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 finance6 Best NFT Marketplaces to Invest in Right Now (2022)If you're looking to get involved in the world of NFTs, then you’ll need some knowledge of the best places to buy, sell, and trade them—and reputable blue-chip NFT marketplaces are a great place to begin! Furthermore, if you're planning on creating your own NFTs down the road, these marketplaces can be a potential way to make some money. However, choosing an NFT marketplace with the best collections and prices for your needs and preferences can be challenging. In this article, we're going to list down some of the best NFT marketplaces for safe, secure, and easy transactions. We'll also give you an overview of what each marketplace offers so that you can make an informed decision about which one best suits you. 1. OpenSea Even newbies to NFTs are aware that OpenSea tops the list. It's one of the top NFT marketplaces globally, with a wide range of collections from digital art to in-game items, and everything in between. One of the best things about OpenSea is its easy-to-use interface that makes buying, selling, and trading NFTs a breeze. Transaction fees are also quite affordable at 2.5% of every sale. This fee is charged to the creator/seller, while the buyer pays the gas fee. The marketplace also supports more than 150 different payment tokens, allowing users to pay with the cryptocurrency of their choice. 2. Bored Ape Yacht Club The BAYC is a project that focuses on delivering high-quality NFTs and providing a unique experience for its users. You can invest in one of the 10,000 Bored Ape NFTs, a collection of digital art that comes with access to members-only perks. The project has also launched its new meme token, the Ape Coin, which is a token for utility and governance. Holders of the Ape Coin have voting rights on the Ape Coin Decentralized Autonomous Organization—the DAO—and can earn rewards for participating in the community. 3. Rarible Rarible is also a popular choice among NFT enthusiasts and is among the top marketplaces in terms of transaction volume. It has a wide range of collections, including digital art, photography, in-game items, and more. Rarible is a community-based marketplace, which means that anyone can create and mint their own NFT on the platform. Trading fees are also quite low at just 2.5%. Rarible also has an easy-to-use interface and supports several blockchains, including Ethereum, Polygon, Flow, TezEthereum, Tezos, and Polygonos. 4. SuperRare SuperRare is your go-to marketplace for curated NFT artworks. It's an exclusive, invite-only NFT marketplace, which means they only deal with NFT artists they know and trust. This makes SuperRare one of the best places to find high-quality NFT artworks (hence the name). SuperRare maintains its goal to preserve the culture of art collection and remains the pioneer in the exclusive NFT art space. The platform has a very strict vetting and approval process, which also makes it one of the most trustworthy NFT marketplaces. As expected, transaction fees can be quite steep compared to other platforms, starting at 15% on primary sales. However, if you're into collecting physical art and would like to add some digital art to your collection, then SuperRare is definitely the marketplace for you. 5. Axie Infinity Marketplace If you know of the popular blockchain-based game Axie Infinity, you may also be aware that it also functions as an NFT marketplace. The Axie Infinity marketplace is one of the top NFT game marketplaces dedicated to in-game assets. Players can buy, sell, and mint Axies, as well as other in-game items. If you're a buyer, there are no fees for purchasing. However, if you're a seller, then you'll be charged a marketplace fee of 5.25%. If you have a creator code, 4.25% is sent to the Community Treasury, while 1% goes to you (the NFT creator). Without a code, the platform will charge the full 5.25%. That said, if you're looking to buy, sell, or mint in-game assets, then the Axie Infinity marketplace is definitely worth checking out. 6. Foundation Another top platform for minting, buying, and selling NFTs is Foundation. The platform used to be invite-only, like SuperRare, but has since opened up its doors to the general public. Foundation is best known for its wide collection of digital art and is popular among crypto natives, collectors, and artists alike. If you're on the hunt for art NFTs ranging from images to videos and 3D pieces, then Foundation is the marketplace for you. The platform has a user-friendly interface and is well-designed, making navigation easier. In terms of transaction fees, Foundation charges creators a 5% marketplace fee per sale, plus an additional 10% for each secondary sale. Buyers do not have to pay fees outside of the purchase amount. The Takeaway These are just some of the best NFT marketplaces to invest in right now. As the world of NFTs continues to grow, so too will the number of marketplaces. The key to finding a good marketplace is to find one that best suits your needs. Whether you're looking for a particular type of NFT or just want to browse a wide selection, there's definitely an NFT marketplace out there for you.
