Boxmining

Author: Angela Wang

  • Hedget ($HGET): Does it live up to the hype?

    Hedget ($HGET): Does it live up to the hype?

    Hedget is conquering one area that decentralised finance (DeFi) projects have yet to fully explore- options trading. DeFi is in all honesty still in its infancy, and there is still plenty of infrastructures which could be built to solve problems relating to contract security, liquidation risks, and speed and cost of transactions. Hedget in collaboration with Chromia aims to become the default options trading platform for DeFi tokens.

    Background

    Hedget rides on the background of DeFi applications. With DeFi assets growing parabolically and reaching $8.77 billion as of August 2020, it is, without doubt, an area that is rapidly on its way to dominating the crypto market. 

    Unfortunately, the volatility of cryptocurrency prices is likely to curtail further growth. On the flip side, the risks involved can be minimized by embracing options trading.

    The project is headed by Malcolm Lerider, a former Research & Development Manager for NEO blockchain. Others include Serge Lubkin, Ex-marketing lead at Chromia, and Riccardo Sibani, who, among other things, developed concepts and proof of works in Ethereum and has a double degree in Cloud Computing. The protocol’s advisors are Roger Lim, NGC Ventures’ founding partner, and Alex Mizrahi, the founder of several academic papers about Bitcoin. The protocol’s partners include NGC Ventures, FBG Capital, and Chromia.

    What is Hedget?

    Hedget is a blockchain-based platform focusing on options trading, with a specific focus on safeguarding users from the fluctuating prices of digital currencies. Options are a unique trading venue since they allow traders to interface with the underlying asset without owning them.

    Trading involves buying and selling assets at a predetermined future date and price. Options can either be a call or put. Call options enable the user to buy while put options give users the right to sell. Options traders can bet on the price either going up or down. 

    The bets can be spread over a period of time, with each having different prices, commonly known as strikes.

    Three things are needed when creating an option: (1) the asset being tracked; (2) option type; and (3) maturity/expiry date. The options maturity date on the platform is every Friday at 8:00 UTC+5. A major point to note is that the system applies European options rules. With these rules, an option’s settlement can only be done at expiry and not in-between strikes regardless of whether the price is favorable.

    The protocol works with Ethereum smart contracts, Chromia-based decentralized apps (dapps), and client-side wallets.

    How Hedget works
    How Hedget works (Image credit: Hedget Twitter)

    Hedget options protocol

    Other aspects of the Hedget protocol include collateral and settlement mode.

    Collateral

    Here, users have to provide the full collateral for both call and put options. For example, those creating a call option for 20 ETH will be required to provide 20 ETH as collateral while those placing a put option will need to provide an equivalent amount of USDC (USD Coin), or any other supported stable coin.

    Settlement mode

    The network supports options settlement in either cash or physical. For physical settlement, the underlying asset, e.g., ETH, is converted to its fiat equivalent at the maturity date. In an ETH call option, the writer swaps ETH for USDC from the holder.

    Cash settlements allow the writer to calculate the profit and transfer it to the holder. Settling in cash is advantageous since it can save on transaction fees.

    Use cases of Hedget

    The Hedget network is an excellent addition to the world of DeFi, from guarding options traders against the fluctuating prices of cryptocurrencies to increasing capital efficiency for both customers and businesses to hedging lending risks.

    Furthermore, the platform can be used:

    As a non-centralized price hedge

    Here, users can use the network to hedge against their virtual currency holdings in a decentralized way. They can do this by buying a put option that protects them against reducing the underlying asset prices.

    As protection on lending platforms

    Hedget is primed for use by other lending networks to provide security against position liquidation by users. DeFi platforms champion for over-collateralized lending to cover losses in case they occur.

    For example, on DeFi platforms such as MakerDAO, users need to put up collateral of 150% in order to borrow. During liquidation, more collateral is auctioned to stabilize DAI prices. Unfortunately, the loss is only reflected on users and not on the platform. 

    When Hedget is used in combination with MakerDAO, for example, users can select at a time that loans are generated to pay a premium for automatic liquidation.

    To power leveraged trading

    The protocol is ideal for traders who don’t flinch at the thought of leveraged trading. Using the protocol, leverage traders benefit from low prices associated with acquiring options compared to directly associating with the tracked asset.

    Hedget token ($HGET)

    HGET is an ERC-20 token that Hedget that is used for governance and utility. As a governance token, it settles transaction fees and fund’s asset reserves and general functions. Also, it’s used to avert order book manipulation through order spamming. This, however, requires staking HGET tokens.

    HGET tokens have a total supply of 10 million tokens. The usage of these tokens is controlled by the Hedget DAO (Decentralized Autonomous Organization).

    Hedget token auction

    On 1st September 2020 at 13:00 UTC, Hedget will have their public auction for 423,000 HGET tokens (i.e. 4.23% of the total supply). There will be 2 separate auctions with 211,500 HGET in each auction, one auction will have all bids denominated in USDT (ERC20) and the other in Chromia’s CHR (ERC20) token.

    Both auctions will have a starting price of USD$1 and run for 11 days in a Convergence Auction format. The Convergent Auction format requires participants to gradually disclose information about their pricing decisions.

    The auction timeline will be as follows:

    Registry phase (6 days): Apply for the auction on their website, go through the KYC process and register your wallet for the token sale. Then, signal your initial bid price and desired amount of HGET you want to purchase. Participants can change their bid price and quantity for an unlimited number of times though this will incur transaction fees.

    Main phase (5 days): Participants can only raise their bid prices or lower the desired token quantity. Note that updating your bid will incur transaction fees and you may be required to deposit additional collateral to support your updated quantity. For an increase in bid prices, they can only increase a specified percentage each day during this phase: Day 1- 90%, Day 2- 70%, Day 3- 50%, Day 4- 30%, Day 5- 10%. During this phase, Hedget will calculate and update participants on the temporary threshold price for the HGET tokens. This is the lowest price where bids which are equal to or above this price are sufficient to buy all the tokens in the sale. So participants can refer to this price and decide if they want to update their bids.

    Fulfilment phase (immediately after end of auction): Hedget will finalise the threshold price. For successful bidders, HGET tokens will be sent to them accordingly. If a participants’ bid was below the threshold price or only part of the bid was fulfilled, the collateral/ remaining collateral (as the case may be) will be returned.

    For more details on the auction see the guide published by Hedget.

    Hedget and Chromia partnership

    Chromia is a blockchain network meant to power a new breed of dapps that would scale beyond what’s currently available. The network brings together blockchain and traditional databases to create a “relational blockchain.”

    Hedget exists as a layer on top of Chromia. The “relational blockchain” acts as a second layer on top of the popular blockchain system, Ethereum. A combination of the two platforms leads to Hedget performing settlements on Ethereum, while the trading is done on Chromia.

    For example, suppose a user sells call options on Ethereum using Hedget. In that case, Chromia will require the user to deposit and lock funds. After this, they can create several options with varying expiry dates and strikes. However, this will appear as a single transaction on the ETH blockchain.

    Read more about Chromia in their White Paper.

    Hedget and Alameda Research

    Hedget has formed a strategic partnership with quantitative trading firm Alameda Research, who is also the team behind FTX exchange and Serum decentralised exchange. Alameda Research made a strategic investment of USD $500,000 for 100,000 $HGET out of Hedget’s “Reserve” tokens.

    This strategic partnership obviously caused a lot of hype, especially with Alameda’s strong background and the success of FTX Exchange. This in turn boosted people’s positive perceptions on Hedget and is causing a lot of people to fear that they will miss out on getting themselves some HGET tokens.

    Hedget IEO on FTX Exchange

    As part of the strategic partnership, Hedget will have an Initial Exchange Offering (IEO) listing on FTX Exchange on 4th September 2020 at 1:00pm (UTC) for 120,000 HGET tokens.

    Participants must be at least KYC level 2 and hold tickets for the IEO. Each person has 1 ticket but those with higher average trading volume or FTT holdings may be entitled to more tickets. (manafort.com) Each ticket entitles you to bid for 100 HGET tokens with a minimum bid of $100 USDT ($1 per HGET) and a maximum bid of $500 USDT + 56 FTT ($5 per HGET +56 FTT).

    There will be a total of 1,200 accepted tickets who will get the allocation of HGET tokens. If there are more than 1,200 tickets that made the maximum bid, FTX will allocate randomly between these bidders.

    For more details check the participation guide.

    Conclusion

    With the volatility and the rigidity of current DeFi platforms, Hedget brings much-needed relief. And when used with blockchain-based lending systems, it can prevent automatic liquidation. Hedget’s application in leveraged trading, as well as its ability to hedge against price swings removes the need for trusted third parties. The fact that it is one of the projects Alameda Research had invested into also gives the public some confidence, considering Alameda’s history of success.

    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.

  • Project Serum ($SRM): First look at FTX’s new DEX for the DeFi wave

    Project Serum ($SRM): First look at FTX’s new DEX for the DeFi wave

    Project Serum is a brand new decentralized exchange (DEX) for the decentralized finance (DeFi) sphere from the same team that created FTX Exchange. It is said to test the boundaries of DEXs using a non-Ethereum blockchain. Built on Solana, Serum was created to solve the centralized vulnerabilities existing in the current DeFi space in the same trustless and permissionless way that DEX traders are comfortable with. With that being said, Serum still needs to be tested with real users first. Although the team boasts that the DEX is already functional, it hasn’t been launched as of now. But we might see Serum go live sometime in the next couple of weeks.

    What is Project Serum?

    Dubbed to be the next frontier, Serum is claimed to be a “pure” form of DeFi that is built on the Solana blockchain and will run on a central limit order book that is fully trustless. This makes it highly scalable, cheap, and fast.

    Serum is completely decentralized down to its seed protocol. It runs on a non-custodial exchange with cross-chain trading support and no KYC required. This will offer users the same UX level comparable or even better than what centralized exchanges can currently offer. With the price, speed, and usability that Serum has, there’s no reason that customers who are used to trading in centralized exchanges wouldn’t give it a chance.

    Despite being native to Solana, Serum is designed to be completely interoperable with Ethereum and Bitcoin, a huge advantage when pitted against Binance DEX or other DeFi DEXs like Balancer and Uniswap. This gives them an edge since many traders are keen to trade other cryptocurrencies besides the ERC-20 tokens that most DeFi platforms currently offer.

    With this in mind, there’s a chance that Serum could eclipse other DEXs in the crypto space when it launches. It has the convenience and familiarity that a centralized exchange can offer but in a non-custodial setup. Serum also offers incentives to node operators to participate in staking from a referral system with “leaders,” inflation, and trading fees.

    A demo of Serum was shown during The Antidote: Serum’s Weekly Convergence on 18th August 2020. The demo showed how users can trade on Serum. Here’s the demo shown during the broadcast:

    Serum demo interface

    During the demonstration, Sam Bankman-Fried commented that there may be some further changes to the appearance of the interface and there will be more features to come. However, the trading feature is already functional.

    Solana Blockchain

    Solana is the first-of-its-kind web-scale blockchain that can potentially reach 710,000 transactions per second (tps). This is possible with a verifiable delay function called SHA 256 hash chain that enables Optimistic Concurrency Control. At present, it can handle around 50,000 tps, which is exponentially faster than Ethereum’s 15 tps.

    Learn more about Solana ($SOL)

    Ethereum dominates the crypto space today but in terms of scaling capabilities, Solana has something more lucrative to offer. This doesn’t make it better than Ethereum. But for now, it is more scalable. Compared to older blockchains, Solana can process transactions quickly at much lower costs. Its transaction throughput could rival even Visa. While other smart contract platforms are loud in terms of their blockchain scaling capabilities, very few have claimed to reach the level of throughput Solana claims to have achieved.

    Solana has also partnered with other crypto giants like Terra, ChainLink, and many others.

    The Team Behind Project Serum

    Project Serum is coined to be the new DEX to be launched by FTX Exchange- a cryptocurrency exchange and derivatives platform. Check out our review of FTX Exchange. The founders of Project Serum are also behind FTX exchange and they have also partnered with titans in the industry who have successful projects including the founders of Multicoin Capital, TomoChain, Compound, and Kyber Network.

    Serum ($SRM) Token

    $SRM is Serum’s governance token based on the Solana blockchain but alternatively also has an Ethereum or ERC-20 version.

