into play. They enhance smart contracts by connecting them with real-world data, events and transactions.
On August 8, Chainlink has also officially confirmed to stay with Ethereum 2.0. This means that any DApps on ETHW can be negatively affected since oracle solutions are essential in retrieving and sharing data without jeopardizing the security of the blockchain.
Lack of Support from Leading DApps and Projects
On 16th August 2022, Aave, a leading decentralized lending protocol on Ethereum, proposed a governance vote to commit to using Ethereum 2.0, giving power to shut down any Aave deployments on any alternative Ethrereum forks. On their blog post, Aave advised developers and DApp teams on the Ethereum network to halt smart contract operations on forked Ethereum blockchains until they become stable.
The lack of support from projects means that any tokens or NFTs on the forked Ethereum chain will less likely be accepted in marketplaces or DeFi applications. In turn this would affect investors who are looking to profit from trading these assets.
As Ethereum is steadily approaching the transition to a Proof-of-Stake mechanism, one notable thing that has changed, aside from further protocol development, has been the change in terminology.
We have already covered Ethereum 2.0 extensively in one of our ongoing blogs where we go in-depth on everything you need to know about Ethereum’s transition to PoS:
Let’s take a closer look at the rebranding from Ethereum 2.0 to the Ethereum Merge, as well as go over the most recent developments in Ethereum’s roadmap as of May 2022.
Check out our latest video- Ethereum Merge: ALL you need to know (including ETHPOW)
Ethereum Merge: ALL you need to know (including ETHPOW)
The move away from using the former term “Eth2.0” that signified the final transition from PoW to PoS was a result of several different developments and considerations, both technical and cultural.
On the technical side, the use of Eth2.0 started to become an inaccurate representation of the PoS transition. Originally, the Ethereum 2.0 roadmap envisioned that both the Phase 0 (Beacon Chain) and Phase 1 (Sharding) would be completed before the final transition. (Clonazepam) But the Beacon Chain was developed faster than expected, making researchers realize that the final migration to a PoS mechanism would be delayed by years due to the focus on sharding. In addition, the ever-growing pressure from the masses about the environmental impact of PoW chains made the migration to PoS that much more pressing.
As the Beacon Chain was deployed, Ethereum L2 rollups started gaining popularity, demonstrating significant scalability potential even for a non-sharded Ethereum blockchain. This released some pressure on solving the scalability challenges that Ethereum’s L1 has faced for years, allowing the R&D team to focus on the remaining Ethereum’s upgrade plans both for the PoW chain, as well the Beacon Chain.
From a cultural perspective, the use of the old terminology would’ve further perpetuated confusion about the nature of Eth1.0 and Eth2.0, making it seem like once Eth2.0 is launched, Eth1.0 will be gone, which is not the case. In addition, scam prevention was another consideration that favoured the rebrand, as the distinction between Eth1.0 and Eth2.0 would’ve likely resulted in scammers trying to convince users to swap their ETH tokens for fictitious ETH2 tokens.
The result of all of this was a decision to move away from the confusing Eth1.0 and Eth2.0 terminology, and rather call the transition to the PoS mechanism on the mainnet The Merge. By choosing to name the process instead of the final outcome (which in reality remains, in essence, the same), a lot of headache and confusion has been avoided.
Progress Towards The Ethereum Merge: Current status
Public testnets being battle-tested
Deployed in late December 2021, the Kintsugi testnet was a public testnet meant to allow execution and consensus client developers and application developers to become familiar with the post-Merge environment. The testnet was bombarded with transactions, bad blocks, and chaotic inputs to battle test it and find bugs.
A new specification for the proceeding public testnet, called Kiln, was published after edge cases from Kintsugi had been discovered. It’s expected to be the last new public testnet to be created before the existing ones are upgraded. Continued extensive testing of the Kiln has been taking place since The Merge took place on it on March 15th 2022. The Ethereum community practised running their nodes, deployed contracts, tested infrastructure, and threw everything they had at it to see if it breaks.
Mainnet shadow forks
Although a lot had been learned since deploying and testing Kintsugi and Kiln testnets, they were still very young testnets with little activity, which prevented proper stress testing of assumptions regarding syncing and state growth. And this is where shadow forking came in. Shadow forking makes it possible to fork an existing testnet, such as Goerli, and the mainnet (with a lot more activity), and add merge related properties to its config, thus allowing the fork to inherit the state of the original testnet.
These shadow forks are short-lived, allowing for testing on them only for a few weeks until a new beacon chain has to be spun up.
Three Goerli testnet shadow forks took place in January and March, and the first mainnet shadow fork happened on April 11th 2022, with the second one following on 23rd April.
The results of the latest mainnet shadow fork have been described by Adrian Sutton from ConsenSys in his twitter thread. The team will continue stress testing main forks, and collaborate with client developers to make them even more robust against edge cases. From now on the main theme as we approach The Merge has been and will be – testing, testing, and even more testing.
Wen Merge? The Triple Halvening, And Price Predictions
As to when The Merge will happen is still somewhat up in the air. No one has, understandably, given any specific dates, but the general consensus is that late Q3 is the time when we are likely to see it finally happen. The dev team’s sole focus is on The Merge, with very little else discussed, as can be seen in the latest AllCoreDevs session update by Tim Beiko.
Price predictions are also under hot debate, as, once The Merge is complete, two factors will influence ETH’s price, one emotional, the other baked into the protocol. Realistic estimates of the fair price of ETH fluctuate around $5000.
The emotional aspect, as experienced by the market, will result from The Merge successfully completing, which will mark the end of the most significant change in the protocol in Ethereum’s history, and solidify the incredible technical competence of Ethereum core devs and researchers, further giving the market confidence in ETH as an asset and the ecosystem as a whole, driving up the price further.
