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Tag: Defi

  • Yearn.Finance merging the DeFi Ecosystem

    Yearn.Finance merging the DeFi Ecosystem

    The decentralized finance (DeFi) space has grown to include platforms in various sectors such as spot trading, derivatives, and futures. Interestingly, some networks such as Yearn Finance support yield farmers and liquidity providers through an aggregation service.

    Instead of offering spot trading, lending, or borrowing functionalities, it allows users to deposit funds, then it distributes it based on projected returns and the risks involved.

    However, this isn’t enough to drive meaningful DeFi adoption. Therefore, Yearn followed the partnership route to expand its ecosystem and to improve interoperability between DeFi systems.

    In this article, we look at the most impactful partnerships in the Yearn ecosystem:

    Yearn + SushiSwap

    On November 3, 2020, Yearn’s creator, Andre Cronje, took to Medium to announce the coming together of his platform and Sushiswap. The connection between the two platforms meets as Sushi improves its automated market-making (AMM) outlooks while Yearn digs deeper into aggregating formulas. These qualities brought a need for cooperation between them, leading to:

    • A combination of development resources.
    • A rise in the total value locked (TVL) on each platform.
    • Working together to develop and launch Deriswap, a platform bringing together spot trading, derivatives, and futures trading.
    • Introducing Keep3r Network, an on-chain price oracle on the second iteration of Sushswap.
    • Additionally, liquidity providers on Sushi provide collateral for the Sushi money market.

    Partnership with Cream Protocol

    The DeFi aggregator platform partnered with Cream, a lending network similar to Aave, in developing the system’s second version. With the partnership, the Yearn and Cream team created Cream V2, which introduced or enhanced leverage and lending features. Notably, the new platform enables yield farming using leverage.

    Additionally, Cream V2 acts as a springboard to power stable credit and yet-to-be-built lending functionalities. Apart from merging resources allocated towards development and seeing a rise in individual TVL, the partnership saw shares in Yearn Vaults qualify to provide collateral in Cream.

    One feature added to Cream’s new version includes rotating multi-signature keys in order to improve deployment, iteration, and testing. Unchanged features include those that touch on governance and native tokens.

    Akropolis and Yearn

    The partnership is rather a unique one. Why? It aims to bring out the best in each platform’s team. Therefore, each team continues with their previous journey but leans on the other if they need help.

    Furthermore, Akropolis users can access Yearn and a host of other networks such as Cream and Pickle. In return, Yearn investors benefit from Akropolis’s investment strategies and a pool of institutional networks. The partnership between the two platforms brought with it improvements on Akropolis.

    For instance, there was a development of new vaults, an institutional application, some strategies, and a rotation of multi-signature. In addition, Akropolis’s native token was upgraded to be able to track losses.

    The PowerPool Partnership

    PowerPool is a decentralized protocol accumulating governance strengths in systems built on the Ethereum blockchain. In short, it brings together governance tokens from a wide range of DeFi protocols, such as Compound and Balancer.

    Yearn x Powerpool
    Yearn x Powerpool (source: Yearn Finance Newsletter #13)

    The partnership with Yearn Finance connected YFI, the governance token on Yearn, with PowerPool’s PowerIndex. PowerIndex provides a DeFi index inspired by distributed exchange-traded funds (ETFs). The index exudes meta-governance functionalities and contains eight tokens, including YFI.

    Note that the meta-governance aspect rides on concentrating user tokens from different DeFi platforms into a single contract. Next, the tokens’ voting weight is delegated to a group consensus. Notably, the contract generates a token that its holders can use to decide the other tokens’ fate in the pool.

    So, what does the partnership bring to Yearn?

    • Having a share of the index gives DeFi lovers a share in Yearn.
    • It increases participation in YFI governance issues.
    • PowerIndex supports swapping. Thus, anyone can exchange another platform’s token with YFI and vice versa.
    • In return, Yearn benefits from more liquidity. Additionally, pooling YFI helps stabilize its price.

    The Cover Merger

    Although Cronje formally announced the partnership on November 28, 2020, the two platforms have been collaborating since Cover’s launch. The marriage between the two opens doors to advanced features targeting optimization, among other aspects.

    The partnership allows Curve to provide backstop coverage to products built on Yearn. Their coming together allows Cronje’s network to enjoy Cover’s range of coverage known for supporting multiple collaterals. Yearn can mitigate risks for users through vault coverage. That’s not all. Underwriting coverage on Yearn becomes more profitable.

    Yearn x Cover (source: Yearn & Cover merger medium article)

    Fortunately, the benefits aren’t one way. For Cover, it’s hoisted to expand its wings to unchartered money markets. Additionally, it’s empowered to seek a bigger share of perpetual coverage and other products in the market. However, components such as the native COVER currency remain intact.

    Pickle and Yearn

    This is another key partnership in the Yearn ecosystem. Its uniqueness emanates from the fact that it’s supposed to eradicate duplicate works among the two teams. Doing so lets each team and individuals within a team work on what they’re extremely good at.

    As a result, Pickle will launch new features such as reward Gauges. Governing members on the Pickle ecosystem receive DILL tokens when they lock their tokens for governance-related purposes. DILL holders share Gauge performance, withdrawal, and deposit fees.

    On the other hand, Yearn users, especially Vault depositors, are incentivized to interact with Gauges through Vault shares. The depositors also receive more rewards by setting aside Pickle tokens to receive DILL. (www.chronicpainpartners.com)

    Others benefits originating from the partnership include:

    • A merger of the platforms’ TVL.
    • Pickle finds its way into the Yearn ecosystem.
    • Pickle enjoys Yearn’s security, among other features.
    • Pickle’s reward Gauges rake in incentives from Yearn depositors.
    • The two protocols’ teams work together on strategy creation and split profits from the strategies.
    • There’s an overall increase in rewards for users in both circles.

    Conclusion

    By expanding the Yearn ecosystem, Cronje and his team seek to build an inter-connected DeFi world. With everything connected to everything, DeFi adoption naturally sets in.

    Apart from interconnection and adoption, the partnerships focus on, for example, reducing the duplication of roles within teams working on DeFi projects. This encourages the birth of new products and features to help drive growth in the space.

    In the process, DeFi enthusiasts benefit from enhanced products and yields, which further encourage interaction with DeFi-focused 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

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    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.

  • Duck Liquidity Pool (DLP) by DuckDAO ($DUCK)

    Duck Liquidity Pool (DLP) by DuckDAO ($DUCK)

    Duck Liquidity Pool ($DUCK) is a DeFi Market Maker protocol, developed by DuckDAO, one of the biggest cryptocurrency community that provides funding and marketing support to early-stage crypto projects.

    The boom of decentralized finance (DeFi) in recent months has ushered in a new profit-making strategy for crypto traders, beginners and advanced alike. Decentralized exchanges (DEX) rely on liquidity pools to help power their market-makers. While the Duck Liquidity Pool is a new entrant in DeFi, it has already captured the attention of many users in the space thanks to its high APY and token burning model.

    https://youtu.be/8MNKafDgW0o

    What is the Duck Liquidity Pool?

    The Duck Liquidity Pool (DLP) is DuckDAO’s own market maker. The funds that supply its pool came from the sale of pre-mined tokens and can be accessible in many other protocols and exchanges. In the meantime, projects that are supported by DuckDAO will be the first to be able to tap the pool. The ticker for the pool is $DUCK.

    The unique feature that distinguishes DLP from others is its “unilateral burn” strategy, or the one-sided token burn model. It is designed to burn 50% of all earned rewards (more on this later).

