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Optimism

Cryptocurrency

Discover the list of the next cryptocurrency to explode, especially AiDoge, Terra Classic, Optimism, and Launchpad XYZ.

https://www.bing.com/th?id=OVFT.zlkxI9NJIuOM42SkkVV2RS&pid=News

Next Cryptocurrency to Explode Sunday 4 June – AiDoge, Terra Classic, Optimism

https://www.bing.com/th?id=ODF.xJeI9n0sq43e8acqzUtULA&pid=news

Inside Bitcoins

TVL demonstrates the trust and confidence users have in a particular protocol. For example, if MakerDAO (MKR) has a TVL of $6.29 billion, it means that users have collectively locked $6.29 billion worth of assets within that protocol. Capital Deployed ...

Crypto Metrics (Part 5): DeFi

Mint

United States Department of the Treasury

The protocol’s community voted for onboarding a new real-world asset vault that would invest up to the additional amount in U.S. Treasury bonds.

https://www.bing.com/th?id=OVFT.azml0yQVzZkwiXRmFTTCYi&pid=News

MakerDAO Paves Way for Additional $1.28B U.S. Treasury Purchase

https://www.bing.com/th?id=ODF.fJDJ4f2BFbmOkQx_rnDw3Q&pid=news

YAHOO!Finance

The decentralized finance (DeFi) lending protocol MakerDAO’s community has voted to drop the $500 million worth of USDP stablecoin from its reserves.

https://www.bing.com/th?id=OVFT.tv47Zjui8EQWTOSA923g8i&pid=News

MakerDAO votes to drop Pax Dollar (USDP) stablecoin from its reserves

https://www.bing.com/th?id=ODF.RU4BC02k-qRanPQmxNA-qg&pid=news

Internet of People

Ditch

Votes

Reserve

Decentralized finance lending protocol MakerDAO’s community has voted to ditch $500 million Paxos Dollar stablecoin from its reserves, impacting half of the token’s supply. Vo

https://www.bing.com/th?id=OVFT.BmXt4vW1Y8GLNGR4MBY98S&pid=News

MakerDAO Votes to Ditch $500M in Paxos Dollar Stablecoin From Reserve Assets

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Ethiopia

Ever scratched your head about which crypto to throw your money at With an ocean of cryptocurrencies swirling around the quest to discover your holy grail c

Best Cryptocurrencies To Buy In 2023: How Caged Beasts, ETH, Chainlink Tops The List?

https://www.bing.com/th?id=ODF.k6O3sRggnv9dZCaM2w5RLw&pid=news

Big News Network.com

"The Hash" tackles today's hot topics: the community governing MakerDAO, the decentralized autonomous organization (DAO) behind stablecoin DAI, has paved the way to purchase up to an additional $1.28 billion in U.

MakerDAO on Track for $1.28B Treasury Purchase; Bitcoin Miners Likely Selling Output at $28K: Matrixport

https://www.bing.com/th?id=ODF.VE0LAuX7uJj52il3ulWVkg&pid=news

CoinDesk

Maker's Mark

The decentralized stablecoin DAI is undergoing a massive shift as MakerDAO reduces USDC exposure and opts for U.S. Treasury bills.

https://www.bing.com/th?id=OVFT.5k1q74MagP5KweJ9tQqwoy&pid=News

USDC Backing Maker’s Stablecoin DAI Plummets to 23%

decrypt

Ethereum

Bitcoin

Integration

Deep integration is crucial for the success of any crypto project, as Bitcoin & Ethereum have shown. DogeMiyagi will aim for success with deep DeFi integration

https://www.bing.com/th?id=OVFT.0M9rrdI-A7okXOtIcyf0uS&pid=News

DogeMiyagi to Follow Bitcoin and Ethereum With Deep DeFi Integration

https://www.bing.com/th?id=ODF.Caqyr0opfKlydldMITdwcw&pid=news

Hindustan Times

Saving

A few months after increasing the DAI savings rate to 1%, the MarkerDAO community is considering a proposal seeking to increase the DSR to 3.33%.

https://www.bing.com/th?id=OVFT.Mg_zB0s0ON6t3W0OZrFmIy&pid=News

MakerDAO proposal eyes new DAI savings rate of 3.33%

Get the most recent info and news about MakerDAO on HackerNoon, where 10k+ technologists publish stories for 4M+ monthly readers.

MakerDAO

The Rise of Decentralized Finance: A Collaborative Effort by Top DeFi Projects A group of over 30 leading decentralized financial protocols have come together to demonstrate the benefits of DeFi for 24 hours. The participating projects, which include , , , , , , and ,, are showcasing the interoperable nature of Web3 by sharing tweets from other protocols and highlighting the trustless nature of DeFi. Balancer Labs, Aura Finance Euler Yearn Element SushiSwap Aave MakerDAO This effort is a celebration of how DeFi can thrive when protocols can work together and create better user experiences. DeFi differs from traditional finance as it is open, permissionless, and composable. The recent crashes in centralized finance have further highlighted the advantages of DeFi, which is governed by smart contracts and open-source code. collaborative Building the Future of DeFi Together “The campaign highlights the difference between DeFi and traditional finance systems and serves as a reminder of DeFi's strengths,” Yearn CMO Draper said. Mamun Rashid, CMO of GrowthCU at Maker, added that “the campaign demonstrates the inclusiveness and collaboration within the DeFi community and the shared belief in making a positive change through decentralized finance.” https://twitter.com/Balancer/status/1622611178534109184?cxt=HHwWgIDUkaOR1oQtAAAA&embedable=true Jared Grey, Head Chef at Sushi, emphasized the importance of replacing the traditional financial framework with DeFi and the need for the industry to remain true to its mission of serving everyone. Fernando Martinelli, CEO of Balancer Labs, highlighted that social change is key to driving DeFi into the mainstream and that no project can complete this mission alone. : Vested Interest Disclosure The author is an independent contributor publishing via our . Be it through direct compensation, media partnerships, or networking. The author has a vested interest in the company/ies mentioned in this story. HackerNoon has reviewed the report for quality, but the claims herein belong to the author. #DYOR brand-as-author program Don’t forget to like and share the story! Image credits: . Shubham's Web3

20 DeFi Projects, including Balancer, Aave, and MakerDAO, Lead The Charge for Decentralized Finance

What is MakerDAO? MakerDAO is a behind the stable coin DAI — a that maintains a 1:1 peg to the USD. Think of 1 DAI as $1. What makes it unique is each DAI is backed by Ether instead of a 3rd party claiming to have the required collateral. Since Ether is volatile this poses some interesting challenges to maintain the peg. protocol cryptocurrency The project was started in 2015 and did not conduct an ICO, instead choosing to privately sell MKR tokens to fund development over time. Maker’s DAI stable coin launched at the start of 2018 and has experienced significant traction since then. Why do we need DAI? Dealing with crypto’s volatility is a problem. As many in the blockchain space know, DAI is not the first stable coin in the space. Predecessors include Tether, TrueUSD and a few others. However the risk of all of these projects is that the custodial party holding the real US dollars will refuse redemption of the stable coin for any regulatory reasons. This goes against the ethos of crypto being permissionless. Furthermore, we have to trust that the custodial solution actually has the correct amount of US dollars and not creating artificial inflation. Who’s using it? DAI is arguably the most successful project built on Ethereum at this point in time. It currently holds 2% of all Ether inside its smart contracts and has issued over $77 MM in DAI (debt) in its system. In addition, Maker continues to see perpetual 20% month-on-month growth in terms of the DAI issued with 71% of users spending their DAI as soon as they acquire it. This signals a shift of usage rather than speculation. Source: https://medium.com/makerdao/dai-in-numbers-2710d8a5633a How does it work? The basics of the system, work like this: You deposit/send Ether to Maker’s smart contract, creating a Collateralised Debt Position (CDP). Say you deposited 1 ETH (worth $100), this will allow you to take up to 40 DAI (assuming a 150% collateralisation rate $100/1.50) against your $100. However, if the price of Ether drops below $100 your CDP will be forcefully closed. To stop this from happening you need to put in more Ether or take out less DAI in the first place. This is to ensure there’s always enough capital locked against the amount of money being taken out. If you want your Ether back, you need to pay back the amount you took out with the addition of a minor fee. It can be a bit overwhelming. Here’s a of how the lifecycle of a CDP might play out assuming the price of Ethereum is $150 and you deposit 1 ETH at this price: few simple examples You decide to take out which means your CDP is collateralised . As long as the price of Ethereum doesn’t drop below (50 * 150%) your position will be safe. After one year, you decide to pay back the and retrieve your Ether locked up. Upon closing the position or other interactions with your CDP, you’ll pay the annual stability fee (set at 3**.5%** as of March 2019). 50 DAI 300% $75 50 DAI You decide to take out which means your CDP is collateralise at just . The price of Ethereum drops to which means your CDP is under-collateralised by ($100*1.5 = $150 < $100). A 3rd party will realise that you don’t have enough collateral and liquidate your CDP on your behalf. This results in your position being liquidated by 3rd parties with a penalty. These 3rd parties have various ways to profit from your position being liquidated. 100 DAI 150% $100 $50 You decide to take out which means your CDP is collateralised at . The price of Ethereum rises to due to the bull market starting. Your CDP is now collateralised at . Since you’re an ETH bull and you think the price won’t go down, you decide to draw an extra putting your CDP ratio at . 75 DAI 200% $300 400% 100 extra DAI 175% Who Controls the System? Inside the MakerDAO ecosystem, their native MKR token allows token holders to influence certain aspects of the protocol such as: What should the be the annual borrowing fee be ( )? stability fee How much collateral should be backing each CDP ( )? collateralisation ratio Shutting down the protocol in the case of a flash crash of the price of Ether or any other unforeseen situation ( )? emergency shutdown One important piece of information I haven’t mentioned so far is the fact that when the stability fee is paid, a is purchased off the market to pay the stability fee. This means that MKR is actually a . dollar equivalent amount of MKR deflationary currency At its core, MakerDAO is like a that issues loans with a certain interest rate. If the interest rate (stability fee) is low, people are encouraged to borrow more (lock up more ETH). If the interest rate is high, the cost of capital is high making it less attractive to borrow (close out CDPs). Recently, DAI has been consistently been . A big reason for this is because there is significant pressure from DAI holders to sell. DAI can only be generated via the opening of CDPs. To bring the peg back to its correct target price, MKR holders voted to the stability fee in hopes that it reduces the incentive to open CDP (and close existing CDPs) to . In the future the Maker team plans to introduce the Dai Savings Rate, which will allow DAI holders to lock up their DAI and earn interest. The interest paid to holders is financed from the stability fee that currently goes to purchase and burn MKR. credit facility trading on exchanges below $1 increase from 1% to 3.5% increase the buy pressure Now in the case that the MakerDAO system contains less collateral than it’s supposed to (flash crash of Ether), additional MKR is issued and sold on the open market to pay back ETH and DAI holders. It is for this reason that MKR holders don’t want to set the collateralisation ratio too low as they’re the buyers of last resort. However, they don’t want to set it too high as the cost to borrow increases. Positive ETH Feedback Loop A type of behaviour that we can’t confirm but can speculate happens is CDP holders doubling down on their positions (or going “long” on ETH). Essentially it goes a little like this: with a 200% collateralisation ratio Open a CDP for the price of Ethereum to appreciate Wait from your CDP (because you can without decreasing your collateralisation ratio) Draw more DAI with your newly minted DAI Purchase more ETH to over collateralise your CDP to safeguard against any market down turns Add ETH to your CDP While it sounds quite harmless, tomorrow if ETH appreciates to $500 from its current $150 price, the current 250% collateralisation ratio (average) would increase to 75900%. Based on current numbers it means 150M dai could be minted which could cause significant buy pressure on Ether causing a positive feedback loop. The current 100M debt ceiling limits this from happening but will most likely be increase with the introduction of multi-collateral DAI. Multi-Collateral DAI So far the MakerDAO experiment seems to be a success amongst the community and is growing every month. However a big limitation is you can only use Ether to collateralise your CDPs. With the introduction of multi-collateral DAI you could use any ERC20 token to collateralise your CDP. You could actually use your wrapped Bitcoin to collateralise your CDP! While it all sounds good there’s two implications which Maker fans should be aware of: Using custodial assets such as wrapped Bitcoin (backed by BitGo) could result in undercollateralised CDPs if issuers are forced to freeze assets. An example of this is authorities telling BitGo they’d like to blacklist wrapped Bitcoin from MakerDAO’s addresses. This means that the value of the Bitcoin backing the CDP is worthless. Since Ethereum isn’t the only asset inside the collateral, it means that any positive feedback loops from the ETH price can’t be realised as there’s less ETH to actually contribute. I don’t see this necessarily being a bad thing but it’s worth being aware of. Final Remarks Thing such as the positive ETH feedback loop and Dai Saving Rate are going to be really exciting to see come to life as we’ve never seen anything like it at scale. Coupled with all the other open finance projects, this experiment is going to be exciting to see play out! I personally think Maker is the third most successful experiment after Bitcoin and Ethereum. The team has stayed true to the values of crypto, engages with the community and has shipped a meaningful contribution to the entire space. They also throw amazing parties but that’s for another time. References: https://hackernoon.com/an-overview-of-makerdao-21e9f34aa1f3 https://medium.com/makerdao/dai-in-numbers-2710d8a5633a https://medium.com/pov-crypto/evaluating-mkr-def6d36092bd https://medium.com/pov-crypto/could-makerdao-trigger-a-positive-feedback-loop-of-increasing-eth-price-fce80b27119 https://medium.com/makerdao/raise-the-stability-fee-to-3-5-f0d6731b1041 https://medium.com/@visionhill_/a-makerdao-case-study-47a31d858be5 https://www.reddit.com/r/MakerDAO/comments/asb9n6/a_couple_questions_concerns_about_maker_and_mkr/ https://medium.com/makerdao/dai-reward-rate-earn-a-reward-from-holding-dai-10a07f52f3cf

What’s MakerDAO and what’s going on with it? Explained with pictures.

