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 finance4 Best Crypto Cold Wallets for Storage in 2023If you've been reading about the cryptocurrency space for some time now, you're aware that hacks and cyberattacks have been happening left and right. Every month, at least one online exchange, protocol, or blockchain bridge is hacked, and thousands of crypto users lose their assets. Even Binance, the biggest online exchange, is not safe from such attacks—on October 6, 2022, it had over $500 million stolen from a hack. So, with so much at stake, it's wise to invest in a crypto DeFi wallet like a cold wallet. Cold wallets are physical devices that hold your digital assets offline. Unlike hot wallets, they require no internet connection to work. Therefore, they aren't prone to cyberattacks or hacks, and the security of the assets is entirely in the hands of the owner. However, there are different types of cold wallets and you might not know which one to choose. Let's go over the best ones and uncover their features. » Unclear on how crypto wallets work? Explore this explanation of crypto wallets Ledger Nano X Price: $150 Coins supported: Over 5,000 different coins, including BTC, ETH, DOGE, BNB, etc. Built-in exchange: No Made by Ledger company, the Ledger Nano X is widely thought to be the best crypto cold wallet on the market. It has an integration with the Ledger Live app, allowing you to trade and swap over 5,000 cryptos from your mobile device. Among the different types of crypto wallets, this one offers almost everything a beginner can expect. With the purchase box, the Ledger Nano X also comes with a "Getting Started" leaflet for beginners and 3 recovery sheets. So, even if you don't exactly remember your private address, you can use the recovery sheets to retrieve your assets. As such, we would rate this wallet as incredibly beginner-friendly, though it can be used by anyone. It offers all of the features you can expect from a cold wallet, though its price is higher than some other options on the market. Trezor Model T Price: $190 Coins supported: Nearly 2,000 cryptos, including BTC, ETH, USDT, etc. Built-in exchange: Yes The Trezor Model T wallet offers more features than the majority of cold wallets, hence its price. With it, you can directly access multiple crypto exchanges like Changelly, ChangeHero, and MorphToken, allowing you to buy digital assets online and store them offline. The wallet is also beginner-friendly as it has a built-in touchscreen feature, allowing its users to easily manage their assets. The box content of the Trezor Model T comes with 2 recovery sheets, which might be useful for beginners who didn't store their private key properly. So, we can classify this wallet as quite reliable and feature-rich, though it's the most expensive one you can find. Also, the mobile app for Trezor is not available for iOS users, so only those with Android will be able to use it. SafePal S1 Price: $50 Coins supported: Nearly 10,000 cryptos, including BTC, LTC, DOGE, etc. Built-in exchange: Yes Widely thought to be one of the most cost-effective cold wallets on the market, the SafePal S1 is just as reliable as some of the more expensive options. Its microSD card allows you to store your digital assets offline and access them anytime you want. The device is also quite lightweight and can be easily transported, which is always a plus. The SafePal S1 has a built-in display that allows you to check your assets and confirm transactions without connecting it to a computer. So, even if you lose the microSD card, you can still retrieve your data by using the SafePal app. However, one downside is that it's not quite beginner-friendly. So, if you're new to the crypto world, we recommend you pick one of the other options on this list. Ledger Nano S Price: $80 Coins supported: Almost 2,000, with BTC, ETH, and LTC featured Built-in exchange: Yes The Ledger Nano S is one of the most popular cold wallets on the market for a good reason. It's a reliable, yet cost-effective storage device that supports a vast number of digital assets. You can easily send and receive crypto payments, as well as confirm transactions offline. The device is also quite user-friendly as it comes with a built-in display that shows all of your data. In terms of security, the Ledger Nano S is quite reliable because it has a chip that stores your private key offline. So, even if you lose the device, you can still retrieve your data by using the recovery phrase. Unfortunately, we wouldn't recommend it to beginners. The features are quite complex, and those new to crypto will have a hard time using them. Conclusion To conclude, we would say that all of the wallets on this list are quite reliable and offer a great way to store your digital assets. However, we would recommend the Ledger Nano X, as it's the most beginner-friendly option on the market. While it comes with a higher price tag, it's worth it if you want a reliable and easy-to-use device. » Curious about hot wallets? Discover the difference between hot vs cold wallets before comparing the best hot wallets for 2023
Decentralized finance5 Best Platforms for DeFi Staking in 2023In addition to yield farming and liquidity providing, crypto staking is one of the best ways to earn passive income from your cryptocurrency holdings. Namely, staking refers to the process of locking your crypto assets at a platform for a specific amount of time and then earning interest on it. In essence, this is how the proof-of-stake consensus algorithm is built and what it's based on. In the majority of cases, the interest is paid back in the crypto you staked—meaning that if you stake ETH, you will receive interest in ETH. On the surface, this might look similar to lending, but there are a couple of differences in staking vs. lending. So, since staking usually involves locking up the assets for some time (often for weeks or months), you must take time to choose a reliable DeFi staking platform. Not sure how to find one? Well, we've got you covered in this