The technical reason for why price is likely to pump is due to the Triple Halvening, which will reduce Ethereum’s annual inflation rate from 4.3% to 0.43%. Following last year’s EIP-1559 upgrade, Ethereum now burns about 70-80% of the fees, with the rest going to PoW miners. Post Merge, these fees will go to the PoS validators. This means that ETH stakers will see their rewards rise to about 8-10%. Staking will lock in significant amounts of ETH, as staked ETH cannot be moved or used in the markets, making enormous amounts of ETH illiquid, further driving up the price. EIP-1559 and The Merge combined are predicted to cause the equivalent of 3 bitcoin halvenings, reducing ETH sell pressure by up to 90%.
In addition, the move to an environmentally friendly PoS mechanism, which will reduce energy consumption by up to 99.95%, will make the asset much more appealing to institutional investors who might’ve been kept away from investing due to public’s pushback on Ethereum’s current energy consumption.
Great progress is being made by the Ethereum team, and the continued successful merges of mainnet forks clearly demonstrate the culmination of 6 years of back-breaking work, and give hope that The Merge truly is just around the corner. For those interested in the nitty-gritty of The Merge preparations, it’s worth checking out The Merge Mainnet Readiness Checklist which lists in detail all of the various tasks that need to be worked through to make The Merge ready for Mainnet release.
Why is the Ethereum Merge so important to crypto traders?
Many cryptocurrency and particularly Ethereum ($ETH) traders are eagerly anticipating the Ethereum Merge because afterward, the issuance of ETH is expected to be reduced by about 90%. This means there will be less ETH in circulation, and in turn, the lower the supply, the higher the demand- potentially resulting in Ethereum prices going up.
ETH Merge is a huge success!
On 15th September 2022 at 06:42:42 UTC at block 15537393, the Merge was completed.
And we finalized!
Happy merge all. This is a big moment for the Ethereum ecosystem. Everyone who helped make the merge happen should feel very proud today.
Missed our historical LIVE Merge party? Check it out here!
Ethereum Merge Party – Watch the Merge live!
How have Ethereum ($ETH) prices reacted to the Merge?
Ethereum ($ETH) prices showed a slight pump in the hours following the Merge. Prices hit a peak of over US$1,640 before coming back down to just under US$1,600. The next crucial point in terms of where ETH prices would go would depend on whether there is any hard fork.
Founders Kyle Davies and Shu Zu were also famous in the cryptocurrency space, with 49k and over 550k Twitter followers respectively.
The fall of Three Arrows Capital
The fall of Three Arrows Capital can be largely attributed to 3 factors: the Axie Infinity hack, the collapse of Terra (LUNA, UST) and failure to meet margin calls.
Axie Infinity hack
Axie Infinity was a “play to earn” blockchain game which at its peak had millions of players worldwide. However, declining popularity and becoming the victim of a US$700m hack in March 2022 caused a huge and seemingly irrevocable blow to the game.
In 2018, Terra was founded by Do Kwon and Daniel Shin. Terra is an open-source blockchain that hosts decentralized applications (dApps) and developer tools. Terra has a native token- $LUNA (now Terra Luna Classic $LUNC), which is used for governance and mining. LUNA has to be burned to mint UST (now Terra Classic USD $USTC) at a ratio of 1:1. This was the only way to obtain UST and take advantage of the various interest rates through staking on the Terra ecosystem. This meant that LUNA was an algorithmic stablecoin i.e. a stablecoin that can only maintain its peg via software and rules.
The risk of these algorithmic stablecoins and why so far they have all failed is because of the “death spiral”. This is a series of events that inevitably led to the demise of a protocol. On 7th May 2022, over US billion worth of UST was unstaked and hundreds of millions worth sold. (Tramadol This huge sale caused prices of UST to fall to 91 cent (i.e. it was no longer maintaining its peg). This caused huge panic in the market with UST holders frantically selling their UST to mitigate their losses, which pushed UST prices further down. A week later on 13th May 2022, prices of UST had already fallen to US$0.01.
Three Arrows Capital was unfortunately caught up in Terra’s collapse since it was heavily invested in LUNA. According to a Twitter post from a whistleblower known as FatMan, Three Arrows Capital purchased 10.9 million locked LUNA for US$559.6 million. However, since the collapse, this LUNA was only worth US$670.45.
In a recent development, a court in Seoul, South Korea issued an arrest warrant against Do Kwon and 5 others who are all currently in Singapore. The 6 persons are accused of violating South Korea’s capital markets law.
Failure to meet margin calls
As a result of suffering losses from the Axie Infinity hack, the Terra collapse, and the crypto market downturn, Three Arrows was unable to meet margin calls from its various lenders. According to the Financial Times, some of these lenders included US-based crypto lender BlockFi, which Three Arrows Capital had borrowed Bitcoin from and was now unable to repay.
Cryptocurrency options and futures exchange Deribit was also chasing down Su Zhu and Kyle Davies as they both kept a low profile since the collapse of Three Arrows Capital. Uncovered messages from Deribit Exchange’s representatives reveal that they have been trying to contact Su Zhu and Kyle Davies in vain. The messages also reveal that Deribit had sold US$85 million worth of BTC and ETH in an attempt to reduce Three Arrows’ position. Deribit also suggested that Three Arrows use their 32 million USDC as collateral.
Three Arrows Capital liquidation
Three Arrows Capital filed for Chapter 15 bankruptcy on 1st July 2022 in New York. The purpose of a chapter 15 bankruptcy is to prevent creditors from seizing a company’s assets located in the US. Meanwhile, liquidation proceedings will continue in the British Virgin Islands where Three Arrows is based.
