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Our DeFi experts demystify and explain decentralized finance, how it works, and how to capitalize on its growth potential.
How the Fei Protocol Is Changing the Way Stablecoins Work

General Discussions About Decentralized Finance

How the Fei Protocol Is Changing the Way Stablecoins Work
As an emerging financial technology, decentralized finance (DeFi) has come a long way since the first projects in 2015. One of the strongest pillars of DeFi is stablecoins, allowing crypto enthusiasts to participate in many protocols without worrying at all about volatility. Now there are many popular stablecoins, like USDT and USDC, but they have one main problem—centralization. They're run by centralized organizations that control the issuing of tokens manually, going against one of the core principles of blockchain technology. This is the main inspiration for the Fei protocol—create a decentralized project on the blockchain that will change the way stablecoins work. The protocol was launched back in March 2021 and has come a very long way since. Now, let's dive deeper into how the protocol works and what it promises to solve in the future. How Does the Fei Protocol Work? The backbone of the Fei protocol is the FEI token, which is an ERC20 stablecoin, meaning it runs on the Ethereum network. The team behind the project wanted to create a market that trades in parallel to the ETH/USD pair—which is the ETH/FEI pair. As you can already guess, the FEI token has a price pegged to $1, allowing users to send and receive payments with near-zero volatility, just like other stablecoins. However, unlike other stablecoins, the FEI token isn't centralized and doesn't have an organization managing the issuing of tokens. So, how does FEI manage to keep its price at $1? Well, the Fei protocol uses two key ideas: Protocol Controlled Value (PCV) and direct incentives. Protocol Controlled Value (PCV) With the PCV model, the Fei protocol can accumulate funds in a similar manner to companies with cash reserves. With this model, the token's value is controlled by the protocol, as the model's name suggests. This means that once the protocol has accumulated funds, it can use them to organize liquidity mining programs, provide liquidity to new markets, and buy back FEI tokens from another market. So, how does the PCV model differ from the way stablecoins work traditionally? The main difference is that with the PCV model, the protocol can use these funds without waiting for deposit confirmations—as soon as the protocol has the necessary amount of Ethereum, it can start using the funds. Let's say that the FEI token has a sharp drop in value. If the price of FEI falls below $1, the protocol will automatically buy back tokens from the market until the price is stabilized, keeping the 1:1 peg to USD. Direct Incentives With the direct incentives model, the protocol offers users different benefits for holding or using FEI. For example, if a user wants to get a loan in FEI, they can put up some collateral in ETH. However, with the FEI protocol, users can get a significantly lower interest rate than what they would typically get from a centralized organization (like with Tether-USDT). This is possible because the protocol can offer these incentives directly without going through middlemen. Moreover, the direct incentives model also allows the protocol to offer different benefits to liquidity providers. If a user provides liquidity to the ETH/FEI market on a decentralized exchange (DEX) like UniSwap, they'll be able to earn a portion of the transaction fees generated by that market, paid in FEI. This is a great way to encourage users to provide liquidity and help keep the price of FEI stable. Explaining the Governance Model Behind the Fei Protocol Since the Fei protocol is fully decentralized, the governance of the protocol is in the hands of the users. This is done with the protocol's governance token named TRIBE. As you can imagine, the holders of the token get to vote on essential matters in the protocol, and the more tokens you have, the more impactful your vote will be. Even if you don't want to participate in the governance of the protocol, you can still benefit from having the TRIBE token. For example, you can contribute to the FEI/TRIBE liquidity pool and earn a certain percentage every time someone swaps one token for the other. Moreover, the token might be a good investment, because as of September 2022, it's trading at around $0.27 per token. If the token manages to reach its previous all-time high of $1.78, you're looking at a 550% profit. Conclusion Overall, the Fei protocol seems to be a promising project. The team behind it has made considerable efforts to launch the project and bring it up to the level it is today, so it might have a bright future. However, the team must continue to work hard to prove to investors that it's worthwhile. Due to the tragic collapse of some stablecoins and DeFi projects, investors might be discouraged from investing in projects like the Fei protocol. Nevertheless, the team has delivered outstanding results so far, and we should expect more or less the same in the near future. So, if you're looking for a stablecoin that you can use in your everyday life or want to invest in a project with a lot of potential, the Fei protocol might be a good option for you.
Explaining UXD—A Fully Decentralized Stablecoin