Decentralized financeTop 5 Reliable Sites For Purchasing Stablecoins SafelyAs the world of cryptocurrency continues to grow, so does the need for more reliable ways to purchase digital assets. One such asset that investors are turning to more and more is the stablecoin. Stablecoins are digital tokens that are designed to maintain a stable value, regardless of the volatility of the cryptocurrency market. This makes them an ideal choice for investors who want to protect their portfolios from market fluctuations. Stablecoin yield farming allows users to borrow and exchange stablecoins on both DEX vs CEX platforms. However, with so many different stablecoins on the market, it can be difficult to know which ones are the most reliable—and where they can be purchased safely. We look at five of the most trusted sites in this article, all of which have been vetted by our team of experts and are known for their dependability and security. » Are stablecoins safe? Discover the safest stablecoins of September 2022 1. Binance Binance is one of the largest cryptocurrency exchanges in the world, offering a wide variety of digital assets for investors to purchase. This includes several of the most popular stablecoins, such as Tether (USDT) Pax Dollar (USDP), Dai (DAI), and more. Binance is known for its user-friendly interface and robust security features, including two-factor authentication to protect user accounts, as well as API access control, device management, and whitelisting. Additionally, all digital assets are stored in offline cold wallets. Investors can purchase stablecoins on Binance using either fiat currency or other cryptocurrencies. The platform also offers a mobile app for users who want to trade on the go, making it a great option for beginners and advanced traders alike. 2. Coinbase Coinbase is a popular option for investors, because it's considered one of the most user-friendly exchanges in the industry, with an easy-to-use platform and educational tools for beginners. Coinbase is one of the most secure exchanges in operation, with multiple layers of security to protect user accounts. The platform also uses advanced encryption techniques to ensure the safety of digital assets, such as two-factor authentication, multi-approval withdrawals, and password protection. Coinbase offers a wide range of stablecoins for investors to choose from, including USD Coin (USDC), Dai (DAI), and Pax Dollar (USDP). 3. Gemini Gemini is owned by the Winklevoss twins, who are also early investors in Bitcoin. The exchange is regulated by the New York State Department of Financial Services (NYDFS) and is compliant with all applicable laws and regulations. One of its strongest features is its industry-leading security protocol, which includes two-factor authentication, wallet address whitelisting, and device management. The platform also has its own hot wallet, which is backed by digital asset insurance. This means that in case of a hack or security breach, users' funds stored in wallets are covered. Needless to say, it's one of the most reliable places to buy and store stablecoins. 4. Kraken Kraken is one of the oldest cryptocurrency exchanges in operation, having been founded in 2011. The platform is known for its high security standards, with multiple layers of protection to keep user accounts safe. This includes two-factor authentication, withdrawal email confirmation, strict surveillance, air-gapped cold storage, SSL encryption, and precise API key permission control. The Kraken exchange's servers are also kept in secured cages with armed guards and video cameras on watch 24 hours a day, seven days a week. As a result, no major hacking incidents have been reported in Kraken's almost 10-year history. Kraken offers a wide range of stablecoins for investors to purchase, as well as over 100 cryptocurrencies. Kraken has a simple user interface and is a high liquidity exchange, making it a great choice for someone looking to buy or sell stablecoins quickly. 5. Nexo Nexo is a bit different from the other exchanges on this list, as it's not strictly an exchange. Rather, Nexo is a lending platform that allows investors to borrow against their digital assets as collateral. This includes stablecoins, which can be used to take out loans in fiat currency or other cryptocurrencies. The platform also offers industry-grade security features to protect user accounts, including two-factor authentication, biometric identification, whitelisting, and a host of other measures. Nexo is also insured by Lloyd's of London, meaning that users' digital assets are protected in case of a hack or security breach. Conclusion These are just a few of the many exchanges where you can buy stablecoins. When choosing an exchange, be sure to consider factors like security, fees, liquidity, and user experience. By doing so, you'll be able to find the best platform for your needs and be well on your way to investing in stablecoins.