quick and easy guide for the 6 best platforms for DeFi staking in 2023. Read to learn more about them. 1. Binance Binance is primarily known for being one of the biggest crypto exchange platforms, often having a daily trading volume between $50 and $100 billion. However, the platform’s services and products don't end with just trading and exchanging crypto. Binance offers also offers DeFi staking via its Binance Earn sub-platform. Namely, its good reputation and wide range of staking options make it a good choice for crypto enthusiasts looking to earn solid APY on their assets. You can find all the DeFi staking projects currently available along with their APYs, staking limits, status, and duration once you open Binance Earn, though expect to see all of the popular coins featured. Keep in mind that, with Binance, the staking options at Binance change frequently, so if there’s an option to stake ETH for 5% annually today, the option might not be there tomorrow. Pros Zero staking feesDaily interest payments after 00:00 (UTC)High rewards of up to 120% APY for the most volatile coins100+ cryptos available for staking Cons Minimum staking limits vary by coinLong lock-in periods for highly volatile coins 2. Coinbase Coinbase is one of the world's most-trusted cryptocurrency exchange platforms in addition to Binance and FTX. In addition to exchanging crypto, Coinbase also allows you to stake eligible assets in a few clicks, whether you buy them on the exchange or transfer them from an external wallet. Regarding the yield, you can expect anywhere from 4% to 6% APY depending on the coin you’re staking. Staking ALGO, for example, will give you 5.75% APY, while SOL is set at 4% APY. It’s also worth mentioning that Coinbase’s staking process is quite simple and the interface is user-friendly. As a result, it's one of the best DeFi staking platforms for beginners. Unfortunately, we were disappointed to see that Coinbase didn’t feature staking for Bitcoin, though we hope to see that change in the future. Pros No minimum staking limitSleek interfaceAvailable on mobile apps for Android and iOSA regulated and publicly traded company Cons A staking fee of 25% of your staking rewardsFew eligible staking assetsNot the best staking yields in the market 3. Nexo Nexo is one of the largest and most reliable crypto staking and lending platforms you’ll find today. Its business model is built around offering high returns for staking as long as you hold a certain percentage of your portfolio in their native token—NEXO. Namely, those who have at least 10% of their portfolio in NEXO tokens can expect a 5% to 7% APY on almost all cryptos, like BTC, ETH, and BNB, and up to 16% on stablecoins like USDT and USDC. » Interested in stablecoins? Be sure to check out the safest stablecoins and the top sites for purchasing them safely. Moreover, Nexo’s features aren’t just limited to staking. You can also borrow against the value of your staked assets and spend it. Those who have at least 10% of their account in NEXO tokens can enjoy loans with 0% interest. Thus, we would highly recommend Nexo for staking, though it’s best suited for long-term crypto holders willing to allocate at least 10% of their portfolios to Nexo tokens to grow their portfolio passively. Pros No lock-in period requirementsA variety of crypto assets for stakingA 2% bonus interest if you opt to receive your staking rewards in NEXOSome of the best returns on the marketZero fees Cons Requires holding the native token (NEXO) to get the best ratesThe loyalty level is dependent on NEXO holdings and can be tough to maintain 4. Lido Lido is a platform dedicated to liquid staking on a couple of cryptos, including Ethereum, Polygon, Solana, Polkadot, and Kusama. The platform was primarily built for Ethereum, but has now expanded and features 5 other cryptos. So, how does staking with Lido work? Well, users can stake their assets and earn daily interest without locking them up for specific amounts of time. Once you stake your crypto, you’ll receive a liquid variation of the token on a daily basis. If you stake ETH, for example, you will receive stETH back, which is a tradable equivalent to ETH. You can then sell this stETH back for a profit. Regarding the APY, you can expect around 5-6% for ETH, SOL, and MATIC, 8% for KSM, and 13.8% for DOT. Although Lido is an overall good platform, we wouldn't recommend it to absolute beginners as there are multiple aspects to keep in mind when it comes to understanding Lido. » Want to learn more? Read Explaining Lido Through Liquid Staking Protocol and Key Insights to Maximizing Staking With Lido. Pros No minimum staking limitsNo lock-upsOne of the best returns on the market Cons 10% staking feesMight be difficult for beginners 5. BlockFi BlockFi is a centralized crypto exchange (CEX) founded in 2017. On the platform’s website, you can buy, sell, and trade a variety of different cryptos. In addition to the features we mentioned, you can also stake your assets and earn rewards, with returns depending on the amount of staked assets. Regarding ETH and BTC, the staking feature at BlockFi is divided into 3 tiers, making the APY vary from 2% to 3.5% and 2.5% to 3.5% for ETH and BTC respectively. The APY for other coins also varies, though it’s usually around 3-5%. There are, however, some altcoins like ADA and DOT which can be staked for 10% and 15% respectively. All in all, BlockFi is a great platform for staking and we recommend it to crypto fans of all experience levels. Pros Allows borrowing against your cryptoUser-friendly interfaceGreat returns Cons Services blocked certain regionsPast problems with regulatory authorities » Compare BlockFi and Compound Final Thoughts There are numerous DeFi staking platforms on the market that can help you grow your portfolio with passive income. Because of this, you should perform due diligence and make sure you’ve got your money saved at a reputable platform. In our opinion, you can’t go wrong if you choose Binance, Coinbase, or Nexo for staking as passive income.