    Around 10 billion SRM was minted as the maximum supply at inception; of which approximately 175m tokens will be circulating initially and will grow to 181 million tokens after the IEO (see below). This amount is then set to grow by around 15% annually. It gives holders governance power over the Serum ecosystem. While most components in Serum are deemed immutable, some parameters, like future fees, can be modified via SRM governance votes. The net prices are used to buy and burn the SRM tokens.

    SRM can be staked and can also be utilized to pay for fees. This gives SRM holders as much as 50% discount on all trading costs. Also, 90% of all SRM tokens are designed for long-term hold or lock-ups. This is to ensure that the team is here for the long-term.

    Cross-chain Support

    Serum has cross-chain support which enables the trustless exchange of assets from different blockchains. This is a striking contrast to other protocols that would require trusted parties to permit cross-chain swaps. Serum opts to do this is in a fully decentralized way, using over 100 validators.

    SerumBTC and Serum USD

    Serum BTC is a wrapped utility token in which price is pegged or tied up with its underlying asset or BTC form. It’s also an entirely decentralized Solana-based BTC token.

    Meanwhile, Serum USD is a decentralized wrapped stable coin which follows both ERC-20 and SPL tokenizations for USD and has no single point of failure.

    Conclusion

    DeFi, in essence, has become incredibly disruptive, challenging the status quo of money in our economy. But up until now, it has mostly served the appetites of yield farming speculators. Serum’s revolution is aimed to bridge the gap between professional traders and DeFi. Their cross-chain support, order books, scalability, and other features could serve as a dangle-the-carrot to professional traders so they would take business from centralized counterparts to DEXs. Overall, Serum is a very promising DEX and DeFi protocol. But we could only know what it’s truly capable of once it launches in the next few weeks.

    FAQs

    Where can I buy $SRM?

    $SRM trading is available on Binance, FTX, Uniswap (v2), BKEX, BitMax, HBTC, Balancer, TomoDEX and Bibox.

    When will Serum’s DEX be released.

    On 28th August 2020 the team announced that Serum DEX will be launching “this week”.

    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.

  • Binance Smart Chain: First look

    Binance Smart Chain: First look

    Binance Smart Chain (BSC) was created by the team behind Binance exchange, arguably the world’s most popular cryptocurrency exchange platforms founded in 2017 by Changpeng Zhao (CZ). BSC is a dual-chain architecture that encourages users to utilize one blockchain for building digital assets and decentralized apps in order to trade faster. This architecture will run alongside the existing Binance Chain (BC), a decentralized digital asset exchange, whilst providing a fast and secure system that enables smart contracts. This article will explore some of the exciting features of BSC and give users some insight into their security and reward system. For more detailed information we suggest taking a look at the whitepaper.

    You can launch your own Binance smart chain validator for free on ANKR

    Binance smart chain
    Binance smart chain

    Features of Binance Smart Chain

    Ethereum Virtual Machine (EVM) Compatibility 

    As users may know, Ethereum is one of the most practical and popular Smart Contract platforms. Hence, BSC has enabled compatibility with multiple Ethereum tools and nodes to be used in this dual-chain architecture (e.g ecosystem components and dApps)

    Cross-Chain Communication

    Communication between BC and BSC will be supported in order for users to move digital assets (i.e BEP2 tokens), as well as any other BEP tokens in the future. This is further optimized for scaling dApps that run best with an efficient user experience.

    Integration with Chainlink’s Oracle solution for building DeFi apps

    Binance Smart Chain integrates Chainlink’s ($LINK) oracle solution. This means that developers on Binance Smart Chain no longer need to dedicate months of engineering time in order to set up their own oracle infrastructure, they can directly build smart contract applications that can connect to real-world data feeds from Chainlink. In turn, developers can build powerful Decentralised Finance (DeFi) applications which utilise Chainlink oracles to retrieve data from data aggregators or price information directly from Binance DEX or Binance exchange. According to Binance, this will bring more robust security and reliability to price feeds on DeFi apps, which in turn gives users more confidence in financial products which are built on Binance Smart Chain.

    Independent Blockchain

    BSC does not include a layer 2 solution, making it a standalone system. In the event that BC experiences a technical failure, most of BSC’s functions are self-contained, hence they should be able to continue operating despite such occurrences. 

    Staking-based Consensus and Administration

    To promote the environment and increased network performance, BSC utilizes a staking-based consensus, additionally allowing for flexible options that the community can administrate.

    Short Block Time

    One of the highlights listed on the website includes a block time of approximately five seconds, ensuring efficient trading for users.

    Binance Smart Chain vs Binance Chain: Differences?

    Binance Chain vs Binance Smart Chain (Image credit: Binance Smart Chain)

    Binance Smart Chain came about because Binance Chain was introduced as a single purpose high-performance DEX. It is on-chain order matching and intended to be very fast. It is able to handle around 100 thousand orders per second with 1-second confirmation. But for Binance Chain to achieve this level of performance, they had to sacrifice something, and that was the smart contract capabilities. However, it was a highly popular feature with users so Binance Smart Chain was released as a parallel chain which supports Ethereum compatible smart contracts, so it supports solidity and is EVM compatible.

    Therefore, a key feature of Binance Smart Chain is that it is compatible with Ethereum-based smart contracts. So, if you have a DeFi contract that runs on Ethereum, you can port it over to Binance Smart Chain and it will run there too. It is meant to be an easy way for users to deploy smart contracts on Binance Chain without any additional learning curve. It will also be fully open-sourced so anyone can deploy contracts on the platform. Finally, in terms of performance, Binance Smart Chain is lower performance than Binance Chain, but it should still be higher than Ethereum 1.0.

    Learn more about Ethereum, and the upcoming Ethereum 2.0 here.

    Rewards and benefits of using Binance Smart Chain

    The major reward implemented for users are transaction gas fees paid in Binance Token ($BNB) (Binance’s native coin), and individuals can also be rewarded for Cross-Chain communication. BNB is the token used to stake for this dual-chain architecture, and allows the prevention of inflation since it is not an inflationary token. Although this token may not be as popular as Bitcoin or Ethereum, it has many uses so validators can still enjoy its benefits.

    Proof of Staked Authority (PoSA)

    BSC makes use of a system of 21 validators through PoSA, which allows lower fees and shorter block times. PoSA is a blockchain method that allows fast deliveries and fast transactions, making it a valuable algorithm to increase positive user experience. As mentioned in the white paper, BSC will be utilizing a combination of Deputy Proof of Stake (DPoS) and Proof-of-Authority (PoA). This means it will allow community governance, only a limited amount of validators will produce blocks, and it will follow a system similar to Ethereum’s Clique consensus engine whereby validators act through a PoA protocol to produce blocks. Combining these will likely improve the efficiency, security, user transparency and satisfaction of the smart chain.

    Security: How does Binance Smart Chain protect users?

    Although PoA systems usually ensure the security of users, there are still risks of Byzantine validators that may breach the network through methods such as a “Clone Attack”. Binance conducts measures to prevent such attacks by encouraging users to wait for blocks to seal after a certain amount of time in order to guarantee secure finality. BSC additionally implements Slashing logic, which is used to punish Byzantine Validators for instability or double signing. This will decrease the chances of “Clone Attacks” and expose malicious validators very quickly. 

    Instability

    Refers to validators who miss their turn to produce blocks, which consequently damages the performance of the BSC network. This can occur when individuals have problems such as configuration or hardware related issues. If a certain number of missed terms are recorded, there are risks of validators being able to vote users out so they receive less or no rewards. 

    Double Signing

    Refers to the malicious signing of more than one block that includes the same height and parent block. BSC already has its ways to prevent this so only a deliberate attack allows this to occur.

    Status of Binance Smart Chain

    The staking mechanism and mainnet for Binance Smart Chain should be launched end of August or early September 2020. Currently, Binance Smart Chain is in testnet phase.

    Conclusion

    Overall, this dual-chain architecture is enticing for those who want to experience fast trading while building their decentralized apps on one platform and we are definitely excited and anticipating their mainnet launch. Currently, you can go onto the Binance Chain testnet and test it out, as well as request free testnet tokens. Based on the functions of BSC, we highly recommend experienced traders and programmers to give Binance’s new feature a try. For those who are new to Binance, it is also worthwhile to test and try out the platform in anticipation for the full launch.

    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!

  • DCEP, Libra, Bitcoin and Cash compared

    DCEP, Libra, Bitcoin and Cash compared

    Currencies have been around for thousands of years as a way to replace the bartering system and so that people can ascribe a unified value which they can exchange with others. With the popularity of “going digital”, digital currencies have started to emerge to the forefront as a potential new asset class. Starting with Bitcoin in 2008 as the world’s first digital currency, from there many other digital assets evolved such as Ethereum and other cryptocurrencies. Now, companies and even nations are hopping onto this trend to create digital currencies that would serve their own purposes, such as Libra and China’s national digital currency DCEP (Digital Currency Electronic Payment, a.k.a. DC/EP). In this article we take a look at the similarities and differences between cash, Bitcoin, Libra and DCEP.

    History and development

    Evolution of money
    The evolution of money (Image Source: Publish0x)

    Many cultures around the world developed the concept of commodity money i.e. objects that have value in themselves as well as their value in their use as money likely during the Bronze Age. Objects that were used as “money” included cowry shells in ancient China, Africa and India, whilst other countries used salt. Eventually metals were favoured and used as money because they were more durable. For example the Egyptians used gold bars of differing weights and the Mesopotamians used silver. During the seventh century in China, the concept of the banknote was developed, though paper money was only formally introduced around the 11th century. The reason for this was so that merchants and wholesalers did not want to carry heavy copper coins in larger commercial transactions.

    Bitcoin was invented in 2008 by a “Satoshi Nakamoto”, whose true identity or identities still remains a mystery today. Bitcoin was revolutionary at the time because it was created as a decentralised digital currency without control by any bank or authority. It could be sent from person to person on the Bitcoin network without having to rely on any intermediaries.

    Libra was created by the Libra Association, who was in turn co-founded by Facebook and formerly other companies such as PayPal, eBay, Visa and Mastercard. The purpose of Libra was to make it easier and more cost effective for people to transfer money on Facebook, thus attracting new users. In addition, potentially helping to empower billions of people who are unbanked. The plan was for this token to be backed by a portfolio of several types foreign currencies namely 50% USD, 18% EUR, 14% JPY, 11% GBP and 7% SGD to avoid volatility.

    DCEP is poised to become the world’s first national digital currency and will be issued by China’s state bank, the People’s Bank of China (PBoC) as a digital version of cash. It is designed as a replacement of the Reserve Money (M0) system and will be pegged with China’s national currency the Renminbi (RMB) at a 1:1 ratio. This means that in future, instead of handing over physical money to buy items in China, you can simply access your electronic wallet on your phone and transfer DCEP to the shopkeeper.

    Development of DCEP started in 2014 with the establishment of a research institute dedicated to digital currencies and looking at how to improve the Chinese Yuan system with blockchain technology. However during 2014 to 2018, the development process slowed down, this was probably because the decentralised nature of Bitcoin or blockchain is incompatible with the nature of the Renminbi as a legal national currency. Things rapidly picked up towards the end of 2019 however and this was directly attributable to Facebook preparing to launch Libra, particularly as partner members of the Libra Association and the currencies which Libra was to be backed by had consciously rejected China. Hence, feeling the heat of the competition, China’s central bank felt immense pressure to urgently speed up in the global competition towards a digital currency.

    Currently, China had already completed the backend infrastructure of DCEP though there will still be ongoing pilot testing as part of the research and development process. Eventually, other Chinese cities, foreign firms and venues for the 2022 Winter Olympics hosted by China will participate in testing of DCEP.

    Type of technology used

    Cash is the only type of asset mentioned in this article which does not require any form of technology. Cash is physical paper or coins which can be transferred simply by handing it over to the recipient. Transactions are recorded on a ledger, and can be physical (e.g. a notebook) or digital (e.g. a spreadsheet).

    Bitcoin utilises blockchain technology, its founder Satoshi Nakamoto referred to Bitcoin as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” Transactions are also publicly recorded on the blockchain, anyone can see what transactions have been made, although they cannot modify the transaction records.