Decentralized finance6 Safest Stablecoins in September 2022—Top Investors' ChoiceStablecoins provide crypto investors with an opportunity to ride the crypto waves amid high volatility—while still maintaining the value of their portfolios. As their name suggests, stablecoins are designed to remain stable in price, usually pegged to a fiat currency or other less volatile assets. This makes them ideal for use in commerce and trading, as well as for holding as a long-term investment. With so many stablecoins on the market, it can be hard to know which ones are the safest to invest in. We take a look at six of the best stablecoins to invest in based on stability, market capitalization, and liquidity. » Where can stablecoins be bought safely? Explore the best sites to buy stablecoins 1. Tether (USDT) Tether (USDT) is one of the oldest and most popular stablecoins in the market. USDT has been in the crypto market since 2014 and is pegged to the US dollar at a 1:1 ratio. It has a market cap of $67.92B, making it the largest stablecoin as well by far. Tether adheres to world-class compliance measures for anti-money laundering (AML), know your customer (KYC), and countering the financing of terrorism (CFT) rules regulations—making it one of the most trusted stablecoins in the market. 2. USD Coin (USDC) USD coin (USDC) is another popular stablecoin pegged to the US dollar. Built on Ethereum, USDC is compatible with all Ethereum wallets and decentralized applications (dApps). Every online digital dollar of USDC is 100% backed by real cash and short-dated U.S. treasuries, ensuring that it's always redeemable in equal amounts of US dollars. Its market cap is $50.19B. USDC is also one of the few stablecoins that undergo regular audits to ensure that it's backed 1:1 by US dollar reserves. These audits are conducted by the top five independent firms, including the likes of Grant Thornton LLP. The statements and reports are published monthly on the center's website for full transparency. 3. Binance (BUSD) Binance (BUSD) is a stablecoin issued by one of the world’s largest cryptocurrency exchanges, Binance, in partnership with Paxos. BUSD is a dollar-backed stablecoin that always holds its value at 1:1 with the US dollar. This means that BUSD can always be bought and sold at the same rate of 1 BUSD to 1 USD. BUSD is ERC-20 compliant and hence compatible with Ethereum-based wallets and applications. It's also regulated by the New York State Department of Financial Services, providing investors with an additional layer of protection. BUSD has a market cap of $20.52B. » Want to stay updated on Binance? Catch up on the evolutions of the BNB chain 4. Dai (DAI) DAI is a cryptocurrency that was created by MakerDAO and is intended to be a stablecoin free of any centralizing authority, as opposed to other stablecoins, which are vulnerable to censorship. DAI is pegged to the US dollar and uses collateralized debt in the form of Ether (ETH). What makes this stablecoin different from others is that it doesn't require collateral held by a company. The process is regulated through smart contracts associated with Collateral Debt Positions taken out with MakerDAO. The stablecoin has a market cap of $6.88B. » Does DAI have tokens? Discover how DAI tokens work 5. TrueUSD (TUSD) TrueUSD (TUSD) is a dollar-backed stablecoin that was created to provide its users with a more trustworthy and transparent alternative to other stablecoins in the market. All TUSD in circulation is backed 1:1 by US dollars held in escrow accounts with verified US banks, making it one of the most stable and reliable stablecoins. TrueUSD claims to be the first regulated stablecoin in the market. It's fully collateralized, legally protected, and transparently audited at regular intervals. These audits are conducted by top-tier accounting firms such as Cohen & Company. TUSD has a market cap of $1.08B. 6. Pax Dollar (USDP) Pax Dollar (USDP) is a dollar-backed stablecoin created by Paxos, a New York State chartered trust company. USDP is always backed 1:1 with US dollars held in reserve by Paxos, making it a reliable and trustworthy stablecoin. Paxos is a regulated financial institution, providing an additional layer of protection to investors. Paxos also conducts regular audits of its US dollar reserve, which are then published on its website. The current market cap is $ 945.39M. Conclusion There are many different types of stablecoins in the market, each with its own unique features and benefits. However, all stablecoins share one common goal: to provide a more stable and reliable alternative to other cryptocurrencies. When looking to invest in and to make money with stablecoins, it's always helpful to research each option thoroughly to find the one that best suits your needs.