Decentralized financeHot vs. Cold Wallets in Crypto: What Is the Difference?Crypto wallets act as digital vaults, safeguarding the keys to your digital currency—the choice between a "hot" or "cold" wallet depends on your needs. The key distinction between hot wallets and cold wallets is that hot wallets are linked to the internet through your electronic device, while cold wallets are usually hardware gadgets that can preserve your data offline. What Is a Hot Wallet? Hot wallets are connected to the internet and allow for easy access, making them a popular choice for day-to-day transactions. Hot wallets often come in the form of mobile or desktop applications, allowing you to quickly access and send your cryptocurrencies. There are generally three kinds of hot wallets: Web-based wallets: These are accessed through a web browser and do not require any extra software.Desktop wallets: These can be downloaded onto your computer for ease of use.Mobile wallets: These are downloaded onto your mobile device, allowing for easy access on the go. Pros Instant access This makes hot wallets ideal for smaller amounts and frequent transactions. With a mobile wallet, you can control your crypto assets anytime and from anywhere.Low cost Most hot wallets are either free or come with minimal maintenance costs.Provides custody This means that a third-party or service provider controls your private keys, which can be beneficial if you don't want to be responsible for keeping your keys safe. On exchanges like Coinbase, users also get an extra layer of security that their deposits are insured. Cons Higher risk Since hot wallets are always connected to the internet, they're more susceptible to hacking and security breaches. It's relatively easy for someone to access your hot wallet, as long as they have your login information. Hot wallets are not recommended for storing large amounts of cryptocurrency for this very reason.Risk of asset loss One way that this might happen is in the event that an exchange or provider closes and their funds are not insured. » Interested in using hot wallets for your crypto? Take a look at the best crypto hot wallets. What Is a Cold Wallet? Unlike hot wallets, cold wallets are offline. They function on USB drives and are generally considered very secure. For this reason, most crypto users with larger holdings prefer to use cold wallets. By principle, cold wallets are only accessible to those with necessary security information, like a PIN code or recovery seed phrase. Some examples of cold wallets are: Paper wallets: A physical paper with your private keys written on it.Hardware wallets: Physical devices (such as a USB) that store private keys.Physical Bitcoin: A physical representation of a Bitcoin that can be used as a cold wallet.Offline software wallets: A downloadable software program for your computer or mobile device. Pros Better security Since they're not connected to the internet, cold wallets greatly reduce the risk of hacking and other online threats. Most high-quality hardware wallets are designed to be impervious to hacking, and may even come with added layers of protection, such as biometric authentication. Even if a hardware wallet is plugged into a hacker's computer or accessed remotely via Bluetooth, the funds held by the wallet will be almost impossible to steal.More reliability Offers complete control over private keys, meaning that users are not reliant on a third-party provider to control their assets. Cons Less convenience Cold wallets require extra steps for sending and receiving cryptocurrency, as they must first be connected to a device before any transaction can take place.Higher cost Cold wallets tend to have higher upfront costs as they often must be purchased upwards of $100.Limited cryptocurrency support Cold wallets may not be compatible with every type of cryptocurrency, so it's best to check beforehand if your desired coin is supported. Should You Be Using Both Wallets? Having both a cold and hot crypto wallet is usually the best idea, as it gives you the benefits of both. You can have easy access to your coins with a hot wallet while also feeling secure that most of your assets are offline in a cold wallet. Some users even go a step further and keep their cold wallet in a bank vault or safety deposit box for added security. There are many considerations to take into account when it comes to choosing the right wallet for your cryptocurrency. Ultimately, the decision is up to the individual to determine their level of risk and choose the wallets that work best for them. » Keep up to date with the changing crypto scene: Learn more about Ethereum's move to proof-of-stake.
