There are several thousands of cryptocurrencies out there, known also as altcoins. These coins and tokens all have their own unique features and uses, for example, some are used to help decide the direction the creator company should take, others give you discounts or access to special features. The Coin Guide is a concise summary of the aims and technology behind a certain cryptocurrencies. Insight is crucial in this field. Many projects disguise their progress through complicated jargon, making it hard to distinguish those who are building something meaningful from those who are not.
FTX operates two exchange domains, including “FTX.com” for users outside of the US, and the US-regulated “FTX.us” for traders in the US. Although both domains are quite similar, there are a few notable differences in their features and functionalities.
FTX cryptocurrency exchange first came onto the scene in 2019 as FTX.com. Since then, FTX cryptocurrency and derivatives exchange experienced tremendous growth in trading volumes and the number of registered users. FTX has increasingly hit several milestones on these metrics by providing innovative financial products for all types of crypto traders. The exchange offers leveraged tokens, futures trading, and many more features, including reduced trading fees and multiple ways to earn passive income. In 2020, FTX.us was launched specifically to be US Regulation compliant and to cater to US customers.
FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION
Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:
Although both domains belong to the same platform, they cater to different groups of users. FTX.com is not available for traders in the US due to securities and crypto asset trading regulations imposed by the US government. US customers can only use the FTX.us exchange, as it complies with regulatory requirements. All features users enjoy on FTX.us are also available on FTX.com.
FTX.com is more suitable for experienced traders since it is strictly a crypto derivatives trading platform with a higher risk of fund loss. Most of the financial products offered by FTX require substantial knowledge of the market and the crypto assets up for trading.
Similarities Between FTX.com and FTX.us
FTX.com and FTX.us offers similar features, including user-friendliness and an easy trading experience. Like many exchange platforms, they both feature a trading chart that provides various trading features, charting tools, and in-built indicators.
Many traders opt for the FTX exchanges because both platforms offer convenient ways to control and track open trading positions. FTX also provides more order types than most crypto exchanges. Available order types include:
Market order
Limit order
Stop limit
Stop market
Trailing stop
Take profit
Take profit limit
Another interesting feature is that they both allow the integration of API keys to automate trading using crypto trading bots. Both domains require users to complete a KYC verification process to start trading and withdrawing funds.
Differences Between FTX.com and FTX.us?
FTX and FTX.us are run by different companies, hence previous negotiations to buy out FTX international did not include FTX.us as part of the deal.
The major difference between the .us and .com FTX exchanges is that FTX.com is a crypto derivatives platform where users can’t trade any real crypto. Users can only trade derivatives, which are secondary products that derive their value from these assets. On the other hand, FTX.us allows users to trade the actual underlying cryptocurrency. Furthermore, the two domains have a few differences regarding the following:
Trading pairs and contracts
Leverage and margin trading
Deposits and withdrawals
Trading fees
Trading Pairs and Contracts
FTX.com supports futures contracts trading for over 80 cryptocurrencies. Unlike many of its competitors, FTX.com allows futures trading for coins with low market caps. It also supports many fiat currencies, including USD, EUR, AUD, SGD, GBP, TRY, HKD, TRY, CHF, BRL, and CAD.
One unique feature of the FTX.com platform is its MOVE contract, which allows users to trade market volatility. MOVE contracts represent the absolute value of the amount a crypto asset moves over a period. Additionally, the platform allows its users to trade leveraged ERC-20 tokens, which give traders leveraged exposure to the cryptocurrency market.
On the other hand, FTX.us does not support as many currencies and contracts as its .com counterpart. The US version only supports about 24 cryptocurrencies and has fewer financial products than FTX.com.
Leverage and Margin Trading
FTX.com currently offers its users up to 101x leverage, with an initial maximum leverage of 10x by default. Traders may expand this leverage if their user accounts meet the platform’s requirements. With FTX.us, crypto traders can only get up to 10x leverage subject to specific terms and conditions.
Deposits and Withdrawals
FTX.com supports deposits in many cryptocurrencies, including Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and various stablecoins. The exchange promptly processes all deposits and withdrawals and does not charge deposit or withdrawal fees for Ether and ERC-20 tokens. For Bitcoin, all withdrawals of more than 0.01 BTC are free. Smaller withdrawals incur withdrawal fees only after the first free one for the day.
FTX.com also allows users to deposit and withdraw in their local fiat currencies using bank wire transfers. USD transactions take one business day, while other currencies may take longer. Although there are no charges on deposits with FTX.com, fiat withdrawals below $10,000 incur a $75 fee.
Deposits and withdrawals on FTX.us are also very fast. However, depositing and withdrawing USD can take up to two weekdays. Like FTX.com, FTX.us also charges a fee for USD deposits completed via wire transfer. Users can make one free withdrawal of less than $5,000 per rolling week period. Additional withdrawals cost $25, but all withdrawals above $5,000 are free.
Trading Fees
FTX.com uses a 6-tier structure for trading fees. Like many other crypto exchanges, FTX.com gradually decreases the trading fees for its users based on their daily trading volume to encourage higher trading volumes. Tier 1 traders pay a taker fee of 0.07% and a maker fee of 0.02%, while traders in tier 6 only pay 0.04% in taker fees.
As for FTX.us, the platform generally charges its users higher fees. Although it operates a similar fee structure, FTX.us has 9 tiers. Tier 1 traders pay a maker fee of 0.1% and a taker fee of 0.2%, while traders in tier 9 pay only 0.05% in taker fees and no maker fee.
Is FTX.us affected by the collapse of FTX International?
As of 10th November 2022, when users go to FTX international, there will be a banner warning: “FTX is currently unable to process withdrawals. We strongly advise against depositing.”
Now, when accessing the FTX.us website, there is now an announcement banner warning that, “…trading may be halted on FTX US in a few days. Please close down any positions you want to close down. Withdrawals are and will remain open. We will give updates as we have them.”
Banner on FTX US website
However, Sam Bankman-Fried, Founder of FTX has tweeted that FTX US is unaffected by the crisis surrounding FTX International and that it is “100% liquid”.
19) A few other assorted comments:
This was about FTX International. FTX US, the US based exchange that accepts Americans, was not financially impacted by this shitshow.
It's 100% liquid. Every user could fully withdraw (modulo gas fees etc).
Nevertheless, many members of the crypto Twitter (CT) community are warning users to withdraw their funds from FTX.us as soon as possible. Given the current situation with FTX International, users of FTX.us are indeed urged to exercise caution and keep updated on any news from the team.
Bitcoin (BTC) is by far the best-known digital asset with the largest trade volume.
Bitcoin is both a currency and a technology. At its core, Bitcoin is peer to peer electronic money with one express objective. The objective is to replace the intermediation and trust vested on centralised financial institutions. It aims to be a replacement for traditional fiat currency and an innovative settlement layer for processing transactions without requiring a third party.
To learn more about Bitcoin and how to get started with cryptocurrencies, check out our beginner’s guide series.
Beginner’s guide to Bitcoin and cryptocurrencies
Bitcoin is Decentralized
Before Bitcoin was invented, the only way to use money digitally, it was through an intermediary, like a Bank or PayPal. Even then, the money used was still government issued and controlled currency. However, Bitcoin changed all that by creating a decentralized form of currency that individuals could trade directly without the need for an intermediary. Instead of trusting a centralized bank to process transactions, we would trust a Protocol that is run by different individuals all over the world.
Each Bitcoin transaction is validated and confirmed by the entire Bitcoin network. There is no single point of failure, so the system is virtually impossible to shut down, manipulate, or control.
Main Features of Bitcoin
Decentralized control: There is no authority that controls Bitcoin. All transactions are visible on a public ledger called the blockchain.
Bitcoin is a store of value: You can use Bitcoin to purchase goods and services.
Security: Bitcoin has never been hacked.
Open source: the Bitcoin source code is publicly available and community members can update it.
Public: All transactions are visible on the Bitcoin blockchain.
Pseudonymous: You can use a pseudonymous identity to make Bitcoin transactions. It is not truly anonymous because the transaction addresses are visible on the public chain.
Limited supply: Bitcoin has a limited and predictable supply.
How do Bitcoin transactions work? How do you earn Bitcoin?
The Bitcoin network is essentially a decentralized public ledger that relies on the combined computing power of its community. Bitcoin works as follows:
Bitcoin transactions are unconfirmed until they are updated on the bitcoin transaction ledger. This is called the blockchain. This is a decentralised public ledger, i.e. everyone can update it and no one person controls this ledger.
People can help update this ledger by using specialised computers. The computers will generate random numbers. The aim is to generate the correct answer to the mathematical problem generated by the system.
The computer that guesses the solution gets to decide which of the pending bitcoin transactions will be grouped together into a block.
The block and the answer to the mathematical problem is sent to the bitcoin network. This is a network of computers.
The bitcoin network will check if the answer is correct. If it is, they will update their copies of the bitcoin transaction ledger with the block you had created. The process is then repeated. Hence the name “Blockchain“.
The computer which guessed the correct number receives an award of Bitcoins and the transaction fees for the transactions in the block.
This process is called mining. This is because you mine (earn) Bitcoins by helping update the bitcoin transaction ledger.
Bitcoin mining farm
What is the halving in Bitcoin mining?
The Bitcoin halving is an important concept for Bitcoin miners. When Bitcoin was first mined, miners were rewarded 50 BTC for generating the correct answer to the mathematical problem. Every 210,000 blocks which occur around every 4 years, this reward is cut in half. (locals.md) This is known as the Bitcoin halving.
The last Bitcoin halving occurred on 11th May 2020 at around 3:00p.m. EST. Following this halving, the block reward was reduced to 6.25 BTC. The next halving is therefore expected to be in 2024 when the block rewards will be cut down to 3.125 BTC.
Bitcoin owners store their coins using wallets. You do not actually hold your Bitcoins, rather you hold a private key that allows you to access your Bitcoin address i.e. your public key.
Click here to learn more about private keys and public keys.
Online wallets: Run on a cloud server and so can be accessed by multiple computers. Most common online wallets are cryptocurrency exchanges. Check out our review of the top exchanges.
Paper wallets: A printout which contains your public and private keys. Though the most rudimentary, it is the safest method of keeping your cryptocurrencies safe.
Desktop wallets: They are downloaded and installed onto your computer.