Find more helpful resources on building and running a successful crypto community on the Chainfuel blog , as well as their free e-book: The 7 Pillars of Crypto Community Management . MakerDAO are the makers of DAI, which is a stablecoin on the Ethereum network. DAI is a completely decentralized stablecoin that exists purely on the blockchain. What’s your background? How did you get started in crypto, and then involved with Makerdao? I studied rhetoric at UC Berkeley and minored in political economy. I heard about crypto for the first time when I was 19, so that would have been in 2012. I thought the concept of a trustless, transnational digital currency like Bitcoin really fascinating but didn’t follow through to create a career path for myself. After college, I went to graduate school on a Rotary scholarship to study a degree at the University of Cambridge Institute of Criminology. The program was was not about forensics but a cross domain course of study that includes sociology, anthropology, psychology, ethical philosophy, statistical analysis and other academic disciplines. Some taboos are universal and there are also a few crime statistics that are universal-such as the declining tendency to commit crime as one gets older and a very large male to female predominance for violent crime. On the other hand, criminal enforcement and punishment varies considerably in different parts of the world. So studying criminology is really a study of human motivation and human-to-human (i.e. socio-cultural) interaction. After getting my MPhil, I was working at the United Nations Crime and Research Institute in Turin and I attended a conference curated by one of my Cambridge criminology colleagues from that was focused on Big Data-and its potential abuses as well as its uses to detect and prevent crime. There was some small intro into crypto there, sort of conversations along the side. I got a bit more interested once again, and decided to start doing some of my own research and reading. My little brother is a very active Redditor and crypto-enthusiast, and he talked me up quite a bit and peaked my interest. It led me to getting a job first with a project called BlockV, which was in Santa Monica. The project focused on putting digital goods on the which is a really cool marketing innovation but I most was intrigued with the idea of creating a successful stablecoin which I believe is necessary to bring the real vision and use case of crypto to fruition. So the opportunity to work for was really the fulfilment of my wildest hopes and dreams. So here I am and I’m loving it everyday. blockchain MakerDAO What was the rationale for not doing an ICO in Makerdao, and how has this impacted community building? Initially MKR were sold via private sales to friends and family, as well as investors like Andreessen Horowitz and Polychain. The process was and has been way more personal that what you see with a typical ICO. The goal was to create an ownership community that is cohesive and committed to long term success and not just short term gain. The goal of MKR is that its holders be responsible for governance and fiscal decisions. Basically, it is a risk sharing model-the owners of Maker share in profits but also share in potential losses. In order to achieve the dream of the DAO, (MakerDAO’s decentralized autonomous organization) there needs to be responsible token holders or MKR holders that make up the DAO. The goal of having responsible “owner/operators” is part of the reason Maker never had a wild and crazy ICO. Given the level of quality interactions that I see between our community members today, I can confidently say that the roll out of Maker tokens was handled wisely. What do you do in your day to day as a community manager? What are your responsibilities? I’m not the only community manager, but when I started I was. Before, it was more time online, but now I specialise more so in the events side of community, more physical spaces. So I look at what are the different opportunities and places for that to happen and that to flourish while the brilliant Rich Brown manages the technical community. It is important to remember t that not all crypto communities happen purely online. There are loads of community members I actually meet at events and tell me how they’re excited about the project and have been passionate about Maker for awhile. The interesting thing is that a lot of these folks don’t always participate in the online chats, thought they do follow the discussions. It’s been cool to see how different community members flourish in different spaces: some prefer being online, and some prefer being offline. My job is to ensure there is space for all of them to participate. Another thing that I do is curate video meetings that are open to community members who are are seeking more information about the project. Right now there’s a lot of focus on governance as we’re moving quickly toward being an operating DAO. MakerDAO’s governance is pretty ambitious, so making sure that community members have the opportunity to get their questions answered and moderating the video call conversations is a really cool and fulfilling way to engage with the community. It’s great to see the bridge between community members and people like our CEO Rune, or our developers that have the opportunity to come on and speak a bit about what they’re doing. Ina public company, shareholders are proportional owners of the corporation. But how often do Google shareholders, for example, get a chance to talk to the CEO, to other key executives or to developers and other technical experts? Those sort of interpersonal non-hierarchical interactions happen regularly at Maker and I am really thrilled to play a small part in enabling those interactions. ( ) Source How does community management fit within the larger organizational structure? What role does it play in the long term vision for the project? We’re moving towards that true vision of decentralization, somewhat slowly but surely. In some ways that requires that we get a lot of information out there, to make sure that our community members are as educated as possible to make responsible and agreeable governing decisions. I’d say that community management has an important role in our plans for expansion. A successful stablecoin has to achieve critical mass and then its use will increase exponentially. We have seen that with other great inventions like air travel, email, the internet-you start with something good and then you build adoption and aim for a network effect. MakerDAO’s success is built upon the development of cohesive, connected community. We are an international project, not just because of our employees and the MKR holders that live in many different countries but because our goal is to create a relatively stable digital currency for the entire world. We’re hiring and we have hired some truly incredible community leads across our planet. I’m in the United States but I just got off a call with Lenka Hudakova, our amazing community lead in Europe. This is great as the opportunity for community building is global and our community lead team is operating globally. I’m so thankful to work with a team of community building super rockstars including Lenka in Europe, Mariano Di Pietrantoni in Latin America, Chao Pan in China, and Jocelyn Chang in Singapore! For any organization it’s important to remember why the organization exists. I’d say in many ways MakerDAO truly exists for the community. We build infrastructure for other organizations or other communities to then go ahead and use. Some of that infrastructure being the stablecoin, Dai, or the permissionless lending that occurs through the CDPs. The way to optimize what Maker is doing is making sure that the community continues to feel passionate and engaged, continues to feel that their needs or questions can really be addressed, and that they have an opportunity to engage with us. So in terms of fulfilling the overall vision of most crypto projects — I’d say communities are centric to that. Can you provide some numbers for your community? What growth strategies you implemented to get there? Our strategy with community right now hasn’t been to expand it so much as it’s been to tend to it. Multi-collateral Dai hasn’t been launched yet, but it will be launched soon. So the community that has joined so far is already excited about single collateral Dai using specifically ethereum. I’d say our goal has been to maintain the excitement and the enthusiasm, which is rightfully there, up until the larger launch of what Dai is truly meant to be, which encompasses multiple collateral types. The growth strategy has been about creating deeper relationships with the community members that already exist, especially the developing community that already would be happy to use MakerDAO infrastructure. Once Multi-collateral Dai is launched the strategy will put more emphasis towards scaling. I guess you could say that we want to do it right before we do it bigger. We hope and expect that growth will accelerate as we continue to reach our milestones. How do you engage with the broader community? We do a community meeting each week on Tuesdays. There is also an opportunity for people to come in and engage or watch the recap. We go over all the news and the development that’s happened that week. Really keeping up to date with great content that comes out on our medium, which we then go ahead and tweet or post to Reddit or use within our own Rocketchat. One of the things I like about our community strategy is that we’re not on too many platforms. For instance, we confine a lot of what we do to on Rocketchat, which is cool as opposed to attending tons of communities across a lot of different channels. That’s not to say that won’t happen in the future, but as of now a lot of the information is dispersed through Twitter, in which we have a big presence, and Reddit and then our Rocketchat. So the maintenance of those communities is streamlined and I’d say that’s helpful. chat.MakerDAO.com How would you define a successful crypto community? What metrics would you use to define success? It depends on the goals of the crypto community. I would define success as an engagement but in a positive way. So not having people come on and ask “When is this going to moon?” could serve as a definition of success for some people. A lot of it just has to do with a qualitative evaluation which can be somewhat difficult to define in a succinct metric. What are Makerdao’s goals for the community? Keeping the community equipped to take on the big things that are happening somewhat soon on our roadmap — that being decentralized governance. Making sure that the community is educated to a level that they feel is necessary for them to make good voting decisions. We also want to maintain the passion and enthusiasm that already exists, and make sure that we can continue that momentum moving forward. If you can go back in time, what would you do differently? What do you wish you knew early on? If I could go back in time, I would have thought more about some of the hybrid that happens between community building and business development. Community is such an expansive and ethereal term. When you think about the community, it really encompasses everybody. One of the things that I’m trying to do now, in becoming a more successful community manager, is honing in on our business development strategies and processes. That way when I interact with people and projects within the Maker community, I can understand our alignment of interests and optimize the spread Maker infrastructure in as many positive ways as I can . How do you approach expanding internationally? I’ve actually approached it through events. So ETH Buenos Aires was great for us in terms of growing out to Latin America, not just community presence but essentially the project presence of MakerDAO. I met two truly amazing individuals there. Including Mariano Di Petrantonio who is now our community lead in Latin America as well as the incredible Nadia Alvarez who is now our business development associate in South America. In terms of building out an international presence from a recruiting perspective, it can be really helpful to meet and engage with the people that are going to be a part of that. If projects have the opportunity to go to a large event or an event that seems like an alignment with the kind of community building that they want to do in a specific area, then they should definitely take advantage of that opportunity. We’ve seen a lot of positive things come out of that. ( ) Source Is there anything else you want to say about community management for new projects starting out and trying to build up their communities? I’ve been fortunate coming into the Maker project because the community already existed and already had this beautiful harmony to it, which was the seed that maintained and continues to flourish. So in terms of building out a community for something that does not yet have a strong following: maintain a pure ethos about what it is that your project is doing, incorporating that roadmap into whatever community that you’re trying to attain and preach what those benefits are in order to bring on new community members. This is something that could lead to some enthusiasm and positivity, as opposed to really aggressive marketing tactics. Maybe attending more events with projects you respect or have some synergy to what you’re trying to do, and then interacting with communities there could be an interesting way to go about building a community. Identifying what already works and then seeing if you can maybe feed off of some of that positive energy. Where can people get in touch with you? They can get in touch with me on , which is a part of our Rocketchat. Also on our Reddit, which is , or if they want to send me a message to , and I’d be really happy to talk more. chat.MakerDAO.com r/MakerDAO u/jesssalomon-MakerDAO Alan VanToai is one of the Co-Founders of Chainfuel — an agency providing community management and design services for crypto startups. You can find more helpful resources on building and running a successful crypto community on their blog , as well as their free e-book: The 7 Pillars of Crypto Community Management .