    The APY level for DLP is high and its suppliers can receive as much as 50% of the profits from market making, airdrop of incubated project tokens, as well as non-fungible token (NFT) campaigns. Such a feature enables yield farmers the ability to earn profit by just providing liquidity to DuckDAO’s market maker.

    To participate in the DLP, users have to lock their cryptocurrency holdings by depositing their funds in the pool. In return, they receive DUCK tokens as a reward for supplying funds to the pool.

    DuckDAO’s Native Token ($DUCK)

    DUCK token is the DuckDAO’s native utility token, which also powers the incentive model for the Duck Liquidity Pool. The token has the following use cases:

    • Yield farming on Uniswap pools – Staking tokens help contribute liquidity to DUCK and DDIM pools. For this, they earn profit through DLP.
    • Reward token for market-making profit – Half of the profit from the market maker is returned to the community who belong to the liquidity pool. If the performance of DLP is good, the profit for the yield farmers grows in proportion as well.
    • Project token airdrops
    • Non-fungible token as reward

    Deflationary Farming: “One-Side-Burn”

    This is touted by the team as “Yield Farming 2.0,” which is designed to support a deflationary, unilateral burning of tokens. To understand how this works, we must first look at how the current yield farming mechanism works.

    The Usual Scenario for Most Liquidity Pools

    Commonly, yield farming pools in the DeFi space look very advanced for the average trader. Not only does this create a psychological barrier to entry, but it also makes profit-making a little more difficult for someone new to yield farming.

    Another issue that traders face is the inflationary structure of the incentive mechanism in most liquidity pools. This is because, in order to provide rewards to yield farmers, mined tokens have to be released into the market. This model isn’t designed for long-term effectiveness since with more reward tokens in supply over time, we can expect its value to depreciate as well.

    Duck’s Unilateral Burn

    $DUCK, on the other hand, is designed to support long-term yield farming strategies. Even beginners on liquidity pools can just stake and earn a part of the profit that DuckDAO’s market maker gets.

    $DUCK One-Side-Burn Deflationary Model (Source: DuckDAO website)

    One-Side-Burn is a deflationary model that is designed to burn 50% of the carry pair as soon as the liquidity provider decides to cash in a portion of his stake.

    What happens in such a situation is that users lose one side of their liquidity as the tokens are burned. And when someone decides to exit the pool completely, his entire liquidity is also burned and further lowers the DUCK tokens in supply.

    While this model may seem counterintuitive for profit-earning at first, over-time, the value of the tokens is going to be greater than what it was when a user has staked in the pool. That is why DLP’s design appears to be much better in the long run.

    Duck Liquidity Pool Market-Maker Models

    Project Token Purchase

    DLP purchases tokens in order to facilitate buy and sell liquidity.

    Duck Liquidity Pool Business Model – Project Token Purchase (Source: Duck Liquidity Pool (DLP) Blackpaper)

    Project Token Borrow

    DLP loans tokens against collateral in order to facilitate buy and sell liquidity.

    Duck Liquidity Pool Business Model – Project Token Borrow (Source: Duck Liquidity Pool (DLP) Blackpaper)

    Fixed Fee Model

    The protocol can charge a fixed service fee for listings that have decided to provide buy and sell liquidity on their own.

    Duck Liquidity Pool Business Model – Fixed Fee Model (Source: Duck Liquidity Pool (DLP) Blackpaper)

    Conclusion

    DeFi has enabled the birth of new profit-making strategies for traders in the space. However, whether existing liquidity pools can support long-term yield farming models is another question altogether. DLP’s model, which is powered by the ‘unilateral burn’ design, appears to be more promising.

    To be fair, like many other pools, the profit it can generate for stakers is also influenced by the number of users joining the pool. This is why it is important to look into that as well before deciding to lock your tokens and supply liquidity to the pool.

    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

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    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.

  • Unido ($UDO): Crypto Banking and DeFi for Enterprise

    Unido ($UDO): Crypto Banking and DeFi for Enterprise

    Unido ($UDO), powered by Polkadot, provides enterprises crypto-asset management solutions, that specialize in governance, security, and interoperability within the crypto banking sphere guaranteeing the satisfaction of all users.


    Background

    Powered by Web3 blockchain Polkadot, Unido was founded by Chris Weddle who has over 20 years of experience within the blockchain sector. The project was initiated in 2017 and is anchored by an experienced team of finance experts, software developers, and blockchain developers. They all come from well-known financial and development firms such as Goldman Sachs, Wipro, and Macquarie.

    Unido’s Founder: Chris Weddle (Source: Unido website)

    Through the Unido project, the team has successfully managed to solve security and accessibility challenges with its distinct and dynamic implementation of a blockchain-based management tool that facilitates the handling of crypto assets.

    What is Unido?

    Unido is a technology ecosystem that addresses the governance, security, and accessibility challenges of decentralized applications, and enables companies to manage crypto assets and capitalize on DeFi.

    Unido’s distinct protocol facilitates investment in DeFi by leveraging its efficient proprietary and multi-sig key signing technology. Furthermore, users have the unique capability to manage crypto banking operations in complete security.

    Under the decentralized platform, assets management enterprises and crypto native companies are ensured agility and efficiency for the custody of their respective digital assets. This creates a strong bridge for firms and organizations to interface with DeFi networks as they remain compliant with licensing and regulatory requirements.

    The platform’s algorithm works best by leveraging, as well as supplying clients with a great deal of crypto trading, payments, and banking solutions.

    Through Unido’s user-friendly protocol, participants essentially have access to three main features all responsible for the system’s special implementation of the blockchain, namely, Enterprise Crypto Banking Suite, DeFi Vault Access, and Governance/Security features.

    Enterprise Crypto Banking Suite

    A business banking portal, through which firms can manage day-to-day operations and capital expenditure. This feature empowers users with a multi-user wallet management protocol that creates, assigns, and manages clients’ wallets.

    Additionally, it is equipped with user governance tools providing access to rights and access requirements unique to the blockchain solution. Overall, this business banking portal is a simple and intuitive instrument with an interoperable, modular architecture that provides analytics on DeFi transactions, activities, and trends.

    DeFi Vault Access

    The vault access is a multi-signature enterprise wallet or DeFi vault used to store, manage, and invest digital assets in an efficient and safe manner.

    The team behind the wallet describes it as a secured and most importantly, a well-integrated bridge into several prominent DeFi investment solutions such as UniSwap, Yearn Finance, and Balancer. Additionally, the vault provides users with a complete overview of investment opportunities within the DeFi space, as well as potential returns and benefits within specific DeFi networks.

    Supported by a portfolio performance dashboard, this feature facilitates the management and investment of digital funds.

    Governance and Security

    Through this blockchain-based feature, the Unido enterprise platform (EP) provides users with an array of security and management instruments ensuring the safety of all funds within the platform.

    The Unido platform guarantees blockchain-based security and agnostic architecture, rendering it versatile and applicable to any given on-chain use cases. Powered by a key signing technology, Unido EP ensures flexible and trustworthy governance, which provides assets access only to permitted entities and parties.

    Unido Token ($UDO)

    The platform’s utility token, $UDO, is the fuel behind Unido’s efficient implementation as it is used to drive network access, ensure transaction security, governance, and network management. Overall, the token is built on a trustworthy smart contract algorithm guaranteeing the development and expansion of the Unido network in the future.

    Furthermore, the token facilitates access to the platform’s variety of products to all users, including institutions and developers. UDO has three main use cases, being network access licenses, consumption fees, and DAO Governance.