Decentralized financeEverything You Need to Know About PolkadotBlockchain technology has evolved and changed a lot since its inception. In the past, it was limited to just a couple of big cryptocurrencies, each with its own network, features, and functionalities. However, with this growth of the space, the market effectively became a bunch of divided blockchains that would benefit from interacting with each other, which is why multi-chain solutions like Polkadot have started arising. Polkadot is both a protocol and cryptocurrency, designed with the primary goal of connecting unrelated blockchains. Still, we've only touched the tip of the iceberg for Polkadot, so let's dive deeper. What Is Polkadot? Polkadot was created by the Web3 Foundation, a non-profit organization from Switzerland that develops decentralized technologies on the blockchain. The project was led by Gavin Wood, who is also one of the co-founders of Ethereum. In order for Polkadot to act as a multi-chain solution aiming to connect different blockchains, it uses so-called parachains (also known as parallel blockchains) to connect different networks like Bitcoin and Ethereum and make them interoperable. A cross-chain protocol like Polkadot makes it possible to buy ETH with BTC without having to exchange them for USD, for example. How Does Polkadot Work? Polkadot is a heterogeneous multi-chain network that can support multiple blockchains with different characteristics, functionalities, and purposes. As mentioned above, it utilizes parachains to connect networks and make them interoperable with each other. The point of all this is to make it easier for developers to build decentralized applications (dApps) that can interact with multiple blockchains. Having this feature means that developers don't need to create a new blockchain from scratch every time they want to connect it to another one. Instead, they can just launch a parachain and be good to go. DOT Governance Token The Polkadot Network has a native cryptocurrency called the DOT token, which is primarily used for governance. Since Polkadot is fully decentralized, the community (i.e., the holders of the token) get to vote on how the protocol is governed. Additionally, the DOT token can also be used for staking. As a blockchain, Polkadot uses an NPoS (nominated proof-of-stake) consensus algorithm, which is how the transactions are verified. » Interested in more details on Polkadot's inner workings? Gain an overview of Polkadot's ecosystem Benefits of Using Polkadot Polkadot is a pretty innovative project with a lot of potential. Below we go into more detail about the benefits of the protocol and why you should consider using it. Scalability The first big benefit of Polkadot is that it's highly scalable. Theoretically, the network can support thousands of parachains, each with its own blockchain. In comparison, Ethereum can only support around 100 dApps at a time before it starts slowing down. This scalability is made possible by the relay chain that Polkadot uses. The relay chain is the main backbone of the network, which is where all the transaction data from the parachains is processed. This data is then bundled up and sent to the validators (i.e., those who stake DOT tokens) to be verified. The relay chain uses a kind of "sharding" technique where different parts of the network can process transactions in parallel, which makes it much faster than Ethereum's main blockchain. » Why is scalability important? Understand the scalability trilemma Interoperability Another big advantage of Polkadot is that it's fully interoperable. As we've said, the network connects different blockchains and allows them to interact with each other. This is a really big feature, as it opens up a whole world of possibilities for dApp developers. For example, let's say you're developing a dApp that needs to interact with a blockchain that's not compatible with Ethereum. With Polkadot, you can launch a parachain for that blockchain and connect it to the network. This way, your dApp can still interact with the other blockchain without any issues. Efficiency Since Polkadot offers a lot of unique features, you might think that it's much more expensive to use than other blockchains. However, this isn't the case as Polkadot is much cheaper to use than other scalable blockchains like Ethereum, because the network only needs to process the data that's relevant to the parachains that you're using. So, if you're not using a particular parachain, the network won't waste any resources processing its data. This efficiency is made possible by the "collators" who are responsible for collecting and packaging the data from the parachains. The collators only need to collect the data that's relevant to the parachains that you're using, which makes the network incredibly efficient. Final Thoughts Overall, we think that Polkadot is an innovative project with a lot of potential. Its ability to connect different blockchains, allowing interoperability between networks, coupled with its efficiency makes it an intriguing prospect for both users and developers. We'll be sure to keep an eye on it and see how it develops in the future.