    How Bitcoin transactions work
    How Bitcoin transactions work (Image credit: CBinsights)

    Libra also utilises blockchain technology, but unlike Bitcoin which runs on a public blockchain, Libra would run on a consortium, or permissioned (private) blockchain. This blockchain can only be accessed and managed by the Libra Association, a group of companies which includes Facebook, Thrive Capital, Shopify, Tagomi and Temasek Holdings etc. This digital currency will be on an open-sourced platform built using its own programming language called Move.

    DCEP is built with blockchain and other cryptographic technologies such as asymmetric cryptography, smart contracts, UTXO and digital wallet. This was confirmed by Mu Changchun, Head of the People’s Bank of China Digital Currency Institute. In particular, asymmetric cryptography (a.k.a public-key cryptography) technology is a process whereby a public key is used to encrypt a message so that only someone who uses the related private key can decipher it. It is the use of this technology that creates the linkage between DCEP and the blockchain and cryptocurrency industry. DCEP, due to the quasi-anoymous nature (as will be seen below) will also be making use of technology that can track its movements, and big data and data mining technology to monitor and prevent illegal activities.

    Anonymity

    Cash is truly anonymous as it has no features that can distinguish who its owner is. Simply put, if you picked up a $100 banknote lying on the street it would be very difficult, if not impossible for anyone to challenge your ownership of it. That is why cash is still the preferred instrument of choice for criminal activities such as money laundering, according to a study by Eruopol.

    Libra’s aim is to be private. In its White Paper, Libra claims that they would support a privacy approach, though simultaneously taking into account the regulatory aspects of this. However unlike Bitcoin, Libra’s transactions won’t be fully public. Node administrators that run the network e.g. Facebook etc will have a copy of all the transactions made by users. How Libra will achieve this aspect of privacy in practice is unknown. Though there is speculation that short term anonymity can be created under Libra through how the Libra wallet is funded. For example, people can possibly purchase Libra from street sellers who would fund the wallet, or funding the wallet through ATM machines or using other cryptocurrencies. In short, Libra users cannot expect total privacy and anonymity.

    Bitcoin allows users to make sever pseudonymous addresses. They are merely strings and numbers and letters, which are not attached to anyone’s identity. But unlike Libra, all transactions on the blockchain are public. So you may be able to find out who the owner of an address is through corroborating the transaction information with known information on who owns certain addresses. It is specifically through this method that funds belonging to victims of various scams are traced and identified, such as the PlusToken scam that resulted in losses of over $3 billion dollars worth of cryptocurrencies.

    Through looking at blockchain transactions, analysts are able to see the movement of funds from scams such as PlusToken

    On the opposite end of the spectrum is DCEP, which contains features that allow China’s central bank to track the movement of the currency and supervise transactions. Filed patents concerning DCEP hint at this, since the patent concerned appears to be a tracking system that would make DCEP’s movements traceable between transactions and payment parties. Although Mu reassures people that DCEP would balance between allowing anonymous payments and “classified supervision” when illegal activities such as money-laundering are involved.

    Market observers believe that the underlying motivation is because China desires to protect its capital boarders in case newer global payment systems and advanced technologies could facilitate illegal cash flows. In addition, Mu confirmed this fear and desire to preserve control when he expressed that if the Renminbi can be converted into Libra, there would be a massive currency exchange which would trigger its depreciation.

    Efficiency of transactions

    Cash transfers are inefficient, even more so if the transfers are across different jurisdictions. We all have been through the experience of having to wire money overseas which can take several days to process. These methods are also cumbersome, outdated, expensive and time consuming as it involves several entities such as banks.

    One of Bitcoin’s major advantages is that you can transfer it conveniently across countries without going through banks. However compared to Libra and DCEP, the efficiency of Bitcoin transfers is still slow at around 7 transactions per second. Depending on the amount of transaction fees you were prepared to pay, some transactions could still take hours.

    Libra’s design is to be more efficient than Bitcoin. This is mainly due to the fact that Libra is centralised, i.e. transactions are processed through the Libra Association, which means that Libra will draw less energy. Libra’s transaction speed also aims to be around 1,000 per second, which is much faster than Bitcoin. However this is not confirmed to be in the case in practice since Libra has not been launched yet.

    According to Yang Wang, Senior Research Fellow with the Fintech Institute of Renmin University, DCEP has a peak transaction speed of 220,000 transactions per second. As with Libra, DCEP has also not been launched yet so it is unknown if this is the case in practice.

    Decentralised?

    Though anonymous, cash is in fact not decentralised. Banknotes are issued by banks which are regulated by governmental authorities. If you have a bank account, it is the bank that processes your transactions. So there is always some form of control by a central authority or an institution.

    Bitcoin on the other hand is completely decentralised, no intermediary is required to process transactions. All transactions are visible on a public ledger known as the blockchain. Each of these Bitcoin transactions is validated and confirmed by the entire Bitcoin network and anyone with the correct hardware can join in and participate in this process.

    Libra transactions, as mentioned previously is partially decentralised. Transactions won’t be fully public i.e. we cannot look up a transaction with a blockchain explorer like we can with Bitcoin. However, node administrators that run the network e.g. those in the Libra Association would have access to every user’s transactions.

    DCEP is highly centralised. The digital currency would be issued by the PBoC to various intermediaries such as Alibaba and Tencent. These intermediaries would then distribute DCEP to companies and individuals in China and DCEP would circulate when transactions occur.

    DCEP two-tiered system
    DCEP will use a two-tiered system of issuance and distribution (Image credit: REITI)

    Current status

    The status and usage of cash is well developed. It remains the most popular payment method for face-to-face transactions and for cheap everyday purchases. In 2019, the Diary of Consumer Payment Choice found that consumers still used cash in 26% of transactions and 49% of all small-value payments under USD$10 were made in cash. Overall, cash is the second most used payment method, with debit cards being the most popular.

    Bitcoin is now gaining more usage and popularity since its invention in 2008. According to data from the US Bureau of Consumer Financial Protection, Bitcoin had US$4 billion in purchasing power in 2018. There are also many major retailers that accept Bitcoin payments e.g. Starbucks and Whole Foods. And almost every country would at least have 1 Bitcoin ATM machine where people can buy Bitcoin. Despite this, its usage is still minuscule compared to credit card purchases, which had a volume of USD$3.7 trillion in 2018. This may be because Bitcoin is still most well-known for being speculative, with many holding onto their Bitcoin in the hopes that they may sell it at a later date for profit.

    Libra was announced in June 2019, and is going through some bumps in its development. The project faced suspicion and even criticism from regulators from the European Union, the United States, Switzerland and Japan. Banks also were notably absent during the initial Libra announcement, expressing reluctance to join because of uncertainties surrounding regulation and feasibility. In additional, shortly after Libra was announced several high profile members of the Libra Association such as PayPal and Vodafone departed.

    However the Libra project is not “dead” as such, they released the second edition of its White Paper in April 2020. In May 2020, the Libra Association appointed its new CEO and announced several incoming members-bringing it to a total membership of 27. In June 2020, the Association also appointed its Chief Compliance Officer. Going forward, it seems that the Libra Association would continue to try and grow whilst engaging in dialogue with regulators. The Libra Association does not set a definitive timeframe for launch in the second edition of its White Paper, but it certainly is unlikely to be 2020 as per its initial projections.

    As for DCEP, it has been confirmed that there will be closed pilot tests in Shenzhen, Chengdu, Suzhou, Xiong’an and some of the 2022 Winter Olympics locations. This will then be expanded to 28 cities and provinces including Beijing, Shanghai, Guangzhou and the Hong Kong Macau Greater Bay Area. However there is currently no timetable for when DCEP will be officially launched. Experts have revealed that it is unclear whether DCEP can debut in the second half of 2020, although plans for its development have certainly been ramped up by the PBoC.

    Summary

    Here’s a table showing the various features of DCEP, Libra, Bitcoin and Cash.

    DCEPLIBRABITCOINCASH
    Anonymous?Can be made anonymousYesYesYes
    Type of technology used?Smart contract, asymmetric cryptography etc.Consortium blockchainPublic blockchainNil
    Efficiency?HighHighLowLow
    Decentralised?NoPartiallyYesNo
    Volatility?LowLowHighLow
    Portability?HighHighMediumLow
    Security?HighHighHighLow
    Offline payment support?YesNoNoYes
    Transaction speed (TPS/sec)?220,0001,0007N/A
    Current StatusUndergoing testingIn developmentIn circulationIn circulation
  • Interview with Chengpeng Zhao (CZ), Co-founder and CEO of Binance

    Interview with Chengpeng Zhao (CZ), Co-founder and CEO of Binance

    Chengpeng Zhao (CZ), Co-founder and CEO of Binance Exchange, went on a LIVE interview with Boxmining on 11th August 2020 to talk about Decentralised Finance (DeFi), Binance card, how Binance decides what coins to list and more.

    Binance is a cryptocurrency exchange that provides users with a platform to trade various cryptocurrencies. It is one, if not THE largest cryptocurrency exchanges in the world in terms of trading volume.

    Watch the full interview here:

    Interview with CZ, Co-founder and CEO of Binance

    Binance Recent Updates

    Binance has been focusing its growth on the futures side of their products offerings- they added 16 derivative contracts in July 2020 alone, and now offers 43 futures contracts along with 8 leveraged tokens. The Future’s trading volume on the Exchange has grown from 80 billion to 109 billion in July 2020-nearly a 25% growth in one month.  Binance also reached $13 billion trading volume in the same month, which is the all-time highest trading volume. Binance has also observed steady growth in trading volume and in July 2020 smashed their record for highest daily trading volume seen on their Exchange- $17 billion.

    They also recently shipped out their Binance cards to several areas in Europe. See also our section below where we look at Binance Card in more detail.

    Furthermore, Binance recently launched Binance Australia, a fiat-to-crypto trading platform providing Australian users with a fast, secure and reliable platform to deposit fiat currencies from their bank accounts and buy and trade digital currencies on the Exchange.

    Listen to the Full interview on Podcast: https://anchor.fm/boxmining/episodes/EXCLUSIVE-Binance-Exchange-CEO-Changpeng-Zhao-CZ-ei62bi/a-a2uverv

    DeFi and DEXs?

    According to CZ DeFi, is truly an innovative space, particularly Automatic Market Makers (AMM) which he sees as a very interesting invention. In fact, he revealed that he would be interested in adding AMMs into Binance so that people can add liquidity to certain pairs.

    But he cautions that most DeFi projects will fail and only a few will see things through, though these few survivors will succeed wildly. He also warns traders to be careful while investing in DeFi tokens, as it is a new space and involves a lot of risks. This, however, does not mean that DeFi as a whole is bad and in fact, the team at Binance are very supportive of DeFi and are doing a number of related initiatives.

    CZ also believes that decentralised exchanges (DEXs) are not a challenge to Binance- which is a part of the centralised finance space. This is because he finds the industry to be quite small, so the more working platforms there are the more people will be attracted and invited into this space. CZ also believes that DEX and centralised finance users are fundamentally quite different, and despite the rapid increase in DeFi staked assets, the number of users is still relatively low. This is because DeFi requires users to hold their own private keys and keep them secure. But the vast majority of people are not capable of doing that currently.

    Criteria for Listing New Coins on Binance: How Do They Decide?

    CZ said that the coin listing on Binance has always been based on the number of users. Simply put, if a coin has a large number of users and there is a huge demand from the community, they will list it. The fact is that Binance does not choose which coin to list, if a coin has a large number of users and it is very sought after and popular, then exchanges have no choice but to list it.

    CZ offers some tips for users who really want a particular coin to get listed. He suggests that the projects really work hard on building their community and getting more users in. Binance itself reviews several criteria when deciding to list a coin including community size, number of Twitter followers and number of addresses. If Binance sees that there is genuinely a high number of users, they will list it. In fact, CZ reveals that he is not personally involved in the listing process and sometimes he even only knows a coin has been listed on Binance when he sees the announcement on Twitter afterwards.

    He also mentions that Binance has ramped up the number of coins being listed on the Exchange due to the rising temperature of the cryptocurrency market. And in fact, the Exchange had already listed 6 coins in one week in early August 2020.

