Our DeFi experts demystify and explain decentralized finance, how it works, and how to capitalize on its growth potential.
What Is TradFi
TradFi, short for traditional finance, refers to the mainstream financial system that consists of retail banks, commercial banks, investment banks, other financial institutions, and fintech companies. A few popular examples of TradFi institutions are Goldman Sachs, JP Morgan, Morgan Stanley, Bank of America, PayPal, and Wise. They are mostly brick-and-mortar organizations that offer banking and financial services which have been around for years. Although most TradFi providers have digitized their operations and services, they are characterized by a high degree of centralization, government regulations, compliance, KYC, and high barriers to entry. As a new wave of non-traditional finance emerges, it’s important to define TradFi and understand how it stands apart. How Is TradFi Regulated? TradFi is regulated by the government and the central bank in most countries. TradFi institutions have to comply with the rules and regulations mandated by the authorities. Depending on the sector and scale of business, the tax requirements vary. It is also mandatory for TradFi institutions to submit audit reports annually. While the red tape is often too stringent for new players to enter, it is also efficient in nurturing the growth of the economy in the desired course. This is given that the policymakers know what they’re doing. For example, the government wants to empower women in rural areas. As a means, the central bank can ask banks to offer loans to rural women at low-interest rates. The regulations help curb money laundering, corruption, and terrorism, among other illicit activities. How TradFi compares to other Finance DeFi vs. TradFi DeFi (decentralized finance) refers to the peer-to-peer financial infrastructure built on blockchains. DeFi uses a distributed ledger system to verify and authorize transactions, removing middlemen like banks and governments from the picture. Let’s take a quick look at the key differences between the two: In DeFi, a blockchain protocol or a community issues money. In TradFi, the central bank issues money.In DeFi, smart contracts authorize the transaction of money between two parties. In TradFi, banks facilitate the transactions. Anybody can give/get DeFi loans as long as they fulfill the collateralization requirements. Banks offer traditional sources of finance after checking the applicant’s financial statements and credit score. You can start investing on DeFi platforms in a few steps. With digitization, TradFi investing has opened up to a large section of people as well. But it still requires KYC and documentation. CeFi vs. TradFi CeFi (centralized finance) merges the yield benefits of DeFi with the user experience and security of TradFi. It offers opportunities to invest in cryptocurrencies and digital assets using crypto-based accounts that are similar to traditional savings accounts. However, the APYs vary significantly. On CeFi platforms, you can borrow money against your crypto holdings, just like how you would avail a collateral-backed loan from a bank. Unlike TradFi, this requires little to no paperwork. While TradFi deposits are sometimes eligible for government-backed insurance, that is not the case with CeFi deposits. Being a relatively new sector, it is riskier. Traditional Finance vs. Behavioral Finance Behavioral finance studies the psychological influences and biases behind the behavior of investors, financial practitioners, and other market participants. Traditional Finance and Entrepreneurial Finance Entrepreneurial finance consists of the resource allocation for new ventures, addressing some of the key challenges faced by entrepreneurs like fundraising and valuation. What Role Does TradFi Have In Cryptocurrency? Industries have to keep pace with the latest technology to prove themselves relevant in the long run. Blockchain and cryptocurrencies mark today’s biggest financial revolution. TradFi organizations and platforms, including banks, will have no choice but to adopt cryptocurrencies eventually, bringing them to the mainstream. Since TradFi is under the watch of the government, this will pave the way for the positive regulation of the crypto industry. In key sectors like insurance and lending, they can work together, blending innovation, accountability, and speed. Benefits of TradFi Only businesses with licenses and accreditation can provide TradFi services. In the event they lapse, customers can raise complaints and get compensation. The red tape makes it difficult for scammers and fraudulent participants to get in. TradFi cooperates with the government to track illegal spending and investments. In DeFi, this will be hard as transactions are anonymous. Governments can implement developmental policies by joining hands with TradFi institutions. TradFi has its set of limitations. The excess regulations and government intervention hamper growth and innovation in the industry. It also prevents a large section of people from accessing financial services. In the coming years, TradFi, blockchain technology, and cryptocurrencies will hopefully find a common ground to build an advanced financial infrastructure feasible for all.
Decentralized financeHow to Invest in DeFi Pulse Index (DPI) In 2023The world of decentralized finance (DeFi) has been growing at a rapid pace over the last few years. This is because DeFi offers many features and benefits over TradFi (traditional finance), making it attractive to investors and users in the space. However, with so many DeFi projects appearing, how can you know which one to invest in? This is exactly what the DeFi Pulse Index (DPI) is—a way to simultaneously invest in the best DeFi projects, effectively offering broad exposure to the entire DeFi market in a single token. You can think of it as the S&P 500, but for projects in the decentralized finance space. So, how can you invest in the DeFi space through DPI? Read to find out. » Learn more about TradFi vs. DeFi and their differences and similarities The Simplest Way to Buy DPI in 2023 1. Research Crypto Exchanges First things first, you need to find a crypto exchange where you can buy DPI. Finding a crypto exchange that offers the DeFi Pulse Index as an asset is not difficult, but finding a reliable one is the tricky part. Make sure to do your due diligence and research the different exchanges available to make sure that they offer what you're looking for in terms of security, fees, user experience, etc. Some of the most popular exchanges that have DPI include KuCoin, Uniswap, and SushiSwap. 2. Create an Account on an Exchange Once you have researched and chosen the crypto exchange that you want to use, it's time to create an account. The account creation process typically involves providing some personal information such as your name, email address, and other contact details. Keep in mind that, nowadays, the majority of CEXs (centralized exchanges) require a KYC (Know Your Customer) process to finish the registration process. This means that you'd have to upload pictures of personal documents like an ID card or a passport. On the other hand, you can stick to DEXs (decentralized exchanges) like Uniswap where none of this is required. » Read more about DEX vs. CEX and which is better 3. Purchase DeFi Pulse Index Once your account is set up and approved, you're ready to purchase DPI. To do this, simply navigate to the trading page on the exchange and select the pair you'd like to buy (e.g., ETH/USDT). Next, enter how much DPI you'd like to purchase and click “Buy”—it's that simple. Now, all you have to do is wait for your purchase to go through and for the DPI tokens to be credited to your account. With that, you now own DPI and are effectively part of the DeFi Pulse Index. Should You Invest in DPI in 2023? Although 2022 was quite a rocky year for crypto (DeFi included), chances are, most analytics and forecasts predict that 2023 will be much better for the industry as a whole. As of December 2022, DPI currently trades at around $70, with an all-time high of $656 reached in May 2021. So, if the DeFi space can recuperate in 2023 and DPI manages to reach its all-time high again, you're looking at a potential 800% increase in the value of your DPI tokens. So, buying DPI while the tokens are at a relatively low price might be a smart investment in the long term. Nevertheless, it's worth mentioning that the macroeconomic climate of the markets is still unclear, so a full recovery might not happen in 2023. Other risks associated with investing in DPI include: The tight correlation between the price of DPI and Ethereum might lead to limited diversification. Occasionally low liquidity, causing difficulties in closing/opening positions. High volatility, as is the case with the majority of crypto projects out there. » Continue reading about DeFi Pulse Index and its pros and cons Final Words In summary, the DeFi Pulse Index (DPI) is the best way to gain broad exposure to the entire DeFi space in a single token. As long as you do your research and choose an exchange that offers DPI tokens, investing in it should be relatively straightforward. Additionally, if the DeFi space can manage to climb back up in 2023, investing in DPI can be a great way to experience some solid profits. With that being said, always do your own research and make sure to analyze the current market conditions before making any investment decisions. Good luck!