Decentralized finance4 Best Crypto Hot Wallets for 2023The 2022 year had a couple of devastating events in the crypto industry. In addition to the collapse of multiple projects, many exchanges also suffered great losses: some declared bankruptcy, while many faced disastrous cyber attacks. In fact, one estimate sets the total amount of money stolen from crypto hacks to be around $3 billion in 2022 alone. Even the biggest exchange, Binance, was a target of a $500 million attack in October 2022. Due to these attacks and collapses, many investors lost some or all of their assets at these exchanges, and will probably never get them back. So, with so much at stake, it's probably a good idea to start thinking about getting your own crypto DeFi wallet if you're an investor. Namely, DeFi wallets are cryptocurrency wallets that you are the sole owner of. This isn't the case with exchanges, as the keys to the wallets are never revealed to you, the investor. Regarding DeFi wallets, there are two primary types: crypto hot wallets and cold wallets. In this article, we will cover the details of different kinds of hot wallets, so you can find the right one for you. » Need more info about crypto wallets? Read our guides to crypto hot wallets and how they keep your crypto safe. 1. MetaMask MetaMask is the most popular hot wallet on the market and is primarily used to store, send, and receive Ethereum (ETH) and other ERC20 tokens. As you can already guess, MetaMask's default network is the Ethereum blockchain, but you can switch to other networks too, like Polygon, BSC, Avalanche, and more. In addition to being a wallet for storage, MetaMask also allows you to access decentralized applications (dApps) on the blockchain without running a full node. Moreover, the wallet is incredibly beginner-friendly and intuitive to use, though it can occasionally be slow. Overall, we would rate it as the best wallet for beginners that aren't looking for too many complex features. The wallet is available on all platforms, including PCs, iOS, and Android devices. » Confused about Ethereum's move to proof-of-stake? Read all about it here. 2. Coinbase Wallet The Coinbase Wallet is a hot wallet that was developed by the popular cryptocurrency exchange, Coinbase. The wallet supports a wide variety of cryptos, including: BTCBCHETHETCLTCAll ERC20 tokens Notably, the app allows you to buy, sell, and store cryptocurrencies, as well as track their prices in real-time. It's also worth mentioning that the Coinbase Wallet is quite rich with features, offering a lot more than your typical DeFi wallet. In addition to offering access to dApps, users of the Coinbase Wallet can take part in airdrops (free crypto giveaways) and acquire NFTs in the form of digital art. Just like Metamask, the wallet is available on all platforms, including PCs, iOS, and Android devices. However, the Coinbase Wallet is also more expensive to use than the other wallets on this list. Although there is no upfront fee or subscription required to use the wallet, conversion and trading fees vary from 2-4% per transaction, which can quickly add up. » Interested in NFTs? Be sure to choose from the best NFT marketplaces. 3. Trust Wallet Acquired by Binance in 2018, the Trust Wallet is a reliable and convenient DeFi wallet available on iOS and Android devices. In addition to being used for storage, the Trust Wallet can also be used to buy, sell, and trade over 1 million different coins and tokens with ease. Moreover, the wallet also has a unique "earn" feature, allowing you to stake your crypto for a modest return. Regarding the user experience of the app, the Trust Wallet is quite intuitive to use regarding its basic features. Additionally, downloading the app is free and the wallet has minimal fees and charges. Still, it's worth mentioning that the Trust Wallet isn't perfect, as it isn't available on PCs, so you can only manage your assets from a mobile device. Also, there is no concrete documentation for the app, so you'll have to resort to reading from external resources if you're a beginner in the crypto space. We can conclude that it's an overall reliable wallet as long as you have some experience in the crypto space. 4. Binance Wallet Developed by the largest cryptocurrency exchange, Binance, the Binance Wallet is built on the Binance Smart Chain (BSC). In addition to being used to buy, sell, and store cryptos on BSC, the wallet also has a cross-chain feature, allowing you to interact with other blockchains. Moreover, you can use it to interact with dApps and discover new projects, though this is limited only to projects on the BSC blockchain. Overall, the Binance Wallet is quite reliable and intuitive for experienced crypto users on both PCs and mobile devices. However, we wouldn't recommend it to absolute beginners as they can quickly get lost in the features the wallet offers. Conclusion To sum it up, the MetaMask Wallet, Coinbase Wallet, Trust Wallet, and Binance Wallet are currently the best hot wallets on the market. They all have their own unique features and benefits, so be sure to go with the right one for your needs.