    Binance Smart Chain

    The history of how Binance Smart Chain came about is because Binance Chain was introduced as a single purpose high-performance DEX. It is on-chain order matching and intended to be very fast- able to handle around 100 thousand orders per second with 1-second confirmation. But in order to achieve this level of performance, they had to take out the smart contract capabilities from Binance Chain- but was a highly popular feature with users. Hence Binance Smart Chain was released as a parallel chain which supports Ethereum compatible smart contracts, so it supports solidity and is Ethereum Virtual Machine (EVM) compatible.

    Hence a key feature of the Binance Smart Chain is that it is compatible with Ethereum-based smart contracts. Also it will be fully open-sourced so anyone can deploy contracts on the platform. So, if you have a DeFi contract that runs on Ethereum, you can port it over to Binance Smart Chain and it will run there too. Binance Smart Chain is meant to be an easy way for users to deploy smart contracts on Binance Chain without any additional learning curve. In terms of performance, Binance Smart Chain is lower performance than Binance Chain, but it should still be higher than Ethereum 1.0.

    Learn more about Ethereum, and the upcoming Ethereum 2.0 here.

    CZ also revealed that the team is designing a staking mechanism for BNB on Binance Smart Chain. The staking mechanism and mainnet for Binance Smart Chain should be launched end of August or early September 2020.

    Binance DEX vs Binance CEX

    According to CZ, most users opt for the centralized Binance exchange i.e. Binance.com rather than Binance DEX as it is much easier to log in and has more customer support. Therefore, he believes that although the future belongs to DEX, they are more focused on CEX as it has a larger user base currently.

    CZ also highlighted that the Binance platform will continue to invest in DEX and Binance Chain developments and also support and fund other external projects.

    Binance exchange aims to attract a lot of users towards crypto. CZ believes that currently, only 0.1% of people hold crypto. If this increases to 1%,  the industry will grow 10 times and Binance will benefit too.

    Binance Card: Swipe ($SXP) partnership and what’s next

    The Binance Card enables users to manage their funds, card security, and spending with just a few clicks. Once you receive your new card, you’ll need to add funds by transferring your BTC or BNB from your Binance.com wallet to the Binance Card wallet. And you’re ready to go!

    CZ shared that Swipe ($SXP) is the main provider for the Binance card and the two teams are partnered for the purpose of developing the Binance card. He believes this partnership and the Binance Card itself is very strategic because it finally allows people to spend their cryptocurrencies directly. This eliminates the need for people to have to take the extra steps of transferring their cryptocurrencies into a stable coin, taking the stable coin elsewhere to turn into fiat currency and finally depositing this currency into the bank accounts to pay for their purchases. Essentially, this allows people to stay 100% in cryptocurrencies.

    Binance has recently shipped out their Binance cards to select areas in Europe, which allows users to shop and spend their cryptocurrencies on Binance directly. As for other locations, the Binance team will be rolling out the cards region by region. The technology to issue these cards is there, but the Binance team need to make sure it complies with the regulations in every region. The workflow is in motion, so it will only be a matter of time when Binance cards will be issued in other countries.

    Is Binance Running Its Own Bitcoin Lightning Node?

    CZ says that Binance.com is not running any Bitcoin lightning nodes since they haven’t gone that far. However, CZ is very supportive of lightning nodes and most of the 2nd layer solutions. He reveals that there is some work to be done before Binance can run its own lightning node, for example they are still busy with the integration of SegWit, a Bitcoin implementation that is intended to increase transaction throughput of the network. This is a large project for them because the Bitcoin wallet itself is already not very high performance. They already had to build a huge infrastructure to deal with all the wallet addresses for all the users on the Exchange- and in fact most users have more than one address. The team has a lot of legacy to deal with in order to move forward, however they are working on it. And at the same time, the team also needs to focus on other aspects of running the Exchange such as listing new coins for users etc.

    Stablecoins: USDT and DAI

    In terms of what is happening with USDT and the fact that new USDT is being minted, CZ himself does not know any further information out of what is publicly available. He does however see that having only one popular stablecoin is very risky particularly if something were to happen to the custody of the bank account etc. So it would be beneficial for the industry to diversify into multiple stablecoins and offer more choices to users. (Clonazepam) For example BUSD, which is actually managed by their partner PAXOS. This is so that the risk is also diversified since there is less reliance on one entity or bank account etc.

    As for the DAI stablecoin, CZ considers it does have an innovative approach to issuing stable coins and Binance is supportive of it and excited to see where it goes.

    Learn more about Binance Exchange

    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.

  • Fuse Network ($FUSE): What is it?

    Fuse Network ($FUSE): What is it?

    Fuse Network is a Decentralised Finance (DeFi) project launched in 2019. They are a finance company that tries to connect everyday payments to the blockchain through leveraging a DeFi infrastructure to create a platform for entrepreneurs and allow them to turn their communities into valuable economies. With the platform, anybody can easily build their own applications where they can digitize and automate traditional financial transactions and processes.

    The project’s primary focus right now is to establish an ecosystem that can merge financial transactions on top of the blockchain. They are developing this in a way that does not trigger too much cost for the users while enabling a system that secures data privacy.

    In this article, we will look at how the Fuse Network designed a way to link different blockchain models (smart contracts, consensus mechanisms) and traditional business transactions without compromising its platform’s user-friendliness and affordability.

    How fuse works
    How Fuse works

    What is the Fuse Network?

    The Fuse Network is a permissionless and borderless public ledger designed for easy integration of day to day payments. The Fuse Network is anchored to Ethereum via a bridge, so any token can move freely between Ethereum and the Fuse-chain. (aaplumbingsa.com) The function of this is so that when tokens are minted on Ethereum, they can be moved to the Fuse-chain which it can access a huge range of features and plugins that brings out different functions and opportunities.

    Functions of Fuse Network

    Integrate digital payments with crypto – Fuse makes it convenient for companies and enterprises to integrate digital payments on their platforms through its simple user interface. With digital payments, businesses can easily offer their goods and services even to other customers worldwide.

    Ease business operations – Because of smart contracts, business operations can be automated. Just by linking your business data with the Fuse network’s smart contracts, you can easily lower the cost of having complicated IT infrastructures.

    Fuse Studio

    The Fuse Studio is a decentralized application (dApp) that handles the whole interface which the user works with. It runs on top of the Ethereum and Fuse Network.

    The Fuse Studio allows the user to launch and operate their own communities and set some conditions through the help of smart contracts. Smart contracts refer to self-executing codes that can be infused in a program to perform certain functions if some standards are met.

    They can find great use cases for users especially since they do not have to monitor their communities 24/7. Therefore, they can update their conditions based on their own agreements if needed. Additionally, Fuse does not own or control any user data that goes through these contracts.

    Through the Fuse Studio, users are also given the ability to mint their own tokens. They can distribute these tokens for use in their own networks. For instance, someone can choose to distribute a stablecoin of their preference, another ERC-20 token supported by the platform, or create a new one for the communities that they will build on the Fuse Network.

    Fuse Studio also has a built-in contract store to allow the easy launch of new features and integrated services. As a result, there have been numerous developments that the community have come up with for the Studio. Some of these are plug-ins that let users:

    • Manage their communities, add members, admins, and designate roles for each;
    • Establish transaction costs;
    • Integrate white label wallets; and,
    • Access local dApp stores, among others.

    To access the Studio DApp, users just have to download the Metamask wallet plugin on their browsers.

    Fuse Wallet

    The Studio is linked with the Fuse Wallet to help transfer the processes from real-world transactions into the blockchain. The Fuse Wallet is based on Ethereum and supports any ERC-20 token, and it allows for easy onboarding, speedy verification times, merchant support and other functions aimed at regular customers. It is a mobile app available on both iOS and Android. It is also non-custodial, so users can feel assured that they do not have to provide their private keys in order to use it.

    What is Fuse Token ($FUSE)?

    The network’s utility token is the Fuse Network Token ($FUSE)- an ERC-20 token. It can be used as a medium of exchange, as payment to the Fuse Network to approve transactions or to participate in the network’s staking mechanism. Currently, there are 300,000,000 FUSE tokens in supply.

    Utilities of FUSE token

    Validation: Users must stake a minimum of 100,000 FUSE to become a validator and help validate transactions on Fuse Network.

    Voting: The Fuse Network works under the Delegated Proof of Stake (DPoS) consensus algorithm so Validators can vote on protocol changes and important decisions concerning the project. This means that the maintenance and governance of the network are largely community-based. The weight of a users’ vote depends on the amount of FUSE staked.

    Fees: Users pay FUSE as fees to the network to approve transactions capped at 1 cent per transaction. This creates circulation between network users looking to validate transactions on the network and validators who invest their computing resources and power to maintain the same.

    Delegation (coming in Q3 2020): Once this function is activated, any FUSE token holder can delegate their owns to a validator in exchange for rewards. and validators with the most tokens are elected to validate transactions on Fuse Network.

    Inflationary value of FUSE token

    Every block which is created on the fuse chain creates new FUSE tokens which are rewarded to the validators for their work. 5% inflation in the network is distributed between the validators. In each 48 hour cycle, the validators with the highest amount of FUSE tokens staked will be entitled to a distribution of the rewards based on their stake.

    Fuse network utilises this fixed inflation rate to help stablise the token price. In phase 2 of the network, there will be an upgrade to a different inflation schedule which will be proposed and voted on by validators.

    How to become a Fuse Validator?

    Validators secure the safety and security of the Fuse Network. Just like mining on Bitcoin or Ethereum, they work to keep the network updated and validate the state of the network by confirming blocks for every cycle.

    There are more than 50 validators in the network. Network transactions are charged at a maximum of 1 cent $ per transaction and these payments go to the validators. Validators also vote on network upgrades and governance changes.

    To be a validator, you need specialized software and hardware that can run 24/7, and as mentioned above you need to stake at least 100,000 FUSE tokens.

    If you don’t have the technical capability to be a validator but have the minimum staking amount, you can instead delegate it to another third-party validator. The delegation process is intended to be activated in Q3 2020.

    Partnership with Rupia Token

    Fuse and Rupiah Token (IDRT) announced a partnership in July 2020, with the goal of widening the reach and adoption of digital assets in all economies across the world. Rupiah Token is the first Ethereum-based stablecoin pegged to the Indonesian Rupiah (Rp).

    Indonesia is the 4th most populated country in the world, but suffers from financial exclusion. According to the Asian Development Bank’s report- “Financial Inclusion in Asia”, around 78% of Indonesians do not have a bank account. Yet, they are becoming mainstream cryptocurrency holders, with 11% of survey respondents saying they hold cryptocurrencies according to the Statista Global Consumer Survey. This puts them in as the 9th country with the most cryptocurrency holders according to the said Survey.

    With Rupiah Token on board, Fuse will have access to this growing Indonesian cryptocurrency market, providing an option to trade and utilize IDRT in the Fuse Studio and wallet app interface.

    The integration of Rupia token will enable individuals, as well as organizations, businesses, and communities to send and receive IDRT globally.

    Rupiah Token (IDRT)
    Rupiah Token (IDRT)

    Fuse partners with Elrond

    On 14th August 2020, Elrond announced that its assets can be used on the Fuse Network for payments, business and community incentives, and loyalty programs. The partnership will involve the integration of the Elrond mainnet with the Fuse Network. Users will be able to create and manage their business incentives, custom rewards, payments, and other related scenarios using eGLD, BUSD and other tokens issued on the Elrond mainnet. And assets issued on the Elrond blockchain will be usable on the Fuse Wallet.

    Learn more about Elrond

    Conclusion

    Digitization is more important now than before. And with the boom of e-commerce to replace traditional business transactions at present, making businesses more technologically updated is essential.

    The Fuse Network makes it easier for businesses and communities to integrate traditional business transactions into digital processes, saving them more time and resources.

    The innovations provided by the Fuse Network is helpful even for small entrepreneurs and big businesses. And given that the network is maintained by its community, we can expect that its developments will continue to be responsive to the demands of the people participating in the network.

    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.

  • Bobby Ong, COO of CoinGecko talks DeFi, DEX and when bull run with Boxmining

    Bobby Ong, COO of CoinGecko talks DeFi, DEX and when bull run with Boxmining

    Bobby Ong, Co-Founder and COO of CoinGecko, sat down in an interview with Boxmining on 4th August 2020. They talked about Decentralised Finance (DeFi), Decentralised Exchanges (DEX), whether 2020 will be a breakout year for a bull run, and more.