    $UDO Tokenomics

    Total Supply: 115,000,000 UDO

    Initial Market Cap: $487,813

    Seed/Private/Pre-Public Sale Fundraising: $1,400,000

    Seed Sale: $0.04, 0% TGE, 20% monthly unlock

    Private Sale: $0.05, 25% TGE, 25% monthly unlock

    Public Sale:: $0.06, full unlock

    Deflationary Economics:

    • Phase 1: From consumption fees, 60% burn, 20% to EDF, and 20% into reserve. Phase 1 when token supply is reduced by 20%.
    • Phase 2: After enterprise products take off, 50% of fees to be invested into EDF & 50% into reserve.

    UDO Use Cases

    Network Access License

    All applications and Unido EP features will only be available via a license purchasable with the UDO token. Once the license is bought, the tokens are removed from circulation and placed into a secured smart contract until the license eventually expires.

    Companies are provided with annual licenses for the Unido platform, where fees are determined by the volume of usage for the target clients and the number of users.

    Consumption Fees

    All fees and consumption charges within the Unido ecosystem and auxiliary platform will be based on the volume of usage within the platforms. Additionally, UDO will be used to authenticate each transaction within its parent platform.

    All operations from developers will either be charged under a subscription model, Freemium model, paid model, or In-App model, all depending on the user specifications and needs.

    DAO Governance

    In general, the DAO will oversee Unido’s Ecosystem Development Fund (EDF) and allow for the subsidizing of new applications implementation and development, which will contribute to the diversification of the platform.

    Unido Ecosystem (source: Unido one-pager)

    Conclusion

    Unido EP aims to be a leader within the blockchain space by spearheading the race toward mass adoption; especially within the traditional financial sector. The platform’s drive to provide secured banking management tools is a great boost for wide DLT acceptance.

    Overall the Polkadot-based platform is a dynamic implementation of decentralized technology, which guarantees total accessibility and security through key features lacking in most solutions of its genre on the market.

    Unido Enterprise Platform is ahead of the curve as it provides a sure connection with blockchain giants, ensuring its growth and development in the future. Unido will likely become a leader within the blockchain given the protocol’s current algorithm and products.

    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

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    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.

  • Ledger Stax: Next-Gen Crypto Wallet Designed by iPhone Co-Creator Tony Fadell

    Ledger Stax: Next-Gen Crypto Wallet Designed by iPhone Co-Creator Tony Fadell

    Ledger and Tony Fadell Unveil Stax Wallet

    Ledger, one of the top hardware wallet providers, has announced the launch of its new Ledger Stax wallet in partnership with Tony Fadell, co-creator of the iPod and iPhone. This is a significant initiative as Fadell being one of the world’s foremost tech engineer is stepping in to bring clarity and confidence to owning digital assets following the collapse of FTX.

    Pre-order your Ledger Stax Wallet here!

    buy now

    Key Features of Ledger Stax Wallet

    Fadell realized that existing hardware wallets are difficult to use for mass consumers. Therefore, he drew inspiration from his iPod design to bring a more user-friendly experience for wallet users.

    Ledger Stax resembles a small smartphone and has a monochromatic E ink display which covers the front and curves around the spine. That way users can easily view complete transaction details as well as their NFT collections even when the wallet is off. This works in conjunction with integrated magnets, allowing multiple Stax devices to stack, hence its name. This is particularly useful for Ledger owners who have different portfolios since they can look at the labels displayed on the spine, like books on a shelf.

    Stackable Ledger Stax wallets with displayable screen on the spine (Source: Ledger)

    Users can store more than 500 cryptocurrencies or NFTs on Ledger Stax. Developers are also planning to allow users to explore Web3 applications through the Ledger Live app. Users can connect the Ledger Live app on (1) laptops via secure USB-C or (2) smartphones via bluetooth. This new user interface will enable clear and intuitive interaction for all mainstream users.

    Ledger Stax also has good energy efficiency and supports wireless Qi charging. Its battery can last as long as few months with a single charge.

    How to Get Ledger Stax Wallet?

    Ledger Stax is now available for preorder at $279 and will begin shipping by the end of March 2023. It will also be available from select retailers such as Best Buy in the U.S. Those who purchase the wallet will also receive an Infinity Pass, which provides users with a free utility NFT.

    Additionally, a Ledger Stax NFT Bundle is available to mint on [Ledger] Market for 0.22 ETH to redeem a free Ledger Stax device. It also unlocks access to exclusive NFT artwork from Ledger’s network of hand-picked artists. However, Genesis Pass holders and PREMINT Collabs have special mint-priority, and there are only 10,000 bundles available.

    Key Takeaway

    “Not your keys, not your crypto” — there is a great risk of losing all your crypto if you park it on a centralized exchange. Hardware wallets are great self-custodial solutions because only you have control over your funds. But the problem is it can be quite daunting to operate one, especially for beginners.

    Ledger Stax will revolutionize this by bringing the familiar user experience of smartphones into hardware wallets. This is a big step towards a decentralized financial future as more people are opting for self-custodial solutions. If you are interested in other hardware wallets, feel free to check these out:

    Pre-order your Ledger Stax for only $279 and get it by end of March 2023!

    buy now
    What is the Ledger Stax wallet?

    The Ledger Stax wallet is a new hardware wallet developed in partnership with Tony Fadell, co-creator of the iPod and iPhone. It has a unique and innovative design in the style of high-end Samsung cell phones, and lets users view their NFT collections even when the wallet is off.

    When will the Ledger Stax be available for sale?

    Ledger Stax is now available for reorder at $279 and will begin shipping by the end of March 2023.

    What features does the Ledger Stax offer?

    The Ledger Stax wallet is an easy-to-carry device about the size of a credit card, which allows users to store more than 500 cryptocurrencies or NFT collections. It also features an E-Ink touchscreen for viewing NFT collections, and a battery that can last for weeks or even months with a single charge.

    Are there any incentives for purchasing the Ledger Stax?

    Yes, those who purchase the wallet will be eligible for various prizes, such as a “Magnet Shell” protective case and an NFT from the “The Art On Ledger Stax Collection.”

  • Will DEXs Take Over Centralized Exchanges after FTX Collapse?

    Will DEXs Take Over Centralized Exchanges after FTX Collapse?

    “Not your keys, not your crypto” — this decade-old mantra has taken full effect after the FTX collapse. Crypto users have lost faith in centralized exchanges (CEXs) and are migrating to decentralized exchanges (DEXs) instead. Though a non-custodial option seem to be an ideal solution, it would likely take a long time until price discovery shifts from centralized to decentralized platforms. Let’s take a closer look.

    Impact of FTX Collapse on Centralized Exchanges

    Almost every centralized platform in the crypto industry had done business with FTX, and some companies bore the brunt of the collapse such as BlockFi, Genesis Trading, and KuCoin. Crypto users around the globe found they could no longer withdraw assets from several crypto exchanges as the contagion spreads.

    FTX’s collapse is a symptom of a problem inherent to centralized exchanges, also known as custodial exchanges. Customers’ tokens parked on the platform are exposed to the risk the exchange could go bust. Because crypto has no government depositary schemes to cover losses, customers of insolvent exchanges must wait for bankruptcy courts to regain what remains of their funds — if there is any left after other investors claim their share.

    Given the circumstances, all crypto exchanges including Binance have been implementing proof-of-reserves to verify they have enough assets to cover all customers’ funds. Though it is a good transparency initiative, investors still fear for the safety of their funds. As a result, many CEX customers rushed to withdraw their funds, opting for non-custodial solutions. This is where DEXs come in.

    Rise of Decentralized Exchanges after FTX Collapse

    Soon after FTX’s downfall, decentralized exchanges saw a vertical spike in trading volume. According to DeFi Llama, the monthly DEX volume showed an increase of 80% from $57.6 billion in October to $103.8 in November. At the time of writing, Uniswap had the largest trading volume with 60%, followed by Curve (9.6%), PancakeSwap (9%), DODO Exchange (8%), and Balancer (3%).