Decentralized financeIs It Worth It to Buy Cardano (ADA) In 2023?Some call Cardano the "Ethereum-killer" because it is one of Ethereum's most visible competitors in the cryptocurrency market. It distinguishes itself as being highly decentralized and scalable, with low transaction fees. Bitcoin and other cryptocurrencies currently can't scale well, but Cardano can already process more transactions than Bitcoin. However, it still has some technical issues that will take significant time and technological development to address before it can become a major player in the market. In addition, Cardano lacks the widespread adoption and media attention of other cryptocurrencies, such as Bitcoin and Ethereum. Briefly put, Cardano is a popular cryptocurrency, and it has a lot of potential. Cardano (ADA) Overview Cardano is a blockchain platform created by Ethereum co-founder Charles Hoskinson in 2015 and officially released to the market in 2017. Its purpose was to provide developers with a premier destination for creating smart contracts and decentralized applications. One of Cardano's key innovations is its consensus protocol called Ouroboros. This proof-of-stake algorithm aims to provide better efficiency and security than other blockchains. Among Cardano's strengths is its ability to scale without compromising decentralization, which lies at the heart of the cryptocurrency movement. » Which is better? Proof of work vs. proof of stake Buy or Sell? Cardano (ADA) Price Prediction for the Next Year Early investors in Cardano (circa 2017 to 2018) would have paid as low as $0.04 and $1.18 per coin. And while Cardano may have been highly volatile since its launch, there have been many times when it gave massive returns to those who invested early on. Also, despite the price volatility, Cardano has progressed technically and improved its operations. In 2021, for example, Cardano introduced smart contracts, leading to an increase in adoption. It has, however, taken a hit recently amid rising interest rates, economic unrest, and widespread global inflation. But this is to be expected as other financial markets are also experiencing similar problems. The question, then, is: How is Cardano expected to fare in 2023? In 2022 alone, the coin saw its value decrease by more than 50%. However, analysts remain optimistic about Cardano in the future. Most predictions suggest that as the broader cryptocurrency market enters a bullish phase in 2023, Cardano will likewise enter the year with steady gains and likely end the year anywhere between $1.50 and $2. Analysts also project that Cardano could trade up to $10 by the end of 2025, provided the demand for it continues to grow. As for buying or selling, it largely depends on one's risk tolerance and investment goals. If you're looking to invest in Cardano long-term, now may be a good time to buy, as prices are relatively low. However, if you're looking for short-term returns, waiting for a market recovery before reinvesting would make more sense. What Affects ADA Price Increase? Despite the price predictions released by analysts, it's important to note that such prices remain speculative. In general, many factors may affect the value of Cardano in 2023. These include: Strong market sentimentRenewed interest in ADAWidespread market recoveryMainstream adoption of cryptocurrencies and blockchain technologiesAny regulatory developments related to cryptocurrency or blockchain technologyTechnological improvements and innovations to the ADA platform itself Is Cardano (ADA) a Good Investment, According to Experts? Thanks to its strong fundamentals and overall usability, Cardano is a project with great potential in the blockchain space. And given that the crypto market is poised to enter a new bullish phase in 2023, now may be a good time to invest in ADA. Investing in Cardano is a wise decision if you are bullish about the crypto and blockchain markets in general. If you already own Ethereum, then investing in Cardano will create a hedge that will more likely than not result in net gains. That said, it's important to remember that cryptocurrencies are speculative instruments and should only be used as part of a well-diversified portfolio. Also, despite what some claim, experts are still skeptical about the whole "Ethereum killer" concept — and this could also apply to Cardano. While Cardano may become a key player in the blockchain world, it is unlikely to surpass Ethereum. Not very soon, at least. Key Takeaways To help you better understand Cardano's price movements, let's take a look at its price history over the years: Cardano entered the market in October 2017 at $0.025On December 2017, Cardano made a new high of $1.18On December 2018, Cardano dropped to $0.04 following the crypto bear marketCardano reached an all-time high of $2.96 in September 2021With markets crashing globally, Cardano dropped to $0.31 in November 2022 Final Words Cardano's price has experienced some ups and downs over the years. However, analysts remain optimistic about its long-term prospects as markets recover and more people adopt cryptocurrencies and blockchain technologies. Whether you're looking to invest in ADA for the short or long term, it's important to do your due diligence and consider all the risks that come with investing in cryptocurrencies. But if you’re willing to take on some risk and stay up-to-date on the latest market trends, Cardano remains a good investment option, especially for those looking for potential returns in 2023 and beyond.