According to court documents, Three Arrows Capital owed US$3.5 billion to 27 different companies including Voyager Digital. Voyager Digital is a publicly listed crypto brokerage firm that suspended trading and withdrawals shortly before the news of 3AC’s bankruptcy. Other sizable creditors included Genesis Global Trading, which had lent US$2.36 billion to Three Arrows Capital.
Court documents also gave insights as to the remaining assets owned by Three Arrows Capital. These consist of cryptocurrencies such as Bitcoin, Avalanche, and Near, as well as shares of Grayscale Bitcoin Trust and in Deribit. In total, these remaining assets are worth at least US$2.8 billion. In particular, the court document estimated the Deribit shares to be worth around US$500 million. However, as reported by CoinTelegraph, there are anonymous sources that claim the value of the Deribit shares is in fact only around $25 million. The consequence of this is it is possible there will not be sufficient assets to repay all of Three Arrows Capital’s creditors.
Su Zhu and Kyle Davies sues Three Arrows Capital.
Both Su Zhu and Kyle Davies’ whereabouts are currently unknown. Previously, the court issued an order allowing Three Arrows Capital liquidators to demand the pair attend court. It was also revealed that Zhu and Davies were uncooperative with their liquidators. According to a legal document filed by Three Arrows Capital’s liquidators, there were Zoom calls with a “Su Zhu” and “Kyle”. However, it could not be confirmed that it was indeed them because their video was switched off. Also, their audio was muted with neither of them speaking despite being asked questions.
However, it appears that whilst Su Zhu was filing a claim for US$5 million against Three Arrows Capital- his own fund. Kyle Davies also filed an affidavit stating that his wife, Kelli Chen also lent US$65.7 million to Three Arrows Capital.
Su Zhu and Kyle Davies buy a yacht with borrowed funds?
According to a legal document filed by the liquidators of Three Arrows Capital, Su Zhu and Kyle Davies made a down payment on a US$50 million yacht. The founders had boasted that the yacht would be larger than any owned even by Singapore’s richest billionaires. It is speculated that the yacht was purchased with borrowed funds.
Three Arrows Capital CEO Su Zhu to sell US$34.8mil bungalow after liquidation
CEO of Three Arrows Capital Su Zhu is apparently urgently trying to sell the US$34.8mil bungalow in Singapore after 3AC filed for bankruptcy. The 31,854 sq ft bungalow was purchased in December 2021 and was held on trust for his 6-year-old son. According to text messages circulating among property agents, the bungalow is being put up for “very urgent sale”
Zhu and his wife own 3 properties between them including the bungalow which they are planning to sell, spending over US$59.5 million.
For the past decade, we have seen the rapid growth of the cryptocurrency industry, with new innovations emerging every now and then. But with thousands of crypto brands out there, standing out among the rest becomes more difficult by the day. Having a unique concept and building it out is one half of the battle, the other half is marketing and presenting it to the world.
Crypto projects, like any other businesses, require strategic marketing and exposure to attract potential investors and partnerships. Crypto marketing agencies can fill this vital role while crypto ventures can focus on their business and development.
Cinchblock is one of the leading crypto and blockchain marketing firms based in Hong Kong. They specialize in growth hacking and influencer marketing, and are extremely efficient in expanding the brand of web3 startups. They achieve this by leveraging their vast network of influencer power worldwide. As such, they have worked with over 2,500 influencers who cover promotional content that would support the long-term growth of their clients.
Since their launch in 2017, Cinchblock has around 160 clients, holding more than 3,800 marketing campaigns so far. Compared to other crypto marketing agencies, Cinchblock performed exceedingly well in promoting play-to-earn and NFT projects during the GameFi boom in 2021. The agency contributed to the success of several notable GameFi and NFT projects such as MetaWars (9,582% ATH) and Refinable (25,233% ATH). This is largely attributed to the experienced development team that Cinchblock has who understands every aspect of smart contract programming, game development, tokenomics ecosystem design and more.
Founded in 2015, Wachsman is a New York-based strategic communications consultancy firm that has worked alongside some of the largest corporations across the Americas, EMEA, and the APAC regions. Their clients span those operating in heavily-regulated environments, such as institutional banking, insurtech and fintech giants, financial service providers, and even national governments.
Apart from experience and expertise in the traditional financial and policy circles, Wachsman is also highly competent in the blockchain landscape, providing services and solutions for web3 businesses and innovators. They are trusted advisors to numerous leading blockchain networks, payment gateways, cryptocurrency exchanges, DAOs, DeFi protocols, innovation labs and more.
Established in 2018, Coinbound has worked with some of the biggest names in web3 such as MetaMask, TRON, and Cosmos. The company specializes in thought leadership marketing and influencer marketing, managing one of the largest network of crypto influencers in the world across Twitter, YouTube, TikTok, Instagram, and more. Its clients saw a 60% increase in organic traffic following successful social media campaigns.
Coinbound also delivers public relations expertise with contacts at some of the largest crypto publishers such as CoinTelegraph, Decrypt, and Forbes. This helps their clients secure organic coverage from the biggest names in the blockchain industry, reaching a wider audience worldwide.
Founded in 2017, Crypto PR is a global Web3 marketing and PR agency. The strength of this agency comes from the former experience of its founder as a PR consultant for Fortune 500 companies, along with long term experience in Web3. They are well known for their solid narrative building, creative strategy, and trend creation within the Web3 ecosystem.
On the creative front, Crypto PR established a production house to create entertaining video commercials, known to be the only crypto agency with such service, it has launched its first crypto video commercial earlier in August 2021, The Crypto Fortune Teller. Shortly after launching the campaign, many other crypto projects followed this video commercial trend, such as FTX, Crypto.com and Coinbase.