    Monthly DEX Trading Volume (Source: DeFi Llama)

    Moreover, Uniswap also surpassed Coinbase in daily ETH trading volume on November 14 ($1.1 billion vs $600 million). This is significant as CEXs have always been dominant in trading large market cap coins given their deep liquidity. It strongly indicates traders are moving away from CEXs.

    This is compounded by the fact that Bitcoin (BTC) has been exiting CEX wallets at a record pace. According to on-chain data analytics Glassnode, BTC withdrawals from CEX to self-custody wallets is unfolding at a historic rate of 106k BTC monthly. This accounts for $3.7 billion worth of Bitcoins over the past week. Simultaneously, hardware wallet providers such as Ledger and Trezor reported its highest sales day. Check out some of these wallets:

    Advantages of Decentralized Exchanges

    Decentralized exchanges, also known as non-custodial exchanges, are decentralized finance (DeFi) protocols that allow users to trade directly with other users via smart contracts, without handing over management of their funds to an intermediary or custodian.

    They are non-custodial, which means users have full and exclusive control of their wallet’s private keys. This is the opposite of putting your assets on CEXs as they hold onto the wallets and keys on your behalf. This feature makes it impossible for centralized players to siphon user funds, and is why people are doing their trading on DEXs instead.

    Transactions on DEXs are facilitated through the use of smart contracts, and liquidity pools are funded by other users. As such, there is significantly reduced counterparty risk — you do not need to trust other users, only the code. There are three types of DEXs that uses different protocols: automated market makers (AMM), order book DEXs, and DEX aggregators. But they are all programmed to determine the best price for an asset, all while offering a better rate for users compared to CEXs.

    Moreover, anyone can earn passive income if they provide liquidity to the protocol. On the other hand, CEXs are managed by a centralized organization such as a bank or a small handful of professional trading firms or market makers. In this case, since liquidity is concentrated in these actors, CEX maker and taker fees are much higher than DEX swap fees. Additionally, they can also choose to withdraw their assets during periods of volatility, restricting trades when users need it most.

    Challenges Facing Decentralized Exchanges

    Despite the many critical advantages DEXs offer, it has several downsides that hinders widespread adoption:

    Relies Heavily on Centralized Exchanges

    Most DEXs are dependent on price oracles (i.e. Chainlink) that source data from CEXs. As such, an attacker can manipulate the price of an asset on a particular DEX, leading to inaccurate price data being fed to all protocols which rely on that DEX as a price oracle.

    A flash loan attack is a common method to trick price oracles. In such events, attackers essentially create false arbitrage opportunities by instantaneously borrowing, swapping, depositing large numbers of tokens, tricking price oracles that the target token’s price is being moved on a single exchange.

    This creates a disparity which can then be arbitraged, allowing the sale or purchase of assets at above or below market price. Polygon’s Quickswap was a victim of this attack in October 2022.

    DEX Transactions are Slower than CEX

    Trading on DEXs are often much slower because all trades take place on the blockchain. It takes time for blocks to be validated and transactions to go through. On the other hand, CEX trades are almost instantaneous because they take place on proprietary matching engines instead of the blockchain. These engines are complex software that synchronizes and combines data from thousands of trading pairs at the same time.

    Liquidity Issues and Impermanent Loss

    DEXs cannot yet compete with large CEXs in size as they cannot offer as much liquidity. When they do not have enough liquidity, large orders can incur slippages in which the buyer pays above-market prices on their order. As such, a lack of liquidity can deter institutional participation as large orders are likely to suffer from slippage.

    On another note, liquidity providers are exposed to a risk of impermanent loss when depositing two assets for a specific trading pair. In most cases, liquidity providers end up withdrawing more of the token that lost value and less of the one that gained value because the ratio of tokens held in the pool changes as trades occur.

    Smart Contract Vulnerabilities

    Although there is significantly reduced counterparty risk when using DEXs, there is still the issue of smart contract vulnerabilities that can be exploited by hackers. Smart contract codes are publicly available and anyone can review their code. Therefore, exploitable bugs can still slip past audits and other code reviews.

    This is a problem inherent to all DeFi protocols. Over the past two years, we have seen numerous hacks on cross-chain bridges, hot wallets, staking platforms, and even entire blockchain infrastructures.

    See also: 10 Best Smart Contract Security Auditing Firms in 2022

    Future Landscape of Crypto Exchanges

    In the wake of FTX’s collapse, users’ confidence in centralized exchanges are waning and the crypto community expects a shift toward decentralized platforms. However, according to JPMorgan and several other financial analysts, centralized exchanges will continue to control the majority of global digital-asset trading volumes. Although DEX trading volume has surged over the past month, it is a possibility that it reflects the automatic liquidations following the FTX collapse, and does not indicate the start of a long-term trend.

    DEX users are still confined to a relatively small base of niche traders and investors, and their interfaces can be difficult to navigate. At this stage, CEXs still provide a better user experience, fiat gateways, and deeper liquidity. To date, Uniswap has a total of 4.5 million users cumulatively, whereas Coinbase has a total verified user base of 108 million.

    With that being said, DeFi is still in its infancy. Development in liquidity protocols, safekeeping mechanisms, and user interfaces is needed to fully realize the potential of non-custodial trading services. As long as DEXs can compete with CEXs in terms of liquidity and speed, we may start to see widespread adoption or even a full-on switch to DEXs. After all, decentralized infrastructures are key to preventing centralized collapses, something we, as the community, has had enough of for the past year.

  • Will the Launch of Ethereum 2.0 Crash Crypto Prices?

    Will the Launch of Ethereum 2.0 Crash Crypto Prices?

    Ethereum 2.0 is coming soon and the question everyone wants to know is “will it cause crypto prices to crash?” This is particularly as markets around the globe are not looking great, and that includes the crypto industry. Everything has been bleeding heavily for months without a sign of stopping, as central banks keep hiking rates, global supply chains struggle, and spending and investment dry up. Stagflation is a very real possibility, and there is no telling how long it will take for us to cool down the overheated markets that have been going only up since the last recession more than ten years ago. 

    The aforementioned notwithstanding, active development in the blockchain space continues to march forward. Although investments might drop significantly, many builders keep on building no matter the state of the markets. As Ethereum is steadily approaching the long-awaited transition from proof-of-work (PoW) to proof-of-stake (PoS), dubbed The Merge, it might be interesting to think about potential impacts of The Merge on the crypto market prices, especially in the context of a potential extended bear market.

    Learn more: 

    Ethereum 2.0 is coming- Here’s what you NEED to know

    Proof of Stake (PoS) explained

    Ethereum ($ETH) Merge: What is it and everything you need to know

    Plus check out our video!

    About Ethereum 2.0

    In short, The Merge will result in Eth2.0’s Beacon chain (the coordination mechanism of the new network) merging with the current Ethereum mainnet, signifying the move to a fully PoS chain. To secure the network, enormous amounts of ETH will be staked in addition to the ETH already staked in the Beacon chain, making all of this locked ETH illiquid. Combined with the EIP-1559 upgrade, which now burns 70-80% of the fees, The Merge is expected to cause the equivalent of 3 bitcoin halvenings, dropping Ethereum’s inflation rate to 0.43% and locking up a lot of ETH, potentially reducing sell pressure by up to 90%. In addition, the PoS mechanism will reduce Ethereum’s energy consumption by up to 99.95%.