Dapps7 Best Risk-Free Decentralized Exchanges in 2023The rise of DeFi (decentralized finance) over the last few years has been incredible. Emerging in 2018, the DeFi space is currently worth around $50 billion, which shows its astronomic increase in popularity. Namely, the rise of DeFi is primarily thanks to the benefits it offers over TradFi (traditional finance). So, with the rise of DeFi, more decentralized exchanges (DEXs) have also appeared. Namely, a decentralized exchange is a platform that allows you to buy, sell, and trade cryptos without any intermediary. This is different than centralized exchanges (CEXs), which have some form of authority governing them. Now, with so many teams creating a crypto exchange, how do you know which one to choose? Read to learn about the best decentralized exchange apps you can use. What Is a Decentralized Exchange App? A decentralized exchange app is an interface that connects you, the user, to the DEX's network. Without an app, you'd have a difficult time working with the protocol behind the DEX, as you'd have to write complex lines of code and open smart contracts yourself. With a DEX app, however, you can just connect your existing wallet and enjoy the benefits of DeFi. This isn't the case with centralized exchanges. At a CEX, you'd have to register, fill in all of your personal information, and wait for your approval. This is one of the main differences between DEX vs. CEX. Moreover, buying crypto on a decentralized exchange is just as easy as buying it at a CEX. It's also worth mentioning that the rise of such projects in the DeFi space has also led to the creation of platforms with new and interesting features. For example, you can now use a decentralized stock exchange like Uniswap to trade directly with other users. Now that we've covered the basics, let's go over the best decentralized exchange apps for 2023. » Confused about which kind of crypto wallet you need? Learn about the difference between hot and cold wallets. 1. 1inch Launched in May 2019 on the Ethereum blockchain, 1inch is a DEX aggregator that will always search for the best rates for your market swaps and trades. Of course, this doesn't come without a cost, as 1inch will charge a small fee for every action you take, though it's still a lot cheaper than opening positions with worse rates. Moreover, the platform is packed with useful features, like earning through liquidity pools and farms, aggregating, trading, and even bridging (i.e. connecting to other blockchains). So, who should use 1inch? We think that 1inch is well-suited for all types of crypto users, but beginners might find it easier to use a different one with a simpler interface. Still, it's an overall amazing platform that offers nearly everything you can expect in a DEX app. Pros One of the best rates on the marketNo withdrawal or deposit feesAllows for complex order typesWide range of tokens to choose from Cons Might be difficult for absolute beginners » Want to learn more? Read our 1inch Exchange review. 2. Uniswap Uniswap is one of the biggest decentralized exchanges on the market, and the reasons behind its popularity are not difficult to see. Namely, this platform offers an all-in-one solution for DeFi, including buys, sells, swaps, and liquidity pools. Even though it doesn't offer complex features like stop limits and buy orders, it's still more than enough for any beginner. Moreover, Uniswap is incredibly easy to use, and any beginner will have an incredibly easy time navigating through it. However, keep in mind that the fees at Uniswap might be slightly higher than other DeFi apps, but they're still on the low end. Pros Liquidity pools with high-interest returns. Incredibly beginner-friendly. Has more than enough features for beginners. Cons Might have slightly higher fees than other platforms. 3. dYdX dYdX is a decentralized exchange app and lending platform that allows you to buy, sell, and trade cryptos. However, unlike the other platforms on this list, dYdX has a noticeable feature it stands out for - it offers up to 5x leverage on trades, which can be incredibly useful if you'd like to magnify your profits. So, if you're looking for an app where you can margin trade crypto, then dYdX should be your go-to. Additionally, the platform is also known for its low fees, as they only charge a 0.1% taker fee and nothing for maker trades. dYdX is also available on both iOS and Android devices, which makes it one of the most accessible decentralized exchanges on the market. However, we wouldn't recommend it to beginners, as you would need to have at least some experience in DeFi to properly use it. Pros Low fees. Allows trading with leverage. Offers liquidity pools where you can earn interest. Is available on mobile devices. Cons Only 3 assets are supported for margin trading and swaps. Can be difficult for beginners. 4. PancakeSwap PancakeSwap is one of the most popular decentralized exchanges on the Binance Smart Chain. The platform was launched in September 2020 and has been growing in popularity ever since. Just like 1inch, PancakeSwap is an automated market maker, which means that it uses pools to provide users with the best rates. In addition to pools, the platform also offers NFTs, staking, and yield farming, which allows users to earn outside of their trading. PancakeSwap also has a very low trading fee of 0.2%, which is lower than the majority of DEXs out there. Unfortunately, the platform is only available on the Binance Smart Chain, so you would need to have a BSC-compatible wallet to use it. This means that you cannot work with ERC20 tokens like DOGE or USDC. Pros Offers staking, yield farming, and NFTs. Higher returns than most decentralized exchanges. Wide range of crypto assets. Cons ERC20 tokens like DOGE and USDC are not available, as the platform is built on BSC. 5. Kyber Swap Kyber Swap is a decentralized exchange app that's known for its low fees and wide range of assets. The platform supports over 100 different cryptos, which is more than what most DEXs have to offer. Moreover, it also allows users to buy crypto with a credit or debit card, which is not something you see often. Furthermore, Kyber Swap also has a very user-friendly interface, which makes it perfect for beginners. The only downside is that it's not as secure as the other platforms out there, as KyberSwap suffered a $265,000 exploit in September 2022, which is why many users have left it. Pros Supports more than 100 assets. Is beginner-friendly. One of the only DEXs that feature credit card payments. Cons Not as secure as other platforms. 6. Bancor Bancor is a decentralized exchange that's available on both the Ethereum and EOS blockchains. The platform is one of the older ones out there, as it was launched back in June 2017. Even though it's older than the other exchanges on this list, Bancor is still one of the most popular DEXs out there. The platform is known for its low fees, as they only charge a 0.1% fee on all trades. Moreover, Bancor is also very user-friendly, which makes it perfect for beginners. However, one large downside of the platform is that it doesn't have the best liquidity, which can be an issue when trading. Pros Low fees. Is user-friendly. One of the oldest and most reliable DEXs out there. Cons Occasionally has low liquidity, which might be a problem for closing positions. 7. SushiSwap SushiSwap is a decentralized exchange that was launched in September 2020. The platform is very similar to Uniswap, as it's an automated market maker that uses pools to provide users with good rates for swaps. However, SushiSwap has a bit more feature-rich than Uniswap, as it has liquidity farms, NFTs, and complex order types. Despite all of these features, SushiSwap isn't better than Uniswap. This is because the platform has higher gas fees than its competitors and is harder to navigate. So, we would only recommend it to those who are experienced in DeFi and are ready to pay a slightly higher fee for the features. Pros Offers a wide variety of ERC20 tokens. Has a lot of features, including NFTs and complex order types. Offers high-return staking. Cons Can be difficult for beginners. Has higher fees than most DEX apps. We know that picking the right DEX is hard, which is why we did most of the hard work for you by covering seven of the best DEX apps out there. Still, remember that the crypto space is constantly changing, so make sure to do your own research before putting your money on any platform. In our opinion, the majority of people will have the best experience with Uniswap and 1inch for ERC20, and PancakeSwap for BSC. Nevertheless, remember to only invest what you're willing to lose, as the crypto markets can be very volatile.