Who is Satoshi Nakamoto
It is the invention of a “Satoshi Nakamoto” in 2008 as a decentralised virtual currency that runs on blockchain technology. We still do not know the true identity(ies) of Satoshi Nakamoto, though there are people who claim to be him.
What’s the future of Bitcoin?
Bitcoin is getting more adoption for payments across the world. At the moment, many stores and merchants accept payment in Bitcoin. The list of merchants are increasing by the day.
Bitcoin is even usable with some credit and debit cards.
However, Bitcoin is not as easily scalable as most other subsequent coins. Accordingly, a future where Bitcoin replaces traditional currency is highly unlikely.
However, Bitcoin will remain an excellent Store of Value (SOV). This is because of its immutability and periodic price appreciation. That said, the question of regulatory policies across the world may be the actual obstacle to Bitcoin’s long-term success.
Can Bitcoin disappear?
Despite what some naysayers will say about Bitcoin having no value or being a scam, Bitcoin cannot and will not disappear. Bitcoin is widely accepted as a value accept and can be converted into fiat currencies. There are also many places that accept Bitcoin as a form of payment such as Home Depot, Microsoft, and Virgin Airlines.
Bitcoin is also decentralized (i.e. not held by any central authority). This means that no single person or entity can confiscate your Bitcoins or shut Bitcoin down.
What will happen after all 21 million Bitcoins are mined?
The total supply of Bitcoin is capped at 21 million and it is expected that all 21 million Bitcoins will be mined in around 2140. When this happens, Bitcoin mining fees will disappear. Bitcoin miners instead will only earn income from transaction processing fees instead of both block rewards and transaction fees.
BTC price predictions once the last Bitcoin is mined?
In an interview with Cointelegraph, Mohamed El Masri, Founder of mining solutions provider PermianChain predicts that BTC would be worth US$430,500 once the last Bitcoin is mined.
El Masri also feels positive that Bitcoin miners will still be able to profit from Bitcoin mining despite all of them being mined. This is despite the fact that by then, Bitcoin miners can only earn transaction fees as a source of income. His positivity stems from the fact that transaction fees will still generate almost US$3 billion a year at his predicted BTC price. This is because Bitcoin miners will still be a necessary part of supporting the Bitcoin infrastructure operating at any cost.
Hot and cold wallets are used to store your cryptocurrencies, specifically your private keys which grant you access to your crypto assets. They are therefore a crucial element of the cryptocurrency space.
The major difference between hot and cold wallets is that hot wallets are connected to the internet whilst cold wallets are not.
For those holding cryptocurrencies, the choice between cold and hot wallets depends on factors such as the amount of coins you hold, the frequency in which you trade etc.
Extra steps are required for trading. Save for the KeepKey which is partnered with ShapeShift exchange, users must first send their cryptocurrencies from their cold wallet to an exchange before they can trade. And when cryptocurrency prices fluctuate by the minute, this can have a profound effect on your gains.
Harder to use. They do require at least 10 minutes for initial set-up, and you will need to plug in your device every time before sending your cryptocurrencies. (www.speedclean.com)
Inconvenient. Even with the Ledger Nano X’s mobile feature allowing you to connect the device to your mobile phone via Bluetooth, it’s still not as convenient as a mobile wallet, which is simply an app on your phone.
Conclusion
Whilst there is a longer list of cons for cold wallets, they are still highly recommended on the basis of significantly improved safety of funds.
Numerous people have suffered from hacks and closures of exchanges. These victims have no way to get their funds back, or at best, it will take a very long time. For example, Mt. Gox exchange was hacked in 2011 and 2014. To date, none of its victims have gotten any of their stolen funds back.
Meanwhile, hot wallets are very convenient — if you leave your funds on exchanges, you can trade with the click of a button.
We recommend keeping small amounts of cryptocurrencies in hot wallets for day-to-day trading or spending only. Whilst the bulk of your cryptocurrencies should be kept in cold wallets. If you obtain any gains from trading, you should also consider how much you want to retain for further trading and immediately transfer the rest to cold wallets.
The crypto market, together with stock markets and the global economy in general, have been experiencing a significant drawdown for the past 6 months, leading to a confluence of factors ranging from high inflation, rate hikes, supply chain issues, energy crisis, to geopolitical instability. This combination packs a powerful punch for any risk-on markets, such as stocks and crypto, forcing retail and institutional investors to exit their capital from markets during these uncertain times.
With Bitcoin currently at $20k, down 70% from its $69k ATH, and the total altcoin marketcap being down 72% from its ATH, it is hard to deny that we’ve entered a bear market. But one question remains – is this anything like the bear market of 2018 and will it last equally as long as the previous one? Let’s dissect the situation and understand if this time is truly different, or if this is just a small bump in the road before an accelerated bull market.
Check out our video comparing the crypto bear market now (2022) and in 2018- and more importantly, how to STILL make money during this downturn:
2018 Bear Market
2017 saw the first true mass influx of retail interest into the crypto space. Bitcoin saw a rapid increase in price, everyone’s friend and grandma were kickstarting their own ICOs to attract funds, and regular companies added the blockchain keyword to their names to increase their share prices. 2017 was the wild west, as there was even less regulation than currently, and the space was rife with opportunists spawning scam projects to extract money from ignorant first-time crypto investors.
But, as with any bubble, it eventually pops. The crypto space was heavily overheated, with investors throwing money at everything that moved, doing minimal to no due diligence, just to get on the crypto hype train. Come 2018, things were starting to cool down and people were beginning to feel the pain. In less than 6 months after the peak ICO craze, over 90% of all the projects were already dead, with many more to go down with them in the rest of the 18-month long bear market.
At the peak of the market, a lot of FUD (fear, uncertainty and doubt) was beginning to circulate. Fear of regulation due to the prevalence of scams, and with China/Korea considering banning cryptocurrencies, things were not looking great for the crypto space. Right around the peak of the market, the Chicago Mercantile Exchange (CME) launched their Bitcoin futures product, which allowed institutional investors to get their hands dirty with Bitcoin. And, naturally, they did just that. With all of the FUD circulating and the market waiting to release a lot of pressure, institutions began shorting the market, creating an enormous sell pressure that brought BTC down to $7k, which kept grinding down to $3k till mid-2019.
2022 Bear Market
After Covid-19 hit, the market experienced a tiny two-month recession. As everyone was locked inside, demand dropped and supply shrunk as well. But once central banks began printing more money to help businesses and people via stimulus checks, many found themselves with a lot of extra cash and no way to spend it, so they turned to investing. After the March crash, the rest of 2020 saw the crypto market boom, calling it the “DeFi summer”, with BTC increasing in price by 400% by the end of the year. After that, it just kept on going. 2021 was the year of the NFTs and Metaverse, i.e. GameFi, with numerous projects sprouting up to capture some of the value amid all the hype.
After reaching its peak in November 2021, the crypto market has kept on steadily grinding down. Those who had called the peak in November aptly understood that the markets were overheated, inflation was starting to get out of hand, and the only way for governments to keep that under control was to begin quantitative tightening through rate hikes. Unfortunately, many were still in denial about the onset of the bear market way into April, which has resulted in a lot of people holding bags that might or might not recover.
Now the path forward seems clear. The US Federal Reserve’s hawkish monetary policy is causing markets a lot of necessary and unavoidable pain. Because the money printing since Covid-19 has been at such an unprecedented level, the Fed is finding it hard to slow down the inflation without causing a lot of damage. The result currently is a looming recession at the same time as inflation is still running rampant and driving up the prices of everything, all the while people’s incomes are stagnating and their expenses increasing.
When is the Next Bull Cycle?
At the moment, there are no clear signs of central banks reeling in their hawkish monetary policies. It might possibly take at least several months if not until the end of the year for the dust to settle, the bottom to come in, and for us to be ready for the next bull cycle once the Fed eases monetary restrictions. Continued geopolitical turbulence aside, the next bull cycle will certainly come, but it’s difficult to say what will be the narratives driving the rapid market expansion this time.
The two most touted bull market catalysts are the long-awaited Bitcoin spot ETF and the Ethereum Merge, which will cause the Ethereum network to transition from its wasteful Proof-of-Work mechanism to Proof-of-Stake. However, as is common in life and in markets, the most obvious things tend not to be the ones to catalyze huge changes. Markets are irrational, and a confluence of new narratives that will be born only in 6 months might very well end up triggering the next bull run.
How to Still Make Money During the Crypto Bear Market?
With great pain come great opportunities, and this bear market is no exception. This is the time for learning, accumulating, and paying attention to the market. In our latest video about the current bear market, we outline a few strategies that you can use as an investor to maximize upside potential come next bull run:
1) Dollar cost averaging (DCA) into your investments – instead of trying to catch the generational bottom and investing your whole capital in one go, better invest 20% of your capital at a time during a longer time period, so that way you are more likely to get a great average entry price and reap the profits in the future.
2) Doing lots of research – fundamental analysis of projects is the best way to ensure you invest in projects that have a real potential, and this is the time to be doing just that. Many projects will die during this bear market, so it’s important to source trustworthy information and be critical of everything in order to position yourself properly during the next stage of growth.
3) Diversify your portfolio – as we’ve seen in the past months, there’s no such thing as too big to fail in the crypto space. Instead of going all-in on one project, spreading risk across several projects will ensure your capital is better protected from a few bad investments.
4) Shorting the market – this should not be practiced by anyone who doesn’t have experience trading, as without proper risk management things can get pretty ugly very fast. During a downtrend, a way to make money is by shorting an asset, which essentially means you’re betting on an asset to go down in value.
Of course, none of this is financial advice, and we implore our readers to do their own research and never invest more than they are willing to lose. It’s a highly volatile market and not for the faint of heart.
Spool is a Decentralized Finance (DeFi) protocol geared towards ordinary users who want to earn yield on their own terms in a simple and straightforward way.
Background
DeFi has been an exciting avenue in the field of cryptocurrencies. Based on the Ethereum blockchain, it uses smart contracts, which are automated agreements used to automatically enforce transactions without the need for a government or a bank.
A vast new set of Ethereum-based protocols have emerged, giving rise to decentralized financial products that automate loans, savings and even insurance. According to Nottingham Trent University associate professor of Cyptofinance and Digital Investment Jeremy Eng-Tuck Cheah, the total value locked up in DeFi contracts grew rapidly from US$2.1 million to US$6.9 billion from September 2017 to August 2020, and continues to rise.