    So all is looking great for Ethereum and projects building on top of it, right? Possibly. However, there is still a decent chance that, given the current market conditions, ETH’s price pump might be short-lived, and would continue to drop, bringing down a lot of other projects with it.

    The Potential Impacts of The Merge

    There are two possible scenarios to look at when discussing the downside impact of The Merge on crypto prices:

    1. The external effect would be caused by Ethereum sucking out liquidity from other PoS alt-L1s and the projects built on top of them (especially if they’re EVM-compatible), as one of the more critical selling points compared to Ethereum is environmental sustainability.
    2. Beacon chain staked ETH unlocks, extended bear market, and poor treasury management of Ethereum-backed projects could see more capitulation events as HODLers and projects sell off their ETH to stay afloat as new investments dry up and stagflation looms.

    1. Ethereum Sucks Liquidity From Other PoS alt-L1’s

    By offering lower gas fees, fast transactions, and relatively high throughput at the expense of decentralization and economic sustainability, many PoS chains have attracted developers, investors, and NFT ecosystems to their networks away from Ethereum. Ethereum’s high demand (=high fees), poor L1 scalability, and the concerning PoW mechanism have severely limited its growth. (https://rpdrlatino.com) Understandably, regular people simply do not want to pay exorbitant fees when minting and trading NFTs, and developing inaccessible dApps on a network that is supposedly destroying trees and warming up the planet.

    The environmental argument will be completely invalid after the merge. Coupled with the enormous innovations in Ethereum’s L2 ecosystem, which have already reduced transaction fees to sub-$1 with no signs of stopping, Ethereum is set to once again become the most sought-after smart contract development platform. As post-Merge buy pressure of ETH increases and scalability improves, alt-L1’s could struggle to offer any significant unique selling points, making new projects opt to build on top of the most secure, established and decentralized smart contract chain out there.

    As more and more people flock to Ethereum, established projects might also decide to migrate to the platform with the most demand and upside potential, effectively sucking out liquidity from other chains, and leaving them dry with evaporated treasuries, limited runway, and reduced demand. The strategy of subsidizing transaction fees during a bull market when funds are plentiful will likely not work when no new investments are coming in during a bear market, and an exodus of users is reducing demand and network revenues.

    Of course, there is plenty of room for growth in this space, and projects existing on other chains might not find it too beneficial to move to Ethereum even though short-term liquidity issues might prove challenging.

    2. Beacon Chain ETH Unlocks in Extended Bear Market Cause Mass Capitulation

    The Merge will unlock a lot of ETH, resulting in a potential aggressive selling spree that might have trickle-down effects on a lot of other coins, especially those that have tight correlation with their ETH pair, are ERC-20 tokens, or have been sitting on ETH treasuries to fund their development. A lot more downside risk due to a selloff is also a very real possibility for ETH and other coins simply due to bad timing (i.e. bear market – with recession slowly creeping into our daily lives due to central banks raising interest rates, supply chain issues, energy crises etc.), the unlocked ETH might serve as a critical lifeline for those who had confidently staked their ETH during the bull market.

    During the bear market, investments will be scarce, and projects that during the bull market had made the decision to not convert their treasury ETH to stablecoins are now seeing their wallets drop in value significantly, forcing them to capitulate by selling at low prices to cover their expenses.

    However, it is important to note that the ETH unlocked from the ETH staked on the Beacon chain will not be immediately available right after The Merge. Rather, this feature – EIP-4895: “Beacon chain push withdrawals as operations”, will be enabled during the Shanghai upgrade. It will probably be deployed much later after The Merge, with estimates ranging from a month to 6 months. This means that any amount of potential sell-off of unlocked ETH would come with a significant delay post-Merge, at which point it’s impossible to predict where the market might be in 6-12 months and how it will behave, with contradicting bullish and bearish narratives clashing against one another in an attempt to drive price in either direction.

    This option does seem a bit far-fetched, however, and no one knows how much more pain we will have to suffer before the momentum shifts towards the upside, so it’s best to be prepared for both the upside and downside, and not fall prey to only bullish narratives.

    Conclusion

    As outlined in the two main points, post-Merge many alt-L1 coins could face a risk of crashing even further due to risks associated with reduced liquidity in a bear market (for non-Ethereum coins), liquidity that might flow towards the Ethereum ecosystem due to its established security, track record, and newly acquired environmental sustainability.

    On the other hand, ETH and other ERC-20 tokens living on Ethereum also run a risk of crashing, if the post-Merge ETH unlock from the Beacon chain results in a mass sell-off of ETH, which could crash other coins and project treasuries.

    As this will be the first time the crypto industry experiences a recession or a stagflation, there is a lot of uncertainty about how low the market could go and, most importantly, how long it could stay so low. This is uncharted territory, so making comparisons with past cycles might not be particularly useful. Nations and companies will keep tightening their belts, and spending will significantly decrease across the board, leaving risk-on markets such as crypto vulnerable to a continued mass exodus to safer investments.

  • Starly NFT Staking: How to Tutorial and Guide

    Starly NFT Staking: How to Tutorial and Guide

    The NFT industry has become one of the most exciting spaces amongst emerging blockchain and crypto trends. With many related projects and startups launching, the sector is becoming more popular and has provided creators with significant earning opportunities.

    NFT creators constantly seek more accessible ways to publish and market their assets to varied audiences while also maximizing potential returns on their art. Buyers who like to collect NFTs also look for the best marketplace that curates these assets and facilitates easy access to purchases and rewards. The Starly platform provides all these and more to both categories of stakeholders. 

    Table of contents

    What Is Starly?

    Starly is an NFT-focused launchpad and marketplace where users can create, buy, and sell gamified NFT collectables. The platform aims to make creating, selling and collecting NFTs as seamless as possible. Starly offers complete creative control to NFT minters, allowing them to set prices, rarity ratings, and decide preferred launch dates. 

    Each Starly NFT collection consists of 21 unique NFTs (or NFT cards) divided into three packs for ease of valuation. The packs are composed of 11 common cards, 6 rare cards, and 4 legendary cards. Members of the Starly community can purchase and sell NFT cards on the secondary market, or buy all the cards in a collection to receive special rewards reserved for buyers who acquire complete collections.

    NFT Staking on Starly

    Collectors can stake their NFT cards for Starly token rewards based on the value and rarity of the NFT. Each NFT card in a collection has a Card Score determined by its pack (common, rare, or legendary) and price. Stakers can earn rewards in $STARLY- the project’s native token. The total $STARLY staking reward for each NFT card is equal to its Card Score and gets distributed daily for over a year. This means that it would take 365 days to accrue the total $STARLY staking reward. 

    Although users can claim a limited number of token rewards, these rewards depend on the user’s Starly token tier. Starly uses the following formula for reward distribution:

    Card Score/365 = Token Amount Distributed for 24h.

    For instance, if a user stakes an NFT with a Card Score of 15,000, the available token staking reward for that card is 15,000 $STARLY. The user can claim up to 41 $STARLY (15,000/365) daily depending on the membership tier until the user exhausts 15,000 $STARLY.

    Starly Token Staking Tiers

    Token holders staking $STARLY are categorized into reward tiers curated according to the number of staked tokens. The tiers include the Silver, Gold, and Platinum memberships, with the following required token amounts:

    • Silver Tier: a minimum of 1000 $STARLY staked
    • Gold Tier: a minimum of 10,000 $STARLY staked 
    • Platinum Tier: a minimum of 50,000 $STARLY staked 

    These tiers come with varying benefits, including the ability to claim more daily NFT staking rewards. Members of the Starly community who stake their NFTs but have no staked Starly tokens are not placed in any of the three tiers and can claim only 2 of the available daily token rewards. Silver, Gold, and Platinum tier members can claim 10, 100, and 500, respectively.