Daos7 Best Crypto DAO Projects to Join in 2023The DeFi space (decentralized finance) is growing at a rapid pace, despite the recent downtrend of the crypto market. Namely, decentralized finance offers many features that TradFi (traditional finance) doesn't have, including the free borrowing and lending of assets, as well as no intermediaries to oversee the process. Thanks to this rise of DeFi and the features it offers, many DAO projects (decentralized autonomous organizations) decided to take their ideas to the market and offer them to the people. Most of these DAO projects have unique features that we haven't seen in finance thus far, making them attractive to both end-users and investors. Now, without further ado, let's go over the best DAO projects you can join in 2023 and see what they're about. » Wondering if a DAO is profitable? Find out how DAOs make money 1. Aave (AAVE) Aave is a DeFi lending protocol founded in November 2017 that's running on the Ethereum blockchain. Namely, Aave is a DAO project that's managed entirely by its community, meaning that everyone can participate in governing the project. Aave can do this thanks to the distributed network of computers managing it, meaning that it's completely run by the code behind it. So, why should you invest in Aave? Well, Aave is one of the most reputable and reliable DAO projects in the DeFi space. It also offers features like lending and borrowing a wide variety of classic cryptocurrencies and stablecoins, including USDT, ETH, and DAI. Of course, the APY differs from asset to asset, though you can expect to have some of the best and most reliable returns on the market with Aave. If you're looking to invest in Aave, then you can buy AAVE tokens, which are the native cryptocurrency of the ecosystem. 2. MakerDAO (MKR) MakerDAO is one of the oldest decentralized autonomous organizations, being built in 2014 on the Ethereum blockchain. Since it's been successfully running for nearly a decade now, it's not too difficult to see why people trust the project for its features and services. Additionally, the history of MakerDAO is quite reputable and stable, so the future is likely to continue in that direction too. Namely, MakerDAO offers borrowing, staking, and lending entirely through the use of smart contracts, allowing you to earn passive income in a reliable way. However, unlike the majority of DAO projects out there, MakerDAO also has its own stablecoin called DAI. And unlike many "stablecoins," DAI has actually proven to be stable, keeping its $1 peg since its launch in December 2017. So, if you'd like to invest in MakerDAO, you can buy MKR coins, which are used to govern and manage the project. 3. Tamadoge (TAMA) Being one of the most popular projects in the P2E space (Play to Earn), Tamadoge is a metaverse game where its users can "breed" virtual dogs as NFTs while competing for crypto prizes. Even though the whole memecoin space started off as a joke, this project quickly gained a lot of traction among the P2E community, gathering the attention of investors too. Regarding the inner workings of the system, it's a protocol that's launched on the Ethereum blockchain and is governed by its native cryptocurrency TAMA. As you can already guess, the TAMA currency will be used to buy and sell NFTs on the network as well as user interaction. As of late 2022, the coin has a price of $0.024, with an all-time high of $0.20. So, if the coin returns to its ATH again, investors are looking at a potential 10x return on their investment. 4. DeFi Swap (DEFC) DeFi Swap is a DEX (decentralized exchange) that's focused on providing users with the best possible liquidity for their assets. Unlike the other DAO projects which are running on Ethereum, this one is powered by the Binance Smart Chain (BSC) and offers its services through the use of smart contracts. It's worth mentioning that DeFi Swap is one of the most popular exchanges running on BSC, making it a potentially good investment. What makes DeFi Swap attractive to investors and users is the fact that it offers one of the lowest trading fees on the market, having them at only 0.03%. Furthermore, DeFi Swap is also a DAO project, meaning that it's community-driven and decentralized. So, if you're looking to invest in this project, consider buying some DEFC (DeFi Coin). 5. Aragon (ANT) Unlike the other projects on this list that offer traditional DeFi services, Aragon is a decentralized organization that's focused on providing users with the tools they need to manage their own DAO. In simple terms, Aragon is DAO that's here to help you create and manage your own DAO. Namely, it offers a wide variety of features, including project management, voting, and even fundraising. The project was built on the Ethereum blockchain and is managed by its own native cryptocurrency ANT. As you can already guess, the ANT tokens are a quite solid investment, and they're primarily used to fuel the network. On the other hand, they can also be staked by the users in order to earn a passive income. Currently, one ANT token is worth $1.86, with an all-time high of $14.12. So, if the coin returns to its ATH again, investors are looking at a potential 650% return on their investment. 6. Compound (COMP) Compound is a DeFi protocol that allows users to earn interest on their cryptocurrency holdings. The project was launched in 2018 on the Ethereum blockchain and has been growing steadily ever since. In terms of features, Compound offers a wide range of them, including borrowing, lending, and even staking. However, what makes Compound unique is the fact that it uses complex algorithms to calculate interest rates, making sure that you always get the best one. Since Compound is a decentralized autonomous organization, anyone can contribute to the project and help it grow. Regarding the native cryptocurrency of the Compound protocol called COMP, it is primarily used to fuel the network and to power the smart contracts. COMP tokens are also a quite solid investment, as they offer a wide range of benefits to their holders, like better yearly returns and voting. 7. SushiSwap (SUSHI) SushiSwap is a DEX (decentralized exchange) that was built as an improvement of the popular Uniswap protocol. The project was launched in 2020 on the BSC blockchain and has been growing steadily ever since. In terms of features, SushiSwap offers a wide range of them, including borrowing, lending, staking, and even farming. However, what makes SushiSwap unique is the fact that it uses a different approach to liquidity provision, which results in lower fees for the users. What makes SushiSwap attractive to investors and users is the fact that it offers one of the lowest trading fees on the market, having them at only 0.03%. Furthermore, SushiSwap is also a DAO project, meaning that it's community-driven and decentralized. So, if you're looking to invest in this project, consider buying some SUSHI tokens. Final Words While there are a lot of DAO projects to choose from on the market, knowing how to choose the best one goes a long way. In summary, we would recommend choosing between the following three: AAVE - Best Overall SushiSwap - Best Eco-Friendly Due to Low FeesAragon - Best Potential In The Future » Ready to get started with DAOs? Learn all about how to start a DAO