Decentralized financeMapping the DeFi Ecosystem in 2022DeFi, or decentralized finance, is a new financial technology that's revolutionizing how we think about future finance. The term "DeFi" was initially coined in 2018 by a team of developers working on Ethereum with the simple goal of improving existing financial systems. The DeFi space seeks to do this by implementing blockchain technology—the same technology behind cryptocurrencies. This space has been rapidly growing in the last couple of years, and with this growth, has split into multiple segments referred to as layers. Let's explore this further. Layers of the DeFi Ecosystem The DeFi space consists of four main layers. Let's cover them in a bit more depth. User Layer Also known as the front-end layer, this is the part of DeFi that most crypto enthusiasts interact with daily. This first layer consists of wallets and DeFi Hubs, which make the features of blockchain technology available to the users. Some of the most popular wallets are MetaMask, Phantom, and the Coinbase Wallet. They allow you to buy and sell crypto while interacting with other users on the blockchain. Alternatively, DeFi Hubs like Zapper are platforms that allow you to actively engage in the world of decentralized finance by staking, yield farming, and providing liquidity. » Want to explore more about wallets? Discover the different types of crypto wallets Chain Layer The second layer holds the basic infrastructure of the DeFi ecosystem, and as the name says, it consists of multiple chains. Some of the most popular ones are Ethereum, the Binance Smart Chain, and Polkadot. These chains provide the essential infrastructure for DeFi applications to run on top of them. So, why is the chain layer important? Well, this layer allows different DeFi protocols to communicate with each other and interact with each other's data. Without it, the DeFi ecosystem would consist of a bunch of isolated blockchains with very restricted communication. Primitive Layer On top of the chain layer is the primitive layer, consisting of multiple protocols with unique features. The protocols in question are the building blocks of the DeFi ecosystem that provide different services to users. Decentralized exchanges (DEX), derivate platforms, and lending protocols are the main components of this layer. Some of the most popular protocols in the primitive layer are Maker, Compound, and Uniswap. Almost all of the protocols in the primitive layer offer a unique service that's essential for the DeFi ecosystem as a whole. For example, if you want to buy some crypto but don't want to do it at a centralized platform like Binance, you can head over to Uniswap (a DEX) and get the job done. Aggregation Layer Being built on both the primitive and chain layer, the aggregation layer is often seen as one of the main catalysts for wide-scale adoption of crypto and DeFi. Since the layer is already built on two other layers, it's designed for optimized experience and usability. However, the aggregation layer doesn't consist of only one segment—it has supply-side protocols and demand-side aggregators. Supply-side protocols are the ones that aggregate (i.e., combine) the funds from multiple protocols and properly distribute them. Demand-side aggregators receive requests from users (like trades or buy orders) and disperse them with optimized efficiency as the primary goal. Key Features of DeFi Let's go over the main features of DeFi and see what it offers to its users. Borrowing and Lending Unlike traditional finance (TradFi), DeFi has made it easy for people to borrow and lend funds, which is one of the main reasons for its popularity. Thanks to protocols built on the blockchain, users can lend out their crypto to others on the blockchain and earn passive income while doing it. Alternatively, DeFi also features borrowing, meaning that you can get quick access to crypto in case you need it without going through tedious processes like with TradFi. » What is Tradfi? Read up on all the essentials Staking Staking is often used in conjunction with lending, but they're usually not the same thing. Lending refers to lending out your crypto to other users on the same protocol. When they use your funds for a transaction, you'll receive a small fee as passive income. However, staking refers to locking your funds on the protocol for any reason (usually to improve liquidity or security). It's also worth mentioning that staking is often done on a much longer timeframe (usually no less than three months), while lending could be a one-time thing. » Want to know more? Discover the difference between staking vs yield farming Synthetic Assets Synthetic assets are cryptocurrencies that represent real-world assets. Often called synths, these assets mimic the price of any asset you can imagine—gold, silver, stocks, bonds, fiat currencies, and much more. They make it easy for newcomers to invest in any market with the practicality and decentralization that crypto offers and still enjoy the same returns. » Curious about synthetic assets? Here's what you need to know NFTs Non-fungible tokens (NFTs) have rapidly expanded on the market in the last few years. NFTs are both immutable and verifiable, which are the two main features why new investors keep coming to them as an asset class. On top of that, NFTs are not only used as a store of value or for investment purposes—they're also used to represent art, real estate, files, etc. » Are NFTs worth it? Discover whether NFTs are a good investment What Is Next For DeFi? All things considered, the DeFi ecosystem is still in its early days, which is precisely why it's so hard to predict the future. Even though we've seen a lot of growth in the last few years, it's still not enough for mass adoption. In order for that to happen, we need more protocols, deeper integration between layers, and better awareness. This is why in the next few years, we can expect to see a lot more interoperability between protocols, meaning that users will be able to move their funds between different protocols with ease. Additionally, we can also expect to see more NFTs being used in DeFi for lending, borrowing, and other financial services. All in all, the DeFi ecosystem is still in its early days, but it has a lot of potential. In the next few years, we can expect to see more growth and wider adoption from it.