General Discussions About Decentralized Finance

Explaining UXD—A Fully Decentralized Stablecoin
Stablecoins have been the backbone of the DeFi space for the last few years. Simply put, they offer way too many benefits to be ignored, as they use the price stability of fiat cash and blockchain technology to implement the functionalities. Of course, paying in Bitcoin is great too, but the high volatility sometimes scares people—especially if big payments are in question. So, what if there was a coin that would have Bitcoin's benefits and be as stable in price as the dollar? That's where UXD comes in: a fully decentralized stablecoin built on the Solana Network. UXD tackles the stablecoin trilemma and seems to do it quite well, being well-balanced on decentralization, stability, and capital efficiency simultaneously. How Does UXD Work? Each stablecoin has a different mechanism in place to keep its price "stable", but usually, stablecoins maintain their price by having fiat reserves, using collateral debt positions (CDPs), or implementing complex algorithms. Popular stablecoins like USDT and USDC have fiat backing to keep their price, but this solution requires the support of a centralized partner, like a bank or a cash fund, which beats the entire purpose of decentralization. What Makes the UXD Protocol Different? UXD works with both collateralized positions and algorithms. The protocol is relatively new, launched in 2020 on the Solana blockchain, and has been consistently stable since its launch. If you want to mint UXD, you'd have to deposit crypto as collateral on the Solana blockchain, and you'll receive UXD in return. Let's say that Solana is currently worth $30. By depositing 3 SOL, you'll get 90 UXD, which is quite similar to how the DAI stablecoin works on the Ethereum blockchain. However, the only problem with DAI is that its price stability is inherently dependent on the strength of Ethereum. To solve this, the UXD protocol uses an algorithm behind the scenes to prevent the stablecoin from losing its value in case Solana drops in price. So, when you create the smart contract to receive UXD with Solana, the protocol holds your deposited 3 SOL as collateral while simultaneously opening a short position. If the price of Solana falls by 10% for the duration of your smart contract, you'll receive 10% more SOL when you decide to return the UXD to the protocol. But if the price jumps by 10%, you'll receive 10% less SOL than what you deposited, ensuring you always get the precise dollar amount that you deposited. Professionally, this is called a delta neutral position. How UXD Handles the Stablecoin Trilemma UXD tackles the stablecoin trilemma of stability, decentralization, and efficiency quite well. So, let's see how it addresses each of these points: Stability UXD is a stablecoin that has never had a price drop bigger than 2%, and if you think 2% is too much for a stablecoin, think again. Tether, which is the most popular and widely used stablecoin, has had a price drop of 7% in the past, which has never happened to UXD. As a stablecoin, UXD uses both collateralized debt positions and algorithms, meaning that you're guaranteed to get exactly $1 back for every UXD you've minted. So, no matter what happens to Solana's price, you'll always have your dollar value returned to you. Decentralization UXD is a decentralized stablecoin, therefore it doesn't require any centralized entity to hold reserves or manage the price. Furthermore, the protocol is completely coherent and built on the Solana blockchain, which is one of the most decentralized blockchains in the world. Since there's no centralized entity involved, there's no risk of the stablecoin being shut down or censored. For example, USDC has centralized entities like banks keeping the cash reserves. In difficult times, the entities holding the reserves behind USDC always have the right to stop funding the project, causing the stablecoin to crash instantaneously. Since there's no fiat backing behind UXD, there's no possibility of something like this happening. Capital Efficiency Being capital efficient means you always get exactly the right value for your money. For example, if you try to get some DAI, you'll see that you need more than $1 in collateral to get 1 DAI. In most cases, you'll need to have around a $1,500 value in ETH to get 1,000 DAI, making it quite capitally inefficient. This isn't the case with UXD. Thanks to the algorithm working in the protocol's background, you'll always get $1 for every UXD you've minted—even if the price of Solana drops. In fact, most analytics say that the capital efficiency of UXD is on the same level as Tether while avoiding the inherent risks of price instability and too much centralization. Conclusion All in all, we believe that UXD is a great project that has an incredibly promising future. The team behind it has possibly built one of the most versatile and efficient stablecoins ever. In our opinion, UXD handles all three aspects of the stablecoin trilemma, ensuring stability, decentralization, and capital efficiency without compromising security. Most experts would say that UXD doesn't have any inherent flaws, but there's only one small problem with it—it's built on the Solana Network. Even though Solana is an excellent cryptocurrency project that is both efficient and secure, the network has had around ten severe outages in 2022 alone. So, if Solana has an outage, you won't be able to use UXD while the network is down.