Lending and borrowing4 Best Crypto Lending Platforms for Uncollateralized LoansOver the last few years, the rise of DeFi (decentralized finance) has been quite extensive, as it offers a ton of incredible benefits over its counterpart, TradFi (traditional finance). In addition to allowing holders to earn money on their existing crypto by staking, users can also borrow crypto without collateral, and even lend their assets to other users. These uncollateralized loans are also called flash loans, and they can be taken by anyone, as long as the loan is returned within the same transaction. The benefit of borrowing crypto this way is that you can make easy profits by trading the loaned money. If your starting capital is $1,000, a 1% profit from a trade is only $10. On the other hand, with a $100,000 flash loan, which anyone can get, a 1% profit amounts to $1,000. With the basics of flash loans out of the way, let's go over the best crypto lending platforms for flash loans. 1. AAVE AAVE is a DeFi protocol on the Ethereum chain that offers different types of lending, including both flash loans and collateralized loans. Namely, the benefit of using AAVE is that the network is incredibly vast and extensive. In addition to being on the ETH blockchain, AAVE is also connected to other chains, like Avalanche and Fantom. The benefit of this is that you're not limited to getting flash loans only on ERC20 tokens—you can get flash loans on tokens from other blockchains too. Moreover, it's widely thought that AAVE is the most popular DeFi platform at the moment. The reason behind this is that it offers an all-in-one solution for decentralized finance, including AAVE lending, borrowing, and staking. Moreover, it's an incredibly beginner-friendly platform, as it has an intuitive interface that anyone can adapt to. Its only downside is that it has slightly higher fees than some of its competitors. » Want to learn more about AAVE? Read our AAVE review. 2. dYdx Similarly to AAVE, dYdX is a decentralized protocol on Ethereum that's been around for quite some time. It was one of the first to offer crypto margin trading and it still continues to be one of the best platforms in the DeFi space. Moreover, getting a dYdX flash loan is relatively easy, as the entire process is described in their documentation. Usually, people choose dYdX over other DeFi protocols primarily because of its low fees. In fact, many believe that dYdX has the lowest fees in the DeFi space, simultaneously for lending, borrowing, and withdrawing. However, the user experience of the platform is not as intuitive as with other platforms, so we would recommend it to those who have at least some experience in the DeFi space. 3. Uniswap Just like the two platforms above, Uniswap is a decentralized protocol primarily used for swapping ERC20 tokens. However, unlike the other platforms we've described above, Uniswap doesn't have traditional lending or borrowing features. Still, you can take out a flash loan on Uniswap by using the "flash swaps" feature. All you have to do is create a smart contract and issue the terms of the loan. The primary reason why users go to Uniswap is its relatively low fees and its wide variety of assets. However, we would only recommend using it if you intend on using flash loans and no other DeFi feature. Since the platform doesn't offer lending and staking, your crypto holdings won't be earning you any interest here. So, if you're looking for an all-in-one solution for DeFi, then Uniswap probably isn't the right choice for you. » Need help creating a smart contract? Read our guide to starting a smart contract. 4. PancakeSwap Unlike the other protocols on this list, which run on the Ethereum Blockchain, PancakeSwap is a decentralized protocol that works on the Binance Smart Chain (BSC). So, if you'd like to work with BEP20 tokens, like BUSD, CAKE, and WBNB, PancakeSwap is the right platform to use. Unfortunately, PancakeSwap being on BSC has a downside, too. Since the protocol is on the Binance Chain, you won't be able to take out flash loans for ERC20 tokens, like USDT, SHIB, and LINK. So, we would only recommend PancakeSwap to those who are interested in borrowing BEP20 tokens. Other than that, the platform is truly one of the best in the DeFi space, offering an intuitive interface for beginners, fixed-term staking, lending, and borrowing. Conclusion Now that we've covered the best crypto lending platforms, make sure you choose the right one based on your needs. Also, keep in mind that flash loans are not risk-free, as, in some cases, you could end up losing more money than you earn. So, if you're a beginner in the DeFi space, consider doing a bit more research on how flash loans work before you dive right in.
Decentralized financeWhat Ethereum’s Proof-Of-Stake Transfer Means for the World of CryptoIf you've been lurking in the tech space, you've probably heard of the Ethereum merge. Namely, this has been a milestone on the Ethereum development timeline for quite some time now, and it finally happened on September 15th, 2022. Namely, this upgrade is changing the crypto narrative and is poised to revolutionize the blockchain industry as a whole. So far, we've only touched the tip of the iceberg for the Ethereum merge. Now, let's dive deeper and uncover what really happened to Ethereum. What Is the Merge? The Ethereum merge was a long-awaited upgrade that changed the consensus algorithm used by Ethereum from proof-of-work (PoW) to proof-of-stake (PoS). This means that, instead of miners verifying transactions and being rewarded with ETH for their efforts, Ethereum users will now be able to validate transactions by staking. The merge is thought to be the single biggest event in blockchain history, as it's a major shift for Ethereum as a project. Not only does it make the network much more energy-efficient, but it also opens up new opportunities for users to earn a passive income for validators. After the protocol's consensus algorithm changed on September 15th, the upgrade is widely considered a success. Of course, this change didn't benefit the miners that bought expensive hardware to earn a profit while ETH was on proof-of-work. This is why a new version of Ethereum, called ETHC (ETH Classic), appeared, where miners can still use their hardware to mine coins for a profit. However, this new ETHC chain is not nearly as popular as the "merged" version of Ethereum, and at this rate, it might get discontinued altogether. Proof-Of-Stake vs. Proof-Of-Work: Why Switch? The primary reason for the switch from PoW to PoS was due to Ethereum's scalability and efficiency issues. The fact is, when a blockchain is powered by proof-of-work, it can only handle so many transactions per second before it starts to slow down. With proof-of-work as a consensus algorithm, the network was powered by thousands of GPUs mining simultaneously, which led to big