    Furthermore, if an NFT card is unstaked, all unclaimed rewards of the staked card remain locked on the card till the user stakes it again. Additionally, if the unstaked NFT card gets sold, the new owner gets all unclaimed staking rewards locked in the card and can stake the card again for token rewards.

    $STARLY Token

    $STARLY is the platform’s native token, helping creators earn from their NFT assets. On the Starly marketplace, creators can monetize their NFT collectibles and receive rewards for their effort via $STARLY tokens. The platform has a total supply of 100 million tokens allocated for different uses. For instance, the largest allocation is for the Product and Ecosystem Development Fund at 31.25% or 31,250,000 tokens. Others include 22% for the Team and Advisors, 20% for the private sale, and 0.75% for the public sale. Furthermore, Starly allocated 5% each for token liquidity and staking payouts, while reserving 16% for the community.

    Benefits Of Starly NFT Staking

    All NFTs have inherent value that provides some aspect of collectibility or utility to collectors. However, collectors can derive additional value by staking these NFTs on Starly. The primary benefit of staking owned NFTs is that users can accrue more $STARLY and then re-stake for added rewards. As users collect more tokens, their designated membership tier moves from Silver to Gold or Gold to Platinum. New tiers furnish users with additional Starly benefits, such as voting rights and exclusive NFT drops from selected artists.

    Staking has become a significant way of contributing to projects across the blockchain and crypto space, with billions of tokens and coins locked on many platforms. NFT staking is no different and is an excellent way for users to earn passive income from idle NFT collections. Although the concept is still relatively in its infancy, Starly opens users to more NFT staking opportunities with the possibility of progressive rewards.

    Visit Starly here to learn more about them.

  • The 2.0 of Step.App – FitEvo: Advancing from Play-to-Earn to Move-to-Earn

    The 2.0 of Step.App – FitEvo: Advancing from Play-to-Earn to Move-to-Earn

    Play-to-Earn experienced a massive wave of adoption during 2021, as crypto-friendly gamers jumped on the opportunity to earn money while playing games. P2E games such as Axie Infinity, Star Atlas, and others saw a dramatic increase in user and revenue growth. However, after the initial hype wave over P2E games settled, what was left was a realization that many of these games lacked truly engaging gameplay, social features, and sustainable tokenomics.

    Fast forward to late 2021/early 2022, we witnessed a significant pivot in the blockchain gaming space: Move-to-Earn. M2E has taken the world by storm, with numerous projects popping up and their valuations skyrocketing. Among the younger generations, there is a trend towards self-care and maintaining a more healthy lifestyle as we continuously get reminded of just how much time we end up spending indoors. Covid lockdowns took this lifestyle to the extreme and forced everyone to spend time at home longer than many felt comfortable. Now there is a thirst for a more active, healthier life.

    P2E games have had (and continue to have) a good run, but M2E has managed to capture the interest of not only gamers, but also those blockchain enthusiasts who might not be fully on board with just spending time tapping away at their phone screen to earn their P2E tokens. However, every project comes with its own shortcomings. Let’s take a look at these shortcomings and how an emerging project – FitEvo has transformed its platform amidst this trend with a new edge.

    Table of contents

    Finding An Edge in the M2E World

    With popular M2E games such as STEPN, Genopets, and STEP, you’ll find that they share a common gameplay model in which the user acquires an in-game asset, be it a sneaker or a pet animal, and upgrades it further as they keep on exercising.

    But these features on their own are not enough to make an M2E game successful. The focus should be just as much on the social aspects and community engagement opportunities around a user’s physical activities, as it is on the earning and NFT upgrading experiences. And many of the games in this space seem to have forgotten what the most popular traditional social fitness apps such as Strava, FitBit, and MyFitnessPal have already done in order to expand their user base, and keep it engaged. 

    Strava, one of the pioneers in the social fitness app space, has achieved an enormous global user adoption, boasting nearly 100 million users. Much of this growth can be attributed to the app offering not only a feed of activities of their friends, but also other social features that are geography-centric and community engagement focused.

    This precedent for a successful M2E game is exactly the reason why FitEvo is so appealing in terms of fundamentals. FitEvo, an M2E dragon breeding NFT game, has the makings of an incredibly successful blockchain-based game, as they have incorporated many of the social features that people know and love.

    FitEvo: Focusing on the Interaction Between Individuals

    FitEvo aims to engage the masses through a powerful combination of NFT dragon breeding (evolving together with a dragon companion), and social features that gamify physical activity and human competitiveness, and bring friends and communities closer together.

    An engaging and fun dragon breeding game, FitEvo has been inspired by the greats, like Tamagotchi and Pokemon, taking it to the next level by syncing the user’s movements with the development of their very own dragon. In FitEvo, the dragon co-evolves with the user, creating a bond between the two. The hatching of eggs, breeding and evolving of dragons, will be intimately linked to the physical movements of their masters.

    And here is where FitEvo will really shine – the social and gamification features. For those familiar with the M2E STEP game, FitEvo will be like a new and improved Step 2.0, incorporating all the crucial engagement mechanisms that have made traditional social fitness apps so popular. If you’re one of those who didn’t manage to get in on STEP early on, it might be worth your while to pay close attention to FitEvo.

    The multiplayer feature alone will offer an enormous amount of value to the users, FitEvo allows FITamins(as the FitEvo community calls itself) to meet other like-minded and even geographically adjacent individuals by organizing group runs or other group exercises. Anyone who has ever tried getting back in shape with their friends cheering them up or even being right next to them, sweating off their own dietary sins, knows how much it helps to have someone give you motivation and some peer pressure at your lowest moments. This type of community support will be possible, with FITamins helping each other become their better selves.

    Of course, what would a fitness app be without some healthy competition? FitEvo will offer many opportunities to challenge others and stimulate their competitive neurons through classical challenges, as well as user-created routes with leaderboards.

    In addition to earning $FIVO tokens through movement, FitEvo has made sure that attention is paid to incentivizing more extensive user engagement beyond exercising and dragon breeding. Users will be able to collect Active Points through interactions, referral count, daily sign-ins, missions completed, community contributions, and more. The Points will significantly influence users’ earnings to the upside, so it will be in everyone’s best interest if they try to make the best of their experiences on the FitEvo app – and why shouldn’t they?

    Another interesting feature that we are yet to hear more about is the training programme, which will offer inexperienced users the opportunity to learn from the community and follow pre-planned exercise curricula without having to design them themselves.

    Incorporating all of these features will be no small feat for FitEvo, and it will be interesting to see how the project progresses forward. With such a clear edge over their competitors defined, it’s now up to the FitEvo team to deliver on these ambitions and rise through the ranks of the M2E space.

    To learn more about FitEvo, see: https://linktr.ee/FitEvoNFT

  • What is AAVE ($LEND)?

    What is AAVE ($LEND)?

    Aave Protocol with their native token $LEND is a leading company within the decentralized finance (DeFi) sphere. The Company allows its users access to its open-source and non-custodial protocol to create money markets, joining a growing list of projects like Compound to bring decentralized options to the masses. We look at who is Aave ($LEND), its uses and how it differs from other projects such as Compound Finance.

    What is Aave?

    Named after the Finnish word for “ghost”, London-based company Aave was set up in September 2018 after a successful initial coin offering (ICO) the previous year for its ETHLend token which raised USD$16.2 million. The executive team under ETHLend migrated to Aave upon its establishment with ETHLend becoming a subsidiary of Aave. In January 2020, ETHLend announced it was no longer in operation and its website would only remain active for current users to close down their existing loans.