DaosDAO Taxation: Everything Crypto Investors Need to KnowDecentralized autonomous organization (DAO) taxation is a rather unique subject to tackle. While the IRS requires taxes on cryptocurrency to be filed and paid, there are no clear rules yet concerning DAOs. Many cryptocurrency projects have adopted the DAO framework in recent years, causing quite a few investors to fumble around with their taxes. How exactly should one report taxes on their DAO tokens, anyway? In this guide, we'll go into a thorough but easy-to-understand discussion of how DAOs are taxed and what investors should look out for in terms of taxable events. » Haven't started a DAO yet? Learn more with our step-by-step guide Criteria for Taxation of DAO Payments Even though a DAO doesn't have a physical presence, it can be seen as an entity for tax purposes. In the United States, for instance, tax regulations stipulate that contractual arrangements engaged in trade, business, venture, or financial operation that affords them profits, may create a separate entity. Since a DAO is created by investors who vote on investment proposals, contribute funds for investment, and share the profits, it may be considered a separate tax entity. However, DAOs not created for profit, such as one formed to raise funds to buy a copy of the U.S. Constitution, are not considered taxable entities. Now, if a DAO has been established as its own tax entity, the next question is: What category does this DAO fall into for taxation purposes? Let’s take a look: Corporations vs. Partnerships The primary types of business classifications are corporations and partnerships. If a business entity has two or more members who share unlimited liability, the default classification is a partnership. In contrast, a corporation is a separate legal entity with shareholders not personally liable for their business' debts or obligations. Domestic vs. Foreign Another criterion to consider is if the DAO is domestic or foreign. The term "domestic" means created or established in the U.S. or under U.S. law, while "foreign" refers to any partnership or corporation outside the U.S. Note that these classifications are just potential factors that may affect how DAOs are taxed in the future. Currently, only the overarching tax rules on cryptocurrency are strictly implemented by the IRS. These include taxable gains and losses that may come from: Selling a crypto asset for fiat moneyExchanging cryptocurrency for goods, services, or propertyTrading one crypto asset for another type of crypto assetReceiving cryptocurrency as payment for goods or servicesObtaining a new crypto asset resulting from a hard forkAcquiring a new crypto asset from mining or stakingReceiving cryptocurrency from an airdrop » Learn all about the advantages and disadvantages of DAOs How DAO Payments Are Taxed The IRS has yet to release clear guidance on how DAOs will be taxed. However, they will likely be taxed much like traditional corporations moving forward — with a few adjustments. The United States already has a legal precedent for this. In 2017, during a discussion of the DAOs governance tokens by the SEC, it was ruled that these types of tokens were offered by a "virtual organization" and were, therefore, subject to securities law. Currently, however, there is no straightforward way to report cryptocurrency taxes on the profits that DAOs make from fees, investment strategies, or other sources. That said, if a DAO's blockchain sends you crypto in exchange for goods or services, those assets may be taxed as income in accordance with IRS rules. For example, if a DAO paid an artist in crypto, they would need to file taxes for that income in the state and/or country where they performed the work. Short & Long-Term Capital Gains Tax When you sell a long-term crypto asset for more money than what you originally paid, the surplus is called a capital gain. How much tax you'll pay on your capital gain depends on the duration of your ownership of the asset before you sell it. Capital gains are classified as either long-term or short-term and taxed differently. Profits you make off of selling an asset are taxable, especially if you day trade online. Short-term gains taxes are equal to income taxes and are paid if the crypto assets were owned for 365 days or less. If you sell an asset you've held for longer than a year, any profit is considered a long-term capital gain. The tax rate on these gains is 0%, 15%, or 20%, depending on your total income. Tax Treatment of Governance Tokens & NFTs If you receive governance tokens or non-fungible tokens (NFTs) from a DAO launch (or as an incentive/reward), you'll need to file them under your crypto taxes as regular income. In addition, if you sell your governance tokens or NFTs in the future, any profit you make will be subject to crypto capital gains tax. Royalties or commissions from NFT resales are also considered income – but there are no clear guidelines on taxing this at the moment. Technically, reselling an NFT would be a taxable sale of property, much like other cryptocurrencies considered by the tax code as property. Will DAOs Be Taxed in the Future? The jury is still out on how DAOs will be taxed in the future, particularly when it comes to identifying who will be responsible for the entity’s taxes and where those taxes are to be paid. In the U.S., pass-through entity tax has been suggested as a possible model for taxing DAOs in the future. Pass-through entities are business organizations in which the owners and/or members file the 1040s and pay individual income taxes on their share of any profits. This includes partnerships (including some limited liability companies ) and S-corporations. Although DAOs are not primarily for profit, should they be taxed as pass-through entities, members are liable to report the DAO's earnings from investments, fees, etc., while filing their personal income tax returns even if the said income hadn't been distributed yet. » Discover how to find new DAO projects Final Words Despite the lack of clear tax guidelines for DAOs, you must file your cryptocurrency taxes accurately. Whether you are a member of a DAO or simply invested in one, it's crucial to know how digital currencies are taxed and what reporting requirements apply. Careful planning and record-keeping can help you stay on top of your crypto taxes and minimize your tax burden. » Ready to get started with DAOs? Check out the best crypto DAO Projects to invest in