Decentralized financeHow the Fei Protocol Is Changing the Way Stablecoins WorkAs an emerging financial technology, decentralized finance (DeFi) has come a long way since the first projects in 2015. One of the strongest pillars of DeFi is stablecoins, allowing crypto enthusiasts to participate in many protocols without worrying at all about volatility. Now there are many popular stablecoins, like USDT and USDC, but they have one main problem—centralization. They're run by centralized organizations that control the issuing of tokens manually, going against one of the core principles of blockchain technology. This is the main inspiration for the Fei protocol—create a decentralized project on the blockchain that will change the way stablecoins work. The protocol was launched back in March 2021 and has come a very long way since. Now, let's dive deeper into how the protocol works and what it promises to solve in the future. How Does the Fei Protocol Work? The backbone of the Fei protocol is the FEI token, which is an ERC20 stablecoin, meaning it runs on the Ethereum network. The team behind the project wanted to create a market that trades in parallel to the ETH/USD pair—which is the ETH/FEI pair. As you can already guess, the FEI token has a price pegged to $1, allowing users to send and receive payments with near-zero volatility, just like other stablecoins. However, unlike other stablecoins, the FEI token isn't centralized and doesn't have an organization managing the issuing of tokens. So, how does FEI manage to keep its price at $1? Well, the Fei protocol uses two key ideas: Protocol Controlled Value (PCV) and direct incentives. Protocol Controlled Value (PCV) With the PCV model, the Fei protocol can accumulate funds in a similar manner to companies with cash reserves. With this model, the token's value is controlled by the protocol, as the model's name suggests. This means that once the protocol has accumulated funds, it can use them to organize liquidity mining programs, provide liquidity to new markets, and buy back FEI tokens from another market. So, how does the PCV model differ from the way stablecoins work traditionally? The main difference is that with the PCV model, the protocol can use these funds without waiting for deposit confirmations—as soon as the protocol has the necessary amount of Ethereum, it can start using the funds. Let's say that the FEI token has a sharp drop in value. If the price of FEI falls below $1, the protocol will automatically buy back tokens from the market until the price is stabilized, keeping the 1:1 peg to USD. Direct Incentives With the direct incentives model, the protocol offers users different benefits for holding or using FEI. For example, if a user wants to get a loan in FEI, they can put up some collateral in ETH. However, with the FEI protocol, users can get a significantly lower interest rate than what they would typically get from a centralized organization (like with Tether-USDT). This is possible because the protocol can offer these incentives directly without going through middlemen. Moreover, the direct incentives model also allows the protocol to offer different benefits to liquidity providers. If a user provides liquidity to the ETH/FEI market on a decentralized exchange (DEX) like UniSwap, they'll be able to earn a portion of the transaction fees generated by that market, paid in FEI. This is a great way to encourage users to provide liquidity and help keep the price of FEI stable. Explaining the Governance Model Behind the Fei Protocol Since the Fei protocol is fully decentralized, the governance of the protocol is in the hands of the users. This is done with the protocol's governance token named TRIBE. As you can imagine, the holders of the token get to vote on essential matters in the protocol, and the more tokens you have, the more impactful your vote will be. Even if you don't want to participate in the governance of the protocol, you can still benefit from having the TRIBE token. For example, you can contribute to the FEI/TRIBE liquidity pool and earn a certain percentage every time someone swaps one token for the other. Moreover, the token might be a good investment, because as of September 2022, it's trading at around $0.27 per token. If the token manages to reach its previous all-time high of $1.78, you're looking at a 550% profit. Conclusion Overall, the Fei protocol seems to be a promising project. The team behind it has made considerable efforts to launch the project and bring it up to the level it is today, so it might have a bright future. However, the team must continue to work hard to prove to investors that it's worthwhile. Due to the tragic collapse of some stablecoins and DeFi projects, investors might be discouraged from investing in projects like the Fei protocol. Nevertheless, the team has delivered outstanding results so far, and we should expect more or less the same in the near future. So, if you're looking for a stablecoin that you can use in your everyday life or want to invest in a project with a lot of potential, the Fei protocol might be a good option for you.