Spool: Yield for the world, Fuel for DeFi
What is Spool?
Luke Lombe, a founding partner of Australian digital asset management firm Faculty Group and Spool contributor, describes Spool as DeFi infrastructure that allows users to create a fully diversified, yield optimised, auto-compounding and risk mitigated DeFi portfolio – in a simple and straightforward manner.
According to Lombe, these portfolios, called Spools, cover complex tasks such as risk evaluation, risk/reward based portfolio construction and rebalancing to deliver an investment’s most optimal yield from the custom strategies deployed based on the user’s indicated risk tolerance.
Arguably, Spool has three synergistic features. The first is accessibility. Its straightforward set-up won’t repel users who might not have otherwise delved into DeFi. The second is diversification. Spools allow diverse portfolio management automatically, easing workloads and reducing barriers for entry. Thirdly is economies of scale. With the automation, having more users simply makes Spool more cost effective to run.
How to set up a Spool?
With just one stablecoin deposit and five more steps done via a simple interface, a user can set a Spool up, which contributor Phil Zimmerer describes as a “vault”. And then the user kicks back as the Spool does the work. The steps are as follows.
Step One: Choose a preferred deposit currency
“We’re starting with stablecoins, essentially USDC, USDT or DAI. That will expand to capture more volatile assets like Bitcoin or Ethereum, which are all subject to DAO (Decentralized Autonomous Organization) vote,” says Lombe.
Lombe goes on to explain that Spool is by its very nature a DAO first and foremost, which will vote on various proposals, including choices of new currencies before they are enacted. Stablecoins are likely chosen because they are, well, relatively stable cryptocurrencies, as they derive their value from an underlying external asset, like a national currency or gold. USDC and USDT (also known as Tether) are pegged to the US Dollar, for instance.
How the Spool token works
Step Two: Choose a risk model
Lombe describes a risk model as essentially a set of criteria that a user would use to assess risk in DeFi. For example, a risk model could factor in Time on Market, as the longer a protocol has been around, the safer it’s likely to be.
From this, Spool creates a risk score for each protocol. For instance, Aave might get a 7.5 out of 10 or Curve a 6.8. This helps the user in figuring out how to diversify their portfolio. He goes on to explain how the nature of DeFi investment makes risk-assessed diversification crucial:
“I imagine people would understand DeFi risk as pretty binary. It’s either your money’s safe or your money’s gone (laughs). Generally it’s a matter of a smart contract failure as opposed to an exploit or a hack or potentially a rug pull.”
Step Three: Choose some protocols
Choosing a risk model allows a user to then select various protocols, such as the ones mentioned in the beginning of this article, that they can place their funds in.
“So Curve, Compound, Aave. All the ones we know generally are included in this list. More will be added subject to DAO vote. So you basically create your ideal portfolio based on the protocols that you like and know,” adds Lombe.
Protocols such as Compound and Aave allow users to trade loans and earn interest via smart contracts, while Curve allows for stablecoin transactions at optimised rates.
Spoolnomics in a nutshell
Step Four: Select Risk Tolerance
Next, a user chooses their Spool’s risk tolerance from a sliding scale. According to Lombe, Spool’s own protocol will factor in the selected risk tolerance level as well as the yield and risk for each of the chosen protocols and then dynamically shape a user’s portfolio and re-weight it according to the parameters set by the user.
“But it’s not static. As the yield changes (which it does on a daily basis), the algorithm will essentially rebalance your portfolio to ensure that you’re constantly getting the most risk-optimised or yield-optimised and risk-mitigated return.”
Spool’s adjustments do this under efficiencies. Ethereum’s gas fees, or the compensated cost of energy used to compute a transaction, can be quite high, as is the cost of rebalancing a portfolio to account for them. So Spool uses economies of scale to mitigate such costs. As Lombe states:
“For example, if your Spool algorithm says ‘move your funds from Curve to Compound’, and mine says ‘move from Compound to Curve’, a tracer smart contract simply reassigns the assignment, so the funds stay where they are. Just like if you’re transferring money to someone at the same bank, the bank doesn’t move anything, it just moves the number from one to the other.
Lombe adds that more likely, funds moving in the same direction will be batched together, sharing the cost of transaction fees. With numerous other efficiencies in mind, more users actually makes Spool more energy efficient.
Spool gets more efficient with more capital
Final Step: Name Your Spool
Finally, a user simply has to name their Spool and assign a performance fee, if desired. This fee sets how much the user is paid by anyone who uses their Spool to invest. Lombe states that:
“You can say, ‘I’ve created a fully diversified portfolio, it’s going to be automatically managed and optimised for you. All you have to do is click on this link’, and they deposit their funds and then you get a small fee, essentially. And that’s only a performance fee, so the user’s actual initial contribution won’t be diluted at all.”
By creating a Spool and sharing it with others, it allows people intimidated by DeFi choices to join in. This then increases economies of scale. Essentially, an end user becomes a kind of “sub-broker” within the Spool network. Major contributor to Spool Phil Zimmerer explains:
“There are going to be users who don’t want to do due diligence, are not able to or it’s simply not worth their time. They’re more likely to trust a person or a group or a friend. And I’m uncomfortable giving financial advice. I think this resonates with a lot of people. So you can create your own “vault” and front load all your decision making with your knowledge and then you can share that schooling with people.”
SDK
However, what’s really interesting about Spool is that on top of what it can already do is its potential to be used as an SDK, or a software developer kit. As Lombe explains:
“Essentially, it’s a DeFi middleware. Not only can you create these DeFi portfolios, you can fire an SDK useful as a backend for white label services. Essentially, use whatever user interface you have on the front end and create your own DeFi products.”
These third party DeFi products could be websites or wallet apps running Spool in the background unnoticed. This could mean a lot of development work saved on such products.
When combined with the ability to share Spools, the automation of diversification and yield optimization as well as the efficiencies that work on economies of scale, Spool looks to be a particularly powerful piece of middleware within the Ethereum ecosystem.
Perhaps more importantly for ordinary people, it allows for better governance of finance – a thing that traditional finance seems to be failing at. As Zimmerer states:
“Traditional finance is stacked against those who are uninterested in it. It’s sort of kept boring so that people don’t really care about it and don’t really know what’s happening. A very concrete example of this we can see is Covid hits the economy really hard, and then you would also assume that the financial markets should also tank. And what happens is central banks are printing a lot of money and obviously now as a lagging effect we are starting to feel it in terms of inflation.”
economy reeling because of Covid
Zimmerer sees inflation as a kind of tax on laypeople, where traditional finance’s lack of accessibility means fewer to offset the same inflation that will not affect traditional finance’s participants.
“For me, it’s because we kind of live in a world that forces you to think about the economy. We see a lot more, at least in my social circle, people getting interested in investing and managing their finances. And on a systemic level, even if you’re just a regular person with a regular job, it’s not just enough to dump it into a high-yield savings account, because those yield very little compared to the yields you can get in the rest of the financial market.”
Cheah notes that the pandemic has driven global interest rates even lower, stating that some jurisdictions, such as the Eurozone, are now in negative territory and others such as the US and UK could follow. Meanwhile Lombe also notes that central banks have had to print more money in the advent of economic collapse, and this drives inflation even higher, eating away at savings yields.
The people at Spool seem to have an understanding about how serious world affairs influence the lives of ordinary people, and seek to use DeFi to provide solutions to these specific problems.
In this climate, DeFi simply looks more profitable. Protocols such as Compound have delivered yields as high as 6.75% for those who save with Tether. But Lombe says that Spool’s role is different. Rather than try and be a new competitor seeking to dominate market share within the Ethereum space, he says Spool is more concerned with what can be seen as the greater good.
“What Spool is trying to do is essentially not try to compete with the other farms out there because we’re not a farm, we’re an aggregator of sorts. We’re not trying to take the piece of the existing pie. We’re trying to grow the pie.”
Spool Token Staking Guide
The purpose and benefit of staking SPOOL token is to obtain more SPOOL and the voSPOOL governance token. The voSPOOL tokens are distributed to stakers based on the amount of time continuously staked, capped at a maximum of the total number of SPOOL tokens staked. The distribution is calculated based on a weekly epoch up to a maximum of 156 weeks. However, if the staker stops staking their SPOOL tokens at any time, the calculation of the time spent continuously staking resets to 0- this means that their voSPOOL distribution will correspondingly be reset to 0. Here’s a step by step guide on how to stake your SPOOL tokens.
Step 1: Obtain the SPOOL token. $SPOOL can be purchased on exchanges like Uniswap. To get started with Uniswap, check out our Uniswap review and tutorial.
Step 2: Go to spool.fi and launch the Spool App on your web browser by clicking on the “Open App” button on the top right hand corner of the page.
Step 3: Click on “Connect Wallet” to connect your web3 wallet to the app. You can choose which wallet to connect such as Metamask, Ledger, Trezor, Coinbase Wallet etc.
Step 4: On the app, click the “Spool Staking” tab.
Step 5: On this page, you can see the amount of SPOOL tokens in your wallet and total SPOOL staked. You can also see the amount of claimable voSPOOL rewards earned and choose to either claim the rewards or stake these rewards. Furthermore, you can use your voSPOOL for voting on governance proposals on this page.
Step 6: To stake your SPOOL tokens, click “Stake” which will bring up a separate staking window.
Step 7: Input the amount of SPOOL tokens that you wish to stake, alternatively you can also click “max” which will stake the entirety of the SPOOL tokens in your wallet.
Step 8: Click “Approve” on both the app page and on your web3 wallet. This will allow the contract to interact and manage your SPOOL tokens.
Step 9: Click “Stake” to stake your SPOOL tokens and wait for the transaction to be completed. Note that this transaction will cost gas fees. Once your SPOOL tokens are staked, you can unstake them at any time.
Step 10: Once the transaction is completed, your $SPOOL tokens will be staked. We suggest you then refresh the page to see the updated amounts staked or remaining in your wallet.
Step 11: On the app, you can click on the “Platform Summary” tab to check the amount of $SPOOL tokens staked, the amount of voSPOOL accumulated, and the claimable staking emissions.
Step 12: On the app, you can also click on the “SPOOL Staking” tab to see the updated $SPOOL staking rewards.