energy wastage and scalability issues. With proof-of-stake, on the other hand, users can validate transactions by staking their ETH. This means that they won't need to use as much energy to power the network, which will lead to increased efficiency and scalability, one of the main advantages of proof-of-work vs. proof-of-stake. However, the PoS switch didn't come without any drawbacks. After the merge, Ethereum has sacrificed a bit of security, which might lead to certain issues down the road—one of which could be centralization. Does This Mean Ethereum Is More Centralized? The fact that users can now validate transactions by staking their ETH means that the network is now more centralized than it was before. This is because those who have more ETH will be able to validate more transactions and earn more rewards. Unfortunately, this could lead to big whales controlling the network and smaller users being left out. However, this is not an issue that's unique to Ethereum—it's a problem that all proof-of-stake blockchains face. Moreover, the team behind Ethereum is aware of this issue and is working on solutions to make sure that the network doesn't get too centralized. For example, they're planning on implementing a "slashing" mechanism that would penalize those who try to validate more blocks than they're supposed to. Moreover, new layer-2 Ethereum protocols have been appearing which seek to improve on Ethereum's aspect of centralization while maintaining or even improving scalability. What Does the Merge Mean for the World of Crypto? The fact that Ethereum has successfully switched from PoW to PoS is a big deal for the world of cryptocurrency. First of all, it shows that proof-of-stake can work on a large scale—something that many people were skeptical about. Moreover, it paves the way for other projects to switch to proof-of-stake, which could lead to big improvements in terms of efficiency and scalability. However, the merge came with one larger issue: it caught the attention of the SEC (the Securities and Exchange Commission). Namely, the SEC is a government agency that regulates the market and has the goal of protecting investors. After the merge, the SEC's chairman, Gary Gensler, proposed that Ethereum should be classified as a security, so it should be subject to federal securities law. This caused a lot of controversy in the crypto community, as many people believe that Ethereum is a decentralized platform that can't be classified as a security. The SEC has not made a final decision on the matter yet, but if they do classify Ethereum as a security, it could have big implications for the world of cryptocurrency. What Does the Merge Mean for You? If you're a miner, the switch to proof-of-stake will definitely have an impact on you. Namely, after the Merge, you'll no longer be able to mine ETH. Instead, you'll need to stake your ETH in order to validate transactions and earn rewards. So, if you don't want to sell your mining hardware, you should consider using it on other PoW blockchains, like Bitcoin, Ravencoin, Monero, or even the new Ethereum Classic. On the other hand, as a holder of Ethereum, the merge will probably have only positive implications for you down the road. Even though the Merge is still a relatively new upgrade, it has proven to be a success so far, as the team behind Ethereum has managed to ensure the security of the blockchain while improving its scalability. So, in the next market cycle, you'll probably reap the benefits of the Ethereum merge as long as the protocol retains its current levels of security. The merge shouldn't change your investment strategy, as it has proven to be a successful upgrade that will only prove to be beneficial down the road. Conclusion The Ethereum merge has been a big success so far as it has shown that proof-of-stake can work on a large scale. Moreover, it paves the way for other projects to switch to proof-of-stake, which could lead to big improvements in the blockchain world. If you're skeptical about the merge, you should consider looking into the best Ethereum alternatives. These projects, like Cardano and Solana, are aiming to improve on Ethereum's existing issues by implementing new features in the world of blockchain.
Decentralized financeBoba Network: Revolutionary Layer-2 Scaling Solution for EthereumBlockchain technology is relatively new, having originated in 2009. Since then, it has come a long way, undergoing massive improvements, like decentralized apps, NFTs, multiple layers, and much more. As developers of different backgrounds started getting into blockchain, more features were implemented, primarily aiming to make the technology more efficient and easier to use. The Problem One of the most scalable blockchains is Ethereum, with the majority of modern blockchain features being implemented on it. Despite its positives, Ethereum has always had one critical flaw: exorbitant gas fees. Many believe this issue will be resolved with the transition to ETH 2.0 set to happen on 19 September 2022. However, many critics believe this won't solve the gas issue for Ethereum, which is why developers have started looking into Ethereum alternatives in 2022. Instead of the merge rectifying the gas issue, critics believe this problem will persist as Ethereum is a so-called "Layer-1 blockchain". This means that all transactions processed within a block are stored on one layer, and then everything is distributed appropriately. Consequently, developers have thought of a new blockchain model that might solve this issue, which is where Boba Network comes in. What Is Boba Network? Boba Network is a Layer-2 scaling solution for Ethereum. This means the blockchain has an additional protocol built on top of the main network—a second layer used to handle transactions. In addition to implementing a second layer, Boba Network also uses an Optimistic rollup model to scale Ethereum's transactions. In short, this rollup model ensures that the data doesn't necessarily have to be stored on the main chain. Instead, the data is stored off-chain, with only a small portion of it being stored on-chain. This way, the network can process a much larger volume of transactions without worrying about bloating the network. How Does Boba Network Work? Boba Network is a smart contract platform that runs atop Ethereum. It consists of two main components: Validator Manager Contract (VMC) This contract manages all the validators within the network. It is responsible for assigning transactions to different validators and keeping track of their activity. When transactions are properly assigned and distributed, there won't be an overloaded validator, meaning that all transactions will be managed accordingly. Rollup Contract (RUC) This is the contract that actually processes the transactions. It consists of two parts: the relay chain and the Rollup Chain. The relay chain is specifically