Aragon—The First Decentralized "Digital Jurisdiction"

General Discussions About Decentralized Finance

Aragon—The First Decentralized "Digital Jurisdiction"
Year by year, blockchain technology has been gaining popularity thanks to the abundance of features it offers. Blockchain technology allows small teams, communities, and even big corporations to create decentralized autonomous organizations (DAOs) that govern a project without even needing central leadership. Nowadays, the majority of DAOs run in the decentralized finance (DeFi) space, allowing the industry to evolve in the direction the users would want it to—making it fully decentralized. The Aragon Network and DAO DAOs offer many benefits over a traditional governance model. With a DAO, a project has a clear roadmap and a path for the future, dictating how upgrades and decisions are made. However, creating and managing a DAO isn't easy, which is where a solution like Aragon comes in. Aragon is a relatively new project, being founded in 2016, and its primary goal is to be a "digital jurisdiction" for both new and old DAOs. The project is based on the Ethereum network and looks quite promising so far, but we have to undercover the details behind it. So now, with the basics out of the way, let's dive deeper into the Aragon Project and what it encompasses. Explaining The Aragon Network The starting idea behind the Aragon Project is quite innovative and seeks to solve a lot of problems for modern decentralized organizations. For example, if you're an entrepreneur in the real world looking to create a start-up, you'd have to go through a legal process that will allow you to create your business. This is exactly what Aragon does, but instead of doing it in the real world, it does so on the blockchain. The platform provides well-defined contracts that help new DAOs set the pillars of their organization, as well as improve their scalability and functionality. Moreover, the network has unique features that are similar to the real world, including a decentralized legal "court" and a system for solving disputes. The system put in place is highly detailed, consisting of three different levels, judges that vote and resolve disputes, and much more. How The Aragon Network Works The backbone of the Aragon platform is open-source software that runs on the Ethereum blockchain, and the platform even has a native token under the label ANT. With the help of the ANT token (which serves as a token for both utility and governance), developers can build their own DAOs on top of the network and deploy new applications. It's worth mentioning that the Aragon Network hasn't become popular only because of it being the first "digital jurisdiction". Instead, its popularity is because of the abundance of features it offers to its new DAOs, including a dedicated investment model for new contributors, a system for raising funds, and a way for new users to join the DAO. Governance with the ANT Token Since the Aragon Network is run by a DAO itself, it means that anyone holding ANT tokens can participate in deciding how the protocol is run. Namely, every holder has a right to vote on how the network will be governed, and the final decision will be ruled by the Aragon Court in case there's a problem in the voting process. The interesting thing about ANT tokens is that they're not only used for governance but also have a utility function. They can be staked to help secure the network or even used to pay fees for the transactions. The Aragon Network is constantly evolving, and with each passing day, it becomes more accessible and user-friendly. The Main Features of The Aragon Network In addition to governance, the Aragon Network has two main features that new DAOs get to use, and they both have a dedicated function. Aragon Client The Aragon Client allows developers and entrepreneurs to launch a DAO by making the process much easier for them. Namely, it offers them dedicated templates and guides them along the way, making the cost of creating a new DAO and managing it much lower. Aragon Court The team behind the Aragon Network has taken the world's first "digital jurisdiction" quite seriously. The protocol has a judicial system that's used when DAOs have complex problems that cannot be solved with smart contracts. So, the Aragon Court allows stakers of the ANT token to participate in the justice system by voting on disputes and discussing "legal" matters. Conclusion All in all, we think that the Aragon Network seems to be quite a promising project. Putting it simply, the Aragon Network seeks to solve truly unique issues that no other projects have even attempted to solve in the past. If the blockchain (especially the DeFi space) continues to rise at the same pace, then there's a high chance that the Aragon Network will become much more popular and widely used. It's worth mentioning that the project is still considered rather new, and we don't know if it has inherent security issues in the protocol. Still, it hasn't had any security breaches or hacks, so there's a high chance that the project will prosper in the future.
Discovering Fei Protocol Through the Valuation Model