Step 13: To claim all your rewards, click on “Claim All Rewards”. A pop-up window will then appear which shows both the SPOOL emission rewards as well as the voSPOOL emission rewards. Click “Claim” to claim these rewards.
Step 14: Wait for the transaction to be confirmed. Once completed, the SPOOL tokens will be sent to your web3 wallet. Note this will also cost gas fees.
Step 15: Clicking on “Stake Emissions Rewards” allows you to stake the rewards you have earned. A pop up window will appear and shows all the rewards that can be claimed and staked for both SPOOL and voSPOOL emissions. Click on “Claim and stake” to both claim your rewards and stake them in 1 transaction.
Step 16: Wait for the transaction to be confirmed. Once completed, the SPOOL tokens will be sent directly to staking and your balance will be updated. Note that this transaction will cost more gas than simply claiming the staking rewards.
Step 17: Once the transaction has been confirmed, it is suggested to refresh the page to see the updated amounts of staked or claimed SPOOL tokens.
Jeremy Eng-Tuck Cheah. 26 August, 2020. The Conversation. What is DeFi and why is it the hottest ticket in cryptocurrencies? (https://theconversation.com/what-is-defi-and-why-is-it-the-hottest-ticket-in-cryptocurrencies-144883)
Spool is a Decentralised Finance (DeFi) application that allows users to create a fully diversified, yield optimised, auto-compounding and risk mitigated investment portfolio – in a simple and straightforward manner. It is also middleware, and can be used to power other applications.
How is it used?
With just one stablecoin deposit and five steps done via a simple interface, a user can set up this automated DeFi portfolio, or Spool up. Choose a preferred currency, a risk model, some protocols to invest in, your risk tolerance, name the Spool and then set a performance fee to charge others than invest in your Spool (in that order). And then, just leave it alone to do its job.
Why use it?
DeFi yields currently seem to be doing better than traditional finance. Amid the global pandemic, inflation threatens to devalue returns from traditional savings. And while getting into Defi could be complicated, Spool is relatively simple and straightforward to use for beginners, and very easy to deal with for experts who are tired of manually managing their portfolios. As more users use it, the more stable it gets, and others can invest in your Spool without having to create their own for the said small performance fee.
Stablecoins are under the microscope right now following the collapse of Luna and UST, the stablecoin of the Terra ecosystem.
In this article, we look at the history of stablecoins, its pros and cons, why they are needed, and what are the risks are of utilizing them.
What is a Stablecoin?
A stablecoin is a cryptocurrency that maintains a fixed value because it is backed by reserves of other assets such as fiat currencies, securities, gold or precious metals, property, or any other assets as collateral.
There are four main types of stablecoins:
Fiat-Collateralized: Fiat-backed stablecoins are backed by real-world currencies such as US Dollars or British Pounds at a 1:1 ratio.
Commodity-Backed: Backed by precious commodities like gold, platinum, or real estate.
Crypto-Backed: Backed by other cryptocurrencies which are kept as a reserve to ensure price stability in the event of price fluctuations. Smart contracts can also be coded to ensure no trust is needed in third parties.
Algorithmic: These involve adjustments in the algorithm for controlling the supply and demand of stablecoins, usually in the form of two tokens: one a stablecoin and the other a cryptocurrency that backs the stablecoin.
Cryptocurrencies are decentralized and not controlled by centralized entities such as governments or regulatory bodies. They operate on supply-and-demand principles in a free market and can be volatile in nature.
Simply put, stablecoins allow investors and traders to ‘cash out’ of risky investments into another crypto coin that will not fluctuate wildly in value during times of market volatility.
History of Stablecoins
Stablecoins actually have a very long history, having been around since 2014 with BitUSD. BitUSD was created in July 2014 backed by the $BTS token and created by Dan Larimer and Charles Hoskinson, both pioneers in the cryptocurrency who went on to create EOS and Cardano ($ADA), respectively.
However, even the world’s first stablecoin was not without its issues. In late 2018, BitUSD lost its peg to the US Dollar, resulting in huge criticism from the cryptocurrency community. BitUSD is no longer commonly used, and many cryptocurrency exchanges no longer support this stablecoin.
The next stablecoin to be launched was NuBits in September 2014 and was functional for 3 years. Eventually, this stablecoin also fell- suffering 2 major crashes during which the peg was broken for an extended period of time. The first of these crashes was in 2016 when NuBits was depegged from the US Dollar for 3 months. This was likely because holders of NuBits suddenly sold their substantial holdings for Bitcoin, resulting in NuBits being unable to handle the large volumes of sell-offs and losing its peg. Surprisingly, after the 2016 crash, the marketcap of NuBits shot up by 1,500%. This was caused by people buying millions worth of NuBits in late December 2017 owing to concerns about the stability of Bitcoin, whilst the NuBits team was unable to print new coins to keep up with the demand, thereby driving up prices.
The second, and final major crash suffered by NuBits was in March 2018 which was caused by insufficient reserves of the coin, meaning that the NuBits team were unable to protect the coin when there was a dip in demand. Of course, large cryptocurrency holders immediately noticed the drop in NuBits prices and panic sold their positions, causing an even greater slide in price.
After the second NuBits depeg, the stablecoin had lost credibility with cryptocurrency investors. Some holders even threatened legal action against the NuBits team or went into Tether ($USDT) and/or TrueUSD instead.
Tether $USDT however has also weathered a few storms of its own, facing legal battles with the Securities and Exchange Commission (SEC), which also shook the confidence of the market. The legal action was eventually settled in 2021 with the parent company of Tether paying nearly US$60 million.
Despite this, cryptocurrency keeps evolving with each passing year as new innovations that were once met with speculation and distrust eventually become trusted by the market. Today there are many other stablecoin options out there such as USD Coin (USDC), Binance USD (BUSD), MakerDAO (DAI), Paxos Standard (PAX), and Gemini Dollar (GUSD) that provide alternatives to USDT.
Pros of Stablecoins
There are several reasons and numerous benefits to using stablecoins. In general, they are simply faster, cheaper, transparent, borderless, and programmable compared to fiat currencies. Some more benefits are listed below.
Stablecoins allow a quicker and easier way for investors to enter the crypto market by bridging fiat into stablecoins, which act like fiat currencies on exchanges.
Stablecoins are more efficient than fiat because they have the digital properties of other crypto tokens and can be moved around quicker and more efficiently than fiat money.
Stablecoins can be held as capital in non-custodial wallets such as Metamask, thus removing the need for third parties to intermediate.
Stablecoins allow for quicker, immediate peer-to-peer payments abroad that are semi-anonymous with much lower fees than fiat currencies.
Stablecoins can be used for holding, trading, borrowing, and lending abroad. When fiat-related regulatory processes are involved, even better.
Stablecoins can be staked to earn a higher yield than traditional finance in DeFi applications. When adding liquidity to protocols, they also minimize the risk of impermanent loss due to their price stability.
Blockchain data and tracking allows for a more transparent view of the market, giving investors more information on liquidity flows and thus greater decision-making power.
Many sectors of the economy and the unbanked population are benefiting from the use of stablecoins in remittance, escrow, payroll, settlement, and alternative banking that is self-custodial, cutting out intermediaries.
Cons of Stablecoins
Stablecoins used to be more controversial in the earlier days of crypto but have garnered more regulatory approval in recent years, minimizing many of the negative aspects.
Stablecoins usually require trust in a third party to ensure the coins are backed by the stated assets, which also means external audits are needed to ensure assets are accounted for.
There are lower yields on stablecoins in DeFi applications than on regular cryptos, however, these yields are still significantly higher than the interest rates offered by traditional banks.
Stablecoins utilized in DeFi applications are subject to the usual risks involved with unregulated cryptocurrency projects. The TerraLuna disaster was a perfect example of an extreme worst-case scenario for an algorithmic stablecoin.
Trial and error. Due to the relative infancy of stablecoins and the experimental nature of new technologies within crypto, there is still a risk when getting involved with newer projects or protocols.
Regulatory scrutiny. As the stablecoin market keeps growing and adding billions of dollars in value to the crypto market, it will generate increased interest from authorities. This can also be seen as a positive.
Conclusion
Stablecoins and their rapid proliferation across all blockchain protocols have brought more flexibility and adoption to the cryptocurrency industry. They are now embedded in the fabric of the market and are here to stay.
The onus remains on the individual investor to do your own research (DYOR) when deciding which stablecoin to hold. Find out who created it, whether it’s a trusted centralized business or a decentralized protocol managed by smart contracts. All the options are open to you when it comes to the safer management of risk in the crypto market.
One major question all new cryptocurrency investors ask is how to actually spend their cryptocurrencies. Unfortunately, cryptocurrency is just not as widely accepted as fiat currencies. Cryptocurrencies are also subject to huge price fluctuations and volatility. Therefore, to “lock in” the price of your cryptocurrencies and as a springboard to cashing out crypto to fiat, many have converted their cryptocurrencies to stablecoins instead. This allows one to keep their dollar-pegged coins in exchanges or cold/hot wallets, so when the moment to jump back into the bull run comes, they can do so within minutes without having to deal with fiat on-ramps. Alternatively, to easily convert their stablecoins to fiat currencies for spending.
Most have considered stablecoins to be a safe means of preserving their capital without experiencing volatility and having to leave the crypto ecosystem. After all, they’re… stable, right?
In most cases, they have been, but the most recent collapse of one of the largest and well-respected stablecoins, terraUSD (UST), and other less known ones, like neutrino USD (USDN) and DEI, has led people to question the stability of all stablecoins. But is this warranted? Isn’t there a bit more nuance to the mechanisms by which a coin retains its dollar or other fiat currency peg, each with their own risks and advantages?
Although a seemingly straightforward idea, stablecoins can be quite tricky to unpack and analyze, especially when talking about non-collateralized algorithmic stablecoins, which sound too good to be true, and in some cases, are. With this in mind, let’s take a look at stablecoins, what kinds are out there, how well they are doing, and what makes them tick.
Check out our latest video- Stablecoins: Are they safe? ($UST, $USDT, $USDC, $BUSD)
Stablecoins: Are they safe? ($UST, $USDT, $USDC, $BUSD)
Stablecoins – What Are They and How Are They Different?