How MakerDAO Created An Engaged, Cohesive Community Without An ICO

Reserve’s Analysis of the MakerDAO Protocol

I will reintroduce the idea of - Volatility insurance If a merchant can’t take the risk of large daily margins in a cryptocurrency value, he could pay a financial entity a commission for ensuring him the same rate over the day or determined period of time, so that he will not suffer the currency volatility while he’s serving as an intermediary between his suppliers and customers. Thus, this issue can be solved not by manipulating the currency as a whole but rather as a proprietary service offered by third parties to users of the currency. The thing with volatility it can have an upturn and a downturn. Merchants don’t want to be suspectible to these changes, because it messes and disrupts their trade. Insurance companies though, with the use of statistics, by spreading the volatility risk between many players and having a large financial backing can withstand and make profit out of these fluctuations, assuming they can predict the overall behavior of the currency — whether it’s going up or down, and at what rate to set commissions paid by the merchants. Volatility insurance in a smart contract Say I am a merchant who received 10K$ worth of ETH, and I want to ensure that in the next period of time of commerce they will be pegged to the value of the USD. I will need to choose from the following parameters: How much volatility am I protecting against. Is it the price of ETH going down x2, x3, x4. How much fee am I willing to pay as a percent of the insured value. What period of time should this insurance apply to This can be standardized. On the other side of the bargain, someone who wants to go LONG the value of ETH or believes some fee is sufficient for the risk, would supply me with the needed collateral for this insurance. Say the parameters chosen are x3, 0.1% fee and 1 day of insurance, and the current price of ETH is 1000$. The merchant will send 10.01 ETH to the smart contract. The insurer will send 20 ETH as the collateral. The 0.01 ETH fee will go immediately to the insurer, and the funds will be held in the smart contract for 1 day. After 1 day, say the price of ETH has dropped to 500$. The merchant has done a good deal in this case. He will receive his 10K$ worth of ETH — now being 20 ETH. The insurer will get back the rest, which is 10 ETH. After 1 day, say the price of ETH stayed the same at 1000$. The merchant gets back his 10 ETH, the insurer gets back his 20 ETH. After 1 day, say the price of ETH went up to 2000$. The merchant gets 5 ETH, the insurer gets 25 ETH — This means that from 20K$ he got 50K$, so he was going LONG with x1.5 leverage. Before the day ends, say the price of ETH drops at some point to 333$. This requires liquidation of the insurance, as the collateral is just enough to supply the merchant with his original worth of 10K$. He will get all the ETH in the smart contract, and will need to re-establish a volatility insurance if he wants to keep on pegging his ETH to USD. Note that the merchant should be able to withdraw his worth of 10K$ at any point. He will then lose the protection of the insurance. The insurer can’t do that as he already received the fee he required. This is meant so that merchants will not be locked out of their coins in case they need them for commerce, and is consistent with the way shorting works in general. It goes without saying but still important to note that this smart contract will require a system of oracles for knowing USD/ETH prices. Volatility insurance vs MakerDAO I think MakerDAO are almost there — look at this quote from their whitepaper: Alice and Bob collaborate using an Ethereum OTC contract to issue 100 USD worth of Dai backed by ETH. Alice contributes 50 USD worth of ETH, while Bob contributes 100 USD worth. The OTC contract takes the funds and creates a CDP, thus generating 100 USD worth of Dai. The newly generated Dai are automatically sent to Bob. From Bob’s point of view, he is buying 100 USD worth of Dai by paying the equivalent value in ETH. The contract then transfers ownership of the CDP to Alice. She ends up with 100 USD worth of debt (denominated in Dai) and 150 USD worth of collateral (denominated in ETH). Since she started with only 50 USD worth of ETH, she is now 3x leveraged long ETH/USD. Example 3 : This is extremely similar, but has quite a few downturns compared to the volatility insurance smart contract described above. The thing with MakerDAO is, Free markets are about voting with your feet, not about getting a vote to how the financial system will work like MakerDAO offers with the MKR token. In a free market, you can choose your own ‘stability fee’, and your own requirements for the size of the collateral in a CDP you’re committed to, not only have a vote in their governance. In the MakerDAO system, it’s either you accept the ‘rules of the game’, or you’re out. You can’t find a match who accept the same terms as you do and go with them. This also allows flexibility when the markets turn whatever way. Because there are many different contracts with different settings, there isn’t a moment in time where everything is liquidated together, causing huge chaos. Also, in these cases in MakerDAO, all the biddings need to happen at the moment of crisis, when time is most important. In Volatility insurance as described, the bidding happens at the start, and from there on the mechanics is clear. Generally in MakerDAO, the mechanics of the platform are so unnecessarily complex, with at least 3 different proprietary coins involved at the moment (PETH, DAI and MKR). The white paper hints at the architecture of the coin but doesn’t put forward the specifics, which are probably still being tested and changed, so an exact analysis can’t be made. In the Volatility Insurance, you know exactly what you get. There is a kind of dualism to markets that enables us to understand them better. There are buyers and sellers. When you see someone shorting an asset, then you have the other side of the bargain who’s gaining a fee for the loan. You can believe both of them are rational, only with different estimations regarding the future. In MakerDAO, there is no clear ‘other side of the bargain’. It’s like Bob would bet against himself, short and long the DAI at the same time. We ask him to add a collateral, and pay a fee. Volatility insurance contracts are USD on the blockchain A Last thing to notice - Once a merchant closes his funds in a Volatility insurance with given risk parameters, he can transfer this asset to anyone he wishes. This can be encoded within the smart contract. And what would you pay for 10K$ worth of ETH with x10 volatility insurance and the fees already paid for 1 year ? Probably just about 10K$. So they can be circulated around the blockchain as the actual asset they’re pegged to, and this was achieved without any central entity such as Tether, and without generating many different coins in many names. Of course there’s no reason to limit yourself to USD, this can be any outside asset whose price can be oracled into the smart contract.

Volatility Insurance and the MakerDAO platform

Anyone who has been watching the crypto markets and decentralized platforms will agree that 2020 was a good run for DeFi. The sector grew by leaps, recording a 2000% growth to close at $13 billion in TVL. As other sectors were crippled under the global pandemic, decentralized finance thrived as crypto enthusiasts got on board. Whether this was fueled by FOMO or by the mainstream global adoption of cryptos, there’s no denying that the massive onboarding by enthusiasts across the globe marked a significant shift for the blockchain industry. Although DeFi was initially established to bank the unbanked, these projects have come up with different ways for users to make money. Whether you know every nook and cranny of the sector or you’re just getting started, there’s something for you in DeFi. Trying to figure out how to make some extra money through DeFi? This article is just what you need. Here are our top four picks for DeFi projects worth looking into and how you can make some coins from them. Uniswap Uniswap is, undoubtedly, one of the most popular DeFi projects, thanks to its automated market maker (AMM) protocols. Thanks to these, there’s no need for order books as is the case with traditional exchanges. offers the opportunity to make money by becoming a liquidity provider (LP). To do this, you will need to trade against a pool of assets so that you can swap tokens and ETH. The liquidity pools are public, and anyone can contribute to them. All you have to do is lock in equal amounts of the token pairs. Uniswap LPs then make money by earning a share of the trading fees. Uniswap currently sets this at 0.3% of the trading fee, distributed according to the amount held in the pool. It is worth noting that providing liquidity on any DeFi platform isn’t entirely riskless. Instead, LPs can make impermanent losses, depending on the price direction of their selected pair. Let’s take an example; Suppose you want to invest $200 in the ETH/USDT pool. You’ll need to deposit $100 of ETH and $100 of USDT. When the trading volume in the pool grows, so do your gains. However, if the prices of the pooled tokens fluctuate significantly, you could lose money through impermanent losses. Suppose ETH gains 5x following your deposit in the ETH/USDT pool; you could have a 25.5% impermanent loss. However, if you gained 40% on the fees, you’ll end up making a net profit of 14.5% since the net gain is calculated by subtracting the impermanent loss from the trading fees. They are called so because the loss isn’t realized if the price ratios are correct before you withdraw. Therefore, you make the highest returns when there are low price changes and a high trading volume. Providing liquidity presents a different kind of risk. As such, it’d be best to analyze real-time data from LP aggregators to project your potential gains better. You could further mitigate the risk of impermanent losses by choosing pools with less volatile assets, such as ETH/USDT. MakerDao is another well-known name within the DeFi space. The open-source project was established in 2014 and has held its position as one of the top DeFi projects even as new contenders join the scene. MakerDao The Maker protocol has Dai as its native token, and token holders have several opportunities to make money on the network. Besides the staking and lending options offered by various DeFi projects, Maker provides a unique way to make money; the Dai Savings Rate (DSR) contracts. Dai holders only need to lock their cryptos in a DSR contract through different gateways, including the . There’s no lower limit on the amount to deposit, and users can start earning automatically. Oasis Save Portal MakerDao employs a global system parameter to determine how much Dai holders earn on their savings. The platform has another token, MKR, which serves as the governance token. MKR holders mitigate Dai’s price instability whenever the market price deviates from the target price. The network, however, has plans to implement the DSR Adjustment Module or easy adjustment of the DSR. The module will control both the DSR and the base rate, making it easier for an MKR holder to adjust the rates in lieu of a bigger group of holders. The DSR is ideal for HODLers who want to earn money from their cryptos without assuming too much risk. Compound Our final pick for this list is Compound, a decentralized protocol for developers that makes it easier to access open financial apps. takes advantage of one of the most important aspects of any financial system; borrowing and lending. Compound Compound users can choose either to borrow or lend cryptos at an interest. Lending your cryptos to the protocol earns you an interest rate in the same way as having your money in a savings account does. The interest starts accumulating once you’ve made your first deposit and is denominated in the same tokens that you deposited. Therefore, if you had lent Dai tokens to the protocol, you will receive interest in Dai. However, once you make a deposit, you earn cTokens, which you can redeem at any time to get the underlying assets. As the underlying asset gains interest, the exchange rate for the cTokens increases over time relative to the underlying asset. Compound protocol automatically determines and implements the interest rates, which fluctuate, depending on the market dynamics. The floating interest rates make it more lucrative to lend cryptos to smaller pools since they generate higher returns. DeFi Yield Protocol (DYP) Our top pick is DeFi Yield Protocol (DYP), a unique platform that offers various DeFi solutions to its users. DYP provides a bunch of advanced trading tools that its users can leverage to get the most out of it. Users on the platform can make money in various ways. Just recently, DYP the Buyback program that offers 100% APR for staking supported assets. Ethereum, BSC, and Avalanche users can deposit any of the supported assets in a Buyback contract. announced The platform will then convert the assets into DYP before depositing them into a staking contract. DYP then distributes the rewards automatically, and users can claim them every day. Besides the , DYP users can make money through several other ways; Buyback contracts - DYP integrates with Compound in this automated yield farming contract. Users can earn from the ETH, DAI, USDC, USDT, and WBTC markets. DYP distributes 75% of the earnings to the liquidity providers and uses the remaining to buy back their token and burn it. Vault - The platform is quite innovative, making history as the first and only in the DeFi scene to reward its users in ETH. The farms allow users to deposit tokens and become liquidity providers to receive their earnings in Ethereum. Farm - DYP token holders can earn DYP rewards by depositing into any of the staking pools. The pools offer different staking options, with the rewards ranging from 20% APR- 35% APR. Users can also choose to reinvest their daily returns into the staking pool or even more earnings. Stake - You can earn DYP by bringing more users on board. The platform provides each user with a referral link at request. Whenever any of your referrals stakes DYP, 5% of their rewards are automatically sent to you, free of gas fee. Referral Bottomline DeFi is constantly challenging the traditional financial systems the world is used to. Thanks to the 2020 craze, crypto critics and fans from across the globe are paying more attention to the industry. Therefore, we can only expect developers to come up with even more ways to earn from these projects. In the meantime, this article provides four of the best DeFi projects to be on the lookout for. They all offer unique ways to make money, so you’re bound to find one that suits you.