Solutions and Services Provided:
Digital Transformation Advisory Public Relations Investor Relations Influencer Marketing Social & Community Management Creative Advertising
When it comes to tailored crypto marketing services, NinjaPromo is perhaps the best agency in engaging with clients by establishing personal connections. Their team understands all industry principles and practices very well, specializing in helping B2B firms, blockchain infrastructures, FinTech companies, software vendors, and various start-ups with global promotion.
NinjaPromo is characterized by flexibility and innovation, hence their name as ninjas are quick and deadly. They have demonstrated the ability to keep up with the times, adopting the latest developments, technologies and methods of crypto marketing. As such, the agency is highly proficient in helping clients reach their target audience.
Founded in 2021, Coinpresso is a very young crypto marketing agency within its startup phase. But what they lack in age, they make up for with outstanding data-driven results. Within a year, Coinpresso is regarded as the best agency in terms of search engine optimization, search engine marketing, and content marketing.
Their marketing model is based on a click funnel approach and ROI-based hypotheses. In other words, they have a team of talented copywriters and technicians that provide engaging content for users, optimizing click-through rates to drive traffic across a variety of platforms and search engines. This is a very cost-effective way to support the growth of their clients. According to their website, increasing the click-through rate of websites “by as little as 2% can increase revenue by millions of dollars.”
Blockwiz was established in 2019 by Dev Sharma who has previously held executive leadership roles with some of the biggest crypto companies, such as OKX and Paxful. The company was founded upon Sharma struggling to find a crypto marketing agency he could trust.
Because of Sharma’s connections, Blockwiz specializes in developing big, active communities with a number of marketing services and solutions, from influencer marketing campaigns to search engine optimization. As of now, the agency holds one of the largest marketing portfolios with 250 high-profile names including KuCoin and Bybit.
Since 2017, Crowdcreate has been one of the pioneers in blockchain marketing and strategy. The agency is also a global leader in NFT and GameFi marketing, amassing one of the largest communities of crypto influencers and thought leaders. Solana, Axie Infinity, and The Sandbox are some of the world famous names that Crowdcreate has worked with.
Crowdcreate is one of the few marketing agencies who has the resources to host global conferences and events to gain international exposure for their clients. As of today, they have raised $250 million in total across 500+ successful projects.
Blockchain App Factory offers more than just marketing services. With multi-chain support, they create blockchain-based solutions for their clients, helping them streamline development, production, and research. According to their website, they can work with various blockchain networks, including Ethereum, TRON, and EOS. Moreover, all of their services are compliant with existing regulations, and they even provide legal consultations for their clients.
Choosing the right cryptocurrency exchange is crucial to optimizing your crypto investments and trading. In this article, we will be comparing two of the top crypto exchanges in the world: KuCoin and Kraken.
What is KuCoin?
Company Overview
Since its launch in 2017, KuCoin has grown to be one of the largest exchanges by trade volume worldwide, with over $1 trillion accumulated trading volume. 11 million people from more than 200 countries are registered on the platform. Known as the “People’s Exchange”, KuCoin puts user experience first, providing users with multi-language and 24/7 customer service. As such, KuCoin has established local communities all around the world including Japan, Italy, Russia, and India, just to name a few.
Trading Bot Feature
While KuCoin provides advanced trading tools for experienced users, its platform also benefits beginners in the trading scene. In fact, KuCoin offers trading bots in which users can enter specific trading parameters and let the bot take over trading activities. As a result, traders of all levels do not have to go through the hassle of timing entries and exits. It is a passive approach to trading cryptocurrency and maximizing potential profit. The best part is that traders do not have to monitor the market constantly, knowing that their crypto trading portfolio is working for them.
Top Altcoin Exchange
KuCoin has one of the largest selection of altcoins available compared to other major exchanges. There are currently over 700 tokens with new ones being added regularly. Even crypto users from Binance or FTX will often keep KuCoin as a secondary exchange to acquire new altcoins that cannot be found anywhere else.
The platform also offers fiat support for over 50 different currencies. As a result, users from remote locations have access to swapping tokens while avoiding high conversion rates.
In 2015, Kraken opened the first dark pool for Bitcoin, resulting in the trading platform becoming a primary place for institutional investors and high-volume whales to trade Bitcoin in discretion.
Who Founded Kraken?
Kraken was founded by Jesse Powell (CEO) who was a security consultant for Mt. Gox. Powell anticipated the fall of Mt. Gox and began developing Kraken as a potential replacement. According to Powell, he realized that “the exchange is the most critical part of the Bitcoin ecosystem” after learning the situation with Mt. Gox. When it indeed collapsed and failed security audits in 2014, it paved the way for newer and more robust exchanges like Kraken to gain market share.
Key Features of Kraken
Though Kraken only offers 185 coins which is fewer compared to other major exchanges, Kraken allows users to stake popular cryptos and earn attractive APY rewards as high as 23% in yearly rewards. To this day, over $10 billion worth of digital assets are staked on Kraken’s on-chain staking platform, rewarding more than $100 million to clients.
Kraken was also one of the first exchanges to offer spot trading with margin, regulated derivatives and index services. Similar to Coinbase, Kraken also has two apps: Kraken and Kraken Pro. The latter is designed for traders on the go and provides an interface for advanced trading, charting, and order types that are not available on the standard app. Advanced traders can easily trade large volumes at stable prices with low spreads and high rate limits.
Kraken is also active in providing in-dept crypto education. Similar to Binance Academy, Kraken has Kraken Learn that are full of articles, videos, and guides that users need to navigate the crypto world. Crypto is still a relatively niche market. As such, this is an important step to mass adoption as education is the key to onboard newcomers.