Stablecoins are cryptocurrencies that are pegged 1:1 to the value of a fiat currency, meaning that, for example, every 1 USDT (USD Tether, the biggest market cap stablecoin) is worth 1 US Dollar. There are numerous stablecoins in circulation, with different coins having different mechanisms for collateralizing their stablecoins.
The most commonly used feature to categorize stablecoins is by looking at how each of them backs their tokens, e.g. their collateral/reserves. By doing that, we can focus on using more narrow criteria for evaluating and comparing stablecoins based on the risks and advantages that stem from the chosen collateralization mechanism. Broadly speaking, there are three main types of stablecoins: Fiat-collaterized stablecoins, crypto-collaterized stablecoins and algorithmic stablecoins.
Fiat-collateralized Stablecoins
By far the most popular type, fiat-collateralized stablecoins occupy the top 3 spots (USDT, USDC, BUSD) among stablecoins by market cap, accounting for roughly 94% of the total ~$155 billion stablecoin supply.
Their working principle is the most straightforward to understand. Each of these coins is backed by a combination of real USD cash reserves, US Treasury Bills, and commercial papers (liquid short-term debt issued by companies).
Crypto-collateralized Stablecoins
Similar to fiat-backed stablecoins, crypto-backed stablecoins use cryptocurrencies as collateral, and smart contracts and, typically, governance tokens to monitor price stability. Due to the volatile nature of cryptocurrencies, crypto-backed stablecoins are over-collateralized (150% for DAI, for example) to account for periods in the market when prices of the collateral assets keep going down. Learn more about DAI.
Compared to fiat-backed stablecoins, they’ve witnessed a much slower rate of adoption. However, based on data, it does seem that they are slowly starting to gain momentum and dominance over the past years, as people begin to develop trust in the previously experimental mechanisms, which is to be expected.
There are also hybrid collateral tokens such as Reserve Tokens (RSV) that are backed by both digital and fiat assets.
By far the most technically complex and technologically least mature, algorithmic stablecoins rely on on-chain algorithms to handle changes in supply and demand between the stablecoins and their sister tokens that back them by burning and minting them in both directions through a process called seigniorage, to maintain a dollar peg. This, however, only works while there isn’t a strong downward pressure on the peg that keeps stressing the mechanism, which can lead to a downward death spiral during which both tokens keep losing value as users keep panic selling at the same time as the algorithm tries to stabilize the price. Although not fully collapsed, neutrinoUSD and its Waves protocol have been experiencing extreme turbulence for the better part of two months, making users lose confidence in its stability, especially as its working mechanism is very similar to that of UST.
On the less extreme side of algo-stables lie hybrid stablecoins, or fractional-algorithmic stablecoins, such as FRAX, which is partly backed by collateral, and partly algorithmically by adjusting the collateral based on the deviation of FRAX from the $1 peg.
Learn more with our Ultimate Guide to Algorithmic Stablecoins:
https://www.youtube.com/watch?v=hdmotWPNVdQ
Criteria for Comparing Stablecoins
Decentralization
The impact of regional regulations can be a risk many would not find appealing. It’s completely reasonable to expect that the industry would be capable of creating largely decentralized stablecoins that are collateralized by one or more decentralized cryptocurrencies, and governed by a DAO. Such is the nature of MakerDAO and its DAI stablecoin, which has shown its peg strength throughout this year and especially during the most recent catastrophic UST collapse. There is a small caveat, however.
The largest crypto-asset backed stablecoin with a $6.5 billion market cap, DAI, is still heavily backed by the second largest market cap stablecoin, USDC, which itself is backed by fiat reserves, calling into question whether it truly is as decentralized as it purports itself to be. The reality is not as grim as it might seem. Even though USDC and USDP (another fiat-backed stablecoin) comprise 28.1% of the total DAI collateral, ETH and WBTC (Wrapped BTC) boast an impressive 58.6% collateral, tipping the collateralization balance in favour of decentralized digital currencies instead of centralized stablecoins. In addition, the Maker platform with the MKR and DAI tokens, together with all of its smart contracts, lives on the Ethereum blockchain, making it truly trustless and decentralized, even if a good portion of the collateral is not.
On the other hand, the decentralization of all stablecoins might not be necessary, or even desirable, as properly regulated stablecoins almost by definition require a legal entity or a consortium of entities with exposure to major governmental bodies (especially in the US) to be behind the stablecoins, so that there is little doubt about who is responsible for ensuring a full fiat backing of their stablecoins. However, this would imply heavy centralization of control over the stablecoin supply and the general mechanisms for issuance, governance, and, crucially, potential censorship.
A centralized stablecoin is a double-edged sword. On one hand, it gives unprecedented power over a vast supply of stablecoins that a decentralization-focused industry heavily relies on to do daily business. On the other hand, it allows for companies like Binance, who are behind the popular BUSD stablecoin, to prioritize user safety and regulatory compliance, giving users peace of mind about the safety of their assets.
Thus, a strong argument can be made to safely onboard millions of new users through reasonably regulated stablecoins. It’s important for this industry to appreciate the need to offer a wide range of stablecoin alternatives, from centralized to decentralized, for users with different risk appetites and technical competencies in order to accelerate crypto adoption worldwide.
Compliance & Transparency
Closely tied with the level of decentralization of a stablecoin, regulatory compliance and transparency are absolutely crucial for companies who are backing their coins with cash reserves, and who desire to find strong and growing support by institutions, companies, and investors looking to enter the space, but who have been apprehensive to do so due to concerns about a potential inability to redeem their tokens for dollars.
It’s important to note that regulatory compliance is largely a concern for stablecoins operated by corporations, as they are the ones operating mostly behind closed doors, with most of the details about their inner workings, decisions, and collateralization mechanisms being hidden from the end-users and legislators. In such situations, it is more than reasonable to expect a regulatory body to force at least some oversight over how exactly these companies are operating their stablecoins and whether they do possess the collateral they claim to have.
The same can’t be said about open-source, decentralized governance-powered, blockchain-native, crypto asset-backed, and over-collateralized stablecoins that are being operated completely out in the open, with every decision, piece of code, and capital relocation in smart contract escrow accounts being registered on-chain. For coins such as DAI, compliance and transparency are baked into the protocol, and it can be reasonably argued that the necessity for any kind of regulatory oversight is moot, as the community and the free market cryptoeconomic pressures have organically grown a robust and freely auditable stablecoin that’s fully backed by digital currencies.
For fiat-backed currencies, the two large-cap extremes in the range of transparency and compliance are BUSD and USDT. While BUSD has been extensively cooperating with the New York State Department of Financial Services (NYFDS), and showing that every BUSD is backed by an equivalent amount of cash, USDT has been under significant scrutiny over the past years regarding its executives and the USDT backing. These allegations, combined with the lack of transparency by Tether, have made many worry whether USDT is a house of cards about to crumble as the Chinese real estate bubble begins to pop.
Financial Sustainability
In addition to the existential risks posed by the type of collateral chosen for stablecoin reserves, another source of risk that can be analyzed for a project is its cashflow. Changes in the cashflow of a protocol can offer clues about the health of the ecosystem and its ability to withstand market shocks.
Understanding how a stablecoin protocol spends and, most importantly, earns its money, is key to making predictions about the long term sustainability of such projects. Without proper long term revenue models, protocols are left to come up with highly appealing but unsustainable practices such as incredibly high yields on stablecoin deposits (such as UST had) or very low to non-existent trading fees to make it appealing for users to use that stablecoin as their dominant medium of exchange. These kinds of practices sooner or later come back to bite them in the ass, as there is a very high probability that the high yields and low fees are paid for not from organic revenues, but rather from alternative revenue sources (as is the case for Binance), or from project’s treasury/VC investment money, in hopes that they would be able to subsidize the attractive rates for long enough to reach a critical mass of users to then eventually either lower the yields and increase the fees, or simply keep running a ponzi-like operation for as long as possible.
Risks are High, always DYOR (Do Your Own Research)
If something in crypto sounds too good to be true, it very likely is. The most recent example of this was the Anchor Protocol’s 19.5% yield for UST deposits, which should’ve been a huge red flag, and yet many, many individuals chose to deposit their life savings into a supposedly stable UST in hopes of an unsustainably high APY.
For a $50 billion project to go down to virtually nothing in a matter of weeks is nothing short of astonishing, and should serve us all as a warning to do our due diligence thoroughly, and ask uncomfortable questions, even if the whole market seems to be fully on-board with a project.
As the saying goes, “Follow the money.” If a protocol is promising unbelievable returns, if the company behind a stablecoin year after year refuses to prove their fiat reserves, and if a algorithmic stablecoin seems to have a fishy peg stabilizing mechanism that can only work in an up-only environment, then you should exercise caution. And as with everything, whether it be cryptocurrencies or stocks etc, ask yourself if you have really fully done your research and never put in more money than you can afford to lose.
Decentralised Platforms (DeFi) platforms have exploded in 2020, however, their complicated user interface and user experience have hindered adoption from investors that outside into the crypto industry. And even those who are already accustomed to the mechanics of these networks still fear one thing: impermanent loss.
Most DeFi platforms use automated market making to determine asset prices in liquidity pools. Therefore, the value of an asset inside the pool may differ from the value of the same asset outside the pool. Since the prices shift radically, it’s hard for liquidity providers to withdraw assets on time to prevent a loss.
The solution is to use automated trading and liquidity provision on these platforms. CyberFi is among the few projects exploring this path and aiming to bring the functionality of centralized exchanges to decentralised exchanges and automatic market makers.
Check out our podcast interview with Geralt, CEO of CyberFi.
Background
Geralt, Igor Sokolov, and Darius Greicius head the project as the CEO, CTO, and CMO, respectively. The CEO has over five years experience in senior management positions, four years being in the crypto sector, with three years spent in creating DeFi, centralized exchanges (CEX), and other blockchain and crypto activities.
On the other hand, Sokolov has four years of experience in cryptocurrency, including participating in Hackathons and creating decentralized applications. Greicius is well-versed in the financial markets, crypto, and marketing.
What is CyberFi?
CyberFi is a blockchain-based platform allowing users to automate critical tasks when interacting with DeFi protocols. The platform uses intelligent automation to know when to exit or enter a position. The network handles the automation of tasks related to lending, trading, liquidity provision, and inter-blockchain interaction.