Decentralized financeHow to Buy a CryptoPunk NFT Before It's Too Late—And Why You ShouldIf you want to buy an NFT but are worried that you might make a bad investment, buying a CryptoPunk is a bet that’s as safe as it gets. Namely, CryptoPunks is one of the world's most popular digital collections of NFTs, containing well over 10,000 unique 8-bit characters, each one a punk with a different hairstyle, outfit, and attitude. While it is true that NFTs are slowly losing steam as of late, it doesn't mean you shouldn't get your hands on one. Here's how to buy a CryptoPunk NFT before they're all gone—a plus to find out why you should get one while you still can. » New to NFTs? Discover how to mint an NFT as a beginner Everything You Need to Know About CryptoPunks CryptoPunks are digital collectibles created back in 2017 by Larva Labs. When it was originally developed, the project was one of the first examples of an NFT (Non-Fungible Token) and was intended to showcase the potential of blockchain technology. Now, many years later, the NFT space has grown to a massive degree. Since their inception, CryptoPunks has become one of the world's most popular digital collections. In fact, they've been featured in major publications like The New York Times, Wall Street Journal, and Forbes, and have been traded for many millions of dollars. Not too long ago, CryptoPunk #5822 was sold for 8000 ETH or $23.7 million, which is the most expensive NFT of the collection. The impressive numbers don’t end here—in fact, the total value of all CryptoPunks transactions exceeds $2 billion as of late 2022. Despite the recent slowdown in the NFT market, CryptoPunks are still highly sought-after by collectors and investors. The reasoning behind this is quite simple—CryptoPunks is one of the most unique and recognizable forms of art on the market, and they're also backed by a strong community. If you're thinking about buying a CryptoPunk, the currently weakened crypto market makes it a perfect time to do so. Here's everything you need to know about purchasing one of these valuable NFTs. » Need more info? Check out how NFTs are used in DeFi How to Buy CryptoPunks NFTs 1. Get Yourself a Crypto Wallet The first step is to get a cryptocurrency wallet that supports NFTs. On the internet, you can find plenty of websites that will allow you to create your own crypto wallet for free and use it at your disposal. Usually, the best option to go for is a DeFi hot wallet like MetaMask. » Confused about which kind of crypto wallet you need? Learn about the difference between hot and cold wallets 2. Fill Up Your Wallet With Crypto In order to connect your wallet to the NFT marketplace, you need to have some Ether (ETH) in it. As you probably already know, ETH is the native cryptocurrency of the Ethereum network and it's required to fuel transactions. You can buy ETH on a cryptocurrency exchange like Coinbase or Binance, or in many cases, you can also buy it from your wallet (though with a larger fee). 3. Connect Your Wallet to a Marketplace. The next step is to find a marketplace that sells CryptoPunks. The most popular one is the Ethereum-based marketplace called OpenSea. On it, you can find a wide variety of digital assets, including CryptoPunks. Once you have ETH in your wallet, go to the "Connect Wallet" section on OpenSea and select the wallet you're using. 4. Find a CryptoPunk You Like and Make an Offer After your wallet is connected to the marketplace, it's time to start browsing through the available CryptoPunks. If you’re at a platform like OpenSea, you can use the filters to find the perfect NFT art for you. When you see one you like, click on it and make an offer. The owner of the CryptoPunk will have 24 hours to accept or reject your offer. Regarding making the offer, keep in mind that CryptoPunks are highly sought-after, so the competition going on there might be fierce. 5. Store the NFT in Your Wallet and Enjoy the Benefits If your offer is accepted, the CryptoPunk will be transferred to your wallet and you can start utilizing the benefits it offers, like being a part of the community. If you couldn’t process the transaction, you'll get your ETH back and you can try your luck again with a different CryptoPunk. Why You Should Invest in CryptoPunks NFTs As we mentioned previously, the current market trend makes investing in CryptoPunks a great idea. With their rarity, collectability, and strong community backing, they are highly probable to be a wise investment in the long run. Here are a few reasons why you should consider investing in CryptoPunks. They're rare: With only 10,000 in existence, CryptoPunks are quite rare. As time goes on and more people become interested in collecting them—and their rarity is only expected to increase, making them a great investment for those looking to purchase rare art. They're collectible: In addition to being rare, CryptoPunks are also easily collectible. Their unique punk aesthetic makes them stand out from other NFTs, and their popularity means that they have strong community backing which makes them a wise investment for those looking to add to their digital collection. They have a strong community: As mentioned above, CryptoPunks have strong community backing. This is evident on social media platforms like Twitter, where there are multiple accounts devoted to sharing news and information about the collection. The community has also been known to participate in airdrops and giveaways, which helps to increase the value of the collection. » Wondering if NFTs are a good investment? Learn more about investing in NFTs
Daos5 Ways DAO Smart Contracts Benefit NFTsThe main reason NFTs are a hot topic in the crypto world for a while now is their elegant use of smart contracts. Namely, it is precisely smart contracts that give NFTs their special and unique ability to be stored and traded on blockchains like Ethereum without the need for mediation. On the other hand, smart contracts are also the culprits behind the recent rise of DAOs (decentralized autonomous organizations). DAOs allow for the effective use of smart contracts that allows groups of people to cooperate on a blockchain project. However, unlike traditional organizations, DAOs are not controlled by a central authority but rather by the code of their smart contracts, which makes them much more efficient and transparent than traditional organizations. Thus, smart contracts are precisely the bridge that connects NFTs and DAOs. In this article, we will discuss how the intelligent use of smart contracts can allow DAOs to support the growth of NFTs. » New to smart contracts? Here's everything you need to know about creating a DAO smart contract 1. DAOs Are Communities for NFTs One of the biggest benefits that DAOs can provide to NFTs is that they can effectively create and maintain a community for the NFT holders. As decentralized organizations are run by their members, the NFT holders within a DAO can join forces with other like-minded individuals to help grow and develop the ecosystem collectively. For example, an NFT holder could join a DAO that is focused on developing new applications for NFTs. This would allow them to be a part of the community, listen to new & innovative ideas, and expand their areas of interest, which ultimately helps shape the future of NFTs and the blockchain. Moreover, the DAO will receive valuable feedback from an actual holder, which will prove to be invaluably beneficial in the long term. 2. DAOs Can Help Manage and Fund NFT Projects Another great thing about DAOs is that they can help manage and fund all kinds of projects, including NFT projects. Namely, DAO members do this by voting on proposals and allocating funds to the projects that they believe in, which is a much more efficient way of funding projects than the traditional method of going through VCs or other investors. In addition to this, DAOs can also help manage NFT projects by providing a clear & precise structure for them. This is something that can be especially beneficial for larger projects that have many moving parts. Having a DAO in place can help keep everything organized and running smoothly. 