General Discussions About Decentralized Finance

Discovering Fei Protocol Through the Valuation Model
Fei Protocol is a project that seeks to provide a solution to the problems associated with stablecoins. It’s a reserve-backed stablecoin that’s pegged to the US dollar. Being the pioneer for Protocol Controlled Value (PCV), Fei has the capability to take ownership of the collateral it receives for minting FEI. Additionally, its development team is now more empowered to realize its goal of creating a truly decentralized, highly scalable stablecoin with Fei V2. Fei V2 Release The start was rocky—not long after its launch, the peg was at a very low $0.71. This showed the team that the first peg mechanism wasn't sustainable. Following that, Fei V2 was released in October 2021. In Fei V2, $1 of FEI can be exchanged for $1 of the assets that the Fei protocol controls. Additionally, it's based on two tenets that Fei considers crucial: stability and incentive alignment. This valuation model offers TRIBE at a price range of $0.41 to $1.00. May 1, 2022 is used as the valuation date to account for the UST de-peg. TRIBE The Fei protocol debuted as a DAO and is managed by its governance token, TRIBE. Fei doesn't necessitate governance, however, TRIBE holders can vote on certain items: Adjusting the PCV allocationModifying protocol parameters like the target reserve ratio The genesis group, community, core team, investors, staking incentives, and grants were allocated 1 billion TRIBE tokens with linear 4-year vesting for investors and 5 years back-weighted vesting for the core team. Current Stablecoin Landscape Centralized stablecoins, such as Tether (USDT) and Circle’s USDC, have gained fame by eliminating price volatility and enabling instant transactions. For decentralized stablecoins, there’s TrueUSD and MakerDAO's DAI. Stablecoin models have their strengths and drawbacks: Stablecoins backed 1:1 by fiat, like USDT and USDC, are centralized, making users opt for more transparent solutions, which creates a regulatory concern.Stablecoins backed by crypto, like DAI and LUSD, are capital inefficient. The stablecoin supply is limited by the demand for ETH-backed loans.Basis Cash and ESD are dependent on supply incentives. If the stablecoin trades below its peg, discounted bonds can be traded for it, which fails to preserve the peg. New Improvements Fei protocol uses its ecosystem to deliver DAO services. Significant initiatives are: Liquidity-as-a-service: Fei protocol and Ondo collaborated to provide projects the option to deposit their token into an Ondo liquidity vault, and Fei would match that deposit with an equivalent quantity of FEI.Tribe Turbo: With compatible tokens as collateral, this service enables users to borrow freshly minted FEI at 0% interest.xTRIBE: xTRIBE immediately converts staked TRIBE into xTRIBE for governance participation when TRIBE is locked. Valuation Fei creates funds via liquidity provision, PCV, and FEI yields. Since the Tribe DAO governs the protocol, staking rewards and buybacks accrue to TRIBE holders. These circumstances allow for conventional token valuation. Discounted Cash Flow It's important to consider the impact of PCV growth on the value. The more liquidity it can provide and the higher yield it can generate, the greater its value. Following a 10-year forecast period and factoring for cash flow with a terminal value, there are three scenarios for PCV increase. The terminal rate is set at 5% to allow for scenario analysis and the calculation of TRIBE's probability-weighted valuation. 1. Bear PCV grows at an annual rate declining from 50% to 10%. This implies a slowdown of the DeFi market or Fei losing market share from its competitors. 2. Base PCV's annual growth rate decreases from 75% to 10%. The base case implies PCV will continue on its current trajectory and drop from its annualized average increase of 78% as the project matures. This average excludes the launch's remarkable spike when major institutional investors joined. 3. Bull PCV's annual growth rate drops from 100% to 10%. To reach these growth levels, Fei must become the top decentralized stablecoin. The protocol's balance sheet also includes FEI. PCF can provide liquidity and yield. To minimize complicating the model, collateralization ratio is used. It represents the amount individuals would get if all UCF is redeemed pro-rata for PCV. As the protocol scales, the ratio is anticipated to hit 100%. By fixing PCF over UCF to 65%, the protocol's FEI can be computed. Rari Capital Merger The merger of Fei Protocol and Rari Capital means that we need to take into account the money market's fee income. Rari Capital has a 10% platform fee on interest earned by Fuse depositors, which is $2.36 million per year. Given all this data, we arrive at a valuation of $359.2 million, or $0.79 for each TRIBE in circulation. Comparable Analysis Six comparable stablecoin projects were chosen for this analysis. Frax Protocol: Frax Protocol is a stablecoin protocol that uses a combination of collateral and algorithms to stabilize the price. It also uses a dual-token system.USD Coin: As the second-largest fiat-collateralized stablecoin, Fei aspires to acquire USDC's market share as a decentralized alternative.Olympus DAO: Despite the fact that it is a non-pegged stablecoin protocol, it's a competitor to Fei.Reflexer: This ETH-backed, non-pegged stablecoin system introduces less volatile reflex indices.Maker DAO: This is the largest decentralized stablecoin protocol, where users can mint Dai with ETH loans. Fei’s goal is to outperform Maker DAO.Liquity: Over-collateralized stablecoin protocol that lets users borrow LUSD with ETH. Minimum collateralization is 110%. The two valuation multiples show that Fei might be undervalued given that it trades below the average price-to-sales and price-to-earnings of 24.21x and 21.28x. We estimate an implied valuation for TRIBE of between $0.41 and $0.58 overall. Liquidation Value Users can exchange FEI for PCV reserves 1:1, so taking the user-circulating FEI out of the PCV reserve provides the liquidation value of TRIBE. At the time of valuation, protocol equity was valued at $363 million, or $0.80 per TRIBE token. Due to PCV reserve volatility, liquidation value is determined over two months, varying from $0.67 to $1.05. The TRIBE cryptocurrency is consistently trading below its liquidation value. Results Given all this, results show a price range of $0.41 to $1.05 for TRIBE. Fei's vision of creating a decentralized ecosystem for stablecoins is fundamentally sound, and if it can deliver on its vision, it will be a true disruptor in the industry.
Explaining Lido Through Liquid Staking Protocol