Notably, CyberFi is not a know-it-all platform. Instead, it gives users the chance to define parameters on how they need things to be done.
For example, liquidity providers (LPs) can automate processes to remove or add liquidity in a pool using set price points. Consequently, LPs don’t get rekt (wrecked) when sleeping since DeFi is a 24-hour industry.
Geralt and his team have the vision to help DeFi enthusiasts to mitigate risks while lowering entry barriers and enhancing user experience.
Most importantly, Cyberfi takes a non-custodial approach, minimizing the security risk to users’ funds. In addition, the protocol contains features to cater to both novice and experienced DeFi users.
Three Areas Cyberfi Seeks to Automate
CyberFi seeks to automate 3 major areas: Trading, Automation and MultiChian.
Trading
Limit orders have dominated crypto trading on centralized exchanges. CyberFi moves beyond the simplicity to tap into price divergent indicators (PDI) to enable smart order handling in DeFi. With no centralized order books, as in CEXs, the protocol uses PDIs that tap into reputable oracles to initiate controlled orders on decentralized exchanges using liquidity pools.
To ensure its users get the best price in the market, the protocol uses the best trade value (BTV). Apart from the price, the concept also caters to the lowest fees.
That’s not all. CyberFi uses additional tools to hedge against volatility. For example, the Change Speed (CS) tool coupled with PDIs, is baked inside the smart order feature.
Consequently, a trader can use the price or its percentage to mark specific points during a trading session that key decisions need to be made. Some of the decisions may be to sell a token when its price falls at a given percentage within a given timeframe.
Automation System
CyberFi’s Automation System will feature multiple complex actions in farming, staking, Liquidity Pools and LP tokens.
The platform uses high-end price triggers and BTV to guard users against inflation, price reduction, and other unforeseen risks.
In addition, it makes it smoother for a user to enter or exit a strategy without the need to sign an array of transactions. As such, users can engage in high-risk yield farming, which is associated with high returns. Note that interaction with this type of DeFi strategy requires pre-defined parameters from the user.
Multichain Activities
The idea of moving crypto assets across different blockchains is finally catching up. Unfortunately, in the DeFi scene, the activity is still mostly manually handled. But not anymore.
Cyberfi automates inter-blockchain activities to allow users to automate activities on popular decentralized networks such as Polkadot and COSMOS. Notably, with this functionally, DeFi users can automatically participate or move their assets on another blockchain.
Cyberfi’s CFi token
CFi is the protocol’s base asset and can be used in the CyberFi ecosystem. The main uses of the CFi token are:
Paying for gas prices;
access to unique products;
reduced commission fees; and
payment for multi-chain operations.
CFi tokenomics
CFi has a total supply of 2,400,000 CFi tokens. Key beneficiaries during distribution include strategic partners who account for 500K tokens, development (300,000 CFis), and initial liquidity team (250K).
Around 300,000 CFi tokens were set aside for marketing and community growth, while staking rewards and liquidity providers (LPs) took 200,000 tokens. Additionally, the transaction mining program was allocated 50,000 CFi coins while the two sale rounds removed 800,000 tokens from the total supply.
Note that allocated coins have different lock-up periods. For instance, tokens allocated to strategic partners have a six-month vesting period, while those on the transaction mining program have 24-weeks unlock period.
The token’s major use cases include giving holders a voice on the governance table, paying for fees, paying for automation strategies, and giving holders the right to private products.
However, automation-based activities also use ETH to cover fees. In this case, ETH coins are automatically converted to the native currency.
Apart from exclusive access and having a voice in the decision-making table, the token gives its holders a right to earn part of the platform’s revenue. And it’s a lot! CyberFi distributes 80% of all fees collected in the native currency to CFi holders. These include those converted from ETH.
Staking on CyberFi
CyberFi’s staking product is called CyberEra. The offering is open for CFi and Ethereum (ETH) investors. One pool supports the native asset while the other interacts with CFi/ETH.
Staking on CyberFi
However, staking rewards differ depending on the pool. On the CFi pool, 10,000 CFi tokens (roughly $30K) are up for grabs, while 25,000 (approximately $76K) CFi tokens are available for rewards on the CFi/ETH pool.
Each pool has room for any amount of tokens, and each staking session lasts for 40 days upon which the staked funds are locked. Apart from the staked funds, rewards accrued during this period are also locked for the first half of the 40 days.
On the CFi pool, the daily reward is estimated at around $750 (250 CFi tokens), while those staking on the CFi/ETH LP expect to receive about $1,898 after every 24 hours.
Interestingly, locking the assets during the staking period attracts only serious users who share in the project’s vision. So far, over 1.5mil worth of CFi has been staked.
However, the duration of CyberEra isn’t fixed. Depending on its success, the team will decide on how long the next staking era will last.
A few months into its launch, the platform already boasts over $1 million total value staked. The CFi pool accounts for the largest share, with roughly $670,000, with the CFi/ETH LP having slightly above $390,000.
CyberFi mega month January- February 2021
CyberFi are doing huge things in January-February 2021 with product rollouts, integrations, partnerships, new development plans etc.
The mega month will begin on 20th January 2021 with 3 major accouncements and product rollouts on-board, together with a full update of Q1 and recap.
23rd January 2021 will be another wave of announcement including “v2” of CyberFi.
Conclusion
CyberFi’s entrance into the space has the right timing. Although the DeFi industry has recorded massive gains so far, the protocol could potentially boost the amount of funds locked in DeFi networks. How? By lowering the entry barriers, guarding against impermanent losses, and allowing users to comfortably initiate high-risk yield farming strategies.
In addition, CyberFi’s implementation of CFi has more benefits to its holders. For instance, sharing 80% of all fees collected with CFi investors and keeping 20% is among the few occurrences in the cryptocurrency industry.
KIRA Network ($KEX) is an interchain exchange protocol that allows users to earn block and fee rewards while staking any digital assets, such as cryptocurrency, stablecoins and non-fungible tokens (NFTs).
Background
KIRA is developed by a strong team consisting of full-stack developers, blockchain engineers, back-end developers, and technical architects. The team is led by Milana Valmont (CEO) and Mateusz Grzelak (CTO).
In the past, Valmont had held different roles which include being a blockchain consultant at Adcoin, as well as a strategy advisor at KNOKS. Grzelak had also held prominent positions in firms such as Settle Finance, Barclays, and Bity.
KIRA Network’s strategic partners include AlphaBit, TRG Capital, Swingby, and Math Wallet. In addition, the team also includes Roger Lim from NGC Ventures and Alssio Treglia from Tendermint.
What is KIRA Network?
KIRA Network is a blockchain-based protocol that brings liquid staking into the DeFi market. It enables access to all virtual currencies, digital fiat, and non-fungible tokens (NFTs) within a cross-chain ecosystem.
With liquid staking, liquidity providers can stake any digital asset. Consequently, they earn incentives emanating from new blocks and transaction fees.
The protocol’s idea of liquid staking stems from the current staking space. Here, centralized cryptocurrency exchanges provide crypto trading, acquisition, as well as act as a hub for a host of digital currencies.
Currently, a large number of those coins that are available for staking are found on centralized exchange platforms. For this reason, KIRA wants to change this by providing a decentralized platform that mirrors what traditional virtual currency exchanges offer.
As such, even small actors in the PoS ecosystem will have access to liquidity and evade security risks found on centralized platforms. Also, the protocol removes the cap on fee and block incentives for liquidity providers.
KIRA Network: 8 Key Pillars
To have a profound impact on the DeFi scene, KIRA Network is supported by eight pillars, which include:
Security
Using the Multi-Bonded PoS (MBPoS) consensus mechanism, the network can harness its security from staked assets. In addition, MBPoS helps remove the barrier as to which virtual assets can be staked and/or can attract rewards.
Utility
KIRA uses IXP (Interchain Exchange Protocol) to provide market access to the wide range of assets staked on the system.
Liquidity
KIRA supports liquidity provision through staking derivatives. The platform has a 1:1 ratio between staking derivatives and staked tokens.
Expansibility
The protocol uses validators to ensure the credibility of transactions. Also, the validators operate Initial Validator Offerings (IVOs) that allow investors to raise funds for new projects without affecting their liquidity.
Investors delegate their tokens to the validators while the validators mine new tokens. Correspondingly, the former earn block rewards.
Upgradeability
Upgrading the system relies on developers. Therefore, to drive development, the protocol uses an on-chain contracting system as an incentive scheme.
Sustainability
To ensure the platform has long term viability, it uses an on-chain governance structure. To elaborate, the governing body touches on the network’s economic aspects that include inflation and interest rates.
Scalability
KIRA tackles scalability by removing restrictions on the number of validators and the stake value. In turn, this makes it possible to introduce shards or zones.
The Network makes use of Polkadot, Cosmos, and other cross-chain systems to power liquid staking. Notably, this staking mechanism does not discriminate against cryptocurrency assets.
KIRA Token ($KEX)
KEX is KIRA Network’s native token. Apart from being used as a staking token on the network, KEX is also used as a base asset upon which other currencies are valued.
Additionally, KIRA’s native currency is a requirement when participating in the system’s governance issues. Moreover, it’s used to reward holders, delegators, and validators. Note that KEX holders are rewarded by being offered low transaction and exchange costs.
In contrast, delegators earn almost 99 percent of all block rewards and close to 50 percent of all network fees. Validators, on the other hand, earn a commission depending on their configuration and sit on the system’s governance table. Their earnings could go up to 50 percent network fees.
KEX is allocated to developers/team (15%), advisors (7%), the KIRA Foundation (20%), as well as reserve and liquidity (26.6%)
KEX token is not available to trade yet and the public sale is soon to be announced. KEX will be launching ERC-20 KEX token on Ethereum network before KIRA Network is launched with the initial supply of 300,000,000 KEX token. Users will be able to swap for the native KEX token with the equal amount of value once the mainnet is launched.
KIRA Network has raised 3.6M during the seed (priced at $0.025) and private sale rounds (priced at $0.05), with a vesting period of 18 months starting at mainnet launch. All seed and private round participants will receive approximately 2.5% of their token after finalization of all stages of the public round distribution.
Public round has a $400k cap, token price at $0.075. Find out more here.