KuCoin vs Kraken Overview
In this section, we will take a closer look at what KuCoin and Kraken have to offer and compare them based on these features:
Cryptocurrencies and Products
KuCoin offers more cryptocurrencies than Kraken by a large margin. It prides itself in being the top major crypto exchange that is constantly up to date with the latest digital assets. KuCoin offers more than 700 supported coins, whereas Kraken only has over 185. However, Kraken focuses on providing large volume to its smaller number of cryptos, which is better for trading in general as users can easily trade large volumes at stable prices. If you opt for high risk, high reward investments, KuCoin is the pick. But if you prefer trading large-cap cryptos at a regular basis, Kraken is the better option.
Kraken also offers higher returns on crypto staking and savings. Take Bitcoin for example, Kraken offers a 1% APR, whereas KuCoin only gives 0.12%. However, Kraken’s Bitcoin staking is done off-chain via their internal programs, which is available in eligible countries only. Nevertheless, though both numbers are small, the difference becomes more significant over time.
Both KuCoin and Kraken offer a wide array of trading tools for advanced users. But KuCoin also provides a trading bot for users to earn passive profits without constantly monitoring the market. In terms of convenience, KuCoin is the winner here as traders of all levels can simply let the bot do the trading around the clock. After all, humans cannot compete with bots in terms of speed and calculation. According to their website, KuCoin has over 9 million bots created worldwide.
Fees
Kraken has a more complex fee structure than KuCoin. Fees are incurred across multiple purchase categories such as (1) Kraken Instant Buy, (2) Kraken Pro, (3) Stablecoins/Pegged Token/FX Pairs, (4) Margin, (5) Futures, and (6) NFTs. On the other hand, KuCoin only has differing fees for spot and futures.
Both exchanges charge no fees for crypto deposits, though Kraken charges an address setup fee for certain assets. In terms of trading fees, KuCoin’s maker and taker fee is between 0.01-0.1%, whereas Kraken’s maker and taker fee is between 0.00% and 0.26%. KuCoin lowers trading fees based on the amount of KCS (KuCoin Shares) the user is holding, whereas Kraken gives discounts based on monthly trading volume.
For most retail investors, KuCoin is the clear winner as the benefit of holding KCS is twofold: lowering trading fees and appreciation of KCS value over time. However, for whales who trade large volumes regularly, Kraken is the better option.
On the other hand, though KuCoin shares most of the security features as Kraken including KYC verification and multi-factor authentication, KuCoin has suffered a major breach in 2020. The hackers managed to obtain the keys to some of the biggest wallets on the exchange, stealing over $281 million worth of coins. Although $204 million were recovered within weeks of the attack, a lot of users in the crypto space had lost faith in KuCoin. However, since the incident, the exchange has been actively upgrading their security mechanisms and performing periodic reviews to protect users’ privacy and assets.
Key Takeaways
If you prefer spot trading and investing in high risk, high reward altcoins, KuCoin is the better choice.
If you want to trade without going through the hassle of monitoring the market constantly, KuCoin is also better as they have a trading bot who can help you trade within specific parameters you set up.
If you are an advanced trader or a whale, Kraken is far superior than KuCoin as they have an app (Kraken Pro) specifically designed for high-level trading and deep liquidity to support large volume trades with low fees.
If you value security first, Kraken is the clear winner as they have never been hacked before, and is one of the few exchanges that operates under U.S. regulations.
One of the core problems with the Ethereum network today is scalability. As more and more decentralized apps (dApps) are built on the network, the number of users and transactions increases. This has slowed down the speed of transactions and driven up the cost of using the network, creating the need for scaling solutions.
At its full capacity, the Ethereum network is only able to process 15 transactions per second. To put Ethereum’s scaling limits into perspective, consider that Visa handles around 1,700 transactions per second on average. Therefore, increasing the network capacity in terms of speed and throughput is fundamental to the meaningful and mass adoption of Ethereum.
There are multiple solutions being researched, tested and implemented that take different approaches to achieve similar goals. Two solutions that we will explore in this article are known as sidechains and optimistic rollups.
Check out our explainer video on layer 2 solutions such as Arbitrum, Boba, Optimism, and Ethereum 2.0
The Ethereum main chain is known as Layer 1. Layer 1 applications and smart contracts interact directly with the native chain. Layer 2 refers to a series of different protocols that facilitate the creation of smart contracts and decentralized applications (dApps) on top of the core Ethereum blockchain.
Operating on Layer 2 frees up Layer 1 by taking transactions off the main chain, offloading it to Layer 2, enabling them to interact, and then recording the remainder of the whole transactions back to Layer 1. Due to transactions being processed off-chain on Layer 2, Ethereum benefits from higher transaction processing capacity, faster confirmation times, and lower gas fees.
In fact, many believe that Layer 2 solutions will be how Ethereum wins over mainstream users. It is estimated that 2,000 – 4,000 transactions per second can be processed in Layer 2, which is already in line with Visa’s processing capabilities. By combining the scaling of Layer 1 with Ethereum 2.0 and Layer 2, Ethereum is set to obtain a powerful economic bandwidth.
Sidechains: Polygon Network
Sidechains are a Layer 2 solution utilizing separate blockchains that run in parallel to the Ethereum main chain but operate independently, hence increasing its scalability.
Polygon is the most popular sidechain that aims to scale Ethereum by building and connecting Ethereum-compatible blockchain networks. Polygon operates on its own consensus mechanism and also has its own native token known as $MATIC.
Because sidechains run on a separate blockchain, they do not inherit the security of Layer 1. If a sidechain is hacked or compromised, the damage will be contained within that chain and will not affect the main chain. Conversely, should the main chain become compromised, the sidechain can still operate.
Sidechains also provide room for a lot of flexibility, allowing developers to experiment with new features or software updates before pushing them onto the main chain.