    What is CoinGecko?

    CoinGecko is a Singapore-based company founded in 2014 by TM Lee and Bobby Ong. It is one of the most popular cryptocurrency data aggregators today. Apart from tracking price, volume, and market capitalization, the platform also records community growth, open-source code development, major events, and on-chain metrics. Basically, Coingecko helps its users quantitatively evaluate and rank crypto assets.

    Here’s some of our KEY TAKEAWAYS from the interview. You can also watch it here:

    DeFi Wave – Decentralized finance on the rise

    According to Ong, the DeFi momentum isn’t slowing down. He believes that DeFi still presents enormous opportunities to democratize financial services to everyone. He also said that Q2 2020 was exceptionally great for DeFi tokens and now it’s everyone’s favorite. Meanwhile, we’ve seen CoinGecko FINALLY answering our prayers for the past few weeks and creating a DeFi coin ranking.

    Trends and Challenges

    In terms of trends, Q2 and Q3 2020 are going to be all about DeFi. When doing analytics, the team found that Uniswap was the most popular exchange in Q2. Everyone in July 2020 everyone was just looking at Uniswap and in fact it was even more popular than centralised exchanges, solidifying their view that DeFi is going to be the hottest trend.

    In terms of challenges, he believes that adding DEXs to the CoinGecko platform was definitely a big challenge because they do not have a rest API. So CoinGecko cannot just integrate DEXs just like how they used to add centralized exchanges. Ong and his team spent a lot of time trying to figure out how to get all of the data from DEXs onto CoinGecko. But they have finally overcome this challenge and found a solution to getting the on-chain data and integrating it with Coingecko. That is why CoinGecko can now show data for Uniswap, Balancer, Gnosis Protocol and other many DEXs.

    How does CoinGecko identify scam cryptocurrency projects?

    Initially, to ensure users get the most complete info, CoinGecko would be very lenient in listing the information of any coin listed on any exchange, including DEXs. However, they discovered a lot of scam coins showing up on Uniswap. For example, some people would create new tokens, list it on Uniswap, provide some liquidity to attract others to buy, and after a while take out all the liquidity leaving people with bags of tokens that can’t be sold.

    Hence CoinGecko had to tighten their policy on what information is listed on their platform. Now they have a blanket policy whereby they will not list coins that are only traded on Uniswap unless it is properly checked and vetted by the CoinGecko team. And they do this by contacting the project itself.

    Ong also notes that Uniswap is working on compiling an maintaining a decentralised list of legitimate coins which other aggregators such as CoinGecko can contribute to so that users can watch out for fake coins which are listed on Uniswap. This is a good sign, as it means there is clearly an effort to tackle these scam projects by different platforms.

    How does CoinGecko tackle fake volume on exchanges?

    As for fake volumes on cryptocurrency exchanges, CoinGecko does something unique, which is to look at order book spread and ±2% depth for each trading pair cited on CoinGecko. When CoinGecko first looked at order book depth a year ago, they found numerous instances where an exchange would report millions in trade volume, but the volume was clearly created by bots. Worse still, when you do put in an order, it would trigger the bots to stop trading. Hence, in reality, you can’t even actually trade $10 of coins in there!

    Ong considers that Automated Market Makers (AMM) such as Uniswap or Balancer are game changes because so long as there is liquidity inside the pool, there is real depth. And even if the price may not always be the best, users can still know for sure whether there is some liquidity in there. Though save of course, if the token creators are trying to pull an exit scam as mentioned above.

    Is this a bull run?

    Talking about the growing demand for DeFi protocols, Ong said that everyone in the crypto space wants to witness the same 2017-18 bull run phase. He said, “The next six months will be crucial in determining whether we are going to enter the bull run or not. I think we are still in the early innings like maybe the first base of an actual bull run.” His reasoning behind this stems from observations on the number of page views on his platform. He noticed that in the past year or so they have around 15 million monthly page views and the growth was quite stagnant. However, in the past 1 or 2 months, they have noticed the traffic has increased by around 1.5 to 2 times. He considers that the increase in traffic on CoinGecko can be attributed to existing cryptocurrency enthusiasts looking into DeFi, but we are not at the stage yet where outsiders are coming in and checking out cryptocurrency like in 2017. Therefore, according to Ong, the market hype is real, but we are not seeing a massive bull run yet.

    We asked Ong a bit more on this. Does he think we are entering a bull market, or is this just a fakeout zone where prices will just eventually dip like some of the short-lived hypes in 2019? Ong admits he does have a conservative side, but at the same time, a part of him feels we are almost there for the next bull run. This is because if we look at a typical cycle, bear markets usually last between 3-4 years, and we have already been in a bear market since 2018. Finally, he also mentions his friend’s observations from analysing Bitcoin’s weekly charts that 2020 won’t be a breakout year, but rather it would likely be in 2021. Ong agrees with this analysis and certainly sees we are building ground and setting the scene for a 2021 bull market.

    Thank you again to Bobby Ong for sitting down with us for an interview! Follow Bobby Ong’s twitter and check out CoinGecko!

  • Orion Protocol ($ORN) explained

    Orion Protocol ($ORN) explained

    Orion Protocol ($ORN) offers a unique liquidity aggregator that connects major exchanges into one simple platform. Orion sees traders having difficulty in performing profitable transactions from popular exchanges. And while there are many exchanges to choose from, the liquidity in these exchanges remains an issue and not everyone has the time to research which exchange offers the best returns. Hence Orion wants to set itself apart, not by competing with exchanges, but by aggregating their order books into one simple terminal.

    Background

    Alexey Koloskov, CEO and Co-Founder of the Orion Protocol, launched the project in 2020 in a bid to deal with the problems of large exchanges monopolizing the cryptocurrency exchange market. In his view, both centralized and decentralized exchanges have their fair share of issues. Centralized exchanges are vulnerable to hacks, whilst decentralized exchanges are still relatively underdeveloped.

    Hence accordingly to Yanush Ali, CSO of Orion Protocol, their project is exactly what the cryptocurrency industry needs today as it is a truly decentralized platform that meets the demands of businesses and consumers alike.

    What is Orion Protocol?

    Orion Protocol is an open-sourced, decentralized finance project mainly created to aggregate liquidity from different major liquidity providers i.e. exchanges. Primarily, Orion helps users get the best return out of their funds while lowering the risks associated with going onto multiple exchanges (both centralized and decentralized).

    Orion operates by collecting the liquidity offered across multiple exchanges in the cryptocurrency market into a single, universal API. This API combines multiple order books from exchanges in order to make it easier for users to make trading calls whenever they wish to.

    For example, when the user makes an order and a single API call is made, Orion itself will split and route this action to multiple exchanges at once. This leads to them being able to find lower buy and sell spreads and eventually the best exchange prices for users.

    With Orion, traders do not have to bother themselves too much with APIs from different exchanges, data formats, modes, and order types. They can just focus on executing their trades or managing their assets.

    In addition, Orion seeks to address another risk from centralized exchanges — hacking. Hot wallets usually provided by online cryptocurrency exchanges are susceptible to hacking. Recent reports already revealed how vulnerable centralized exchanges (and even decentralized ones) are. And users have no option but to deposit their cryptocurrencies there for trading, which inevitably puts them at risk. Orion’s non-custodial solutions try to solve this by letting users freely manage their assets on the platform, whenever and however they want, without ever giving up their private keys just to do so.

    Along with Orion’s multi-currency wallet, it is easier to keep track of your portfolio’s overall performance as they can easily be found in just a single API. The hassle in using and maintaining multiple wallets just to trade in multiple exchanges is eliminated.

    Since Orion is open-sourced, third-party developers can join the protocol and make their own decentralized applications on top of it.

    Orion Products

    Orion aims to be a one-stop shop, so naturally they have a whole suite of products and ecosystem for traders. Let’s take a look at them in turn.

    Orion Trading Terminal

    The trading terminal is Orion’s platform to allow traders and investors to conveniently execute trades in its universal API. In just a single call, users can make trade orders that will be automatically executed across different exchange platforms in search for the best spot prices.

    If users want to invest in emerging blockchain initiatives or are interested in purchasing new tokens, they can also perform such transactions with Orion’s trading terminal.

    Portfolio management application

    Instead of having to check different accounts from multiple exchanges one by one just to monitor your portfolio, Orion simplifies the process by collecting all relevant information together in a single tool for the user.

    Orion’s portfolio management application allows users to monitor and record their activity across exchanges, set alarms for arbitrage opportunities, and automate asset management processes, among others.

    All these processes do not require the user to give up custody over their funds because the application offers a non-custodial portfolio management feature. Surrendering your private keys to a third party is no longer necessary.

    App store

    Orion has a marketplace of decentralized applications that users can access to purchase Orion-based software. Many of these software may be third-party developments built on top of the protocol. Some applications users can gain access to are:

    • Arbitrage apps;
    • Algorithmic trading bot; and,
    • Payment integration systems.

    Enterprise trade

    While interoperability is a concern for some aggregators, Orion has developed a system made to address this. Orion has its own extension that firms and traders can embed into their own software to provide access to Orion’s API.

    Liquidity boost plugin for exchanges

    Orion has its own plug-in that centralized and decentralized exchanges can place on their own platforms to contribute to Orion’s aggregated liquidity. This also helps bring market-makers to exchanges at a reasonable fee.

    Orion shared liquidity pool — brokers are liquidity providers who hold funds in exchanges while also executing orders on behalf of the users. They stake a minimum amount of ORN tokens to join the liquidity pool. The more ORN they have, the more fees they get from executing orders.

    DEX launcher

    This is the platform where users can launch their own decentralized exchange with access to Orion’s liquidity. It is not just a simple method to open new exchanges but also provides instant liquidity.

    Orion Token ($ORN)

    Orion Protocol’s native utility token, $ORN, is an ERC-20 token. The token supply is capped at 100,000,000 ORN and the circulating supply is around 3.8 million coins. Orion claims it is committed to ensuring ORN’s sustainability and they aim to achieve this through several means:

    • providing uses for the token;
    • non-inflationary staking;
    • diminishing supply;
    • benefits for holders; and
    • refund opportunities.

    Uses for ORN

    ORN can be used throughout its various products. For example:

    • Orion terminal: Users receive fee discounts when paying using ORN, and can earn terminal transaction fees and interest by staking ORN tokens.
    • Decentralized brokerage: brokers are required to stake ORN in order to be chosen to execute trades. Whilst non-brokers can stake ORN to vote for their chosen broker.
    • Orion Enterprise: All licensing fees generated will be used to buy ORN from the market and removed from the total supply.

    Non-inflationary staking

    Currently Orion has a multi-exchange pre-staking initiative and according to them, it yields a 39% APR. Apparently it is so lucrative that 50% of circulating ORN ahs already been staked.

    Upon Mainnet launch in Q4 2020, Orion will utilize a Delegated Proof of Broker (DPoB) staking model. This model has 2 components: Broker Stakers and Non-broker Stakers. Brokers run the Orion Broker Software, which automatically executes trades routed there from Orion’s liquidity aggregator. The more ORN staked by the Broker, the more likely they are chosen to execute trades. Brokers can also increase their chances of getting chosen through Non-broker Stakers who stake ORN to “vote” for their chosen Broker to execute the trades. Both Broker Stakers and Non-Broker Stakers receive rewards. Broker Stakers receive a portion of fees from each trade they execute, whilst Non-Broker Stakers a variable reward share offered by the Brokers in exchange for their vote.

    The DPoB model for staking ORN is non-inflationary because, under existing mechanisms used by other exchanges, miner/staker benefits are typically minted as new tokens which hurts the underlying asset over time. Orion departs from this existing mechanism because Orion does not mint tokens for the purpose of giving rewards, instead, DPoB stakers receive rewards that are generated through Orion’s 13 revenue streams. This in turn preserves the necessity and the value of the ORN token.

    Orion's 13 revenue streams
    Orion’s 13 revenue streams

    Diminishing supply

    Orion actively removes ORN from ciruclation (thus increasing its value over time) through the following means:

    • Staking: Under the DPoB model, both Broker and Non-Broker stakers remove their ORN from the circulating supply. The rewards generated are compounded into their stake which further reduces circulating supply.
    • Licensing fees: 100% of licensing fees generated from Orion’s DeFi solutions will be used to purchase ORN from the market and removed from circulation.
    • Refunds: ORN tokens refunded via the Dynamic Coin Offering (DYCO) will be destroyed.