responsible for processing deposits and withdrawals, while the Rollup Chain handles all other transactions. What Are the Advantages of Boba Network? Boba Network's primary benefit is its scalability. Thanks to its Optimistic rollup model, the network can process around 500 TPS (transactions per second). This number is set to increase in the future as more improvements are made to the network. Ethereum currently has a TPS of 13. In terms of security, Boba Network uses a combination of Proof-of-Stake and Plasma to secure its transactions. Proof-of-Stake consensus is used to validate all the transactions happening on the chain, while Plasma is used to prevent double-spending. This combination makes Boba Network one of the most secure Layer-2 scaling solutions available. Another big positive for Boba Network is that it's user-friendly and doesn't require any special software to be used. Instead, users only need a Web3-compatible wallet, like MetaMask. In addition, Boba Network has an easy-to-use interface that makes it perfect for those who are not too familiar with blockchain technology. What Are the Drawbacks of Boba Network? The main drawback of Boba Network is that it's still in its early stages of development. Even though the network officially launched in September 2021, it's still a relative newcomer compared to older players. Unfortunately, some bugs and glitches are inevitable, potentially leading to security issues. Additionally, the team behind Boba Network is relatively small, so it might take a while for all the planned features to be implemented. Another factor to keep in mind is that since Boba Network is built on Ethereum, it shares all of Ethereum's limitations. The Future of Blockchain Technology Boba Network seems to be a promising project that, if executed correctly, could revolutionize the way Ethereum currently works. If the Ethereum merge fails to solve the main issue of the network, developers and users alike might be forced to use alternative solutions like Boba Network. While Boba Network is not the first Layer-2 solution to be proposed, it still has significant advantages that should be considered for the future of blockchain technology.
Decentralized financeFat Protocol Theory: Is It Outdated and Becoming Obsolete?In the years after its development, the blockchain model caught the attention of many professionals. The technology behind this model was widely thought to be revolutionary, as it would be a fully decentralized communication model. Moreover, its use cases would also be massive, potentially revolutionizing how many industries function. However, certain analysts immediately developed theories regarding how the blockchain will develop. One of the most popular ones is the Fat Protocol theory or thesis (FTP), which we will cover below. Difference Between the Traditional Network Model and the Blockchain Model To understand this theory, a distinction needs to be made between traditional network protocols and blockchain technology. Unlike traditional network protocols, like TCP/IP and HTTP, the blockchain network model works quite differently. With traditional network models, the dynamic works in a client-server manner—the client requests data from the server, the server processes it, and then sends it back to the client after the validity of the data in question has been verified. With blockchain technology, there is no such thing as a client and a server. Instead, every node that joins the network can act as both. As a result, the nodes in the blockchain model can process and send data to another node in the server, allowing for much more transparent communication. In a traditional network model, data's validity is verified from the server, but in the blockchain model, the data is verified by other nodes in the network. What Is the Fat Protocol Theory? Joel Monegro first proposed the Fat Protocol theory in 2016. In his original post, Monegro argues that the value of a network will be determined primarily by its underlying protocol layer rather than the applications built on top of it. Let's take a look at his statement in simpler terms. With the way most networks work, they have a so-called "application layer" on top. For the world wide web (WWW), the application layer is where all the apps we use daily are stored—like Facebook, Instagram, LinkedIn, etc. Underneath this application layer is a "protocol layer", which defines how the network works. Regarding the internet we use today, the network consists of a "fat" application layer and a "thin" protocol layer. Monegro believes the blockchain network will have the opposite model—a "fat" protocol layer and a "thin" application layer. The reasoning behind this is that, with traditional networks, the app developers don't have to worry about how the network works—they just develop their app and launch it on the app store. But with blockchain technology, every developer who wants to launch an app will first have to create their own blockchain. Thus, the "fat" protocol layer will be much more valuable than the "thin" application layer. Shortfalls of the Fat Protocol Theory The Fat Protocol theory is controversial for a few reasons. Firstly, it goes against the way all networks have developed so far. As we've seen, with the internet, the application layer is much more valuable than the protocol layer. The dApps built on top of the network are what drive users to use it, and thus, they are what create value. The second flaw in the theory is that it doesn't take into account the fact that the blockchain is still in its early stages of development. At this point, it's still very hard to create a functional blockchain, and most people that want to do so don't have the necessary technical expertise. Moreover, it's also hard to launch an app on a blockchain, as there are very few users that actually have the required cryptocurrency to use it. These factors make it very unlikely that the Fat Protocol theory will play out in reality. For now, it seems much more likely that the value of a blockchain network will be determined by the applications built on top of it rather than the protocol layer. As more and more developers start seeing the benefits that blockchain technology offers over traditional network models, we'll likely see more apps being built on the blockchain. Cloaked in Controversy We can conclude that the Fat Protocol theory is a controversial one, and it's doubtful that it will come to fruition. The main reason for this is that the theory doesn't take into account the fact that blockchain technology is still in its early stages of development. As previously highlighted, creating a blockchain is complex, and most people don't have the technical expertise required. However, as the industry grows, we'll likely see more blockchains being built with an extensive application layer, which is what gives a network its actual value.