Rollups Explained: Optimistic Rollups & Zero Knowledge Rollups
Rollups are another Layer 2 solution intended to solve Ethereum’s scalability and complement the network. Rollups interact with the main chain, therefore inheriting Layer 1’s security features as well as its secure consensus mechanism. The term ‘rollup’ refers to the way that the chain bundles many transactions to be submitted to the main chain.
Because rollups use smart contracts that reside within Ethereum, they do not require a native token like Polygon, but instead use $ETH as their currency. Rollups seem to be the most sound scaling solution for Ethereum as it does not compromise the security and sovereignty of Layer 1.
There are basically two types of rollups: Optimistic Rollups and Zero Knowledge Rollups (ZK Rollups). Both aim to scale Ethereum by processing transactions on Layer 2 before submitting the results back to Ethereum. However, the difference is in how they validate transactions.
In simple terms, Optimistic Rollups assume that transactions are valid — hence an optimistic outlook. However, it also allows what are called “watchers” to call out fraudulent transactions since blockchain is transparent and public. If a watcher proves instances of fraud, the transaction is reverted, the bad actor penalized, and the watcher rewarded to incentivize them.
On the other hand, Zero Knowledge Rollups attempt to prove that transactions are valid. They do so by submitting validity proof to an Ethereum smart contract along with the bundled transactions.
Optimistic Rollups are currently the more popular option, so let us look at some projects that have adopted this mechanism. These projects are Arbitrum, Boba, and Optimism.
Optimistic Rollups: Arbitrum, Boba & Optimism
Arbitrum, Boba and Optimism are 3 projects which have the same goals of scaling Ethereum and reducing gas fees. All of these Layer 2 projects are competing with one another to be the best network. Therefore, each project offers different features to stand out from the others.
Arbitrum describes itself as a Layer 2 solution designed to improve the capabilities of Ethereum smart contracts — boosting their speed and scalability while adding additional privacy features to boot. Arbitrum is, according to the team, around 90-95% cheaper than Ethereum. And with their Nitro being launched soon, they expect costs to be cut even further.
Optimism is an EVM-compatible Optimistic Rollup chain designed to be fast, simple, and secure. Optimism pledges to uphold the values of Ethereum by producing infrastructure that promotes the growth and sustainability of public goods.
Boba Network is a next-generation Layer 2 scaling solution that reduces gas fees, improves transaction throughput, and extends the capabilities of smart contracts, shrinking the Optimistic Rollup exit period from seven days to only a few minutes, while giving liquidity pools (LPs) incentivized yield farming opportunities.
Arbitrum’s fraud proofs seek to find the particular point of disagreement over transaction history. In contrast, Optimism’s tech looks at fraud a bit more holistically. And this means that Arbitrum has a higher transaction capacity equating to higher performance.
Optimistic Rollups have a time period in which users can dispute transactions and call fraud. Both Arbitrum and Optimism allow one week for that dispute period, which means that transactions in a bundle under suspicion can be held in limbo for one week before they are verified and released. This is where Boba comes in as a serious player.
Instead of having funds locked for several days, Boba’s solution brings the dispute period down to only a few minutes. It also provides incentivized yield farming opportunities, both serving as very attractive features in comparison to its competitors.
Will Ethereum 2.0 Make Layer 2 Solutions Irrelevant?
Ethereum 2.0 is regarded as the long-term solution that can bring speed, efficiency, and scalability to the Ethereum network. The long awaited upgrade will move the network from a Proof-of-Work consensus to a Proof-of-Stake consensus, a much more energy efficient method of maintaining the network that uses validators instead of miners.
Ethereum 2.0 is currently slowly being released in different phases and will ultimately speed up transactions as well as drastically reduce the cost of gas fees. That brings up the question: Will Ethereum 2.0 make all these Layer 2 solutions irrelevant?
While there are many different opinions and discussions surrounding this topic, however, we think that all of these solutions can coexist and benefit the network as well as its economy.
This is because despite the upgrade, Ethereum 2.0 may still not be able to handle the amount of transactions per second required for widespread adoption. The impressive capabilities of Layer 2 solutions could eradicate Ethereum’s scalability issues for good, allowing the network to improve other aspects and prevent congestion on the main chain.
Final Thoughts: Why Are So Many Solutions Needed?
There is no debate that Ethereum has a stronghold over developer mindshare. It is the first network that enabled developers to build truly unstoppable decentralized applications with global distribution from day one. But competition is coming fast, and as it stands today, Ethereum will not be able to handle the scale necessary for millions of users. If the network wants to retain the same level of decentralization, it will have to look for new ways to structure use around the main blockchain.
As such, there are currently several Layer 2 solutions that aim to resolve Ethereum’s scaling issues. There are also some hybrid solutions which seek to improve the network’s scalability by combining the technologies. But is there really a need for so many solutions?
We say yes, because multiple solutions can help reduce the overall traffic on any one part of the network, and also prevent single points of failure. The whole is greater than the sum of its parts. Different solutions can exist and work in harmony, allowing for an exponential effect on future transaction speed and throughput. Furthermore, not all solutions require utilizing the Ethereum consensus algorithm directly, and alternatives can offer benefits that would otherwise be difficult to achieve.
If Ethereum achieves its full potential of becoming a global trust layer, it is likely that these solutions and more will be required to scale the network in combination with Ethereum 2.0. In the future, the Ethereum ecosystem could see significant change as new projects assess the benefits and drawbacks of running on Layer 2.
If all of these solutions can come together in harmony, Ethereum will achieve a blockchain system that can match the speed and scale of programmatic advertising – one that can be used by industries with high data processing needs as well as users worldwide.
NFTs (non-fungible tokens) have become very popular amongst cryptocurrency traders and are drawing a lot of attention from several industries. The world of art has greatly benefitted from the sector, more than other industries (so far) because it opens creators and potential buyers to an ever-expanding marketplace. Generally, this stems from NFTs’ non-fungible nature, meaning that each one is unique.