Making Money with DeFi: Uniswap Vs. MakerDAO Vs. Compound Vs. DYP

An Overview of MakerDAO

Follow me @flatoutcrypto . All of my articles (and some which I am unable to publish on Medium) can be found on flatoutcrypto.com . Decentralising many of our financial institutions (or rather, the purposes they serve) has long been a goal for many projects. began life as a “A Peer-to-Peer Electronic Cash System”, with payments being one of (alongside deposits/savings) the most frequently used banking facilities. blockchain Bitcoin Recent months have seen the proliferation of the idea of ‘ , yet another narrative designed to explain or to assign value to protocols. The term has already earned the but it is clear there are aiming to facilitate and decentralise elements of financial systems and institutions. Over the next couple of months I will be taking a look at some of the projects which make up this ‘Open Finance’. Open Finance’ scorn of many numerous projects A nice overview of the many Open Finance services in development; Felix Feng First on the list is MakerDAO (henceforth Maker), a project I wrote about in this month’s issue of as the ‘DApp of the Month’. The idea of the segment is to look at DApps that are operational and open for business, in an attempt to encourage people to try these nascent services out. As a sidenote, I would encourage giving the magazine a read as there are many talented and interesting authors featured. The publication is also both level-headed and free from many of the ills that taint the space which is why I was keen on contributing to it and I’ll be doing five articles a month focusing on the ‘Learn’ section. 21Cryptos Now, on to Maker… What is it? Maker is positively an elder statesman by crypto standards. Announced in 2015, the project has been one I’ve followed for a considerable period. If I was ever asked to give an example of a DApp it would have inevitably have been Maker but curiously I have never owned or traded it. I’ve also been meaning to do a write-up of it for at least two years but for one reason or another have never got around to it. This series provides the perfect reason to finally do it, however, as Maker covers two elements crucial to any financial system — stable money and easy lending/borrowing. It has a reputation for being a complicated project to understand but I would contend it has one of the simplest visions which, when understood, allows the constituent parts and designs of its system to become clear. Maker’s avowed goal is the facilitation of a decentralised stablecoin. Why a stablecoin? Because it frees users from having to worry about the extreme price volatility current cryptoassets suffer from which should encourage them to transact using crypto. For those unfamiliar, a stablecoin is one, which as the name suggests, remains at or near a fixed value. These are usually, but not always, pegged to another currency (such as Tether, pegged to USD1) or other assets (such as gold). Why decentralised? Because it should allow for lower interest rates to be charged (no banking overheads to worry about), provide transparency (thanks to all transactions being visible to all on the blockchain) and means that it is open to everyone — no need to worry about KYC, being turned down for a loan, complying with onerous requirements, asset seizure or any of the other myriad of banking issues. And of course, removing the need for an intermediary removes the need to any intermediary trust What problem is it trying to solve? In addition to the above issues, Maker is trying to solve issues with competing stablecoin implementations. Chief amongst these is inextricably linked with the decentralisation point above. The most (in)famous and widely used stablecoin is Tether, believed to be either a useful tool to move in and out of crypto or a mechanism to pump the markets depending on whom you listen to. Tether is ultimately reliant upon a bank. To buy Tether an investor must buy Tether from the source, who ‘print’ new Tether which are put into circulation. These Tether are then exchanged for Bitcoin or other cryptoassets. There are two obvious issues here: We have to trust the company behind Tether that for every Tether (USDT) produced it has received USD 1. If, instead, the company are just printing USDT and exchanging them for BTC themselves then there are no assets backing Tether and therefore it is based on a house of cards which will eventually see USDT crash to zero Tether, as a company, must rely upon external banking relationships. This means that they are at risk of their banking partners refusing to serve them, as has happened before. This means that they are unable to offer unfettered service and ensures it is incumbent upon them to comply with KYC and AML regulations Although the stablecoin aspect takes the lion’s share of attention, the trustless mechanism for borrowing and lending is also exciting and should open up new opportunities for users and entities alike. How does it work? Maker comprises two elements: DAI: Dai is the stablecoin implementation. 1 Dai = 1 USD. MKR: Whereas Dai is what is intended to be created and used by people, MKR is the more typical cryptoasset. Holders of MKR are afforded a proportional say in the running of the system. Owing to the way Maker works, as shall be shortly seen, the success of Dai should correlate with an increase in price of MKR. Therefore, if you wish to benefit financially from any future success of Maker, you would buy MKR. However, you do not need to buy MKR to buy DAI — the two are related, but functionally separate. The process of acquiring, using and divesting Dai follows this rough process: User creates what is known as a Collateralised Debt Position (CDP) by sending a transaction to the Maker address. They then choose an amount of ETH to deposit. This funds the CDP. This also has the effect of converting the ETH into first Wrapped Eth (WETH) which basically turns ETH into a ERC20 (e.g. like all other tokens running on the Ethereum network). This WETH is then turned into Pooled ETH (PETH) in order for it to be merged with the rest of the collateral which underpins the generated Dai. User sets their Loan to Value (LTV) rate (there is a minimum as to how much leverage a user can take on). A deposit of 10 ETH at a LTV rate of 50% would mean that if ETH was worth $300 a user could borrow 1,500 Dai (10 ETH *300 = $3000, 50% LTV = $1500 = 1,500 Dai). User receives Dai in return for pledged collateral. You don’t have to withdraw all the Dai available to you at once — you can draw it out over time or not at all. When user wants to pay back the loan and get their ETH back they pay the necessary amount of Dai back. If they borrowed 100 Dai they would pay back the 100 Dai and then pay an interest payment on top. This interest payment burns an equivalent amount of MKR, making MKR a deflationary asset (hence why increased Dai usage should see MKR rise in price ) ceteris paribus The price of ETH is set throughout the process by use of oracles (which take price data from external sources and relay it to the Maker system). User gets their original collateral back The whole process works pretty seamlessly and is worth trying out if you’re unconvinced. It is important to note this is simply how you use Maker to acquire Dai — you can also just buy it as with any other cryptoasset on exchanges. The collateralisation is important because it is intended to ensure that no matter what, the holdings of Maker are enough to sustain the amount of Dai that has been generated. For example, if users could deposit 1 ETH @ $300 and receive 300 Dai back, then if ETH dropped in price to $200 the next day then the system would effectively be underwater and it would be in the users interest to default on the loan (because they could sell their 300 Dai for $300 and then buy back 1.5 ETH). If the price of the pledged collateral was to drop then the user would be faced with either having to pledge more collateral (to make sure their CDP didn’t go underwater) or see enough of their ETH liquidated to bring their CDP back to the requisite borrowing level. This happens automatically, and only liquidates enough to bring the user back to the required level rather than taking the whole amount. MKR holders are incentivised to prevent risky borrowing behaviour by users as a whole. If the wider userbase was to go underwater on their collateral (e.g. if all cryptoassets dropped sharply and suddenly) then an additional and proportional amount of MKR would be generated to make sure there was enough collateral backing again. This should, again all things being equal, see the value of MKR reduce owing to the increased supply. This is one of the common arguments against Maker’s long term viability — if there was an unexpected and wide ranging event which caused all cryptoassets (or even all global assets) to drop precipitously overnight then Maker could enter a death spiral from which it could not recover. The value of assets drop, necessitating liquidation. Liquidation would (if Maker got large enough) mean values would drop further, which would require further liquidation and so forth. If all other assets were to drop then MKR would likely drop too, meaning that more and more MKR would need to be generated as collateral. In addition to the aforementioned governance and MKR generation to ccover losses, the system uses target prices and target rates to keep Dai at or near $1. This is done automatically by the Maker system and essentially incentivises either increasing or decreasing supply in order to reciprocally increase or decrease supply to bring the price back to $1. As a result of this, and ensuring that $1 of Dai is always backed by at least $1 of collateral, the value of Dai should (and it is by no means assured at this stage until proper stress testing and unpredictable events are experienced) remain near $1, even if it is never exactly $1. If the worst-case scenario did happen and the value of Dai irredeemably broke with its peg or the system suffered a failure so severe it could not recover then MKR holders are able to invoke what is known as ‘Global Settlement’. This essentially shuts down the system and distributes all collateral to users. The project would be dead, but funds would at least be protected (to a degree). Anything else? One of the big issues with any working crypto products is that of adoption. In a bid to encourage wider usage, Maker has recently slightly amended its reward structure and continues to partner widely across the Ethereum landscape. These aforementioned amends saw Maker in a bid to encourage the demand for Dai which sees Dai holders given a proportion of the rewards previously allocated to MKR holders. The idea is that by doing this, it will lead to Dai generation and therefore adoption, which will ultimately enrich MKR holders. announce changes An important goal on the roadmap is to move to a multi-collateral Dai. This means that users could then pledge a variety of different assets, including and , as opposed to solely ETH. This is set to launch imminently, with the testnet deployment coming on September 17th. DigixDGX OmiseGo The team has also been working to make Dai a feature of the many decentralised exchanges, such as , Bancor, Radar Relay and Kyber Network. Again, this is an obvious fit. We can’t trade USD on decentralised exchanges, but many will prefer to trade against a USD replacement than against ETH. This extension of fiat is reflected also in the recent announcement that Dai would be a trading pair on Wyre, a blockchain money transfer company, which facilitates fiat on and off-ramps. AirSwap These partnerships are complemented by a number of other ventures with other Ethereum projects, including bZx, CargoX, STK, Request.Network and Lendroid. There are many more projects that will likely benefit from a trusted stablecoin. Conclusion I chose to start this series with Maker not solely because of its longstanding nature, but also because it fulfils a clear need. It focuses on a couple of problems, and the team have done a good job of focusing just on elements needed to solve those pain points. Having used it myself, I find it one of the most compelling projects around with clear use cases. For anyone who has had to deal with a bank when trying to obtain a loan, the ability to create and take one out without needing to pass multiple tests, prove earnings and provide identification is a pretty amazing experience. For example, many people around the world (and it is certainly not confined to poorer countries) live month to month. They often have to resort to payday loans and are forced to use rapacious and often under regulated companies. Maker solves a big part of that immediately. Instead of pledging watches or jewellery and paying steep fees, or taking out , a system like Maker allows for instant and low interest borrowing. There remains issues with on ramp/off ramp so people can use their borrowed funds for their everyday purchases, but it is a start. unsecured loans at even higher fees The other reason I chose to begin with Maker was because one of the problems it solves is one of the most obvious issues crypto faces to widespread adoption (ignoring the store of value debate). There is around stablecoins, and particularly around if they can maintain their peg under unpredictable market circumstances. Time will tell how it holds up; caution should be preached until rigorous challenges are faced. It is a complex and difficult challenge to solve. plenty of justified scepticism However it can produce a tried and tested stablecoin then, given its position as both an established project as well as the relative lack of competition, Maker could emerge as a central pillar of not just open finance but of the Ethereum ecosystem as a whole. The exciting aspect of Maker is what new uses and products a stablecoin could give rise to, for a stablecoin is a central pillar upon which many other teams could build upon. if If you enjoy my articles then please follow me @flatoutcrypto .