Yield farming7 Safest & Most Profitable Yield Farming Platforms (2022)Crypto markets are notoriously unstable, especially as of late. This is why many investors are becoming interested in earning cryptocurrency through yield farming instead of holding or day trading. Yield farming was a key catalyst behind the decentralized finance (DeFi) boom of 2020. Investors jumped at the chance to earn high-interest rates on their digital assets while taking advantage of the explosive growth of many popular cryptocurrencies. Well into 2022 and beyond, yield farming will remain a popular way to earn and grow your investments. Here are seven of the safest and most profitable yield farming platforms you should consider. » Looking for a more secure crypto option? Read up on stablecoin yield farming 1. YieldShield YieldShield is a DeFi farming platform that leverages algorithmic trading. Designed to help users maximize their profits, it functions by using a dedicated smart contract for each member. It also has a stop-loss function to minimize losses. Additionally, members have the option of creating a robo-farmer contract to find new farms with higher potential earnings and automatically sell the yield while maintaining their set risk parameters. 2. AAVE AAVE is a lending and borrowing platform that allows users to deposit digital assets into a liquidity pool and receive interest payments. With liquidity pools, the protocol’s code can easily and quickly approve loans at scale, while smart contracts make borrowing and lending easier. Transactions are automatically completed, and the smart contract that governs the protocols' decisions will liquidate users’ assets to the letter of the code. AAVE boasts some of the best borrow APRs (annual percentage rate) in the industry due to investors flooding the platform with cryptocurrency. » Want to learn more about AAVE? Read more in our AAVE review and evaluation 3. AQRU AQRU is a relatively new yield farming platform wherein users can stake their digital assets to earn rewards from participating protocols. The platform offers interest calculated and added per day, and because the interest is reinvested, this provides users with a very easy source of yield farming. The process happens automatically, and there are no extra fees for participating in it. AQRU also offers a 10 USDC initial welcome investment, KYC documentation requirements, and no deposit fees. The minimum deposit is 100 Euros. 4. BlockFi BlockFi is a cryptocurrency exchange that offers investors a variety of options to grow their portfolios. On the platform, investors can earn interest on stablecoins and digital assets with reasonable APYs (annual percentage yields). For instance, one can earn up to 9.25% APY on Tether deposits into a BlockFi account, with no lock-up period. This rate applies to the first 20,000 USDT deposited. For security purposes, BlockFi stores the majority of client digital funds in cold storage, and digital tokens are kept with third-party exchanges like Gemini. 5. eToro eToro doesn't offer traditional yield farming services, but members can still earn passive income. The eToro platform has a staking tool that automatically generates income as long as users hold the tokens in their accounts. They can withdraw this income at any time. Staking with eToro is one of the easiest ways to earn passive income from digital assets, and the minimum first deposit amount is as low as $10 for users in the US and the UK. There’s also no minimum duration for keeping your eToro tokens, as all interest-bearing tools are available on flexible terms. 6. SushiSwap On SushiSwap, users can swap Ethereum-based tokens. The platform supports both yield farming and staking, which means users can earn rewards for providing liquidity to the platform or for simply holding their digital assets in a SushiSwap account. SushiSwap is very user-friendly, and there's no need to go through a complicated process to begin earning rewards. Many investors prefer staking because it yields returns with minimal effort, while farming provides rewards without having to provide liquidity. 7. UniSwap Uniswap is one of the best platforms for yield farming. It offers swaps for Ethereum and ERC-20 tokens, as well as liquidity pool staking. Liquidity providers earn a percentage of every swap's trading fees, and if they deposit a large enough amount, they can potentially gain significant interest. Pool-specific and constantly changing market conditions determine the interest rates for Uniswap, much like other DEXs. » Inspired to try yield farming but unsure where to begin? Make sure you're familiar with the basics of yield farming strategies Conclusion These are only a few of the best yield farming platforms you can choose from. As you can see, the different platforms offer various services to help you grow your digital assets. The key is to find the one that best fits your current needs and financial goals. As with any investment, it's important to do your research before committing. If you're looking for a way to earn passive income from digital assets, yield farming is definitely worth considering.