    Aave’s aim is to fill in the gaps left by centralised fintech industry giants like PayPal, Skrill and Coinbase. Their main product is Aave Protocol, an open source and non-custodial protocol for creating money markets on the Ethereum blockchain.

    Who is the team behind Aave?

    Aave has a wealth of talent and experience within its team. Stani Kulechov (CEO) and Jordan Lazaro Gustave (COO) have retained and migrated their roles from ETHLend, bringing their wealth of knowledge to Aave. Their diverse 18 man team bring together a wealth of experience in the startup scene.

    What is Aave Protocol?

    Aave’s biggest and most integral aspect is Aave Protocol which was launched in January 2020. Its shift from ETHLend marked a significant shift in strategy for the Company. Going from decentralized P2P lending to a pool-based strategy, Aave Protocol is an open source an non-custodial protocol that allows users to create their own decentralized money markets on the Ethereum blockchain.

    Aave Protocol
    Aave Protocol

    Depositors provide liquidity by depositing cryptocurrencies into lending pools which will then allow them to earn interest. Meanwhile, borrowers can obtain loans by tapping into these lending pools in either an overcollateralized or undercollateralized way. The loans do not need to be individually matched i.e. one lender to one borrower. Instead, deposits into the pool and the amounts borrowed/ collateral are used to make instant loans based on the pool’s state. There are currently 2 money markets that users can enter into, these are Aave and Uniswap.

    Aave markets
    Aave markets

    Flash Loans

    Aave has one feature that sets it apart from the rest. Flash loans allow customers or to take out loans without any collateral. These flash loans enable a customised smart contract to borrow assets from Aave’s reserve pools within one transaction. The loan is made on the condition that the liquidity is returned to the pool before the transaction ends. However, if it’s not repaid by that time, the transaction gets reversed- which will effectively undo any actions executed until that point and guarantee the safety of the funds in the reserve pool.

    The Fast Loan feature is designed for developers to make tools that require capital for arbitrage, refinancing, or liquidating purposes. Aave explained Flash Loans saying it is “designed for developers/people with some technical knowledge”, with the benefit of risk-free loans. Aave charges a 0.09% fee on flash loans.

    Rate Switching

    Rate switching is another unique selling point for Aave, which arrived during the May upgrade of their borrowing/interest rates. Rate switching allows borrowers to switch between fixed and floating interest rates, something useful in a volatile decentralized market. For high-interest rates, users will usually opt for the fixed-rate but when it is more volatile and expected to be lower, one might go for the floating option to reduce borrowing costs. The fixed-rate can change but only when the deposit earning rate increases above the fixed borrow rate as the system could get unstable by paying out more than its being paid. If so, the fixed rate is rebalanced to the new stable rate. On the other hand, when the variable rate is lower than the fixed-rate by 20%, the loan will automatically decrease to account for the difference.

    Which Cryptocurrency Tokens are linked?

    There are 19 tokens available on Aave. These include DAI, USD Coin (USDC), TrueUSD (TUSD), USDT Coin (USDT), sUSD, Binance USD (BUSD), Ethereum (ETH), Basic Attention Token (BAT), Kyber Network (KNC), ChainLink (LINK), Decentraland (MANA), Maker (MKR), Augur (REP), SNK, Enjin Coin (ENJ), REN, WBTC Coin (WBTC), Yearn.finance (YFI) and Ox Coin (ZRX).

    Please note: Each asset has a different collateral requirement. This is because of the differences in price volatility. Stablecoins naturally give loan-to-value ratios, due to their price stability. A full breakdown of Aave’s grading process can be found in their Risk Framework.

    Alongside these tokens, there is also a native token that Aave uses and which is called Lend. An explanation and analysis of the token can be found below.

    LEND ($LEND) Token

    Often referred too as ETHLend, the LEND cryptocurrency token has rolled over to become the native token of Aave following the winding-up of operations by ETHLend in January this year. Although it has kept the name, the new Aave version of Lend is largely different from the previous one.

    LEND token metrics
    LEND token metrics

    Binance Key metrics on Lend

    Built based on the ERC-20 standard, $LEND tokens can be used for fee reductions. The tokens are burnt from the fees collected from the Aave Protocol, with around 80% of platform fees used. This appears to suggest that Lend tokens will be worth more over time. LEND owners can also claim on protocol fees in exchange for acting as the first line of defense in the case of liquidity events by malicious borrowers.

    In addition, $LEND tokens can be used for voting on Aave Improvement Proposals (AIPs). What’s more, LEND holders can vote with their LEND deposited on the Aave platform, even if it is currently being used as collateral. Currently, this feature is pre-launched on the Ropsten test network before it is launched on the Ethereum mainnet. This is so the Aave community can vote on proposals without incurring huge gas costs, try out the module and provide feedback to the Aave team before it is formally launched. It is also worth noting that the outcomes of all votes on the testnet are not considered as valid for the long term.

    How to lend on Aave

    Depositing and earning interest on Aave is a simple process. Before you start, you must visit https://app.aave.com/ and connect using a web 3.0 wallet such as Metamask, Coinbase Wallet or Fortmatic.

    Depositing is easy, just simply pick your desired asset in which to invest and then allow Aave access to the asset. Once the transaction is processed, and the interest rate is confirmed you can check the rate changes on the Aave app. The interest-earning tokens are called aTokens which are similar to Compound’s C tokens.

    Interest generating tokens

    There are some differences between Compound’s tokens and the aToken. The main one being that the aToken’s keep their underlying assets price and will increase the amount of owned tokens when the price goes up rather than increasing the tokens price.

    Aave vs Compound ($COMP)

    Both Compound Finance and Aave appear to be the two top DeFi lending platforms. However, both have unique features that set them apart. Compound does have USDT as a usable asset, but Aave has a wider range of tokens on offer. For Aave, their new interest rates and regulations, like rate switching gives them a slight edge. For first time users, Aave offers great incentive rates. However, lending rates and Borrow fees are higher on average with Aave. Either way though, Aave has proven a good addition to the Defi community and should prove popular. You can read more about Compound ($COMP) here.

    Key features of Aave 2.0

    Aave 2.0 was announced on 14th August 2020. Aave Market now offers 19 assets, plus the Uniswap Market offers different Uniswap pairs as collateral. The platform has also grown to over 15,000 users. Here are some of the key new features which can be expected in Phase 2 of Aave.

    Pay with collateral

    Currently, if users want to repay their loan with part of their collateral they need to do 4 separate transactions on several protocols: withdraw the collateral, buy the cryptocurrency which is borrowed, repay the debt and unlock all the deposited collateral. With this new function, Aave users can deleverage or close their positions by directly paying with collateral in 1 transaction.

    Debt tokenization and native credit delegation

    Users’ debt positions will be tokens i.e. users will receive tokens which represent their debt. This enables native credit delegation within the Aave Protocol, in addition to other features such as native position management from cold wallets and user-specific yield farming strategies.

    Fixed rate deposit

    Deposits on Aave can generate predictable interest rates which are not bound by market variations.

    Improved Stable Borrow Rate

    This will further ensure the predictability of interest rates by locking down their borrow interest rate to a specified time period.

    Private markets

    Aave will allow governance to open private markets to open private markets to support all types of tokenized assets. The Aave team are also working on a collaboration with RealT which will bring mortgages onto Ethereum.

    Improved aTokens

    aTokens are Aave’s interest bearing tokens which are minted when a deposit is made and subsequently burned when redeemed. The aToken is pegged 1:1 to the value of the underlying asset deposited with Aave. In Aave 2.0, there will now be a version 2 of the aToken which integrates the EIP 2612 which allows for gasless approvals.