General Discussions About Decentralized Finance

Explaining Lido Through Liquid Staking Protocol
The Lido decentralized autonomous organization (DAO) runs the user-friendly, decentralized Lido platform. It allows users to stake without locking assets or managing infrastructure while participating in on-chain operations like lending. Stakers get a liquid, tokenized derivative called Lido-staked assets (stAssets) in exchange for their investment. This represents their interest in the yield and underlying stake pool. These stAssets can be exchanged or used as collateral on major DeFi protocols. Features of Lido's Operation The Lido DAO governs the five Lido liquid staking protocols: Ethereum, Solana, Kusama, Polygon, and Polkadot. Despite design variances, their liquid staking mechanisms are analogous. Users (stakers) and node operators are the two primary players (validators). Staking smart contracts, tokenized staking derivatives (stAssets), and external DeFi integrations make up the main parts of the protocol (e.g., Curve). Node Operators Node operators do the actual staking. They're evaluated by the Lido Node Operator Sub-Governance Group (LNOSG) based on the following factors: ReputationPast performanceSecurity, reliability, and novelty of their setup Once LNOSG examines an applicant pool, it provides a list of suggested node operators to the Lido DAO for voting. These operators cannot access user funds. Instead, they utilize a public validation key to validate transactions and receive a cut of the staking rewards produced from delegated funds. Staking Contracts Users delegate stake to node operators through Lido’s smart contracts. The three main smart contracts are the NodeOperatorsRegistry, the staking pool, and the LidoOracle. NodeOperatorsRegistry: This contract maintains the list of approved node operators. Staking pool: As the protocol’s central smart contract, users interact with it by depositing or withdrawing their crypto assets and minting or burning stAssets. Deposits are distributed uniformly or round-robin to node operators using their addresses and validation keys. The staking pool also distributes fees to the Lido DAO treasury and node operators. LidoOracle: Monitors staking balances. The difference between the staking yield and any slashing penalties is the net staking reward, which is tallied daily and sent to the staking pool contract. 90% of this reward goes to stAsset holders. The balance is distributed equally between node operators and the Lido DAO treasury by minting a proportional amount of the stAssets. They show up as an increase in the stAsset either through its balance (via rebasing) or its exchange rate. Lido-staked Assets (stAssets) stAssets come in rebase form or as shares. Rebasing tokens, namely stETH, stKSM, and stDOT, are minted at a 1:1 ratio with the deposit assets. The token balance rebases daily to match the underlying stake and factor in accrued staking rewards. The rebasing happens irrespective of whether the stAsset is acquired directly from Lido, a decentralized exchange (DEX), or another holder. DeFi Integrations The Lido DAO rewards the Curve stETH:ETH pool to maintain the liquidity of stETH. LDO and CRV rewards help raise Annual Percentage Yield (APY) and draw liquidity in, letting stETH holders pay out for ETH before the unlock. A ceiling is placed, so the 1stETH never goes above 1 ETH. The Lido protocol prohibits the burning of stETH, so the exchange rate is based on the market's price discovery below the ceiling. Lending and Borrowing Lido stakers can either hold their tokens or offer a DEX low-risk liquidity. They can also increase their prospects when they start using stAssets as collateral. Aave, MakerDAO, and Solend for stETH and stSOL, respectively, are some noteworthy lending protocol integrations. Recursive borrowing is the most widely used method of increasing leverage across stAssets. LDO Token Lido DAO’s Ethereum-based ERC-20 governance token is called LDO. Its initial supply is divided as follows: 22.2% for early investors, 20% for Lido developers, 15% for future employees, and 6.5% for validators and withdrawal key signers. About 64% of the entire supply went to these groups along with a 1-year lock and a 1-year vesting period. The token generation event (TGE) was on December 17, 2020, so tokens will fully vest on December 17, 2022. 36.2% of the total token supply is held by the Lido DAO treasury. Some previously approved uses for these tokens include liquidity incentives, advisory work, sales to venture capital firms, referral programs, and funding of the Ethereum Protocol Guild. Lido's Uptake Amidst Competition In early May, Lido momentarily surpassed Curve to become the largest DeFi protocol by total value locked (TVL). Since the UST depegging, its overall TVL rank has hovered around fourth. At almost 70%, most of the new Eth2 staking deposits in May 2022 came from Lido. In total, 3.25 % of all staked ETH is on Lido. While Lido dominates more than 90% of the non-custodial, decentralized liquid staking market, it does have some strong competition: Rocket Pool Despite tripling its staked Ethereum, Rocket Pool’s market share in non-custodial liquid staking remains under 4%. Unlike Lido, which relies on carefully selected node operators, Rocket Pool allows anyone to participate in the validator set and secures staked tokens through economic incentives rather than reputation or past performance. Although the system used by Rocket Pool does encourage validation participation, scalability is difficult due to the capital inefficiency it causes. In terms of liquidity, Lido DAO spends about $4 million LDO per month to incentivize liquidity across chains and DEXs (mostly on stETH:ETH), while Rocket Pool has no liquidity spend. Binance Given its custodial nature, Binance is not a major competitor. It issues a liquid tokenized derivative (bETH), but the token has no value outside of the staker's Binance wallet, making it inferior to stETH and Rocket Pool's rETH. In terms of DeFi integration, bETH likewise lacks critical mass. Speculated Challenges Given the Lido DAO's dependency on Ethereum, a disruption in The Merge could be detrimental. Additionally, any delay in the transition date or a lack of confidence in the transition might cause the ETH:stETH discount to cease. However, if The Merge runs perfectly, Lido will become the largest proof of stake (PoS) chain. Lido's limited node operator set raises worries about centralization since the LNOSG that controls and selects node operators is an internal body. Even though there is eventually a Lido DAO vote on the finalized list, the LDO token has concentrated insider ownership as well. A 6-of-11 multisig holds the credentials for withdrawals for ETH staked before July 15, 2021. Once withdrawals are authorized, if 5 or more signatories lose their keys or go rogue, 600,000 ETH (15% of Lido ETH2 investment) is at risk of being locked. Future Goals The Lido DAO team plans on addressing potential challenges and aims to transfer stake to the 0x01 (upgradable smart contract) withdrawal credentials. Additionally, Lido has outlined a strategy for eliminating the majority of the remaining trust surfaces and decentralizing stake by implementing permissionless validation and dealing with the concentration of LDO ownership. This indicates a strong intention to remain and grow trust between users. We look forward to Lido's continuing journey.
Cronos: Using Smart Contracts to Enhance Blockchains