Governance on KIRA Network
The protocol uses a governance structure that slowly hedges away from full dependency on stake and or wealth distribution.Governance is guided by rules that exclusively put whitelisted actors to execute on-chain actions that are cleared for execution.
On top of these rules are parameters and individually assigned permissions. The network puts checks and balances on its governance model through operators, a voting council, an electorate council, and a proposal council.
Notable KIRA Network Partnerships
To drive the adoption and usability of the KIRA protocol, the platform has partnered with notable players in the DeFi Space. Some of the most conspicuous are:
KIRA and Finance.vote – The partnership enabled KIRA to provide liquidity to Finance.vote’s social trading layer. For this reason, it opened a new revenue stream forFinance.vote users by allowing them to conduct yield farming using digital assets in their portfolios.
KIRA Network and Math Foundation – Here, theMath Foundation benefited from staking KEX (KIRA’s native token) tokens and the interaction with KIRA’s MBPoS.
KIRA Network and Swingby – Thepartnership brought staking functionalities to Skybridge users. Skybridge is a decentralized inter-chain asset bridge.
KIRA and Blockparty – This partnership madeBlockparty one of KIRA’s validators.
Conclusion
From crucial partnerships to using a new consensus mechanism, KIRA Network is keen on expanding the possibilities in the DeFi space for liquidity miners and yield farmers. Furthermore, the protocol’s eight pillars help it to enhance security, sustainability, utility, scalability, among other functionalities that are key in driving DeFi adoption.
Decentralised Finance (DeFi) series: tutorials, guides and more
With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces
More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
Aavegotchi ($GHST), powered by Aave, is the combination of DeFi staking and non-fungible tokens (NFT) that possesses three attributes, determining their value and rarity: collateral stake, traits, and wearables.
Aave, one of the biggest DeFi protocols today, developed NFTs that function within the DeFi framework. The project shows a promising alternative to the way many stakers perform yield farming.
Launched in July 2018, the team behind Aave created Aavegotchi to offer new alternatives for yield farming. This project puts entertaining gaming mechanics on the platform to support a new type of DeFi experience for its users.
Daniel Mathieu, the lead developer for Buillionix.io, and Jesse Johnson, co-founder at Bullionix, lead the team of builders working for the Aavegotchi team. Their work centers on the main goal of “gamifying DeFi experience” through NFTs.
Aavegotchis are Ethereum-based crypto-collectibles powered by NFT technology. The Aavegotchi NFTs follow a similar set-up that other blockchain-based games such as Cryptokitties implement on their own gaming economies.
What Aavegotchi offers to the blockchain gaming space are DeFi models such as collateral staking, dynamic rarity, rarity farming, decentralized autonomous organizations (DAO), and smart contract implementations. Simply put, the objective is to use DeFi and yield farming concepts in creating NFTs that can hold value and appreciate over time.
The team behind Aavegotchi sought to liken the project to the Tamagotchi. Aavegotchis can be considered as the blockchain counterpart of digital pets that we play within Tamagotchi. Aavegotchis are playable NFTs that can hold digital economic value.
There are three elements to the Aavegotchi NFT that help define its value and rarity. They are:
Spirit Force – Putting it in DeFi terms, this means “collateral stake.” Aavegotchi has an escrow account where every owner’s Aave-backed ERC20 tokens are held as collateral. These collateralized tokens are called “aTokens,” and are accessible to Aave’s lending pool. Since these are assets can generate yield over time, this helps increase the value of aTokens kept in Aavegotchi’s escrow account. Today, there are many aTokens supported by the platform such as aDAI, aLEND, aLINK, and aUSD, among others.
Traits – Aavegotchis can have different attributes that make up their identity as NFTs. These traits affect their rarity, performance, and compatible wearables. While most of these traits are given to Aavegotchis randomly the moment they are created, they can be affected by user interactions that their holders make.
Wearables – Through the ERC-998 composability standard, Aavegotchi can be used to manage child NFTs as well. These child NFTs back the wearables that users can attach to Aavegotchis. If worn on compatible Aavegotchis, they can affect their traits and value.
Where do Aavegotchis gain value?
Aavegotchis derive their value from two sources: intrinsic value and rarity value.
Their intrinsic value originates from the amount staked by users on the NFT behind the Aavegotchi. The collateral stake, along with the interest it has accrued from Aave’s lending pool, becomes an Aavegotchi’s intrinsic value. For example, a 10 aLEND stake in an Aavegotchi will mean that it can hold that value as well, along with the interest accrued.
As of now, the only collaterals that can be staked on Aavegotchis are ERC-20 tokens listed on the Aave platform. As soon as the AavegotchiDAO is launched, the number of acceptable collaterals can be expanded. (lakeforestgc.com)
Rarity Value
The rarity of an Aavegotchi influences its value as well. This introduces the concept of “rarity farming” on the ecosystem as well. Users get rewards for training rare Aavegotchis and trading them with other players on its platform.
Aavegotchi Ecosystem
Portals
Users can only summon or create Aavegotchis through the Portal. This is backed by a smart contract that allows for the creation of new NFTs. Portals can be bought from the Aavegotchi dapp or from an external marketplace.
In claiming Aavegotchis, users have to stake the collateral required for it. Portals can only support the summoning of one Aavegotchi.
What is $GHST Token?
$GHST is the native utility token for the Aavegotchi platform. They can be used as a medium of exchange, fees payment for purchasing stuff like portals and wearables, voting functions, and rarity farming. $GHST is also required to mint REALM.
$GHST’s can be freely transferred to other users or swapped with supported tokens on the Aave platform.
$GHST Tokenomics
$GHST will be distributed in 3 main phases – i) Initial token distribution event, and ii) Governance rewards and iii) Rarity farming.
The Token Distribution Event is planned to begin in late Q3 2020 or early Q4 2020, split into 3 phases: Private Round, Pre Sale Round, and Token Bonding Curve.
Private Round – 5,000,000 GHST tokens will be distributed, at a price of 0.05 DAI / GHST. Open to participants with KYC validation with a minimum of 20K DAI to be redeemed for GHST tokens. The total vesting period is 365 days, with an initial release of tokens on the 180th day after the close of the pre-sale round, followed by a release over the subsequent 185 days thereafter.
Pre Sale Round – 500,000 GHST tokens will be distributed, at a price of 0.1 DAI / GHST. Open to participants with KYC validation with no minimum contribution. The vesting period is the same as the Private Round. Funds raised during the Pre Sale will be used as liquidity in the Token Bonding Curve reserve pool.
Token Bonding Curve (TBC) – Open to participants with KYC validation with no minimum contribution. No maximum supply of GHST distributed via the bonding curve. No lockup or vesting period.
During the Pre Sale Round, $GHST will also be created and distributed to the Ecosystem Fund (1,000,000 GHST) and Team Fund (1,000,000 GHST). Both funds are locked according to the same schedule as the Private Round.
The community-governance model of the platform will be supported by the AavegotchiDAO. This protocol will allow the users to decide on the list of collaterals that can be staked in NFTs, amend gaming parameters, and even limit the number of Aavegotchis that can be created in the future. To incentivize token holders on community governance, they are rewarded with GHST.
Aavegotchi Realm
This refers to the metaverse for Aavegotchis. The Realm is the digital world where Aavegotchis can interact with each other and join games, execute smart contracts, and call for governance functions.
Users can purchase parcels of land, or REALM, in the Aavegotchi world by staking GHST tokens. Aavegotchi’s Realm is also the social layer for the AavegotchiDAO, aimed at creating a more visual experience for community voters. Within this digital experience, Aavegotchis convene in a 2D town square to discuss platform proposals and cast votes.
Conclusion
The DeFi space seems a bit too complex for many newbies. This reality can be daunting for someone who is just newly-introduced to the world of blockchain, which unfortunately presents psychological barriers to adoption. Platforms that help users ease themselves onto DeFi could be helpful additions to the crypto space in general.
Aavegotchi is a valuable concept on that end since it has a promising model in making it easier for anyone to participate in yield farming. Gamifying the DeFi space for anyone who wants to dip their toes on interest-earning products is likely to help foster adoption later on. Overall, the project shows huge potential in proving the capacity of different blockchain innovations, such as NFTs and collateral staking, to provide reliable financial products and services.
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.
Rarible ($RARI) is a platform that allows users to create and sell their digital collectibles secured with blockchain technology.
Traditional ways of marketing your own work as an artist, selling high-value collectibles, or even just finding the opportunity to show your work to the rest of the world can be a difficult endeavor. Apart from the operational and financial costs that these objectives may incur, there are always intellectual property risks on an artist’s or collectible owner’s end. Rarible offers an innovative solution for those concerns—and more.
Through the blockchain, Rarible has created a platform that allows artists and owners to reach a wider audience and find interested investors. All of these goals are achievable through the platform without risking an artist’s ownership of a particular art, or an owner’s claim over a collectible. But how are they doing this, and how did it all begin?
Summary
Rarible is a platform that allows users to create, sell and buy non-fungible tokens (NFTs).
RARI is Rarible’s native utility token. Users can earn these tokens from various activities on the platform such as buying/selling artworks or collectables- known as “Marketplace liquidity mining”.
The RARI token gives holders the right to decide on system updates on Rarible and to curate what content is marketed on the platform.
Background
Rarible was founded by Alex Salnikov and Alexei Falin in early 2020. Their vision is to be able to create a successful blockchain application with a focus on helping artists and owners of collectables.
The team behind Rarible came up with a blockchain-based online marketplace where artists can find prospective buyers for their content.
According to Salnikov, community participation in terms of making decisions for the platform can help a lot moving forward. Charging fees for the use of the platform is one example of a community concern that Salnikov believes could be discussed, hence, their decision to implement a governance token for the platform.
These features have given Rarible a share of the attention that decentralized finance (DeFi) platforms were getting in mid-2020.
What is Rarible?
Rarible is an Ethereum-based decentralized application (dapp) focused on creating a marketplace for NFTs. It also enables a feature for users to make their own NFTs, which means tokenizing their collectables.
A notable feature of the platform, which has also caught the attention of many, is its governance set-up. Through its native utility token, users can participate in protocol governance decisions through a voting mechanism. This is what is referred to by Rarible implementing a decentralized autonomous organization (DAO).
Such a feature does not exist in most NFT marketplaces in the crypto space.
What are NFTs?