    Gas Optimizations

    This feature is currently in the works and will lead to a significant drop in transaction costs for most of the interactions on Aave. For some interactions the gas cost may even be reduced by 50%. Aave version 2 will also implement native GasToken Support.

    Security

    In version 2, the internal design has been made simpler, the architecture is also improved so it is more formal verification friendly. Aave is also working with top auditors such as Consensys Diligence and Certora- a leading company in automatic verification technologies.

    Native trading functionalities

    Aave v2 will introduce the ability for users to natively trade their debt position from one asset to another, i.e. you can borrow DAI, and if USDC becomes cheaper to borrow, you could change your debt position to USDC in one transaction.

    Users can also trade their deposited assets across the various cryptocurrencies supported by Aave, even when it is being used as collateral.

    Margin trading is also introduced in version 2, so users can directly take long and short leveraged positions without using third party services. Conversely with margin lending, liquidity providers can increase the weight of their deposits to take opportunities.

    Governance

    Aave version 2 also introduces several new governance features. Now, AAVE token holders can delegate their voting weight to any other address. Aave believes this may lead to the emergence of Protocol Politicians, who will represent the interests of their peers to delegated their votes to them. But unlike most representative democracies we see around the world today, vote delegation is a liquid democracy so this means a user can instantly remove the delegation in a single transaction if they so wish.

    The Aave team also recognises the pain points of the need to move tokens to another location to participate in governance. So Aave now allows users to be able to sign messages from their cold wallet to participate in Aave Governance. This will in turn reduce the security risk.

    References:

    AsiaCryptoToday: https://www.asiacryptotoday.com/aave/

    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

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    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.

  • Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Decentralized Finance (DeFi) has been the breakout trend of 2020. With prices of standout DeFi tokens surging and terms like “Yield Farming” getting mainstream attention, the DEFi field has taken off. This next step in the evolution of finance uses public blockchain technology and has a wide range of sub- divisions that make up the growing field. The most notable and popular of these DeFi services are decentralized exchanges, decentralized stablecoins, decentralized money markets, decentralized synthetics and decentralized insurance. To understand this emerging field, first a definition on what decentralized means must be had. 

    Learn more about DeFi, and liquidity pools such as Balancer, Uniswap and Curve with our video:

    What is decentralized and what does it mean?

    Decentralized is a term you will have definitely heard thrown around even if you are relatively new to the cryptocurrency scene. Be it on Twitter, with the various profiles espousing the benefits of decentralization and calling out centralized cryptocurrency projects, or in articles online. To give a little context, the decentralized v centralized argument is akin to economic arguments on political systems between capitalists and communists. 

    Part of the reasoning for many supporters of decentralization is that blockchain technology at its core was made to be decentralized. Blockchain is reliant on open source networks and has no central entity controlling it. Rather, the computer power and the overall network is split up, which is why it is decentralized. The benefits of this system are that it doesn’t have a single point of failure, making cyber attacks and poor leadership somewhat irrelevant. 

    As such blockchain has been earmarked as the breakout technology of the 21st century. Companies, governments and financial institutions are all clambering to bring developers on board as blockchain continues to be viewed in an increasingly glowing light. Yet, how does blockchain’s decentralized foundation play into the emerging DeFi field?

    DeFi Explained

    For many, blockchain is the embodiment of the DeFi field and is the promised land of finance that Satoshi Nakamoto first imagined when he created Bitcoin. The term DeFi has turned into an all encompassing term for a range of projects, but the core values of each are pretty clear. These are open access to anyone, resistance to censorship, privacy and an open democracy of finance away from singular control. The majority of DeFi sites are run through decentralized apps or Dapps, which allow for financial services to be created and be used easily by anyone. 

    The DeFi Market

    The DeFi market is a field that has grown massively in recent months as billions of dollars are handled every hour in the sub industry. Part of DeFi’s popularity is down to its transformative effect on almost all aspects of finance. From loans to remittance markets and even insurance, the DeFi field could give financial access to people around the world as all they need is an internet connection. The technology could have an impact on the third world, where many of the population is unbanked or even in more developed financial societies as governments and financial institutions continue to lose credibility as they go from recession to recession. Sold on DeFi now? Well if so, read on for a closer look at the different blockchain applications in the field and the top companies within each subcategory. 

    What is a Decentralized Exchange?

    Exchanges are the heartbeat of the cryptocurrency traders. Most of you will have an idea of the more famous centralized exchanges like Binance and Coinbase, but decentralized exchanges (DEX’s) may be less so. The main difference between the two is that there is no central authority over decentralized exchanges, rather governance is determined in various ways, like through earning native tokens. 

    Focusing on namely cryptocurrencies, the decentralized exchanges offer a range of benefits. The first is security as you are not trusting a centralized exchange which could be susceptible to hacks with your funds. Instead trades are done through a peer to peer (P2P) trading network and a range of methods are used to facilitate this. Some DEX’s use proxy tokens, others multi-signature escrow systems and some use shares. Popular DEX’s are dYdX, Uniswap and Kyber network.

    Decentralized Stablecoins

    Much like DeFi applications, stablecoins have also seen a rise in popularity and usage in recent times. Put simply, stablecoins are less volatile tokens that are usually backed by a currency, commodity or a collection of both that enables them to keep a steady price, unlike the often wild swings of other cryptocurrencies. Some stablecoins are centralized but there is a growing amount of stablecoins that have become decentralized. These include industry favourites like DAI, USDC and Tether (USDT). To be classed as a DeFi stablecoin, there needs to be no central figure ruling the tokens or single point of failure as well as a resilient network.

    What is a Decentralized Money Market?

    Money markets are markets for borrowing and lending assets. The decentralized element means that users can borrow and lend cryptocurrencies without the control of a central figure. The lack of central authority is fixed using smart contracts and algorithms to determine the markets function. Decentralized money markets put interest earning potential in the hands of anyone with an internet connection in the world. Popular examples of decentralized money markets include Aave, Compound, MakerDao and Balancer. This area of DeFi has gained the most traction in recent times, especially with the bearish crypto market. This is because there are lots of profits to be made, with “Yield Farmers” churning in large sums from interest earned.

    Decentralized Synthetics

    Decentralized synthetics is another growing sector of the DeFi field. Synthetics or derivatives as it is also known refers to the tracking of a value for an asset. This means traders can get an insight into an asset without physically investing themselves. This representation of the asset allows traders to make educated investment decisions. There are a number of decentralized synthetic companies, the most popular ones being UMA and Synthetik. Expect more companies to pop up in the future too.

    Decentralized Insurance

    As blockchain gains exposure, more and more use cases appear, from accounting to product tracking. One industry that has taken to the technology is insurance. The bureaucratic side of the industry is perfect for blockchain technology and smart contracts, with a wide variety of usages for the technologies. The technology has the ability to revolutionise the insurance field as it cuts out added fees and reduces smart contract risk. Notable decentralized insurance companies include Nexus Mutual and Opyn.

    Conclusion

    Overall, it would appear that the DeFi field is growing and most importantly, is here to stay. People around the world are increasingly seeing the problems of a centralized method, especially in the cryptocurrency industry which has a long history of customers’ funds being lost due to hacks of centralized exchanges. Partner this with an increasingly more aware population with regards to internet privacy, you have the makings of the next big thing in the cryptocurrency industry and possibly the wider financial field. 

    Although the industry is in its infantile stage, there are a number of interesting projects and options, most strikingly in the decentralized exchange and money market area, which users can partake in. Boxmining has a number of guides which can help you decipher more clearly which is the best project for you. For more DeFi related information and other cryptocurrency news, subscribe to our YouTube channel and newsletter. 

    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

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    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.