The Open Finance Series Part 1: MakerDAO

In the presentation below, Niklas Kunkel, Oracle Core Unit Facilitator at MakerDAO, talks about the role that oracles play in bridging real world assets on-chain. https://youtu.be/rFv4FWMtlRE?embedable=true Below are further explanations of key points highlighted during his talk. Introduction to MakerDAO & Stablecoins MakerDAO is a decentralized autonomous organization (DAO) that guides the development of the Maker protocol. The Maker protocol is built on Ethereum and makes use of smart contracts to generate and maintain their stablecoin, Dai. Stablecoins are cryptocurrencies that maintain a stable value by being pegged to other stable assets or by using algorithms. Stablecoins generally fall into the following categories; Stablecoins that are backed 1:1 by one or more currencies such as the US dollar and Euro. Oneexample of a fiat-backed stablecoin is . Fiat-backed: USDT Stablecoins that are backed by other cryptocurrencies like Ether (ETH). Since cryptocurrencies are more volatile than fiat currency, crypto-backed stablecoins are usually overcollateralized. This means that instead of being backed 1:1, the amount in reserves would be higher than the value of the stablecoins in circulation. Crypto-backed stablecoins are issued on-chain using smart contracts. is an example of a crypto-backed stablecoin. Crypto-backed: Dai Stablecoins that are backed 1:1 by physical commodities such as gold. is an example of a commodity-backed stablecoin. Commodity-backed: Paxos Gold Stablecoins that make use of algorithms to manage the circulating supply based on market prices. is one example of an algorithmic stablecoin. Algorithmic: Ampleforth According to Niklas, the Maker team developed one of the first oracles on Ethereum. Back in 2014 when they were developing the protocol, there were no oracle solutions available that suited their needs. The team decided to build their own oracle with the intention of switching to another service later on. However, nothing suitable was ever developed and MakerDAO still uses their own oracle today. Niklas is currently responsible for leading the oracle unit of the Maker protocol. DeFi, DEXs & CEXs Decentralized Finance (DeFi) has faced unprecedented growth over the last 2 years. As a result, Decentralized Exchanges (DEXs) have also seen a surge in the amount of usage, with volumes now with centralized exchanges (CEXs) like Coinbase. competing DEXs are peer-to-peer marketplaces built on chain that enable the permissionless trading of assets. This is done by creating liquidity pools and incentivizing users to deposit assets to these pools through a process called yield farming. refers to the process where users deposit cryptocurrency assets into liquidity pools in exchange for trading fees. Assets are automatically swapped between traders and liquidity pools using smart contracts. While CEXs have Order Books that match bids to asks, Automated Market Makers, AMMs, are essential to  DEXs like Uniswap or Curve, acting as the mechanism that sets the price of tokens in a liquidity pool. Yield farming Hyperreflexivity of DeFi In his presentation, Niklas describes DeFi as being “hyperreflexive” in nature. He illustrates this point by describing the following scenario; During bull markets, as the price of popular cryptocurrency tokens like Bitcoin and Ethereum go up, the demand for also increases. As a result, the yield that can be earned for lending also goes up in order to incentivize users to provide liquidity for this leverage. This leads to a large amount of capital flowing into DeFi protocols. leverage As more and more users start , the Total Value Locked ( ) on AMMs like and go up. This ends up serving as a positive feedback loop – a higher TVL attracts more and more users to put their capital into the protocol. The inherent problem with this hyperreflexivity is that when asset prices drop, all the feedback loops explained previously that help DeFi thrive go in reverse, and capital flows out just as quickly as it flowed in. yield farming TVL Uniswap Curve Connecting DeFi to the Real World According to Niklas, in order for DeFi to grow beyond this hyperreflexive bubble, it must be connected to the real world. There are over 100 trillion dollars worth of assets in the traditional financial (TradFi) system versus approximately 100 billion dollars worth in DeFi. Even in a bear market, there is a chance that DeFi can continue to grow by absorbing these Real World Assets (RWAs). The growth from that can outscale any negative macroeconomic pressures. Absorbing RWAs into the DeFi ecosystem would also lower overhead costs in traditional markets by minimizing the need for middlemen typically required in traditional finance. According to Niklas, DAI could be a benefactor of this as the most time and stress tested decentralized stablecoin. One problem with connecting RWAs to DeFi is that the majority of these assets are highly illiquid, meaning they are not actively traded on markets. It is also difficult to derive fair market values for these assets. Financial information pertaining to these assets are heavily censored, with limited information available about the relevant counterparties. If the asset originators are the only source of the data, there is a moral hazard involved as they would be incentivized to report market data that benefits themselves. Implementing RWA oracles In the framework prescribed by Niklas, in order to implement RWA oracles, 3 main players are required – The asset originator, an auditor and the data consumer, who is the ultimate end user consuming the oracle data. Asset originators should submit underlying data on the asset, and not the price. They should not be setting the price of an asset themselves. Rather, they should be submitting data that can be utilized to derive a fair price.  Asset originators are incentivized to provide valid data because an auditor is going to check that this data is correct. If the auditor concludes otherwise, the asset originator can get their credit ratings slashed. Nevertheless, asset originators are assumed to be adversarial and will try to obtain an edge where possible. The role of an auditor is to validate that the data supplied by the asset originator is legitimate. The data consumer will define a data model for how prices should be derived. Auditors then validate the data inputs provided by the asset originator, and plug these inputs into the aforementioned data model. In this model, it is important to note that it is the data consumer who is paying the auditor for their services. The auditor and the asset originator cannot be morally aligned, or aligned in any business sense. A good counterexample would be this from ‘The Big Short’, where the ‘asset originator’ is the one giving business to the ‘auditor’, incentivizing the auditor to fake the validity of the data inputs. scene MakerDAO & RWA Maker has begun the absorption of RWAs into the DeFi ecosystem through a series of partnerships stated below: – MakerDAO is helping to provide short term mortgages for people who want to buy and sell homes quickly for a profit. New silver – Credit tenant lease financing. MakerDAO provides capital, so 6S Capital can finance the construction of buildings when they have guaranteed tenants. 6S Capital – A financier which allows MakerDAO to divert USDC on their balance sheet into US treasuries. US treasuries are extremely liquid, resulting in higher yields with lower risks involved. Monetalis – Covered bonds backed by home loans. Forge wants to 40 million Euros worth of bonds, proposing a 30 million DAI debt facility. Societe Generale (Forge) finance In the current crypto market, there are many who believe that there is a lot of value to be extracted from traditional markets which could help offset some of the revenue lost from crypto. While embracing RWAs could help protocols like Maker maintain its position as a leading DeFi protocol despite market conditions, there is still some concern over the centralized aspect of traditional assets. In his interview with , manager of Real World Assets at MakerDAO, TJ Ragsdale, explained that “the goal is really to take advantage of all the value that lives out there in the real world, and as Maker — with our unique position in the market, build in transparency and determinism that we all love about crypto into those traditional systems.” Blockworks The Blockchain Oracle Summit was the world’s first conference to fully focus on the importance of oracles and the potential value they bring to DeFi and beyond. Leading oracle experts from around the world gathered in Berlin to take deep-dives into their work. Find out more about MakerDAO: MakerDAO Documentation MakerDAO Twitter MakerDAO Discord MakerDAO Youtube Niklas Kunkel Twitter Niklas Kunkel Github

How Oracles Act a Catalyst in Bridging Real World Assets On-Chain

This is the official HackerNoon wiki for Maker. As part of our , this living wiki displays on . If you’d like to suggest edits to our official Maker wiki, please submit them in the comment field below, a real human editor will read and review your suggestions for accuracy and publication. coin price pages Maker crypto price page Maker is short for Maker DAO. Maker is a decentralized autonomous organization smart contract platform. It created the MKR token which is the governance token of the Maker platform and funds MakerDAO. The platform also created the DAI stablecoin. The DAI stablecoin offers a safer option that is unaffected by the current cryptocurrency market for MakerDAO users. The Maker token is backed by Ether by Ethereum and not traditional currency. Maker DAO is operated by the maker foundation. History MakerDAO was created by Rune Christensen. In 2017 and 2018, MAKER DAO received venture capital worth $27 million. The first venture round had eight investors, the largest being Anderseen Horowitz who invested $15 million into the platform. The DAI stablecoin was launched in December 2017 and became among the top fifty top traded cryptocurrencies within a year according to Coin Market cap. In 2019, two venture capital firms, Paradigm and Dragonfly Capital, bought 5.5% of the global supply of DAI for $27 million. Biggest Claims to Fame The entire token system controlled by Maker is fully on blockchain platforms. It is a trully and completely decentralized token system which is one of the main tenets of cryptocurrency. This has encouraged true believers of cryptocurrency and the cryptocurrency vision to invest in Maker over any of the competitors of Maker. The Maker tokens stayed steady in value during the 2018 cryptocurrency market which was at an all-time low. Despite the value of Ethereum dropping and staying low for most of the year, the value of Maker tokens MKR and DAI stayed at a relatively steady value. This encouraged people and gave them hope the tokens could last for a long time. Makers transparency has put it above its competitors, especially in the stablecoin market. All of their transactions are transparent and their developments are advertised well before they are implemented. They make recordings of meetings they have available for anyone who wishes to watch, whether users or skeptics. Over 400 decentralized finance applications and cryptocurrency exchanges use DAI, one of the MakerDAO cryptocurrencies. Its exposure to several diverse markets has increased its visibility to the crypto market. The constant circulation is also good in increasing the value of the DAI and, in turn, Maker DAI is among the leading decentralized, permissionless, and trustless stablecoins on Ethereum’s decentralized finance platform. There is DAI worth nearly $8 billion in circulation on the Ethereum blockchain. This makes it the better choice for most of the users of the Ethereum platform who need to make use of a stablecoin. By using Ethereum to back it, Maker DAO avoids many of the issues other cryptocurrencies face of having backers make demands and try to censor information. The decentralization gives Maker the opportunity to be truly independent of traditional financial institutions that would make demands Maker may not want to meet. Biggest Criticism Though the decentralization of finance was one of the main principles behind cryptocurrency, Maker having all its backing finances in cryptocurrency form is considered risky by skeptics. In case the value of Ethereum ever falls drastically, many of the people who have money in Maker will find themselves without any. In order to reduce its dependence on Ethereum, the platform began to accept different forms of collateral such as other stablecoins and assets. The introduction of different assets may give way to the centralized stablecoins and assets entering the market which could increase the level of censorship and could lead to users trying to centralize the platform. Ethereum has a very publicly known issue with scaling the platform. As the backer of MakerDAO, this has caused many problems for Maker, since people assume these issues may affect the growth in value of MKR. This has caused the price of MKR to reduce in value and market price. The value of DAI is very often not exactly $1. It fluctuates by a few cents in either direction. This price fluctuation could happen within seconds. It has put off those who would like to put their money in a stablecoin from putting their money in DAI because it is unsure whether the fluctuations will always be just a few cents all the time. Team Maker DAO was created by Rune Christensen. He currently acts as the CEO of the platform. Christensen studied Biochemistry at the University of Copenhagen and proceeded to study international business at Copenhagen business school. He cofounded Try China, a company that served as an international recruitment platform before going on to create Maker DAO. In Conclusion MakerDAO has held up to time, becoming one of the most decentralized and stable cryptocurrencies in the market today. Though it is stabilized by Ethereum, the platform has a series of checks and balances that have ensured the value of its stablecoin is steady, despite the value of Ethereum rising and falling. This is the official HackerNoon wiki for Maker. As part of our , this living wiki displays on . If you’d like to suggest edits to our official Maker wiki, please submit them in the comment field below, a real human editor will read and review your suggestions for accuracy and publication. coin price pages Maker crypto price page

Maker $MKR Wiki: Coin History, Techstack, and Crypto News

Last month the social media space was hit with a wave of news that Facebook and the rest of its services had temporarily gone down. The overall effects of that incident and those before it continue to shift our general curiosity about and approval of incentives to switch to decentralized technology. I argue that our society needs more innovative solutions for privacy, interoperability, and decision-making. Blockchain is a part of a trustless digital solution. There are multiple sources and solutions to decentralize existing projects or build a DApp from scratch. Moreover, I observe a notion of building projects under open governance where communities make all the decisions. Another term for it is DAO governance. Below, you can find out more about what it is, how it works, and the solutions for building trustless projects operated by DAO. Why DAO? First, let’s examine why traditional governance doesn’t work anymore. In innovative business, there is no place for bureaucracy, and decision-making is lightning fast. If you are late, a competitor comes along and steals the show - I mean, money. Hence, traditional forms of governance usually assume numerous layers of management for the coordination and enforcement of processes. This comes with a drawback: many operations can become a bottleneck or a source of corruption. DAO ( ) is open-source or completely transparent and, in theory, uncorrupt. It has no board of directors or managers, only entrepreneurs whose authority is generally nominal. decentralized autonomous organization The community, or each member of DAO, reviews, records, and maintains all the tasks, proposals, and updates using a blockchain. However, some experts believe that one can’t achieve fully decentralized governance. While DAOs may be architecturally decentralized (independent parties run different nodes) and geographically distributed,  they might also be logically centralized (by the protocol rules). Cautionary Tale: Examples of DAO Governance Gone Wrong The history of using DAOs for blockchain projects dates back to 2016. It was the year when The DAO (Genesis DAO) was hacked. A minor bug in an application on Ethereum led to the loss of 3.6 million ETH (the equivalent of $70 million at the time). The Ethereum community reacted quickly and regained control: it presented multiple proposals to deal with the exploit. As a result, they froze the tokens leaving the hacker unable to finish his gateway. Moreover, major crypto exchanges started to delist DAO Genesis to comply with the US SEC’s restrictions. Nonetheless, it didn’t stop the DAO idea from spreading. The Genesis story showcased a faulty scenario of launching its own DAO. Developers learned to establish secure blockchain solutions and avoid mistakes in their code, often with the help of external audits. Secondly, the SEC’s ban on The DAO has pushed blockchain startups to come up with new ways of avoiding regulation. Open Internet Services Managed by Open Tokenized Governance Systems Many DAOs rely on a simple structure where every member can propose an idea and vote upon it democratically. People use them for charity, investment, governance, and fundraising. One example would be the by DFINITY — a public network that promises a safe and unlimited environment for smart contracts. IC gives an opportunity to build anything, tokenize it on Ethereum, and reduce computing costs by more than a million times(!). Internet Computer (IC) A key feature of this software is the open governance system that controls Internet Computer blockchain — NNS (Network Nervous System). Anyone can participate in the governance by staking its utility token ICP: vote, propose changes, and lock tokens. The second example is , which enables a plug-and-play process of creating and managing decentralized organizations. Communities get a powerful tool to organize themselves around capital assets, currency, or tokens. The latter can increase in value as more people hold and use them to participate in the life of these communities. Aragon protocol Finally, there is , governed by MKR stakeholders. Apart from its on-chain governance, there is also an off-chain discussion for general feedback. It is used before on-chain voting to evaluate the overall sentiment about issues affecting the MakerDAO ecosystem and determine a consensus regarding their resolution. MakerDAO More and more projects are beginning to understand the importance of functioning as a DAO. Prominent projects like , , and have been in the headlines in recent months with innovative DAO updates. Each with its own element that differentiates them from each other, for example Orakuru functions as an off-chain method for data verification and node validation mechanics. ShapeShift Tellor DOS Network Orakuru Key Advantages of Open Tokenized Governance Open tokenized governance gives a lot of opportunities for developers (DApps creators) and users (token holders). DAO assists developers and entrepreneurs with user communication, regular feature updates, and necessary funding. For early adopters, it can be considered as a long-term investment and source of regular rewards. And for the community in general, it gives a clear understanding of the decision-making process. DAO is the future of organizations. It can make them more secure and give their members a voice. Open tokenized organizations could reduce corruption since all decisions are made by the community, open for review by anyone, and can’t be altered by third parties. What do you think about DAO and how can it change our reality? Additional sources: What is Distributed Governance? Latest research about DAOs