3. DAOs Help Protect the Ownership of NFTs and Ensure That NFTs Are Used for Their Intended Purpose A benefit of using DAOs with NFTs that's worth mentioning is that they can help protect the ownership of the NFTs and ensure that everything is running smoothly. This is because DAOs can hold the NFTs in a trustless manner, which means that the owners do not have to worry about losing their NFTs to hacks or scams. Since DAOs use smart contracts to store and manage NFTs, even if the DAO itself is hacked, the NFTs will still be safe. Simultaneously, smart contracts also give DAOs the ability to enforce the rules that are written into their smart contracts. So, if an NFT is meant to be used for a specific purpose, the DAO can make sure that it is only traded or sold for that purpose. Let's take a look at a simple example. If an NFT is meant to represent a piece of digital art, the DAO can make sure that it is only used for that purpose and not sold for other uses such as gambling or speculation. This is all thanks to smart contracts and the notion that “code is law”. 4. DAOs Can Help Increase the Liquidity of NFTs and Reduce the Cost of Transactions DAOs can trade or sell NFTs on behalf of their members (if it's needed). This is a benefit that doesn’t apply only to the members of that DAO, but to the entire blockchain ecosystem because it increases the liquidity of the NFTs. For example, if an NFT owner wants to sell their NFT but cannot find a buyer, the DAO can help by selling the NFT on their behalf. This allows NFT owners to liquidity their assets without having to go through exchanges and all the hassles that come with them. Of course, this will be entirely processed by a smart contract, so you can rest assured that all parties will be fairly treated. In this regard, DAOs can pool together resources and negotiate better deals with providers such as wallets and exchanges, which will ultimately reduce transaction costs. For example, if a group of potential investors wants to buy an NFT but doesn’t have enough ETH to cover the transaction fees, the DAO can help by pooling together the resources and paying the transaction fees on behalf of the group. 5. DAOs Are Helpful With the Marketing and Promotion of NFTs Finally, DAOs can also help with the marketing and promotion of NFTs. By using their resources, DAOs can reach larger audiences and spread the word about new and upcoming NFT projects. For example, a DAO could use its resources to create a website or social media campaign to promote an NFT project. This would help raise awareness about the project and get more people interested in it. Final Words As you can see, DAOs and NFTs go hand-in-hand. The truth is that almost every area of the NFT ecosystem can be improved with the help of DAOs, including: The management, funding, and promotion of NFT projects. The protection of the ownership of NFTs. The NFT liquidity and reduction of transaction costs. » Ready to get started with DAOs? Check out 7 best crypto DAO projects to join in 2023
DaosThe Importance of DAO Treasuries for Crypto TradingThere are quite a few ways to make money in the world of cryptocurrency, like staking, lending, and trading. Still, for the majority of people, trading is one of the most popular, exciting, and profitable ways to earn a profit on your crypto holdings. However, on the other hand, trading can also be quite risky, so traders do their best to use different types of techniques (like hedging) in order to minimize the risk. Another, not so commonly known technique used for minimizing trading risk is a DAO treasury (Decentralized Autonomous Organization). Namely, a DAO treasury is a pool of funds that are used to support operations and investments within a DAO. Today’s article will cover the importance and the benefits of using a DAO treasury for crypto trading, so stick around if you want to learn more. » Thinking of starting a DAO? Consider the advantages and disadvantages of DAOs The Role of Treasury Management in Crypto Trading In finance, the term “treasury management” refers to the process of managing an organization's financial resources to achieve its financial objectives. This includes activities like handling cash flow, managing risk, and making investments. Just like traditional organizations, the same types of treasuries apply to DAOs. So, it goes without saying that treasury management is essential, both in traditional finance and when dealing with cryptocurrencies. Crypto traders, in particular, depend on treasury management to ensure that their portfolio is properly diversified and that their funds are being used in the most efficient way possible. While there is no surefire way to guarantee a 100% success rate in the world of crypto trading, proper treasury management can certainly help tilt the odds in your favor, minimize the risk and maximize the chance of profit. Keep in mind that crypto trading can be a volatile and risky business. Without the proper guidance, it's all too easy to make bad decisions that can cost you dearly. That's why having a DAO treasury is so important. Namely, a DAO treasury is a fund that is used to support the development of a project or to pay for expenses related to the project. The fund is managed by a group of people who are elected by the community, which ensures that the fund is used wisely and in the best interests of the project. Having a DAO treasury gives crypto traders a much-needed sense of security and stability. It allows them to trade with confidence knowing that there is a team of experienced professionals looking out for the project. Without a DAO treasury, traders would be taking on unnecessary risks. DAO Treasury Management There are three main components to treasury management that all DAOs should consider when it comes to managing their funds: Diversification: The process of being invested in a variety of different assets in order to minimize risk. This is one of the most important aspects of treasury management. By investing in a variety of assets, DAOs can protect themselves from loss if the value of one asset falls. Multisignature wallets: MultiSig wallets give DAOs the ability to require multiple signatures before funds can be spent. In addition to providing an extra layer of security, they ensure everyone agrees with how the funds are being spent and protect against autocratic transactions. Reporting: Treasury management also involves keeping track of your finances and reporting on your progress. This is important for both transparency and accountability. By regularly reporting on the state of the treasury, DAO members can keep track of how the fund is being used and make sure that it is being used wisely. What Modern DAO Treasuries Look Like In the early days, most DAOs simply held all of their funds in a single Ethereum wallet and relied on the community to keep track of spending. However, as DAOs have grown more complex, they have begun to implement more sophisticated treasury management systems. Today, the vast majority of DAOs use a MultiSig wallet to safeguard funds and require multiple individuals to sign off on expenditures. Some DAOs also use dedicated software platforms to track spending and monitor budgeting. In addition, DAOs have started to experiment with new ways of managing their funds. For example, some DAOs have begun using decentralized exchanges to trade assets in an automated manner and manage risk. Others have started to use synthetic assets to hedge against volatility. All in all, modern DAOs have diversified portfolios and use a variety of different tools to manage their funds. However, they all have one thing in common—they rely on good treasury management to ensure that their projects are well-funded and that their funds are being used in the most efficient way possible. » Looking for a DAO project to invest in? Learn how to find new DAO projects Final Words Treasury management is a critical part of any successful DAO. By diversifying their portfolios and using sophisticated tools to track spending, DAOs can minimize the risk of financial losses and ensure that their projects are well-funded. Moreover, they can make sure that: Projects are run in a transparent and accountable manner. All stakeholders have a say in how the DAO's funds are spent. The DAO is able to adapt to changing market conditions. In the end, treasury management is all about giving DAOs the resources they need to thrive. By carefully managing their finances, DAOs can ensure that they have the funds they need to grow and prosper. » Wondering what you need to get started? Find out all about how to start a DAO