General Discussions About Decentralized Finance

Cronos: Using Smart Contracts to Enhance Blockchains
Cronos, a new layer-1 (L1) by the Crypto.com ecosystem's smart contract-enabled chain, has arrived. Monaco, a centralized exchange precursor to Crypto.com, launched in June 2016. In 2019, Crypto.org was launched for trading, payments, and financial services products on blockchain rails. The chain used a new native token called CRO. Although the Crypto.org chain achieved product-market fit as the underlying technology for Crypto.com's mobile payment service, the absence of native smart contract capability stifled further development. To address this issue, the Crypto.org EVM chain, now referred to as the Cronos chain, was introduced in 2021. Technology Behind Cronos Cronos is the dedicated smart contract chain, while Crypto.org manages the transaction and staking activity for Crypto.com. Both use the Cosmos SDK to swiftly build a standalone blockchain framework. This pre-built capability can communicate with other Cosmos "zones". The Cosmos Inter-Blockchain Communication enables a connection between Cronos and Crypto.org (IBC). Cronos also has connections to Juno, Terra, and Akash, and will eventually add Ethereum through Gravity Bridge. To develop their own Ethereum Virtual Machine (EVM), the Cronos team partnered with Ethermint, a Cosmos SDK-built EVM module that creates a hub for chain EVMs. Cronos utilizes a modified version of Ethermint to power its blockchain and enable EVM compatibility. The Tendermint proof-of-stake (PoS) consensus serves as the foundation for Ethermint. Cronos is known as a proof-of-authority chain, because only those who have received Cronos governance token allocations are eligible to be validators. Because of Tendermint PoS, each validator's voting power is proportional to the number of Cronos governance tokens they've staked for governance and consensus. Economy Behind Tokens The Crypto.org and Cronos chains are both fueled by the Cronos (CRO) coin. On Crypto.org, it's a native CRO; on Cronos, it's CRC-20 CRO, and on Ethereum mainnet, it's ERC-20 CRO. Therefore: 1 native CRO = 1 ERC-20 CRO and 1 CRC-20 CRO Crypto.org The CRO coin is for staking, transactions, and governance. It's been utilized as a payment mechanism since the beginning. Valid proposals require 20,000 CRO and approval by one-third of the network. The proposal also needs 50% network approval to pass. If your proposal fails, the CRO tokens will have to be burned. Validators earn CRO from a combination of block rewards, commissions from users delegating cash to their pool, proposal rewards for new blocks, and transaction fees. Cronos Chain Cronos uses a dual-token model: A governance token for consensus and governance, and a transaction fee token (CRO). Validators only receive CRO from user transaction fees. There are no block bonuses. Cronos Ecosystem Cronos has over 200 apps on its blockchain and is growing its ecosystem with the Cronos Ecosystem Grants program. Cronos Labs does due diligence on grant applicants and have also hosted $500,000 Hackathons. They also intend to do an accelerator program to help companies grow. Currently, Cronos' TVL is at $2 billion, down from $4 billion in April. The ecosystem is dominated by four protocols, which control over 90% of the outstanding TVL. CRO Valuation in Perspective As far as transactions and addresses go, the Cronos chain is expanding rapidly. Crypto.org activity stats aren't as visible, thus it's unknown if that chain is growing CRO. According to the total statistics of CRO token owners (ERC-20 only), the token's total transaction volume appears to have peaked in November 2021. Advantages Through its active passport, users can connect directly to Terra and, eventually, Ethereum and other major chainsThanks to Crypto.com's amazing marketing strategy, Cronos has a strong brand recognition.It offers a 12% real yield higher than other L1s.Crypto.com boasts 50 million users, many of which are assumed to hold CRO due to the rewards mechanism.Retailers may easily access Cronos through Crypto.com. Users can effortlessly earn CRO using the Crypto.com credit card. Challenges It's extremely centralized with just 26 validators and Cronos controlling most of them.Crypto.com was hacked for $15 million Ether in January 2022. While no customer funds were compromised, and the platform has $750 million in hack insurance, it gave them bad press.It charges more than its rivals, yet it's still under $1. Cronos validators rely on transaction fees, therefore it's unlikely to drop even if the network expands.It has minimal financing when compared to rivals. Token holder's value accrual is uncertain. Future Goals Capacity Increase For the last few months, Cronos has been running their beta version of the mainnet. This version allows about 400,000 transactions per day, although it can technically handle more. On May 10, 2022 Cronos upgraded their mainnet beta to version 0.7.0 and doubled block capacity. Gravity Bridge Launch Cronos plans to deploy Gravity Bridge linking Ethereum mainnet and Cronos soon. The launch will ease integration for native Ethereum users and developers. GameFi Rollout Cronos Play will let developers use Unity and Unreal to create games. Big studios, like Revolve Games and Decentral Games, have already shown interest. DeFi Expansion With the introduction of a decentralized exchange and protocols for borrowing and lending, the ecosystem has prepared the foundation for more DeFi development. Competition Simply said, Cronos is a blockchain that outperforms Ethereum and Bitcoin in terms of speed and cost. It's also considerably more centralized. Things may change when Cronos goes for a modular arrangement. Final Thoughts Cronos has expanded quickly, placing among the top 20 in terms of market capitalization and the top 10 in terms of total value locked (TVL). Currently, it's the Cosmos ecosystem's most valuable cryptocurrency. While Cronos admittedly faces challenges, they have outlined future goals which will hopefully continue to propel them upward.
Vega Protocol: Disrupting Defi With Trading Derivatives