Why DAO? : The Problem With Traditional Governance

Decentralized Finance (DeFi) can be rightfully considered a third revolution in the crypto space. If you wonder what the first two are, these are the invention of blockchain itself along with the technology’s firstborn, Bitcoin, and the inception of the smart contract technology. Just like blockchain provides the basis for smart contracts, the latter give rise to DeFi. It is often said that smart contracts are poised to revolutionize the ways both humans and organizations interact in their contractual relationships. In this sense, DeFi is the stage where these relationships are set to emerge and develop. With a bigger picture in mind, it is the world that the blockchain technology lays the foundation for, while smart contracts help to build it. Why we need DeFi, how it is possible, what makes it tick and click are the main themes of this article. But seriously, why do we need it? Since most financial services in existence today are provided by or involve third parties, for example, banks, exchanges, investment companies, insurance agencies etc, DeFi is an attempt to build an alternative environment, an ecosystem of applications offering the same set of services but now powered by public blockchain networks in a decentralized, transparent and permissionless way. By and large, the basic idea that guides DeFi is essentially the same ethos that drives innovation with crypto as such, but at an entirely different level. Just like cryptocurrencies try to wrest the state supremacy over money from the hands of rogue governments and central banks, DeFi takes it further and aims higher. With DeFi, it is no longer a matter of creating a coin in an effort to replace fiat money, which mostly doesn’t work anyway. However, building a whole new domain of financial services available fairly and squarely to anyone, with full control over the assets but without corrupt governments and greedy intermediaries sticking around, may pan out better after all. So, answering the question posed at the beginning of this section, we need DeFi for basically the same reasons we need cryptocurrencies. Or, put differently, if we need cryptocurrencies, an assumption that has been proved indisputable, it is inevitable as well that we will sooner or later become interested in decentralized financial services powered by these cryptocurrencies through smart contract blockchains. We can’t just create Bitcoin and say that’ll do. It is a natural development, a Maslow’s hierarchy of needs, in a sense. How is it even possible? As mentioned in the introduction, DeFi emerges thanks to smart contract tech and decentralized applications (or simply dApps) running them. So how does it work in practice? To better understand the idea, let’s take a closer look at a relatively simple example of a decentralized crypto-backed stablecoin which can be created through a smart contract. Stablecoins are coins whose value is pegged to a stable asset such as a commodity like gold or a fiat currency like the US dollar. There are a few different types of stablecoins that exist in the wild. For the purpose of this exposition, we are interested in crypto-backed stablecoins. Like stablecoins collateralized by fiat, these stablecoins use cryptocurrencies as collateral. However, the key difference is that a fiat-based stablecoin is pegged to the fiat currency which is backing it up. Kinda obvious. A crypto-backed stablecoin, on the other hand, is pegged to one asset, say, the American dollar, but backed up by a completely different one, for example, Ether. Things get tricky. A crypto-collateralized stablecoin is possible through the magic and the beauty of the smart contract governing it. If the price of such a stablecoin rises above its peg or parity, you can create more stablecoins and sell them at a premium. If the price of the stablecoin falls below parity, you can buy stablecoins and liquidate them at a discount. If the collateral itself crashes, undercollateralized stablecoins will be liquidated with their collateral now backing up fewer stablecoins. As a result, the price always gets pushed back to parity. And all this rather complicated stuff is done on the blockchain in a decentralized and automatic fashion with no banks or other third parties involved. Consequently, more services are easily possible too. And quite a few at that. Okay, what decentralized financial services are available? Well, one such service we have just described above. Cryptocurrencies are infamous for being extremely volatile, and stablecoins are designed to deal with this issue. There are many stablecoins out there like Tether, TrueUSD, or Gemini Coin, but they are all based on trusting the third parties. Easily one of the best known crypto-backed stablecoins is ’s DAI, which is pegged against the US dollar with a basket of crypto-assets as collateral in a truly decentralized and trustless way, that is, a blockchain way. MakerDAO Crypto-based stablecoins can be used on their own by offering a hedge against the price volatility of such popular cryptocurrencies as Ether or Bitcoin. Aside from that, they are also instrumental in other DeFi services, for example, in decentralized exchanges like or . IDEX BiKi.com With stablecoins, it becomes possible to create fiat trading pairs in addition to crypto ones in entirely decentralized, non-custodial trading environments as opposed to centralized exchanges like Bitfinex or Binance, which are vulnerable to high-profile hacks and personal data leaks. Unlike MakerDAO, doesn’t strive to create a rock-solid stablecoin. Instead, it comes up with the notion of “adaptive money built on sound economics”, with its mission stretching out as far as to marry “the scarcity of Bitcoin with the elasticity of fiat”. Ampleforth It tries to go beyond the relatively simple concept of a stablecoin and brings forth the idea of elastic money supply that can expand and contract depending on market demands, as well as allow the creation of a valid form of collateral for DeFi based on that idea. Obviously, DeFi is not just about stablecoins or the financial services using them. Blockchain-based borrowing and lending is another important DeFi arena. With platforms like , , , you can deposit your crypto assets to either earn interest on them or use these assets as collateral for borrowing. Compound dYdX Dharma Smart contracts automatically match borrowers and lenders, offering dynamic interest rates based on supply and demand. And with tools like , you can also easily shop around for the best interest rates on the block. LoanScan These examples are far from exhaustive, of course, as space is rapidly expanding and evolving. However, there are some fundamental issues that put grit into the wheels of the DeFi war machine. So where’s the catch? There are many advantages of DeFi, but to be of any practical use, it needs up-to-date information that would be reliable and authentic. Smart contracts that DeFi is based on are hopelessly on-chain, but the data they need for processing is mostly off-chain. Without a bridge to close this gap between a smart contract and its source of external information, smart contracts are entrapped in closed-off dungeons of their blockchains. To be sure, no crypto-based stablecoin is going to work correctly without a real-time price feed for the assets taken as its collateral and used for maintaining the peg. To get around this roadblock, a concept of blockchain oracles has been suggested. But as the chain cannot be stronger than its weakest link, blockchain oracles seem to be that weak link in the field of DeFi and beyond as obtaining information in a verifiable way can be an intimidating task. What approaches dApps are taking to procure and verify sources of truth in the external world is the topic of our upcoming article about blockchain oracles. Stay with us and stay tuned! The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision. Follow us to get the latest news about the crypto world. Previously published at https://stealthex.io/blog/2020/08/04/decentralized-finance-defi/

DeFi - The Whys, Whats, Wheres, and Hows of Decentralized Finance

A lot of my recent research has been around cryptocurrency as money - and how stable assets are the core to scaling the industry and building reputation and trust. I believe that creating price stability often through , whether that’s with fiat currencies like the dollar or pound, cryptocurrencies like ethereum or bitcoin, or commodities like gold and oil, will be essential to many web3 innovations in the coming decade. collateralization The same applies to building blockchain - they require some kind of stable priced coupon or credit that can be used to build on and across multiple blockchain networks. Otherwise token interoperability is a big problem as well as volatility. applications Most developers don’t like using volatile assets, let alone big businesses or enterprise. Until now, there was no universal credit that could be used across multiple blockchains or ledgers. If you wanted to build an application on Ethereum for example, you’d have to hold ethereum to pay fees (gas) for transactions and deployments. If you wanted to build on, or be interoperable with multiple blockchain networks, you’d have to hold multiple volatile tokens. Adoption indicators are down since 2019, and we need smart solutions to move the space forward and to encourage a new wave of builders. The team at Outlier Ventures set out to solve this problem, and they came up with ZIP - a standardised credit for use on multiple blockchain networks, which is surprisingly simple. Aptly named, ZIP is multi-network gas station with a minted, stable value credit, collateralized by a managed basket of tokens that correspond to the networks you can build dApps on. For example, you could build on Ethereum today and Fetch tomorrow, or both simultaneously - with the same credit, as long as the basket contained both Ethereum and Fetch. This opens huge opportunities for previously siloed development efforts, it also makes choosing a layer 1 a much easier and less important task, knowing you can move flexibly and build across many networks at the same time, or even later on. Last but not least, of course, this makes deploying blockchain SaaS solutions considerably easier. In some respects, ZIP is similar to MakerDAO’s DAI, or Amazon Web Service (AWS) Credits. You collateralise assets (like Ethereum) in return for a stable credit (Like DAI, or in this case, ZIP). but ZIP is not a traditional stablecoin in that sense, its more for builders than . buyers View it as more of a credit for building on multiple blockchains, ideal for developers building SaaS tools, rather than a DeFi tool for lending, or borrowing dollars. (Decentralised Autonomous Organisation). In this case on Aragon - and it already has a little activity, but I am looking forward to seeing more contributors join. The DAO Is at the heart of how ZIP runs; It’s how the collateral token basket is managed, project finances are handled, and proposals are made to the DAO members and the system is governed. Like Maker, ZIP is also supported by a DAO DAO’s present big opportunities but also challenges, particularly around the collateral asset management and ensuring that there is enough collateral at all times, particularly when holding volatile tokens.  If ZIP scales quickly, it’ll need the collateral to back it. I’ll cover more on this later. They’re used to pay for ellegible services on Amazon Web Services, which is ideal for SaaS solutions because its a very flexible environment with dynamic, standardised, and fair value pricing (through credits). ZIP credits could also be compared to AWS Credits. building For people to take blockchain and web3 networks seriously for deploying SaaS solutions, they’ll also need some stable priced credit to pay their development and deployment costs. This is where ZIP comes in to support all of the networks in its collateral basket. Clearly the long term goal is to offer this kind of scale. See the below visual on collateralisation and redemption of ZIP. ZIP will support the following networks out of the gate: Ocean Oasis Labs Fetch Qtum Arweave Enigma Conflux Foam Chainlink Aragon Cosmos Golem I am confident that there will be very few protocol teams who aren’t interested in ZIP, as it is a very concise approach to solving developer friction and standardised pricing models in blockchain. It’ll also have great network effects to be a part of. On a longer time frame, we’ll hope to see mounting interest from traditional firms who can leverage ZIP to build frictionlessly across multiple networks. Unique Problems Require Unique Solutions The difficulty around ZIP is the collateralization basket. With tokens being highly volatile, the basket must be actively managed. To mint DAI (MakerDAO stable dollars) you have to collateralise a huge 1.5x the amount of ETH that you get back in DAI (dollars) - to account for big sell offs and price moves.  That’s a lot of collateral that’s required, and that’s for Ethereum, which is considerably more liquid than most tokens. This is acknowledged effectively in the whitepaper, but it will certainly require some fluid thinking and asset management through the DAO and wider team to ensure that the collateral remains valuable enough to support all minted ZIP. To summarise, ZIP feels like a great convergence point for distributed ledger technology in the public eye if it can scale quickly enough and get the right people on board. More information on ZIP will become available at Diffusion , a web-event and demo day hosted by Outlier Ventures which takes place on the 28th of May. Until then, you can learn more by reading the website or whitepaper. (Disclaimer: The author does not have any vested interests in ZIP)