NFTs are part of the many blockchain innovations that allow anyone to create a digital counterpart of a real-world asset being held. In essence, this gives real-world assets the potential not only to be marketed worldwide but also to have the capability to receive international investments as long as they are connected to the network.
NFTs also ensure that owners of artworks, or any kind of work, can be assured that their products cannot be duplicated via a feature that allows for authenticity checks.
Anyone can create an NFT. An artist can easily go to the platform and create its digital counterpart. Whether or not they want to put their NFTs on sale is up to them.
The cost of transaction fees in purchasing a particular artwork can also be decided by the owner of an NFT. Through token transfer features, a collectible can be conveniently given to another person as a gift by just sending the NFT to the intended recipient.
If the owner of an artwork decides that they want to remove their work from the platform, they can freely do so. By “burning” the NFT, the artwork can be removed from the blockchain. Ultimately, every function that pertains to the ownership of a collectible is entirely under the control of the owners of NFTs.
The platform also implements a “royalty system,” which functions similarly to the traditional reward mechanism for an artwork’s original creator. Through this system, a creator is entitled to a certain percentage of the artwork’s selling price should it be sold again to others.
If users find that some artworks or collectibles were counterfeited, they can freely report them through the platform as well.
Rarible’s DAO
The future implementation of the DAO is included in Rarible’s roadmap. This is where its platform participants are given the right to participate in protocol governance. This means that they can propose platform upgrades and amend existing protocols as a community.
RARI is the token that backs the implementation of the DAO. But how can you get RARI?
$RARI Token
As already mentioned, RARI is Rarible’s native utility token. It cannot be bought from the platform and can only be earned by participating in platform activities, such as buying and selling artworks and other collectibles. This is called “Marketplace Liquidity Mining.”
Marketplace Liquidity Mining started on 15 July 2020 and issuance of the token held every Sunday from 19 July 2020 for 200 weeks consecutively. Exactly 75,000 RARI is distributed to users weekly, proportional to the volume of their sales and purchases from the preceding week. Both buyers and sellers equally receive half of the distributed amount.
Holding RARI entitles a user to certain rights. Apart from decisions on system updates, RARI holders can also be part of Rarible’s community-based platform moderation.
RARI is also used in helping curate the content marketed on the platform. The community can vote on which artwork belongs to its weekly pick, giving them an added boost in the reach that they need.
In the future, RARI will be rolling-out its NFT market index, which features a portfolio of the most sought-after NFTs that investors could be interested in supporting.
Other future implementations include:
Price Discovery Mechanism
Mobile App
Social Features
More Types of Content (AR+VR+Metaverse+3D)
DeFi NFTs
Fractional Ownership
Conclusion
Blockchain has unlocked the potential of the digital world, which would greatly benefit users. Traditionally, it is difficult to market an artwork without having to find middlemen to help you connect to a wider audience. The operational and financial costs of doing so are also a different discussion altogether.
And through blockchain, these may not be so much of a concern anymore. Rarible is one of the innovations that will ensure that collectible owners and artists can be completely independent in making decisions for their own assets.
Rarible also makes sure that the platform is as decentralized as it can be by leaving protocol governance decisions to the discretion of its community. With that in mind, the road ahead appears to be promising.
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.
Filecoin ($FIL) is created by Protocol Labs and aims to provide a real use case for blockchain technology outside of finance. As the name suggests, it’s all about files. But, since the system is decentralized, how does it guarantee security and availability? Also, are those storing files paid? Here, we look at what Filecoin is, plus the reasons why it has become quite a sensation in China.
Summary
Filecoin is a decentralised file storage network. Users pay for their files to be stored whilst those that help with storage are rewarded with $FIL tokens.
The project raised USD$200 million in its Initial Coin Offering (ICO) in 2017. Mainnet launch will be around 3:00pm (UTC) on 15th October 2020.
Filecoin has already been on the Chinese radar since 2018 where Chinese firms have started marketing Filecoin cloud mining services. It is considered easier to mine because specialised mining devices are not required.
Filecoin is also popular in China because of speculation on the price of $FIL tokens. Some exchanges already offer $FIL trading on an IOU basis.
What is Filecoin ($FIL)?
Filecoin is a decentralised file storing network that rewards users who store files. Those who keep files are referred to as storage miners. Users pay for their files to be stored while storage miners are rewarded for their work.
Its distributed nature allows for peer-to-peer file storage and retrieval design. The platform has a native virtual currency called FIL, which is used to reward miners.
The network is inspired by Web3, an advanced software development architecture that eliminates centralization. Filecoin can provide file storage services to other decentralized platforms as well. Furthermore, the network projects a way to enable transaction interaction with other blockchain platforms promoting interoperability.
What is Filecoin Token $FIL?
Filecoin token $FIL is the platform’s native virtual currency which is used to reward miners. Note that Filecoin mainnet has not launched yet and FIL tokens are not in circulation. However, as will be seen below a few exchanges are already trading FIL on an IOU basis. This means that users will only receive FIL tokens in the future. However, this has not deterred enthusiasts, with FIL having more than USD$100 million in trading volume every 24 hours and prices seemingly on an upward trajectory.
Upon the Filecoin mainnet launch (see below), Huobi Global will launch $FIL and open trading, deposits and withdrawals. Other exchanges have also rushed to list one of the most talked-about Chinese projects since 2017 such as Binance and FTX exchanges.
Filecoin Mainnet Launch
Protocol Labs spearheaded the project’s ICO in 2017. Backed by top names in venture capital like Sequoia and Andreessen Horowitz, $200 million was raised.
The ICO was followed by testnet postponement until 2019. Protocol Labs initially promised the mainnet launch in the first quarter of 2020.
Filecoin mainnet has now launched at epoch 148,888- at around 3:00pm (UTC) on 15th October 2020. You can check the status of the chain here.
How Filecoin works
For users
Users on the platform are charged for file storage. However, storage charges vary depending on whether a user chooses speed over redundancy and vice versa. Also, storage prices are affected by availability and demand.
For storage miners/providers
On the Filecoin protocol, a storage provider can either be an individual or an organization. And the only criteria for becoming a miner is having a free hard disk space and an internet connection. Miners will also have access to the entire pool of Filecoin users.
For smooth usage, the network provides a standard application programming interface for miners and advertises their availability. Without individual marketing, storage providers rely on speed, storage space, and reliability to woe users and attract rewards.
Filecoin has a self-healing feature that automatically checks if files on the blockchain are stored correctly. Additionally, the feature enables the network to detect faulty miners and their loads to be distributed to other miners.
The process of self-healing generates tracks showing a miner’s history on the network. A good reputation earns them more storage opportunities hence more rewards. The system uses proof-of-file and proof-of-storage mechanisms that are not energy-intensive, like the proof-of-work mechanism employed by Bitcoin (BTC).
Apart from general storage miners, there are also retrieval miners. These type of miners need to have a strong internet connection as they pre-fetch the most downloaded files and deliver them to users who are in close proximity. Afterward, they are rewarded for facilitating a smooth traffic flow on the network.
China is all-in on Filecoin
Miners are seriously considering Filecoin
Although the protocol does not require specialized mining devices for access, China is eyeing developing Filecoin mining hardware. Furthermore, Chinese investors are already speculating on FIL’s price. In fact, the Chinese have already been into Filecoin since as early as 2018, and with the mainnet launch being potentially weeks away, the hype is only getting stronger.
For example, when Protocol Labs announced an incentive program in early June 2020, Chinese firms started marketing cloud mining services that users can contract and use to provide storage to Filecoin users.
With the popularity of cryptocurrency mining in China, it is not surprising that these firms attracted a minimum of $500,000 in sales in the first few days. In addition, data from blockchain explorers revealed that the leading storage miners on Filecoin are located in China. Cumulatively, these miners account for over 80 percent of the network’s testnet storage mining power at roughly 15 petabytes (15,000 terabytes).
However, the tremendous uptake of storage mining in the Asian country can be attributed to the country’s love for Bitcoin and other cryptocurrency mining activities. Although Bitcoin trading is banned in China, most of Bitcoin’s mining power is still concentrated in the country at approximately 65 percent.
Also, even before Filecoin went live, mining hardware companies were already hyping their products in anticipation. Andy Tian, the co-founder of 1475, a hardware manufacturing company, thinks that China’s Filecoin mining hype is partly driven by the fact that the idea behind the mining is simpler to retail miners compared to mining BTC where ASICs are used.
The anticipation in China is so high that more than $15 million worth of Filecoin mining software and hardware has been stashed by mining pools waiting for investors and self-mining. Other large BTC mining companies like RRMine reportedly sold $15 million in cloud computing contracts “within minutes.” RRMine is also accumulating FIL mining hardware.
Unfortunately, it’s not the amount of free space you provide to the network that matters more, but the amount of sealed data. While accessing the FIL protocol does not require massive processing power, sealing data on a hard drive does.
The sealing can be done by harnessing power from a CPU or a GPU hardware. However, throwing a piece of specialized equipment in the mix makes it faster, allowing miners to seal more data in a day. In return, they also get more rewards.
Chinese Companies are also speculating on Filecoin
But it does not stop at mining. Close to 50 cryptocurrency exchanges in the Southeastern Asian country, including Biki Exchange and MXC Exchange, have FIL futures served with Tether (USDT) on their menu. Note however that this is only an IOU, as the token hasn’t actually been released yet.
Cryptocurrency data aggregator platforms like CoinMarketCap, Feixiaohao, recorded roughly $100 million in trading volume in 24 hours. The price of Filecoin futures, however, has been fluctuating from $11 to $28 to $18 within days.
Some firms dealing in cloud contracts, e.g., Mars Finance, project a 300 percent annual return for FIL miners without providing the amount of FIL tokens each terabyte of contracted space can bring.
Conclusion
Although the mainnet and the rules governing storage mining are yet to be released, the Chinese community has long gravitated towards Filecoin. Some of the reasons behind this craze can be because of China’s uneven domestic investment landscape that has alienated middle-class individuals looking for attractive investment opportunities.
Also, China’s rigid stand on capital controls has led Chinese investors to seek reputable cryptocurrency or blockchain-based projects that can facilitate financial interaction with the rest of the world. Filecoin’s association with leading venture capital firms makes it attractive to the Chinese community. Also, its storage mining tag makes it simple for retail miners and investors.
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.