Defi derivatives

Vega Protocol: Disrupting Defi With Trading Derivatives
Traditional financial systems have always been dependent on central authorities, intermediaries, and third-party service providers. Therefore, financial products and services have remained at the mercy of organizations and providers with infrastructures to create, execute, and secure financial contracts. This has resulted in high barriers to entry, slow processes, and a lack of transparency. Today, the financial industry is a mix of both manually-intensive and technology-intensive processes. Needless to say, the industry is ripe for change and disruption. Concurrent with the decentralized finance (DeFi) boom of recent years, it was only a matter of time before a completely decentralized trading platform emerged. This is where Vega protocol comes in—a decentralized derivatives trading platform designed to enable the creation, execution, and settlement of derivative contracts in a trustless, permissionless, and transparent manner. What Is the Vega Protocol? In simple terms, Vega attracts and allocates market-making resources in a decentralized system, making financial products available to the general public on a more level playing field. Through Vega, everyone can have access to markets that were previously only available to a select few. Additionally, these same markets and products can be created without needing approval from a central authority, which is made possible through a derivatives scaling layer specifically for Web3 applications. Founded in 2018, Vega aims to provide a decentralized infrastructure for financial products and services that's both robust and scalable. In doing so, it hopes to create an ecosystem where anyone can securely and non-custodially trade derivative products using margin. Features of the Vega Protocol Vega is a custom-built, proof-of-stake (PoS) blockchain with built-in liquidity incentives. This translates into both traders and market-makers being paired across any financial instrument, thereby solving the challenge of attracting and allocating resources for market-making. The protocol’s network architecture is optimized for speed, particularly because trading systems require low latency and high throughput. With Vega’s consensus layer, native order books can be supported adequately and orders priced correctly. Vega boasts of 1 second block time and instant finality, with the ability to process thousands of transactions per block. The protocol's PoS bridge connects it with all major blockchains for collateral, which means that collateral can be posted in any cryptocurrency, including Bitcoin (BTC), Ether (ETH), and stablecoins. Vega is currently in a restricted mainnet, which was launched in November of 2021. How Does the Vega Protocol Work? Because market creation on the protocol is fully decentralized, community safeguards are in place to ensure the quality and viability of these markets. To list a new market on the platform, it must first pass a governance vote and have enough liquidity from market makers. Vega's markets are provably fair, which means that since everything is carried out openly on a blockchain, all activity is visible and everyone adheres to the same regulations. Vega uses decentralized ledger technology and an industry-grade API and trading user interface. The protocol utilizes a variant of the Tendermint consensus algorithm, which is a Byzantine-Fault-Tolerant (BFT) PoS algorithm. Under this system, validators are responsible for maintaining network security and ensuring that all transactions are processed in a timely manner. VEGA Token Vega's native token is called VEGA, and it's used for staking and governance. As a fully decentralized network, protocol decisions are made by the community, with VEGA token holders having voting rights. The VEGA token can be used for several purposes, including delegating to a validator, suggesting market proposals and voting on them, or suggesting and voting on governance changes that will help influence the network's overall direction. Vega allows token holders to stake and delegate their tokens even while locked, allowing for a more inclusive and decentralized governance model. As for fees, users are only charged upon successful execution of a trade. It's currently free to submit, amend, or cancel limit orders. Trading fees collected are given to validators, token holders, and liquidity providers as a way of rewarding them for helping keep the network running smoothly. What's Next? Vega’s promising features and robust architecture make it a disruptor in the world of decentralized finance. The protocol has the potential to democratize access to financial products and services as well as provide much-needed infrastructure for the industry. The team behind Vega is experienced and well-funded, with a clear vision for the project. While the platform is still in its early stages, it has great potential to grow and become a leading player in the space. That being said, the Vega Fairground testnet is currently a safe venue for users to play around with the platform's features. The testnet presently offers access to the Vega Console app and the protocol's decentralized APIs. Interested users can also try Vega's permissionless market creation and order book liquidity mining.
Lightweight Mina Protocol Aims to Deliver Powerful Punches

General Discussions About Decentralized Finance

Lightweight Mina Protocol Aims to Deliver Powerful Punches
The so-called "blockchain trilemma" has plagued the blockchain industry for some time now. First proposed by Ethereum co-founder Vitalik Buterin, the trilemma posits that it's impossible to have all three of the following features in a blockchain protocol: Scalability: The ability to process a large number of transactions per secondDecentralization: A network with many different actors participating in the consensus processSecurity: A network that is resistant to attack and fraud Many protocols focus on two of the three features at the expense of the third. For example, older blockchains like Bitcoin and Ethereum are focused on security and decentralization over scalability. But newer blockchains like Solana have vastly improved transaction throughput at the cost of decentralization (to a certain degree). How Is the Mina Protocol Different? The Mina protocol is a new generation, layer-1 blockchain protocol that seeks to strike a balance between all three features of the trilemma. Unlike other new generation blockchains that focus primarily on scalability, Mina prioritizes decentralization while also addressing the state bloat challenge. State Bloat Often a byproduct of decentralization, state bloat refers to the ever-growing size of a blockchain's state (or data) as more transactions are processed on the network. This is because each new transaction must be recorded on the blockchain for it to be considered immutable and secure. Over time, the state size of a blockchain can become so large that it becomes unwieldy for node operators and end users alike. This results in two major problems: Increases barriers to entry for new node operators as they must have the resources (storage, bandwidth, etc.) to process the entire state. Decreases decentralization as only a small number of large node operators can participate in the network. The Mina protocol is built on top of a cryptographic technique called "zero-knowledge proofs", which allows for extremely efficient verification of transactions without needing to store the entire transaction history on the blockchain. This makes Mina's blockchain very lightweight—a mere 11 kilobytes. How Does the Mina Protocol Work? The protocol's current throughput is one transaction per second (TPS), which might be considered low compared to other protocols like Solana. However, as mentioned earlier, Mina's main focus is on decentralization. Token and Supply The network's native token is called MINA, and it's used to pay transaction fees and reward consensus participation. Plans are underway for token-based governance as well, but the details have not yet been finalized. MINA's total supply is one billion tokens, with 806 million made available for staking at the time of launch. Most of these tokens were locked for sale but users did earn block rewards while staking. Over time, the remaining 194 million tokens of the initial supply will be given to the public in the form of supercharged payouts, mining bonuses, and ecosystem grants. MINA is an inflationary currency with a 12% initial inflation that will decline to 7% after four years on the mainnet. The inflation rate is fixed, but the amount that you earn from staking will change along with the staking participation rate. Even though it may appear high, inflation helps to keep the network secure by incentivizing more users to participate in staking. Consensus and Cryptography Mina's unique consensus mechanism, Ouroboros Samasika, is a slightly modified version of Cardano's original Ouroboros model. Ouroboros Samasika has the special quality of utilizing a succinct blockchain that doesn't keep track of all transactions. Therefore, the likelihood of being chosen as a block producer on Ouroboros is determined by the proportion of Mina staked by a node compared to the overall stake. The Mina protocol uses recursive cryptography to keep a secure and efficient blockchain that remains within its size allowance. While other layer-1 blockchains expand with each new block, Mina maintains a constant size by using a self-referencing series of cryptographic proofs. Mina's recursive cryptography procedure can best be understood using the analogy of one "taking a photograph" of the blockchain. Each time a new block is created, another picture of the new block is taken along with the current blockchain, limiting the size of the blockchain to one image while preserving all genesis data. zk-SNARKs Mina remains at a fixed size thanks to sophisticated cryptography called recursive zk-SNARKs, which means "zero-knowledge succinct non-interactive argument of knowledge". Essentially, zk-SNARKs are proofs of knowledge that can be verified quickly without constant back-and-forth communication between the prover and verifier. Mina's use of zk-SNARKs makes it an appealing alternative to traditional blockchains, with advantages such as increased decentralization and better privacy. What's Next? The Mina protocol may be small in size, yet it packs a powerful punch. By using recursive cryptography, Mina can maintain a blockchain that's smaller than most thumb drives—indeed the lightest blockchain in the world. However, a lot of Mina's developments are still in the works, so it remains to be seen whether Mina can indeed strike a balance between decentralization, security, and scalability. So far, the project seems to be on track, with a passionate and growing community behind it.
WAX Leading the Way in Sustainable Blockchain Technology