    Benefits for ORN holders

    As seen above, Orion Terminal users get fee discounts when paying using ORN and stakers get additional incentives.

    Refund opportunities

    Orion is the first project ever to implement a DYCO. 80% of the funds which were raised during the token sale were set aside to buy-back holders’ tokens if they so requested. Any refunded tokens will be burned.

    Where can I trade ORN?

    ORN can be purchased with Ethereum (ETH) or USDT in several exchanges such as KuCoin, BitMax or Uniswap (v2), although according to Coingecko, it is most actively traded on Bilaxy exchange. Orion also claims that through a multi-exchange pre-staking program, ORN tokens can be staked on Bitmax, KuCoin and Biki for staking rewards of approximately 39% APR.

    Orion roadmap: What can we expect?

    Orion’s token sale had ended on 14th July 2020 and as mentioned above ORN is already listed on several exchanges. In the upcoming Q4 2020 we can expect the launch of the public mainnet, decentralized brokerage and Orion price oracle. Most importantly upon public mainnet launch the DPoB staking model will be place.

    Here’s a look at Orion’s roadmap:

    Orion roadmap
    Orion roadmap

    Conclusion

    The challenge for traders and investors is how they can make sure that the transactions they make are still profitable. This is because day-to-day market prices can be manipulated by crypto whales and other large investors as they influence overall liquidity.

    Orion’s aggregated liquidity promised to solve this issue and so far, it is off to a good start. With Orion, no single entity or investor can influence its aggregated liquidity. Users can consider this platform if they want to execute trades that are much more profitable, or if they just simply want to have a better view of how their portfolio is performing on different exchanges.

    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.

  • Uniswap Review and Tutorial: Beginners Guide and Advanced Tips and Tricks

    Uniswap Review and Tutorial: Beginners Guide and Advanced Tips and Tricks

    Uniswap is an automated liquidity protocol and is one of the most popular decentralised exchanges (DEX) out there because of the surge in popularity of decentralised finance (DeFi). Users can become liquidity providers for a pool on Uniswap by depositing an equivalent value of each underlying token in return for other tokens in the pool. In this article, we look at why Uniswap is so popular and provide a tutorial suitable for both beginners, and some advanced tips and hacks for more advanced users.

    You can also check out our Uniswap Guide with a walkthrough of their various features, tips and tricks here:

    Key features of Uniswap

    Uniswap has 2 major elements or features known as Swap and Pool:

    Swap: Uniswap’s Swap feature allows users to swap between Ethereum (ETH) and different ERC-20 tokens.

    Pool: Uniswap’s Pool Allows users to earn through providing liquidity. This is done by depositing tokens into a smart contract and you would receive pool tokens in return.

    Why is Uniswap so popular? Advantages of the Exchange

    Self-custodial: Uniswap allows you to retain full custody of your funds. So there is no risk associated with centralised exchanges where you could stand to lose your funds if the exchange is hacked or goes bankrupt.

    No Know Your Customer (KYC) process: Because Uniswap allows you to retain custody of your funds they do not require you to go through a lengthy KYC process and disclose your full name, passport details etc. It also means getting started on the Exchange will be much quicker and will drastically reduce the chances of your personal information falling into the wrong hands if the Exchange is hacked.

    Low trading fees: Uniswap only charges a flat fee of 0.30% per trade. This is much cheaper than most decentralised exchanges.

    Access to new coins: Usually with centralised exchanges, different cryptocurrency or DeFi projects will need to go through a vetting process with the exchange before their coin or token is listed for trading. However, since Uniswap is decentralised and owing to their popularity, a lot of projects are instead choosing to launch on Uniswap directly. So with Uniswap, users can get their hands on these new tokens first. And with crazy fluctuations in token prices, especially when they first launch, many traders consider it crucial to be the first ones there.

    Is Uniswap safe or a scam? Disadvantages and risks

    Transaction failure: When swapping coins on Uniswap, transactions can be at risk of failing. This is mostly for 3 reasons. Firstly, you paid too little gas fees and the transaction took longer than the hard deadline coded into the transaction. Secondly, you had specified a maximum price that you would be prepared to pay per token but the price exceeds the maximum before the transaction is completed. Lastly, there is insufficient liquidity in the pool. In these cases, your transactions are “reverted” i.e. reset as if the transaction never occurred, so you would not lose your funds. So it cannot really be said that Uniswap is a scam.

    Fake coins: Anyone can list their tokens on Uniswap, so there are people out there who list fake coins on Uniswap in the hopes of being able to scam people into sending their funds for these coins. So Uniswap users need to be extra careful in this respect- see our section below on identifying and avoiding fake coins on Uniswap which teaches you how to double-check you are sending funds to the correct transaction.

    Uniswap beginners guide

    Uniswap allows users to connect directly to their Exchange, the following wallets are supported: MetaMask, WalletConnect, Coinbase Wallet, Fortmatic and Portis.

    Connecting MetaMask to Uniswap

    If you don’t have a MetaMask wallet yet, learn to set one up with our MetaMask tutorial.

    On Uniswap, click “Launch App” and then “Connect to a wallet”. Choose the MetaMask wallet (or whichever other wallets you want to connect with) and click “Connect wallet”. A popup window would appear showing your account, choose the wallet then click “Next” and “Connect”. Then you are all set!

    How to use Uniswap’s Swap feature

    Uniswap allows you to swap between ERC-20 tokens. On the Swap tab, choose the amount of ERC-20 tokens you want to swap. Choose the token you want to swap to by clicking the down arrow under “To”. A list will appear and you can choose the token you want to swap to, or if your token is not on the list you can paste the address of the token. Uniswap will display an estimate of how many tokens you would receive after the swap. To confirm, click “Swap”.

    Choose the token to be swapped
    Choose the token to be swapped

    You will then be taken to a page to confirm your swap (see left image below). There are several figures you need to look out for here:

    • the amount you are swapping from, and the amount you will receive;
    • minimum sent: which is the guaranteed minimum amount you would receive if the price drops whilst the transaction is processing;
    • price impact: the difference between the market price and the price estimate provided by Uniswap due to trade size; and
    • liquidity provider fee: amount of fees you will be paying to Uniswap. This is generally 0.03% of the transaction.

    Once you’ve confirmed your swap, a pop-up window would appear (see right image below) to confirm the gas prices to be paid for this swap since it is an Ethereum transaction. Input the gas prices you wish to pay and click “confirm”.

    Confirm swap
    Confirm swap

    Once the transaction is completed, Uniswap will let you know and provide you with a link to Etherscan to show your transaction details. Here you can check how many tokens you actually got out of the swap, and the amount of transaction fees that were paid.

    Uniswap advanced tips and tricks

    Failed transactions: why does it happen and how to avoid them?

    Transactions on Uniswap can fail if the prices of the input currency drops such that it does not fulfil your preset criteria. When a transaction fails, all your sent Ethereum would be reverted back to you. So you do not lose your original funds. However the Ethereum gas fee does get deducted and it is not refunded.

    To avoid failed transactions, you can look out for other people who are also trying to do the same transaction as you. To do this click “…” on Uniswap go to “Analytics” and search for your intended trading pair to see how many other people are also trying to do the same swap. If the price of the token you want to swap for is increasing in value, you may want to increase the amount of gas fees. This will speed up your transaction and beat your other competitors to lock in the swap price.

    How to get faster / speed up Uniswap transactions

    Get faster or speed up your transactions by essentially outbidding other competitors who are trying to process the same transaction. This is by paying more gas fees than others. To see how much gas fees to pay go to Ethereum Gas Station and see the recommended gas prices for fast, standard and safe transactions. As a tip for getting fast transactions, we suggest paying around 10% more than the recommended price for fast transactions. You can input the amount of gas prices you wish to pay in the MetaMask pop-up window before you confirm your transaction (see above section on how to use Uniswap’s Swap feature).

    ETH gas station
    ETH gas station

    Fake coins on Uniswap: How to identify and avoid them

    Because any coin can be added to Uniswap, there are lots of scam or fake coins on the Exchange. Cryptocurrency transactions are irreversible, so if you accidentally send your funds to buy these scam coins or tokens you will not be refunded. The logo and ticker of these fake coins can look exactly like the real ones, so you need to be careful.

    You can verify if the coin or token is real by checking it on Coingecko. To do this, look up the coin or token you want to exchange to on Coingecko, at the bottom of the page find and click on the trading pair for Uniswap (see image on left). You will then automatically be taken back to Uniswap and the token will have been imported (see image on right).

    Import token on Uniswap
    Import token on Uniswap

    Another way to verify that the token is genuine is to check it on Etherscan (see below). Again on Coingecko, find the token and click on the etherscan.io explorer. On the Etherscan window, you will be able to see the contract number for the token. Match this contract number with the number in the address bar in your web browser for Uniswap.

    Check token number on Etherscan
    Check the token number on Etherscan against the number in your Uniswap browser.

    Warning: Do NOT search for the token or its address on Etherscan. Always link to Etherscan via Coingecko or the project’s official website. This is because Etherscan itself lets you search for all tokens and transactions on the blockchain, including the fake ones.

    How to adjust slippage tolerance

    Slippage in trading occurs when the price at which the order is eventually executed does not match the price at the time you confirmed the transaction. When trading on Uniswap, this is referred to as “slippage tolerance” and is expressed as a percentage.

    For coins or tokens whose price is on the way up, there may be a lot of competition to process the transaction and get those tokens. In that case, you can increase the chances of your transaction being processed faster by increasing your slippage tolerance. This will also avoid failed transactions.

    To adjust your slippage tolerance, click on the gear icon located at the top right-hand corner on the Uniswap browser. There you can adjust your slippage tolerance. This will, in turn, decrease the minimum amount that is guaranteed to be sent to you. That is, it will increase the chances of your transaction going through but at the cost of potentially receiving fewer cryptocurrencies.

    Slippage tolerance compared
    Slippage tolerance compared

    Mobile trading: How to use Uniswap on your phone

    Prices of cryptocurrencies are always fluctuating, so serious traders want to be able to trade their cryptocurrencies on the go. Uniswap allows you to connect your mobile wallet. Simply go onto Uniswap on your browser and follow the same steps as you would on your PC. This allows the same wallet to appear on your PC and your mobile phone. The following mobile wallets are supported: MetaMask, Trustwallet, Coinbase wallet, Rainbow, Argent, imToken, Pillar, Safe, Math, and Fortmatic.

    From our user experience, it’s not the most convenient feature since you need to multitask between several windows. BUT it does fulfil the objective of being able to trade cryptocurrencies on the go.

    Uniswap Liquidity Pool guide

    Uniswap has liquidity pool which is essentially pools of various tokens that sit in smart contracts. Users can exchange the tokens in the pools using Ethereum as a conduit. And a main feature of Uniswap is that anyone can create new exchange pairs in a liquidity pool for any token, unlike centralised exchanges where the exchange dictates what trading pairs are available.

    First off, note that for liquidity pools you need to deposit both an equal value of Ethereum and the token that you want to participate with. So say I want to participate in the ETH/USDT pool, I would need to deposit an equivalent amount of ETH and USDT into the pool at the same time. The funds you supply to these pools will be traded by other people and so there will be fluctuations in the ratios of ETH and USDT that you have.

    This is because if someone wants to sell ETH for USDT, they will tap into your liquidity pool and the USDT that you supplied to the pool would be used to buy up the ETH- this whole concept is known as Automated Market Making (AMM). As a result of this, there would be a higher ratio of USDT compared to ETH in your pool. Conversely, if someone wants to sell their USDT for ETH, they would take ETH out and shrink your ETH liquidity. Thus the liquidity pool is like scale, whereby if your ETH goes down by 10 dollars, then your USDT should correspondingly up to by 10 dollars.

    So why would liquidity providers do this? It is because they receive a Liquidity Provider Fee from those who are conducting swaps in their liquidity pool. As mentioned earlier in this article, Uniswap charges a flat fee of 0.3% for each transaction. This 0.3% is actually then split in proportion amongst all the liquidity providers of that pool based on their contributions.