Decentralized financeExplaining UXD—A Fully Decentralized Stablecoin Stablecoins have been the backbone of the DeFi space for the last few years. Simply put, they offer way too many benefits to be ignored, as they use the price stability of fiat cash and blockchain technology to implement the functionalities. Of course, paying in Bitcoin is great too, but the high volatility sometimes scares people—especially if big payments are in question. So, what if there was a coin that would have Bitcoin's benefits and be as stable in price as the dollar? That's where UXD comes in: a fully decentralized stablecoin built on the Solana Network. UXD tackles the stablecoin trilemma and seems to do it quite well, being well-balanced on decentralization, stability, and capital efficiency simultaneously. How Does UXD Work? Each stablecoin has a different mechanism in place to keep its price "stable", but usually, stablecoins maintain their price by having fiat reserves, using collateral debt positions (CDPs), or implementing complex algorithms. Popular stablecoins like USDT and USDC have fiat backing to keep their price, but this solution requires the support of a centralized partner, like a bank or a cash fund, which beats the entire purpose of decentralization. What Makes the UXD Protocol Different? UXD works with both collateralized positions and algorithms. The protocol is relatively new, launched in 2020 on the Solana blockchain, and has been consistently stable since its launch. If you want to mint UXD, you'd have to deposit crypto as collateral on the Solana blockchain, and you'll receive UXD in return. Let's say that Solana is currently worth $30. By depositing 3 SOL, you'll get 90 UXD, which is quite similar to how the DAI stablecoin works on the Ethereum blockchain. However, the only problem with DAI is that its price stability is inherently dependent on the strength of Ethereum. To solve this, the UXD protocol uses an algorithm behind the scenes to prevent the stablecoin from losing its value in case Solana drops in price. So, when you create the smart contract to receive UXD with Solana, the protocol holds your deposited 3 SOL as collateral while simultaneously opening a short position. If the price of Solana falls by 10% for the duration of your smart contract, you'll receive 10% more SOL when you decide to return the UXD to the protocol. But if the price jumps by 10%, you'll receive 10% less SOL than what you deposited, ensuring you always get the precise dollar amount that you deposited. Professionally, this is called a delta neutral position. How UXD Handles the Stablecoin Trilemma UXD tackles the stablecoin trilemma of stability, decentralization, and efficiency quite well. So, let's see how it addresses each of these points: Stability UXD is a stablecoin that has never had a price drop bigger than 2%, and if you think 2% is too much for a stablecoin, think again. Tether, which is the most popular and widely used stablecoin, has had a price drop of 7% in the past, which has never happened to UXD. As a stablecoin, UXD uses both collateralized debt positions and algorithms, meaning that you're guaranteed to get exactly $1 back for every UXD you've minted. So, no matter what happens to Solana's price, you'll always have your dollar value returned to you. Decentralization UXD is a decentralized stablecoin, therefore it doesn't require any centralized entity to hold reserves or manage the price. Furthermore, the protocol is completely coherent and built on the Solana blockchain, which is one of the most decentralized blockchains in the world. Since there's no centralized entity involved, there's no risk of the stablecoin being shut down or censored. For example, USDC has centralized entities like banks keeping the cash reserves. In difficult times, the entities holding the reserves behind USDC always have the right to stop funding the project, causing the stablecoin to crash instantaneously. Since there's no fiat backing behind UXD, there's no possibility of something like this happening. Capital Efficiency Being capital efficient means you always get exactly the right value for your money. For example, if you try to get some DAI, you'll see that you need more than $1 in collateral to get 1 DAI. In most cases, you'll need to have around a $1,500 value in ETH to get 1,000 DAI, making it quite capitally inefficient. This isn't the case with UXD. Thanks to the algorithm working in the protocol's background, you'll always get $1 for every UXD you've minted—even if the price of Solana drops. In fact, most analytics say that the capital efficiency of UXD is on the same level as Tether while avoiding the inherent risks of price instability and too much centralization. Conclusion All in all, we believe that UXD is a great project that has an incredibly promising future. The team behind it has possibly built one of the most versatile and efficient stablecoins ever. In our opinion, UXD handles all three aspects of the stablecoin trilemma, ensuring stability, decentralization, and capital efficiency without compromising security. Most experts would say that UXD doesn't have any inherent flaws, but there's only one small problem with it—it's built on the Solana Network. Even though Solana is an excellent cryptocurrency project that is both efficient and secure, the network has had around ten severe outages in 2022 alone. So, if Solana has an outage, you won't be able to use UXD while the network is down.