Decentralized finance7 Best Smart Contract Crypto Audit Firms to Consider in 2023As blockchain technology continues to evolve and becomes more widely adopted, it's important for businesses and individuals to ensure their smart contracts are functioning properly, especially since smart contracts are legally binding. This is where crypto audit firms come in. Choosing a reputable and trustworthy smart contract audit firm is paramount, as working with them will require you to divulge important information about your project and its code. Here are some of the top smart contract audit firms to consider in 2023. » Need to brush up on smart contracts? Discover how smart contracts work and the types of smart contracts 1. Hacken A leading cybersecurity consulting firm based in Estonia, Hacken was founded in 2017 by cybersecurity experts, specialists, and white hat hackers. The company focuses on blockchain security and development, making them a great choice for smart contract audits. Hacken specializes in finding and eliminating security weaknesses in various technological products. Smart contracts take a prime spot in this list, with Hacken boasting a team of experienced professionals who thoroughly analyze and test smart contract code. Hacken employs the technical skills of thousands of pro hackers globally, providing the best security audits as well as penetration testing, KYC background checks, and vulnerability bounty programs. 2. SlowMist SlowMist is a China-based blockchain security firm that offers smart contract auditing services as well as other blockchain cybersecurity solutions. The SlowMist team boasts over a decade of experience in first-line cybersecurity offensives, as well as defensive combat. Focused on blockchain ecological security, SlowMist's engineers have achieved world-class safety engineering, making their firm a top choice for smart contract audits. Among their most in-demand cybersecurity services are security audits, defense deployments, threat information, and bug bounties. They also offer consulting services, helping clients to properly manage security risks and prevent future attacks. 3. OpenZeppelin Because of their particular focus on auditing blockchain security and open-source tools, OpenZeppelin has become one of the most popular smart contract auditing companies. It offers a comprehensive set of tools that aim to help developers bolster their projects, as well as a secure infrastructure for decentralized application (dApp) development on Ethereum and other blockchain platforms. Owing to their deep understanding of building dApps, OpenZeppelin's founders are regularly able to release new and helpful tools for developers, such as Etherenaut, a gamified testing tool for Ethereum smart contracts. The company recently launched a new app that focuses on preventing hacks in the DeFi sector, further solidifying its expertise in smart contract security. » Going back to the basics: Learn how to create a blockchain smart contract 4. CertiK CertiK is a smart contract auditing firm with many well-known clients, such as PancakeSwap, the largest automated market maker (AMM) in the Binance Smart Chain network. CertiK is also the trusted auditor of many Binance Smart Chain Labs projects. On top of auditing smart contracts, CertiK also gives each project they review a safety rating, allowing investors to make more informed decisions. This rating is based on the project's code vulnerabilities and potential attack vectors, making it a valuable tool for not just smart contract audits, but also for overall project analysis. CertiK prides itself in its team of highly experienced experts, and a highly-efficient auditing process that involves having two different audit teams working independently on each project to ensure result accuracy and integrity. 5. ConsenSys Diligence ConsenSys Diligence is one of the most well-known security auditing firms in the blockchain industry, but their focus areas and company objectives differ from other dApp auditors. Its primary focus is on developing and growing Ethereum smart contracts, applications, and projects. The company dedicates all its resources and technologies to enhancing security, trust, and scalability for Ethereum-based projects. ConsenSys Diligence offers comprehensive smart contract audits as well as security consulting for dApps and blockchain projects. The company has also released several open-source and closed-source products, such as MythX, an automated security scanner for Ethereum smart contract audits. 6. QuillAudits QuillAudits, designed by QuillHash Technologies, is a secure smart-contracts audit platform that uses both automated and manual tools to check for security vulnerabilities. QuillAudits also conducts penetration tests in addition to smart contract audits, ensuring your project's code and infrastructure are secure. Other services include blockchain protocol audits and dApp security audits, where mathematically rigorous methods are used to verify the correctness of smart contract code. 7. Chainsulting A German blockchain security and development firm, Chainsulting is one of the most reputable smart contract auditors globally. Its team of security researchers has extensive experience and performed blockchain and smart contract audits for market giants such as Algorand, Solana, Ethereum, and Binance Smart Chain, among others. Chainsulting specializes in smart contract code verification, ensuring that code follows best practices and industry standards, as well as penetration testing to simulate real-world attacks on smart contracts. Chainsulting also offers a range of blockchain-related services, including blockchain technology development, smart contracts operations, dApp architecture, and more. How to Choose the Right Smart Contract Auditor for You Choosing the right smart contract auditor for your project depends on a few factors, including the blockchain platform your project is built on, the specific services you need, and your budget. It's important to do thorough research on the various auditing firms and their specialties to ensure that your project receives the best and most comprehensive security audit. Ultimately, the best auditor for your project is one that has a strong track record, experience with the specific blockchain platform you're using, and the ability to provide comprehensive security services. » Are your smart contracts vulnerable? Consider these examples of smart contract vulnerabilities