    Adding liquidity and earning provider fees
    Adding liquidity to pools allows you to earn provider fees when other people do swaps

    And Uniswap is not the only liquidity pool provider out there, so many people try to find and contribute to the most profitable pools in order to earn more liquidity provider fees. Pools.fyi is one such website that a lot of people use to try and find the best liquidity pools.

    Click here for our video tutorial on Uniswap liquidity pools.

    FAQs

    What’s the difference between Uniswap version 1 and 2?

    Uniswap has launched an improved version of their Exchange, simply referred to as version 2. The main difference between these versions is that version 2 offers ERC-20 to ERC-20 token pools, native price oracles and flash swaps.

    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.

  • PrimeXBT Exchange Review and Guide 2020

    PrimeXBT Exchange Review and Guide 2020

    PrimeXBT is based in the Seychelles and was launched in 2018 as a Bitcoin-based exchange platform offering various products such as leveraged trading in cryptocurrencies, Forex, indices and commodities. Today they are ranked no.24 of all derivatives exchanges with over USD$250 million in daily trade volume according to CoinGecko. They serve clients from over 150 countries and the platform is available in 16 languages: English, Malay, Chinese, German, Spanish, French, Hindi, Indonesian, Italian, Japanese, Korean, Portuguese, Russian, Thai, Turkish and Vietnamese. The Exchange was also recently recognised as the Best Bitcoin Platform for Margin Trading at the 2020 ADVFN International Financial Awards. In this review and guide we look at several features of PrimeXBT, our user experiences and give you a step-by-step guide on how to get started.

    Key Features

    • No KYC required: You only need to provide your email and country of residence to register for an account. No address proof is required.
    • Customisable trading interface: Users can enable, disable or move various information panels on their trading page. They can also add various widgets such as orders, watchlists or positions etc.
    • Annotate trading charts: On their Analysis page, you can overlay different trading pairs, insert up to 50 technical indicators, mark and save trading charts for further study.
    • Up to 1000x leverage: PrimeXBT offers up to 100x leverage for trading cryptocurrencies, stock indices and commodities. For Forex trades, up to 1000x leverage is available. (https://www.air-inc.com/
    • Wide range of products: PrimeXBT offers cryptocurrency trading, as well as trading indices, Forex and commodities. For fast results, traders can also try out Turbo, one of PrimeXBT’s unique trading features.

    Let’s look at some of PrimeXBT’s features in detail.

    PrimeXBT offers more than cryptocurrency trading

    PrimeXBT offers cryptocurrency trading, as well as trading indices, Forex, and commodities. PrimeXBT supports trading in 5 cryptocurrencies: BTC, ETH, LTC, XRP and EOS; with trading pairs between these cryptocurrencies and USD and BTC only. Unfortunately, the Exchange does not seem to be jumping onto the DeFi train, unlike their competitors. So unless they start listing some DeFi coins and fast, we are concerned they may be overshadowed by more aggressive exchanges.

    For Forex, the following 7 foreign currencies can be traded on PrimeXBT: USD, EUR, GBP, AUD, NZD, CAD, CHF and JPY. However the Exchange does also offer trading pairs with other currencies such as SGD, RUB and TRY. Traders can also trade the following 10 stock indices: S&P 500, NASDAQ 100, FTSE 100, EURO STOXX 50, CAC 40, NIKKEI 225, DJI, ASX 200, GER30 (DAX30), IBEX 35 and HK-HSI.

    Lastly, the Exchange provides commodities trading, this is done entirely digitally through the Exchange and its CFDs without having to physically handle gold bars and oil barrels etc. The following 5 commodities are available for trading on PrimeXBT: Gold, Silver, BRENT, CRUDE and NAT. GAS.

    Margin trading is offered by PrimeXBT. The Exchange offers up to 100x leverage for trading cryptocurrencies, stock indices and commodities. For Forex trades, up to 1000x leverage is available. Obviously there are serious risks involved in doing this because if the position goes against what you traded your losses will be correspondingly magnified. Hence margin trading should be for very experienced traders only and even so, extreme caution must always be exercised.

    Turbo trading: How to guide

    PrimeXBT offers a unique product called Turbo trading, and as the name suggests it is basically trading on turbo mode. All you need to do is predict if a chosen asset’s price will be higher or lower than the current price after a specified period. Both the specified period (which will be between 30 seconds to 15 minutes) and the potential profit ratio will depend on the asset chosen and this will be calculated and displayed to you before you confirm your trade.

    Taking the below image as an illustration, I predicted that BTC/USD prices would go up in 10 minutes (i.e. when the chart reaches the circular green arrow). I invested 0.0002 BTC and the potential profit was calculated for me at 0.000013 BTC, or 65% of what I put in if my prediction was correct. However if my prediction was wrong, I would lose the 0.0002 BTC I had put in.

    Turbo trading
    Turbo trading

    We think this feature would be very attractive to novice traders, and even advanced traders who something quick and simple for a change. We tried out this feature and enjoyed knowing what the potential outcomes would be before we put in the trade and found ourselves excitedly fixated on the trading screen during the whole period.

    Note that PrimeXBT Turbo trading is not available to citizens and residents of the following countries: USA, Canada, United States Minor Outlying Islands, American Samoa, Israel, Japan, Algeria, Ecuador, Iran, North Korea, Sudan, Syria and Crimea.

    Supported currencies and payment methods

    PrimeXBT only supports BTC deposits. For some locations, you can buy Bitcoin with your credit (Visa or Mastercard) or debit card and deposit this directly to your Exchange wallet. PrimeXBT only accepts payments in USD, EUR and GDP and a minimum purchase of 0.002BTC is required. You will be required to select your location beforehand and the Exchange will let you know if your location supports this feature.

    For security reasons, to buy BTC on PrimeXBT you will need to provide the following personal details: email, country of residence and identification document (ID card, driver license or passport). The Exchange will also email you a code to enter at checkout to confirm your email.

    PrimeXBT Fees

    Deposit and withdrawal fees

    PrimeXBT does not charge fees or deposits into your Exchange wallet or for transferring from one wallet to another on your own PrimeXBT account. The Exchange charges 0.0005 BTC for withdrawals.

    Trading fees

    PrimeXBT charges 2 types of trading fees: a trade fee and overnight financing fee. Trade fees are 0.05% for cryptocurrencies, 0.01% for stock indices and commodities, and 0.001% for Forex.

    Overnight financing fees are charged if traders do not open or close their leveraged position within the same trading day (i.e. 0:00 UTC) and it is a percentage of the daily funding rate depending on the liquidity of the underlying asset. Taking BTC/USD for example, the overnight financing fee is 0.04166% of the daily funding rate for both long and short positions.

    PrimeXBT has competitive fees compared to other exchanges if you are a casual or small volume trader. However most other exchanges have discounts for high volume traders by way of VIP tiers, or discounts for holders of an exchange’s native token. PrimeXBT does not have such discounts so there is little incentive for users who trade more, especially if other exchanges have comparatively cheaper trading fees for larger trade volumes.

    Here’s a breakdown of all PrimeXBT’s fees and trading conditions.

    Supported countries

    PrimeXBT offers its services to over 150 countries except for citizens and residents from the following locations: USA, Canada, Seychelles and countries currently under economic sanctions by either the United Nations or the European Union.

    Security: Is PrimeXBT safe?

    PrimeXBT uses numerous security tools and measures. From our user experience, we can see on the front end that the Exchange uses 2-factor authentication (via. Google Authenticator) and sends a confirmation email letting us know we’ve logged in. We do see some additional security features not typically found elsewhere. One such feature is mandatory whitelisting of destination addresses for Bitcoin withdrawals i.e. users can only withdraw their Bitcoin to addresses they have previously whitelisted.

    On the back end, PrimeXBT utilises cold storage of digital assets using multi-signature technology, DDOS protection and cryptographic hashing for all passwords and encryption of all other sensitive data, among others. They also conduct full risk checks after every order placement and execution, and regular testing and assessments by their technical team.

    We also note that the Exchange currently has a good track record of no hacks or discovered vulnerabilities so far. Nevertheless users should still remain careful and vigilant with their security measures e.g. not leaving all their funds on the Exchange.

    Learn more about PrimeXBT’s security features here.

    User Experience and guide

    We found PrimeXBT to be very open and transparent about themselves and what they do. For example answers to any questions we had about them can be found on their website. Their website and tutorials are a detailed one-stop resource for how to use their platform and their explanations are very clear and well organised. This is very positive and it certainly points to the Exchange being reliable.

    How to register for a PrimeXBT account

    PrimeXBT claims their registration process only takes 40 seconds and indeed we found it to be very fast and convenient. No KYC procedures were required. To register, simply fill in your email and choose a password.

    PrimeXBT registration
    PrimeXBT registration

    The Exchange would then send you an email asking you to confirm your email address. Confirm this and you will be brought back to the main page where you would be asked to select your country of residence. No address proof is required for this step.

    Confirm your email and country of residence
    Confirm your email and country of residence

    Once you have confirmed these details you are all set!

    Registration complete!
    Registration complete!

    How to deposit and withdraw cryptocurrencies on PrimeXBT

    Deposits

    As a Bitcoin-based exchange, PrimeXBT only allows you to deposit Bitcoin. Users can either deposit Bitcoin directly from another cryptocurrency wallet or if their location is supported, purchase Bitcoin with their credit/debit cards.

    To deposit Bitcoin from another wallet, click on “Account” on the top bar and “Deposit” on the sidebar. There you will find your Bitcoin wallet address.

    deposit bitcoin
    Deposit Bitcoin

    For some locations, you can buy Bitcoin using your credit (Visa or Mastercard) or debit card. To do this click “Buy Bitcoin”on the Deposits page. You will then be required to input how much Bitcoin you wish to purchase. Confirm this by clicking “Buy”. Please note that PrimeXBT only accepts payment in USD, EUR and GDP and a minimum purchase of 0.002BTC is required.

    Buy Bitcoin
    Buy Bitcoin

    You would then be asked to provide your email and country of residence. The email address is so that the Exchange can send you a code to enter at checkout as a security measure. You are required to choose your country of residence because some locations do not support Bitcoin purchases, and the page will instantly let you know if this is the case. If Bitcoin purchases are supported you would be required to provide photographs of your identification document (ID card, driver license or passport) and your payment details.

    Provide details for payment
    Provide details for payment

    Afterwards you would be required to confirm your purchase and at checkout, enter the code previously sent to your email address. The Bitcoin you purchase would automatically be sent to your Exchange wallet.

    We found depositing Bitcoin from another wallet to be very simple. As for buying Bitcoin, the steps were easy to follow but we found it excessive in terms of all the information you need to provide. After all, we are depositing Bitcoin into an account, not withdrawing. We don’t expect to require an ID copy AND a picture of us holding said ID when buying items from other online retailers. So in all honesty, unless you do not use any other exchanges and you are buying Bitcoin for the very first time, we foresee most people would just buy Bitcoin elsewhere and transfer it to the Exchange.

    Withdrawals

    Withdrawals from PrimeXBT require a few additional steps compared to other exchanges because they have a mandatory whitelist of destination addresses. Note also that the Exchange only supports Bitcoin withdrawals, so any other asset must be converted to Bitcoin first before withdrawing.

    To withdraw, go to “Account” on the top bar and “Withdraw” on the sidebar. Select “Add new address” and type in the address you wish to send your Bitcoin to together with a name for this address in the “Comment” field, then click “Add new address”.

    Add new address
    Add new address

    The Exchange will send you an email asking you to confirm the new Bitcoin withdrawal address. To confirm, click “Confirm new address”.

    Confirm new address
    Confirm new address

    Back on the Exchange’s Withdraw page, the new address will show up on the list of destination addresses. Select the address you want to send your Bitcoin to and the amount you wish to send. On the right, you would be able to see details of the send i.e. the destination address, the transfer amount, transfer fee and the actual amount which would be sent. To confirm, click “Submit to withdraw”.

    The Exchange’s limitation of only allowing Bitcoin withdrawals can be troublesome since you would need to first convert everything to Bitcoin, which may result in losses if prices fall. We also found the whitelist process to be a bit annoying at first, but as it is for security we consider it a fair tradeoff. It however won’t cause that much inconvenience in the long run if you usually only send Bitcoin to a few specific addresses e.g. your hardware wallet.