One Stable Credit For Building On All Blockchains

Central banks are pushing for strict regulation of centralized, privately issued global stablecoins. Fiat-anchored crypto-currencies are being scrutinized based on the recommendations of the Financial Stability Board. Stablecoins like tether are extremely popular with many people in the crypto sector. Tether has a market cap of approximately $6,370,234,959 and a larger 24-hour volume than Bitcoin. Many use such stablecoins to either send from one exchange to another or to cash out of Bitcoin and Co. without going into the dollar. This has some advantages. On 14.4.2020, the Financial Stability Board (FSB) published a document dealing with the regulatory, supervisory and oversight challenges posed by global stablecoins. Financial Stability Board is hosted and financed by the Bank for International Settlements (BIS). Its members are representatives of the finance ministries and central banks of all G20 member states and ten international organisations, including the IMF, BIS, ECB, World Bank and European Commission. It concerns the Stablecoins which are commemorated with Fiat currency. Many companies, like MakerDAO, have based their entire business model on Stablecoins and it will be very exciting to see how it all develops – positively or negatively? For me and all those who have been following me for a long time, it was relatively clear that sooner or later this will happen and that this “jungle” will not continue unregulated forever So what is the impact of all this on Bitcoin? For me it is as always clear to distinguish between value and price. As with the last crash in March, it is important not to listen to the screamers out there, but to go behind them with a clear head and question what the effects might be. Like this crash, the value of Bitcoin hasn’t changed, no big change in technology or any other big change. For this reason, the price has only changed in the short term, but nothing in value. And I see exactly the same thing here with this issue. There could be fluctuations now in the short term, but the value of Bitcoin has not changed. So I am very positive in the long term and that this has not been very important in the long term. If you want more information about this topic, I have made a video: Now I would be very happy to hear your opinion. What’s your take on this whole Stable Coins thing? If you want cashflow from your crypto-currencies, check out CAKE: https://cakedefi.com Your Julian

Will Stablecoins Become Illegal?

In the world of decentralized finance (“defi”) we often hear about “banking the unbanked”. The vision is to give people with no access to even a bank account, access to global financial market. People from developing countries often suffer from hyper inflation, massive fluctuations of their local currencies, restrictions by their governments or simply have no bank account to store their financial valuables. They cannot do anything than accept that. With the defi ecosystem they do not have to accept that any longer. Venezuelans, for example, are already massively adopting bitcoin to protect their wealth from governmental control and hyperinflation. There are many articles about the advantages of defi and people talking about their personal positive experiences. Here is a short overview of the biggest advantages of defi: Permissionless (anyone can connect: wealth, status, location irrelevant) Decentralized (no central server, records kept across many computers) Trustless (no central validation authority) Transparent (transactions publicly auditable) Censorship Resistant (no interference by central authority possible) Programmable (code is law) Low Cost (affordable cross-border transactions) Fast and Anytime (instant transactions 24/7/365) In this article I will show you how to rethink your financial planning right now for yourself and for your children and profit from all those advantages. It is really easy to take you first small steps in defi today and ensure the accumulation and protection of your future wealth for good. So maybe you belong to the privileged part of the population that thinks you do not have to care about defi, because you have access anyways? On the one hand that is quite selfish, on the other hand that is pretty ignorant. Even in developed countries, we already see a big shift away from a one stop shop bank relationship to a diversification of financial services’ providers. We access our check account via an online bank or app instead of a physical bank branch, use another online broker dealer for our trading activities and take up loans where they are cheapest – thanks to smart comparison portals. The “unbanking from your bank” is already in full progress. Fintechs have revolutionized financial services. But DeFi reinvents banking entirely new, focussing on full decentralisation and global financial inclusion at almost no cost. You are still not convinced why you should be well-versed in these topics? Then you probably also belonged to those children that only believed that touching a hot stove is not a good idea, directly after trying it our yourself. And this is not a bad thing. Not believing everything and questioning a lot is a good virtue. If the advantages of DeFi are difficult to grasp for you, start making your own experiences! Otherwise, you miss out on a lot of innovation and advantages. Starting today has never been easier I can tell you from my own experience, the more you learn about it and the more you gain experience, the deeper you get drawn into it. The effect will be so much stronger than any written or verbal advice. Let’s start throughout the lifecycle of a human being from child to pensioner to help you make your first steps into defi today. Financial planning cycle with defi from child to pensioner 1. Savings Account In Germany a paper savings book (“Sparbuch”) has for centuries been a typical gift for a new born by his grandparents. The child could for example save his pocket money and gain compound interest on that. Gain what? Yes, exactly. We barely have any interest rates anymore on savings accounts and therefore this product has become completely obsolete and only costs money. Defi offers a very attractive alternative here. MakerDAO constructed the stable coin DAI, which replicates 1:1 the USD. While a regular savings account offers a negative or low interest rate (e.g. Germany currently 0.01%), which does not even compensate for inflation (Germany CPI 1.4%) the interest rate on DAI, called Dai Savings Rate (DSR) is currently at 2%. So while some traditional bank accounts even charge negative rates, at Maker Oasis, you don’t have to pay for your savings, but actually receive interest and in the best case can compensate for inflation (depending on your country). Even for a non-techie like me, it was really easy to “open an account” in a few seconds. If you own certain coins, you can also stake them and generate attractive returns as well. However, this is a bit more complicated, but can generate an annual yield of up to 10%. Via StakingFacilities for example you can stake (bake) Tezos, Atom or Aion. You can delegate tokens to a validator, which executes your staking (baking) rights. 2. Loan / Credit Card Let’s stay in the field of interest rates and have a closer look at borrowing and lending. At some point your savings and income might not be enough to afford bigger purchases. But do you really want to wait several days or weeks for a creditworthiness check, show your bank all irrelevant reliabilities of the past and present and rely on an opaque credit score just to receive in the end a loan with an interest rate of audacious 10%-30%? Besides Maker Vault, the DeFi space has several other crypto to crypto lending and borrowing platforms (e.g. Dharma, Compound, Salt, Ethlend, dydx) as well as crypto to fiat platforms (e.g. BlockFi or Unchained Capital). With InstaDapp you can even optimize across decentralised platforms to get the best return offered. Maker, for example, goes entirely trust-less without approval process or credit score, relies simply on your underlying collateral, offers currently an attractive interest rate (called “stability fee”) of 4% and their CDP Portal is available 24/7/365. 3. Driver’s License If you managed to open a savings account and get a credit with Maker protocol, probably at the age of 18 you will have to undergo an identity check to legally vote for the first time, get a driver’s licence or a passport to travel across borders. But why would you show all your personal details if just your age (driver’s license) or just your place of residence (elections) matters? In the defi space several companies like Iden3, Civic or uPort are working on encrypted solutions that allow people to control their own data and just show the most relevant information for the respective occasion. 4. Voting Rights We are all aware of the double counting problem during presidential elections and the general problem of manual counting of paper votes in the traditional world. 2019 has been the year of the so-called decentralized autonomous organizations (short DAOs). Even though the first DAO wasn’t a success story, the DeFi space has learnt from it and projects like Decred, Maker or Gnosis show how successful digital decentralized governance and voting can look like. As a coin holder you can actively vote on proposals and make your voice heard. Every vote counts. 5. Income and Payments After you opened a savings account, got your driver’s license, travelled a bit abroad, voted for the first time and took up a loan to finance your studies for example, you finally landed a job. But what if you live in a country with extreme currency fluctuation or hyperinflation where the money earned doesn’t allow you to pay your bills? Here again DAI offers a solution for stability in the income that you earned. And if you want to conduct instant peer-to-peer transactions, projects like OmiseGO facilitate financial services payments when it comes to loyalty programs or fiat money, while the lightning network enables instant transactions via payment channels. 6. Real Estate / Car / Art Now that you have your daily finances settled, you might want to start investing short or long term. For crypto currency trading decentralized exchanges like AirSwap, KyberSwap or Uniswap are a good place to go to. You can profit from the cost-average effect and invest monthly in crypto currencies to accumulate and grow crypto wealth constantly over time. If you want to diversify your portfolio further, start investing in other asset classes as well. You can invest in non-fungible tokens (like crypto-kitties) or get exposure to traditional assets like real estate, cars or others valuables by investing in tokenised assets. The best part is that you don’t have to buy an entire house, car or piece of art, but can buy fractions of it with little money and flexibly divest or increase your exposure. Projects like Tinlake or Neufund are interesting starting points. If you are interested in expensive cars, check out CurioInvest.com. I met the founder and CEO this year and was thrilled by their idea of tokenising cars. Conclusion You can see that already by today you can easily “un-bank your bank”, become financially independent and profit from all advantages that were mentioned in the beginning: Instant permissionless low-cost transactions at any time and for anyone without interference of a central party. Who doesn’t want that? If you invest with the right risk appetite during the respective life cycle (the longer your investment horizon, the more risk you can take) while incorporating personal liquidity needs, investing with defi can help you optimising your long-term retirement planning and enhancing your financial return. Disclaimer: This is not financial or investment advice. Information is based on my own opinion. Always do your own research and never invest more than you can afford to lose. (Photo by Jessica Da Rosa on Unsplash)

How DeFi Simplifies Financial Planning for All

In May 2019, announced a partnership with Provable, a very efficient oracle that produces reliable real-time prices that the framework uses today to calculate critical levels every six minutes. Since this time, the project has also engaged in further research and development to reduce third-party risk, and improve the quality of its price feeds for EOSDT position owners and NUT (the framework’s utility token) holders. Equilibrium Quality price feeds help position owners make informed decisions for accurate valuation and sound management of their positions and risks. It also guides NUT holders through the liquidation process: should closely monitor their collateralization ratio. If the ratio drops below the 170% minimum collateralization threshold, the owner will suffer a 20% liquidation penalty. The EOS price feed determines the current dollar value of the collateral, which in turn is divided by the dollar value of the EOSDT debt (assuming 1 EOSDT = 1 USD) in order to calculate the collateralization ratio. - Position owners can buy EOS collateral with NUT at a discount, then buy and redeem the bad EOSDT debt. In other words, they are de-leveraging the Equilibrium Balance Sheet. This price-dependent process must be swiftly executed to effectively minimize Equilibrium’s insolvency risk. - NUT holders The EOS price feed needs to be accurate and reliable. If not, the consequences on a contract’s output can be catastrophic. The great oracle problem Synthetix, a service that provides fiat currency stablecoins, experienced serious issues in June 2019 due to a mispriced Korean Won (KRW) rate in its private oracle. In normal conditions, the reference price produced is based on the average of several sources. After an outage that removed most price feeds from the equation, the reference price produced became for a short period of time an average of two prices, ! “resulting in several trades with profits of 1,000x”, representing “over $1 billion in profit in less than an hour” Source: https://coinmarketcap.com/currencies/synthetix-network-token/ Let’s consider a hypothetical scenario where the initial collateralization ratio is at 170%. Close your eyes, open them a few minutes later, and imagine that EOS price has declined more than 45% in that short time. The resulting collateralization ratio is now below 100%! Equilibrium is insolvent and the oracle failed to warn the framework in time! A drop like this hasn’t happened on EOS yet, but there is always a chance that it could happen in the future. Let’s imagine a further worse scenario in which the oracle feed isn’t delayed, but incorrect, like with Synthetix. Whichever decision the smart contract makes will not only be wrong, but will usually be irreversible too. The problem we’ve been describing so far is “the great oracle problem.” If we feed outdated or incorrect data to a smart contract, that contract’s output will likely be incorrect as well: garbage in, garbage out. Medianize it One solution is to use not one but multiple external price feeds. The robust median value of reported prices would define a reliable, more accurate reference price than the average. It isn’t affected by outliers, therefore it would disregard any outdated or erroneous price as long as most of the price feeds are neither outdated nor erroneous. In any case, this is no guarantee that there won’t be any mispricing down the road, but it’s an important step in the right direction. For instance, the was introduced by MakerDAO to produce such a . medianizer smart contract reference price Source: https://mkr.tools/system/feeds The inclusion of several sources, combined with the choice of the median as a reference price, drastically improves the oracle’s quality. In the case of MakerDAO, the triggers for a reference price update are either: - a difference between the last reference price and the updated median price that’s above 1% - an update time that comes more than six hours after the previous price update. These trigger conditions are scattered in value or time (at least 1% or six hours apart) for good reason. The process of running the medianizer contract and using its output to update other smart contracts (e.g. the liquidation contract) comes at a . cost Source: https://www.eosrp.io/ In EOSDT’s case, the resources required to scale the process for thousands of users can be costly and limited even though the EOS blockchain can theoretically support unlimited scale and speed: the current is 0.0851 EOS/KB, and the current CPU price is 0.00236 EOS/ms/day. RAM price The RAM supply is also currently capped at 129.13 GB. These constraints drive dApp developers to look for affordable and effective solutions. Equilibrium’s partnership with LiquidApps Equilibrium and LiquidApps are partnering up today with the ultimate objective of implementing a scalable, cost effective on-chain rate medianizer for better event monitoring. As a first step, Equilibrium refactored its rates table to incorporate the EOS and NUT prices quoted in several currencies from multiple sources. Acting as arbitrators, NUT holders need to observe timely and consistent EOS and NUT reference prices to determine whether they should handle the liquidation, or expect to handle it very shortly. Timing is always critical in a market that will more likely be volatile when significant liquidations are triggered. A swift procedure brings more certainty in an arbitrator’s ability to turn the discount on his purchase of a bad debt’s collateral, into a realized USD profit. To alleviate the arbitrator’s duty even further, Equilibrium is adding an on-chain function that automatically liquidates the position with the lowest collateral ratio if it stands below the critical level. This function acts as a strong safeguard against insolvency risk. Its input is a table of positions sorted by their collateralization ratio, that is updated with every new event by the . eosdtcntract In time, this table can not only spot and liquidate the under-collateralized positions, but also act to preserve a position (similar to MakerDAO’s “CDP saver” feature) by warning position owners of forthcoming liquidations. Follow Equilibrium | | Website Twitter Telegram