Table of Contents
What makes NFTs special?
Anyone can trade one Bitcoin (BTC) or Ether (ETH) for another and end up with the same asset they traded in terms of value and usability. However, non-fungibility means that no two assets are alike. If you trade one NFT for another, the newly-received asset will be fundamentally different. In the art sector, this allows people to buy directly from the creator, with the assurance that there is no duplicate anywhere. NFTs have also created a whole asset class and industry of NFT speculators which buy, sell and trade them for profit. There are estimates that in 2021 alone, there were over US$23 billion worth of trades in NFTs. In fact, the most expensive NFT sold in 2021 was Beeple’s The First 5,000 Days, which sold for US$69.3 million.
Some Common NFT Scams
However, as with most up-and-coming industries, the NFT space is rife with its fair share of scams. Malicious players find ways to take advantage of buyers pumping money into the industry. Scammers are also becoming more sophisticated with their methods and will go to any lengths to swindle NFT holders, especially since some NFTs are worth millions. Here are some common NFT scams.
Fake offers
Scammers frequently entice NFT holders with false offers. Known methods include phishing emails, fake links, and service offers that require people to sign malicious contracts. Sometimes, people willingly give up their signatures for seemingly legitimate reasons, such as a paid offer to help animate your NFT. Tokens and NFTs may get stolen after you sign the transaction. In December 2021, scammers hacked the NFT marketplace Fractal, pushing a link to prospective buyers through the platform’s official Discord. Within 10 minutes, around 370 users lost 862 SOL, worth more than US$150,000 at the time.
False NFT projects
The NFT space has seen several rug pull scams where a known or unknown creator publishes an NFT for sale. For many reasons, including the possibility of high returns, people may skip adequate due diligence and quickly sink money into a new NFT with growing popularity. In many cases, these projects eventually lose their value and can’t be sold for a profit or the initial capital. The unknown creators then take all the money and are almost always unreachable. A popular example is the Frosties rug pull and scam. In January, buyers who purchased pieces of the cartoon ice cream digital collection lost a total of . (https://inboundrem.com) 3 million after the creators and funds disappeared from OpenSea.
Counterfeit NFTs
Scammers can create fake NFTs that resemble originals, especially when the original is not very popular. The forger would then list the fake NFT on a marketplace where an unsuspecting buyer may purchase what they think is the authentic version. Since no one wants a plagiarized or counterfeit NFT, the buyer is left with a worthless asset.
Pump and dump scams
Here, a group of scammers artificially pump a worthless NFT collection which eventually drives price and demand from speculators. Within a short period, the collection garners enough attention that people consider it valuable and start buying. However, the group will pull the plug and disappear as soon as they make enough money from the sale. The price of the NFT eventually tanks, leaving holders unable to resell their worthless NFTs. A relevant example of a pump-and-dump scam is the Squid Game token. Last year, unknown creators launched a token that exploited the popularity of Netflix’s Squid Game series. The SQUID token pumped past $2,800 and eventually crashed to $0. The scammers made away with more than $3 million in total and have still not been found.
Fake Holder Verification Bots
Scammers may create programs that impersonate authentic verification bots used with discord servers. Owners then allow approvals for these fake bots that transfer sensitive information to scammers who steal the NFTs.
How to Avoid NFT Scams
All players in the NFT marketplace should know how to avoid scams. Due diligence often does the trick, as fake projects or assets usually have features that stick out. Generally, avoiding scams requires a lot of caution from NFT holders. Owners looking to sell their NFTs must set approvals. The process requires the seller to set an approval so that the marketplace can transact on the owner’s behalf if, for example, someone else buys the asset. While popular marketplaces like OpenSea are relatively safe, there is still a significant risk with setting approvals.
Approvals give the receiving contract or address the authority needed to transfer tokens. If a malicious bot or contract has the approval, your funds are not safe. To avoid these scams, there are a few things to note.
Setting approvals and verification
The blockchain is a public ledger and does not need permission for people to read stored information. However, executing transactions on the blockchain requires gas. When transacting with a third-party bot, marketplace, or address, any verification requiring gas fees is likely illicit. In the same way, setting approvals should cost some gas. There might be a serious problem if a transaction to set an approval is gasless.
Due diligence
It is important to do intensive research into an NFT collection or project before purchasing it. Trustworthy projects should have verifiable teams compromised of members without fraudulent histories. Depending on the project, a whitepaper might also be necessary. For phishing scams, buyers must double-check email addresses and links to ensure authenticity. Buyers must also do their due diligence to avoid plagiarized or counterfeit NFTs by confirming verification ticks on marketplaces or sticking to links posted on the project’s official Discord.
Discord Notes
Buyers using Collabland for management can attach specific notes to authentic bots in a server. This note will be available anywhere you see the bot, making it easy to avoid corrupt bots.
Personal Safety
All wallet credentials should only be in safe locations that are not easily accessible by third parties. It is inadvisable to keep this information on a mobile phone or with someone else. All owners should also consider unique passwords in addition to two-factor authentication (2FA).
Conclusion: Staying Safe
Avoiding NFT scams requires continuous effort. Buyers who have done their due diligence should consider taking further steps, including actions not listed above. Since the NFT space is still somewhat nascent, buyers should expect that scammers may come up with newer ways to steal NFTs or swindle unsuspecting users. Therefore, traders must take additional protective steps when buying, selling, or setting approvals for NFTs.
As savvy investors, it is easy to get carried away by flashy numbers like 1000% staking rewards. But what most beginners overlook is the three little letters standing right next to it: APY or APR.
Although APY and APR may sound identical, there is a significant difference to the calculations for returns over a period of time. There are also underlying risk factors of certain decentralized finance (DeFi) products with very high return on investment (ROI).