General Discussions About Decentralized Finance

WAX Leading the Way in Sustainable Blockchain Technology
One of the major critiques of blockchains such as Bitcoin and Ethereum is their high energy consumption. Because of the amount of processing power required to maintain the ledger and secure the network, these blockchains can use as much energy as a small country, thereby producing a significant carbon footprint. But WAX is different: it's the first blockchain designed to be carbon neutral and is focused on making sustainability part of blockchain technology. Unlike Ethereum and Bitcoin, which currently operate on a proof-of-work (PoW) system, WAX works as a proof-of-stake (PoS) system and therefore consumes less energy. PoS shifts validation from miners to token holders, who stake their coins to validate transactions and secure the network. WAX is committed to being a sustainable and eco-friendly blockchain with ethical practices. So far, WAX has offset all of the carbon emissions from its network by investing in renewable energy projects around the world, such as: Lifestraw Carbon for Water, KenyaIndia Wind, IndiaGyapa Efficient Stoves, GhanaXinyang Landfill Gas Recovery Project, China What Is WAX and How Does It Work? WAX, or the World Asset eXchange protocol, is a blockchain designed to facilitate digital asset trades. WAX uses a delegated proof-of-stake (dPoS) consensus mechanism, allowing it to provide high throughput while maintaining a high degree of decentralization—and a very small carbon footprint. WAX was founded in 2017 by OPSkins marketplace co-creators, William Quigley and Jonathan Yantis. It was initially meant to provide a scalable, user-friendly solution that allowed fiat onboarding and app integration. Its user base has since expanded, with the latest tallies showing 6 million users. Under the dPoS consensus mechanism, users can stake their native tokens to vote for proportionate amounts of delegates, called WAX Guilds. These representatives are responsible for validating new blocks. Upon validation, blocks are confirmed by the rest of the delegates. What Are the Applications of WAX? WAX can be used for a variety of applications, the most popular one being gaming. The WAX network is also home to many non-fungible token (NFT) marketplaces, such as AtomicHub, where users can buy, sell, or trade digital assets. GameFi The Binance Chain and Ethereum are the most popular platforms for GameFi (gaming and DeFi) applications. However, the number of GameFi apps on WAX continues to increase exponentially as it offers a user-friendly platform with fast transaction times. This is because WAX's underlying focus on NFTs and gaming allow for a more seamless user experience. Additionally, WAX's dPoS consensus mechanism provides the high throughput needed to support resource-intensive gaming applications. Some of the most popular play-to-earn gaming applications built on WAX, for example, are Alien Worlds and Farmers World. NFTs WAX was created with NFT management in mind, with a specific focus on scalability. For creators, this meant creating a user experience similar to the Web2 gaming platforms they were used to. They created an NFT standard that would work for a variety of future use cases, such as augmented and virtual reality, as well as a gaming wallet with fiat onboarding. The use of Guilds also allows for a more decentralized governance model that can still support a high degree of transactions per second. The popular NFT marketplace Atomic Hub is built on top of WAX. So far, it has hosted 104,000 NFT collections that include digital assets and play-to-earn tokens. In addition, trading NFTs on WAX isn't financially burdensome as the network doesn't charge gas fees. This means that all sorts of peer-to-peer trades are virtually free. vIRL NFTs Virtual in real life (vIRL) NFTs separate NFT ownership from the digital world by bringing it into the physical world. This is done by minting an NFT backed by a physical item, such as a piece of art or a limited-edition collectible. The vIRL standard was created by WAX and allows for the tokenization of physical items. This means any physical item can be turned into an NFT and traded on the WAX network. So far, there have been a variety of vIRLs minted on WAX, such as art, tickets to concerts, and even sneakers. The WAX team has tokenized unique physical assets with NFTs by partnering with Topps, Atari, Funko, and other companies. The end-user has the right to ownership of a physical thing like a pair of shoes, a set of tickets, or headphones if they buy the NFT. As a result, vIRL NFTs eliminate the expense of packing, shipping, and delivery, further reducing the carbon emissions typically associated with these added steps. Final Thoughts WAX is a relatively young blockchain with a unique vision. Its focus on NFTs and gaming, and its unique features like Guilds and vIRLs make it a blockchain to watch in the coming years. With its team continuing to build its roadmap, WAX has the potential to become a major player in the digital asset space.