    Trading on PrimeXBT

    One thing we really liked about PrimeXBT is that when you log in to your account for the first time, each page will have a pop up tutorial covering topics such as how to fund your trading account, how to place your first order etc. For a subsequent refresher, you can always click the question mark “?” on the top right hand corner for more tutorial videos. So getting started with trading was relatively easy.

    A feature that some traders might like is their one-click or double-click trading feature. This allows you to open and close positions, and cancel orders with literally one click i.e. bypassing the confirmation process. It is a really convenient feature for those who are impatient or need to lock in their positions quickly. On the flip-side you could suffer huge losses if you misclick since it is irreversible.

    The main feature of PrimeXBT is its ability to customise. As mentioned above the Exchange lets users customise their trading interface and charts. For the trading interface, you can move, add and remove various widgets e.g. charts, watchlists and orders etc. You can also add new “workspaces” i.e. tabs by clicking “+”. Workspaces can be renamed, and you can add widgets onto them and customise their location.

    This feature is very helpful for experienced traders who wants all their necessary information displayed in one place, or even more casual traders who want to customise their trading page so it is similar to other exchanges they may be more familiar with.

    Customisable trading interface
    Customisable trading interface

    PrimeXBT also allows users to customise and annotate trading charts. Users can overlay different trading pairs on top of each other for comparison, e.g. in the below image we put together the charts for BTC/USD and ETH/USD. Users can also write notes, draw lines and choose from up to 50 indicators to put onto the charts etc. There are lots of features which will certainly keep technical analysts very occupied and finally, you can save a picture of your chart for a later date. This is certainly a feature designed by pro traders with other professionals in mind.

    Customisable charts
    Customisable charts

    Welcome bonus

    PrimeXBT currently has an enticing welcome bonus to encourage more users. New users who deposit more than 0.009 BTC into their trading account within the first 6 hours of registration are entitled to a US$50 trading bonus. The Exchange will automatically deposit the Bitcoin equivalent of this into your trading account.

    Welcome bonus
    USD$50 trading bonus for new users

    Conclusion: Is PrimeXBT a good exchange?

    Here’s some pros and cons of PrimeXBT based on our user experiences.

    Pros

    • Good track record without any hacks so far. The Exchange has additional security features not usually found elsewhere such as mandatory withdrawal address whitelisting.
    • The Exchange is one of the most open and transparent we have come across. Almost any question we had on the Exchange is answered on their own website.
    • Customisable trading interface and charts. This feature is likely to be very attractive to seasoned traders.

    Cons

    • Even with the Exchange’s helpful tutorials, there is still a steep learning curve if you want to make use of the many features the Exchange has to offer.
    • Very limited cryptocurrency support and only Bitcoin deposits and withdrawals are supported.
    • Requiring photo ID and KYC process just to buy Bitcoin is a bit excessive.

    In conclusion, we find PrimeXBT definitely geared towards traders with a bit more experience, particularly those who trade the major cryptocurrencies and other markets such as stocks and commodities on the side. We also find Turbo to be a very novel and interesting feature which we may revisit in the future. The Exchange’s interface is very clear and intuitive, and in any event you can customise it to your needs and preferences. Users will need a bit of time exploring all of the customisation features that PrimeXBT has to offer which may seem overwhelming at first, but is certainly worth it in the long run. With this high level of customisation, we think once users overcome the initial learning curve, they are likely to come back to this exchange time and time again.

    SIGN UP TODAY!

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • What is Compound Finance ($COMP)? A guide to hacks and tips on the latest DeFi platform

    What is Compound Finance ($COMP)? A guide to hacks and tips on the latest DeFi platform

    Compound Finance is a leading decentralised finance (DeFi) protocol which allows users to deposit and borrow cryptocurrencies, and earn interest whilst doing so. How Compound does this is by creating liquid money markets for cryptocurrencies by setting interest rates with the use of algorithms. They are popular mainly because they are cryptocurrency exchange Coinbase‘s first ever investment into a crypto project and prices for their $COMP token had more than doubled in the past week. In this Compound guide we cover topics such as what is Compound, how to use the platform profitably and how to earn more of their $COMP token.

    For an overview, check out our explainer video on DeFi and Compound:

    What is Decentralised Finance (DeFi)?

    Decentralised Finance (DeFi) was designed to “cut out the middle man” i.e. banks and reduce the cost of traditional financial operations such as taking out a loan or buying property. The aim of DeFi is so that people, particularly the unbanked can have open access to every financial service on the internet with their smartphones, without needing the banking system. Smart contract platforms such as Ethereum opened the door to DeFi, whereby programs running on the blockchain can self-execute when certain conditions are met. Developers can make use of these smart contract platforms to build decentralised apps (Dapps) with various functions. Developers brought the concepts of Dapps and DeFi together by bringing functions traditionally served by banks onto smart contract platforms. Compound is an example of a DiFi app, it is a blockchain-based Dapp which allows deposits and taking out loans of cryptocurrencies on its platform.

    How does Compound work?

    Compound operates similar to a bank. You can deposit various cryptocurrencies and earn an annual interest on your deposits, similar to depositing your money into the bank. However, Compound’s main difference is that it does not have custody of your cryptocurrency deposits. Instead, you are actually sending your crypto to and interact with a smart contract, rather than another company or user. This feature is important because it means that no person or authority can control or take your funds.

    What makes all of this so interesting is that since Compound is a DeFi platform, it does not have to follow the Federal Funds Rate. It can do something completely different and cannot be shut down since there is no central authority.

    How to supply (deposit) cryptocurrencies onto Compound and earn interest

    On Compound’s website you can earn interest when you deposit (Compound refers to this as “supply”) cryptocurrencies onto their platform. To do this, first load an Ethereum account with any of the cryptocurrencies supported by Compound. Then on the Dashboard, choose which cryptocurrency you wish to supply to the platform by clicking on it.

    Supply cryptocurrencies
    Choose which cryptocurrency you wish to supply to the platform

    In the below image you can see that we will be depositing USD Coin (USDC) which generates an Annual Percentage Yield (APY) of 0.12%. So you can earn 0.12% per year if you supply USDC to the platform. Input the amount you wish to supply and confirm by clicking “SUPPLY”. A metamask window will pop up where you will interact with the smart contract and confirm the transaction. You will be charged gas fees for interacting with the smart contract. In our case we were charged USD$1.

    Supply cryptocurrencies
    Supplying cryptocurrencies to the platform generates interest

    Once you have supplied cryptocurrencies onto the platform, you would be able to use Compound’s other features such as using these supplied cryptocurrencies as collateral to take out loans.

    An important point to note is that Compound has floating interest rates which are subject to change. How Compound determines the interest rate is similar to the Federal Reserve, Compound would analyse the supply and demand for a particular cryptocurrency and then set a floating interest rate that will adjust based on market conditions. Compound also takes a 10% cut off your earned interest. Users can take back their cryptocurrencies at any time with a 15 second lag between executing the instruction and receiving their crypto.

    How do I take out loans/ borrow cryptocurrencies on Compound?

    You can use your deposited cryptocurrencies as collateral to borrow other cryptocurrencies. Compound requires users to put up 100% of the value of your intended loan. There are risks of doing this though which will be explained below where we look at Compound’s liquidation clause.

    Borrowing cryptocurrencies does also require you to pay fees. For example in the below image you can see that taking out a loan of BAT will cost you a whopping 29.4% per year.

    Borrowing cryptocurrencies
    Borrowing cryptocurrencies requires you to put up collateral and pay fees

    You can also see from the above image how Compound makes money, since there is a spread between the amount of interest generated from depositing, say BAT and the amount of fees you need to pay for borrowing the same.

    What is $COMP token? How can I earn $COMP?

    Since May 2020, Compound has transitioned to community governance. This means holders of Compound’s token, $COMP can make proposals and vote on decisions relating to how Compound is to be developed or run, e.g. what kind of collateral should Compound support, or what the interest rates should be.

    There is a total supply of 10 million $COMP, of which 42.3% is reserved for distribution to users to earn when they use Compound e.g. by supplying or borrowing cryptocurrencies. For every Ethereum block, 0.5 $COMP is distributed across Compound’s 9 markets in proportion to the interest accrued in the market. And within each of these markets, the amount of distributed $COMP is divided 50:50 between suppliers and borrowers of that particular cryptocurrency. Hence the cryptocurrency which is earning the most COMP per day is always changing. Users should check Compound’s User Distribution page, where they can see the amount of interest paid per day as well as the amount of $COMP distributed to suppliers and borrowers.

    You can also earn $COMP by voting on various governance proposals concerning how Compound should be run.

    Governance proposals
    Users can vote on governance proposals and earn more $COMP

    $COMP can be traded on various exchanges, such as Coinbase or FTX Exchange. And there was certainly a lot of attention focused on $COMP since prices for the token recently shot up from USD$60 to over USD$300 in a matter of days.

    $COMP prices
    $COMP prices

    How are people using the Compound platform to earn 100%+ APR?

    Users earn COMP when they supply or borrow cryptocurrencies on the platform. So in the below image we deposited 500 USDC and borrowed 300 USDT to get a net effective interest of -12.27% which on the face of it does not look profitable.

    Net interest
    In our case, depositing USDC and borrowing USDT generated a net interest of -12.27%

    BUT at the same time we are also earning $COMP. This calculator shows you how much $COMP would be distributed depending on the type and amount of tokens supplied or borrowed. So as seen in the below image, whilst the net interest was -12.27% per annum, we EARNED 13.94% APY of $COMP. Basically, you are being PAID to take out a loan.

    $COMP mining: Another way to potentially earn more $COMP

    $COMP mining goes beyond simply supplying cryptocurrencies and profiting off the interest rates on Compound. Rather it is about getting as much $COMP rewards as possible in the shortest amount of time. Some methods even allow you to multiply your earnings by folding your position 4x.

    In a nutshell, people have have been finding ways to do this by first depositing USDC, borrowing USDT and then converting the USDT to USDC. Then depositing the USDC onto the platform, leveraging it, withdrawing USDT and depositing it onto the Compound platform several times over.

    What cryptocurrencies does Compound support?

    Compound currently supports 9 cryptocurrencies, namely: Ether (ETH), USD Coin (USDC), Basic Attention Token (BAT), Tether (USDT), 0x (ZRX), Wrapped BTC (WBTC), Dai (DAI), Augur (Rep) and Sai (Legacy DAI) (SAI).

    Available markets on Compound
    Available markets on Compound

    What are the risks of DeFi platforms?

    DeFi, and any such platforms such as Compound has the main feature of being decentralised. Yet, it is decentralisation that brings associated risks. This is because instead of trusting a central authority to supervise the transactions, we are trusting the code which the smart platform was built upon. If there is a mistake in the smart contract e.g. the conditions for release of funds are set incorrectly, there is no overriding body which can correct this mistake or any customer service representative that can help. And the biggest risk of all is if the developer did not code the contract correctly making it vulnerable to hackers. An example of this was the dForce hack where hackers exploited a well-known exploit of an Ethereum token, resulting in losses of USD $25 million worth of customers’ cryptocurrencies.

    Risks of using Compound: Compound’s liquidation clause

    For Compound, there are risks associated with trying to earn $COMP through borrowing on the platform. Compound has a liquidation clause that kicks in when borrowing on the platform. For instance if the cryptocurrency you are borrowing increases in value and exceeds the value of your collateral, your borrowing account will become insolvent. In such case, other users can step in and repay a portion of your outstanding loan in exchange for a portion of your collateral at a liquidation incentive. This liquidation incentive is the discount at which other users can receive your collateral. So if the liquidation incentive at the time is 8% (subject to change through voting on Compound’s governance system), then other users can receive your collateral at 8% off the market price when they help repay your loan. Hence there are serious incentives for users on Compound to liquidate others and this will result in the person being liquidated to potentially suffer huge losses.

    What is Compound’s aim for the future?

    Currently, Compound only deals in cryptocurrencies on the Ethereum blockchain. However the Company eventually wants to expand and move into carrying tokenised versions of real-world assets, for example the US Dollar, Japanese Yen or stocks in companies such as Google.

    Decentralised Finance (DeFi) series: tutorials, guides and more

    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.