Therefore, it is crucial that you have a better understanding of the formulas used to generate these two measures as well as what they signify for the potential returns on your crypto investments.
What is APR?
APR, which stands for annual percentage rate, is interest you gain from your investment in a year. It is also known as “simple interest” and its formula is straightforward.
For example, if you stake 10,000 USDT at an APR of 10%, you will earn $1,000 in interest after a year. Your interest is simply calculated by multiplying the principal amount ($10,000) and the APR (10%). In a year, your capital will amount to $11,000, and in two years, it will be $12,000, and so on.
As such, APR is always quoted as a fixed yearly rate, thus a simpler and more static metric. However, with APY, interest calculations become slightly more complicated with compounding taken into account.
What is APY?
APY, short for annual percentage yield, is the annual rate of compound return earned on an investment. The keyword here is “compound.”
What is Compound Interest?
Compound interest is not only earning interest on your initial investment, but you are also earning interest on the accrued interests. This effect is called “compounding.”
A simple scenario would be like this. Let’s say this time you stake 10,000 USDT at an APY of 10% compounded monthly. This means that interest is added to your principal sum each month, and the sum on which you earn interest increases over time. In other words, you will have more money earning interest each month.
In one year, your capital will amount to $11,047.13, which is $47.13 more in interest by adding the effect of compound interest.
The Power of Compound Interest
The aforementioned scenario is an instance of monthly compounding. In fact, there are different compounding periods depending on the institution. Interests can be compounded quarterly, monthly, week, or daily.
The more frequent the compounding periods, the higher your effective yield is going to be. For example, if your staked 10,000 USDT is compounded daily at 10% APY, then you will earn $11,051.56 in one year, which is $4.43 more than monthly compounding.
It may not seem like a big difference but the power of compounding is more significant over more extended periods. After five years, you will have earned around $16,500 if compounded, which is $1,500 more than simple interest.
As illustrated in the graph above, the APR line is linear, whereas the APY line is exponential, which is always higher than the linear as time progresses. The principal remains the same if no investment is made.
You can use an APY calculator to calculate how much you can earn with different compounding periods and different time frames.
How does APY Work in DeFi?
The previous section is a simplified example of how compound interest works in general. However, APY investments work differently in DeFi. APYs in the crypto space constantly change due to several factors. As such, as a rule of thumb, the APY shown on DeFi products should be considered as estimates.
Supply and Demand
As with any market economy, the law of supply and demand influences the assets’ price. Since interest is generated based on the demand to borrow and trade crypto, market dynamics play a role in determining the rates.
Since the crypto market is volatile in nature, the APY changes according to the level of demand for trading liquidity of the token. If there is plenty of supply, APY interest rates tend to be lower. Conversely, if the demand is high, the APY usually increases as well.
Inflation
Inflation refers to the loss in value of a currency over time. In crypto, inflation is brought about by adding new tokens at a predetermined rate to the blockchain. The rate of inflation affects the staking returns. If the inflation rate exceeds the interest earned on a staked token, then the investor is losing money.
Different Compounding Periods
Different projects have specified blockchain protocols which play a part in the calculation of the APY. As a result, compounding periods may vary for each project. For example, some projects compound interest weekly, daily, or even according to the mined block per block cycle. It is important to note that the more frequent the compounding periods, the higher the APY will be.
Most crypto projects offer shorter compounding periods, with weekly compounding being one of the most popular ones. This is to help potential investors mitigate the effects of price swings in the long run, since crypto prices rise and fall over time. This way investors can do their compounding manually, and calculate their returns within specific time frames, so that they can strategize their entries and exits when engaging in DeFi protocols.
Comparing APY vs APR Investments
Although APY seems to be the obvious choice in maximizing ROI, there are also underlying risk factors when it comes to APY investments in general.
Prevalence of Non-Sustainable APY Projects
Projects with very high APYs, as high as 1,000% or more, are high risk/high reward investments. This is especially common for newly launched DeFi projects, because the price of a token is highly volatile during its early phase. To keep investors in the ecosystem, the project would provide trading pairs for the token also known as liquidity pools.
Liquidity pools are one of the products that allow for staking and generating returns for providing liquidity. As such, projects will offer high APYs to offset impermanent loss, which occurs when the ratio of tokens in the liquidity pool is unbalanced. This also incentivizes users to continue providing liquidity instead of selling.
However, there is a possibility of a dump for the project. Since most DeFi protocol tokens are inflationary in nature, the revenue capacity for the protocol might be insufficient for everyone to share. In other words, if everyone is earning 1,000% APY and the token has no real utility, it then becomes a race for the liquidity providers to see who cashes out first. As a result, this drives the token price and APY down, leaving real users of the protocol with no exit liquidity.
Distinction of DeFi Product Yields
Products with a higher APY will not necessarily generate more returns than those with a lower APR. It depends on what the APY and APR mean in relation to the DeFi product.
Some products advertise the term “APY” referring to the cryptocurrency earned, and not the actual yield in fiat currency. Some beginners often mistake the APY crypto rewards for fiat currency, which blindly clouds their judgement.
This is a critical distinction to point out because the value of your investment in fiat terms may increase or decrease depending on the volatility of crypto asset prices. Even if you continue to earn high APY in crypto, the value of your investment in fiat terms may still be lower than the initial amount you placed in fiat, should the price of the crypto asset decline.
Key Takeaway
APR (annual percentage rate) is interest you gain from your investment in a year. On the other hand, APY (annual percentage yield) is the annual rate of compound return earned on an investment, which means you earn interest on previous interests accrued.
Although APY is the obvious choice in maximizing ROI, there are also underlying risk factors behind it. Therefore, it is crucial to comprehend how these two measures are determined as well as what it means for the potential returns on your digital investments.