A Guide For Stablecoins Owners On Handling Liquidation - Accurate Prices Matter

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A Solution to the Oracle Problem The right architecture to safeguard users from oracles permits them to safely exit with their funds Providing users a way to exit with their value Would creating an insurance policy where policyholders are able to reclaim ownership of their premiums and walk away be a bad thing? Most people are convinced that such an insurance policy would create a among the participants. moral hazard This comes from a naive assumption that as soon as someone else would open up an honest claim, selfish policyholders would decide to leave with their premiums. This would effectively give scumbag policyholders one months worth of coverage at zero cost to them (provided that they don’t come back). Some would assume that this selfish behavior would then lead to the systems inevitable collapse given the cost of these bad policyholders. The point of this post is to highlight that failure to permit users to exit with their value is to fail to use a very important tool in incentive architecture. In decentralized architecture the problem of an oracle going rogue is known as . the oracle problem Defections are the ultimate tool for keeping oracles honest. They are a powerful check on any oracle which might act corruptly or which might malfunction. They are also a valid means to allow a group to reach consensus. In this way the oracle would be forced to remain honest, because dishonesty could in some architectures prompt a wave of mass defections. The goal of this post is to show how: Allowing users to defect with their value can keep an oracle honest The cost of selfish defections can be understood as being reasonably low In this way can be a force for good rather than evil and an important tool for designing decentralized systems. defections Rune discusses the oracle problem and Maker’s solution Episode 28, Creating Stability out of Chaos — Advanced Maker Topics with Rune Christensen, Founder of MakerDAO — Mar 26, 2019 (72m 47s) Yes so the Oracle problem is definitely the number one problem of all decentralized systems. Our approach to solving that problem, which I think we have actually solved completely, is just . fundamentally assuming that oracles are going to fail So the system fundamentally does not rely on the oracles never colluding or never attacking or never breaking and failing. Rather, it has this has built in defense mechanism that means that even if the oracles do fail or try to attack the system or whatever, whatever could happen theoretically the system is able to completely mitigate that without any sort of major damage happening. That’s just because that (scenario where the system fails) would be unacceptable. If Maker wasn’t able to completely 100% shrug off an oracle attack, or Oracle failure it just wouldn’t be scalable. I mean it would not be a functional alternative to traditional finance. Because, you’re never going to want to be (willing to) put your money in a bank (where) there’s a small chance that it will all blow up. That doesn’t work. Regardless of what (the circumstances are) the chance (it will blow up) has to be zero percent. So the mechanism for protecting against this is twofold. So it is a combination of what we call the Oracle security module which is basically a smart contract that ensures that there is a delay on the Oracle data that’s input into the system. So when the oracles input data into the system there’s a one hour delay in posting that data before it’s actually pushed into the core of the system logic and has any effect on the CDPs. In that one hour window, there is then an opportunity for the community to perform what we call the . So the emergency shutdown is basically is the most important feature of the system. emergency shutdown It’s the feature that ensures that the worst thing that can happen to you as a DAI Holder is that . From a UX perspective it’s not really a nice user experience in the sense that you don’t want to have to go and redeem collateral for your DAI and all of this stuff. you get to redeem the underlying value of your DAI directly from the collateral But, from kind of like a financial perspective and an economic perspective and a risk perspective it’s just incredibly important to have that . fundamental guarantee in the system And there’s actually various ways it can be improved. There are various ways that the actual UX friction (for the end user can be alleviated). (This) means that in the end like for the system to undergo an emergency shutdown let’s say in the event of an oracle attack really what that just looked like is that if you’re a user of a decentralized wallet, you just have to click a button in your wallet. If you’re a user of a centralized exchange or some sort of custodian service, you actually don’t even notice because the custodian service just takes care of the transition for you. That’s the basic gist of it. So, if the oracle is compromised, there is a way to basically gracefully shut down the system and mitigate any sort of damage from the tech (by) settling up people at the last honest oracle value. Content was produced by Wyre Talks podcast, produced by Wyre. For more on this topic please see: MakerDAO Governance Risk Framework (Part 3) Burning Bridges to Greener Grass: Incentivizing Tokenized Forking In his mentions how some systems naturally award defecting early. He doesn’t identify permitting defections as a type of decentralized design choice in this post. blog post Simon de la Rouviere Instead he indicates that defections naturally occur in economic systems and they provide benefits to both the defectors as well as the loyalists or remainers. An eventual equilibrium will be reached when the bonus to leave is not as valuable anymore vs the value in staying. Making it beneficial for early defectors to defect not only rewards those defectors in believing their new opportunity is a better choice, it also strengthens the value of the focal point of the existing group (think: “All the non-believers left. Thus, I can believe in those that are still here, more”). He goes on further to tie the thought of permitting defections as allowing a faster way of reaching consensus by highlighting how it works in regards to . signaling theory those that are actively signalling that (they) aren’t . It thus reinforces the bonds of the groups who are . This is also apparent in relationships. Those who when they have options, is a strong signal to the partner of . stay exiting staying stay commitment In a later post he shows how designers of decentralized protocols can consciously use defections to organize participants around a shared goal. The Moloch DAO: Collapsing The Firm In Simon looks at how the Moloch DAO team consciously decided to build defections into the protocol. another post Moloch DAO incentivizes coordination by collapsing traditionally separate parts of a company into one process, and by creating additional incentives for defectors to defect and exit … Making it easier for people to leave reduces coordination costs. specifically identifies this as a key part of the architecture: Their whitepaper Game Theory: , . By allowing Guild members to ragequit and exit at any time Moloch protects its members from 51% attacks and from supporting proposals they vehemently oppose When participants defect it comes at an opportunity cost where they forgo the chance to built out the Ethereum ecosystem When users defect/exit with capital, they are leaving with profit for themselves, never to return Coordination about how to use a shared resource has a cost. Moloch DAO seeks to reduce that cost by setting clearly defined rules in a smart contract. These rules become a to the participants which condition their behavior. If the participants view the proposed actions of the DAO as conflicting with these rules then this might lead many to defect. This might mean that the DAO is held to account to a rigid set of predefined rules. This would limit what the DAO could do but it would also limit the time required for the participants to reach consensus. schelling point How to build communities upon zero-fraud architecture In a I highlight that the same strategy works for effectively vetoing the approval of a fraudulent insurance claim. previous blog post The smart contract allows people to make a choice:* their premium payment by sending it directly to the claimants* with their premium payment and walk away from the Tanda* in which case their payment is still sent to the claimants Finalize Defect Do nothing Providing policyholders with the option to defect allows them to veto decisions made by a secretary simply by walking away from the tanda with their insurance premium. A secretary is an oracle which informs the smart contract which policyholder is eligible to receive a claim award. Without the power of defection given to the policyholder the power of the secretary to approve any claim for payment would go unchecked. Used in this way, defections solve the oracle problem because they provide the ultimate protection against fraud for policyholders. Defections guarantee that an oracle (secretary) can never determine that a fraudulent claim will be paid. Even if a fraudulent claim is approved for payment, the power of participants to defect would deny a fraudulent claim from receiving payment. Now that we’ve established strong guarantees for policyholders, how can we provide assurance to honest claimants that their claims will be paid? How can we make sure that the cost of selfish defections are kept in check? Guaranteeing that honest claims are paid is determined by the strong social bonds within the community, “the stronger the social bonds are between people in a society, the fewer defections there will likely be.” TandaPay doesn’t seek to create trust that doesn’t already exist within a community. It simply provides communities tools to negate bad behavior if it occurs. Since the power of dissolving a community is divided equally among all the participants, an exit strategy assures those who approve claims that they will never profit from bad behavior. Enabling defections has a net positive impact on deterring bad behavior by administrators. The real question is if it promotes more selfish behavior leading to defections against honest claimants? This is where subgroups and overpayments are added to deter bad behavior against honest claims. The dynamic of overpayments and subgroups A subgroup is 4–7 policyholders As discussed , the average initial size of a TandaPay coverage group is 50 people. Since a subgroup is between 4–7 policyholders, this implies that the average number of subgroups per TandaPay group is likely to be around 10. in previous blogs : This is effectively a bet that no one in your subgroup will become scumbag defector (defection against an honest claim). This bet is anywhere between 33%-16% of a users premium and you always get it back if one of the following conditions are true: Overpayment You become a defector You have zero defectors in your subgroup in a monthly coverage period Groups of 4–7 TandaPay members who impact each other when one of them decides to defect. The penalty of single defections is incurred via the loss of a groups overpayments. All the overpayments in a subgroup equal one full payment. To be allowed to participate in coverage you must join a subgroup. Subgroups: When combined together these two effectively encourage a group to defect or remain together as a group. A scumbag defector will cause their friends to loose their overpayment, but the overpayment prevents a negative financial impact to the honest claimant. The friends therefore have adequate incentive to be upset at the scumbag defector because they decided to remain in the Tanda. But the penalty is not so large that the friends will decide to beat up on their friend for being a scumbag defector. If fraud occurs and this becomes known to the group, the group should reach consensus to defect together. If an entire subgroup defects together then everyone gets both their premium payment and overpayment returned to them. This incentivizes a shelling point around their being either 0 defectors or everyone defecting. Sustained cooperation by running away from bad behavior This is a title of an which reached the following conclusion Article in Evolution and Human Behavior · January 2016 Conditioning one’s current behavior … was a pattern almost entirely due to players who had recently cooperated. In other words they found that participants were more willing to cooperate in a persistent environment of cooperation. So if we can create architecture that defection but cooperation then cooperation should win out. permits conditions Conclusion Defections provide a powerful check on oracles. Overpayments and subgroups provide a powerful check on defections. These work together to provide strong guarantees to both policyholders and claimants. <a href="https://medium.com/media/3c851dac986ab6dbb2d1aaa91205a8eb/href">https://medium.com/media/3c851dac986ab6dbb2d1aaa91205a8eb/href</a>

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