Decentralized financeAragon—The First Decentralized "Digital Jurisdiction"Year by year, blockchain technology has been gaining popularity thanks to the abundance of features it offers. Blockchain technology allows small teams, communities, and even big corporations to create decentralized autonomous organizations (DAOs) that govern a project without even needing central leadership. Nowadays, the majority of DAOs run in the decentralized finance (DeFi) space, allowing the industry to evolve in the direction the users would want it to—making it fully decentralized. The Aragon Network and DAO DAOs offer many benefits over a traditional governance model. With a DAO, a project has a clear roadmap and a path for the future, dictating how upgrades and decisions are made. However, creating and managing a DAO isn't easy, which is where a solution like Aragon comes in. Aragon is a relatively new project, being founded in 2016, and its primary goal is to be a "digital jurisdiction" for both new and old DAOs. The project is based on the Ethereum network and looks quite promising so far, but we have to undercover the details behind it. So now, with the basics out of the way, let's dive deeper into the Aragon Project and what it encompasses. Explaining The Aragon Network The starting idea behind the Aragon Project is quite innovative and seeks to solve a lot of problems for modern decentralized organizations. For example, if you're an entrepreneur in the real world looking to create a start-up, you'd have to go through a legal process that will allow you to create your business. This is exactly what Aragon does, but instead of doing it in the real world, it does so on the blockchain. The platform provides well-defined contracts that help new DAOs set the pillars of their organization, as well as improve their scalability and functionality. Moreover, the network has unique features that are similar to the real world, including a decentralized legal "court" and a system for solving disputes. The system put in place is highly detailed, consisting of three different levels, judges that vote and resolve disputes, and much more. How The Aragon Network Works The backbone of the Aragon platform is open-source software that runs on the Ethereum blockchain, and the platform even has a native token under the label ANT. With the help of the ANT token (which serves as a token for both utility and governance), developers can build their own DAOs on top of the network and deploy new applications. It's worth mentioning that the Aragon Network hasn't become popular only because of it being the first "digital jurisdiction". Instead, its popularity is because of the abundance of features it offers to its new DAOs, including a dedicated investment model for new contributors, a system for raising funds, and a way for new users to join the DAO. Governance with the ANT Token Since the Aragon Network is run by a DAO itself, it means that anyone holding ANT tokens can participate in deciding how the protocol is run. Namely, every holder has a right to vote on how the network will be governed, and the final decision will be ruled by the Aragon Court in case there's a problem in the voting process. The interesting thing about ANT tokens is that they're not only used for governance but also have a utility function. They can be staked to help secure the network or even used to pay fees for the transactions. The Aragon Network is constantly evolving, and with each passing day, it becomes more accessible and user-friendly. The Main Features of The Aragon Network In addition to governance, the Aragon Network has two main features that new DAOs get to use, and they both have a dedicated function. Aragon Client The Aragon Client allows developers and entrepreneurs to launch a DAO by making the process much easier for them. Namely, it offers them dedicated templates and guides them along the way, making the cost of creating a new DAO and managing it much lower. Aragon Court The team behind the Aragon Network has taken the world's first "digital jurisdiction" quite seriously. The protocol has a judicial system that's used when DAOs have complex problems that cannot be solved with smart contracts. So, the Aragon Court allows stakers of the ANT token to participate in the justice system by voting on disputes and discussing "legal" matters. Conclusion All in all, we think that the Aragon Network seems to be quite a promising project. Putting it simply, the Aragon Network seeks to solve truly unique issues that no other projects have even attempted to solve in the past. If the blockchain (especially the DeFi space) continues to rise at the same pace, then there's a high chance that the Aragon Network will become much more popular and widely used. It's worth mentioning that the project is still considered rather new, and we don't know if it has inherent security issues in the protocol. Still, it hasn't had any security breaches or hacks, so there's a high chance that the project will prosper in the future.