Blockchain
7 Common Concerns and Misconceptions About Bitcoin
The things that are putting you off and why you may want to reconsider
I have no vested interest in persuading you to invest in Bitcoin. We all have our own inherent appetite for risk and security, not to mention scepticism about many aspects of the modern world.
Bitcoin and cryptocurrency fall into the category of things that many treat with suspicion and confusion. What I want to do is address those concerns — as much for my own peace of mind as for yours!
I started investing in crypto with a small purchase of Bitcoin and then of Ethereum in early 2021, just as the prices of each skyrocketed. I took the rather foolish approach of buy now, learn later.
I’m now educating myself retrospectively and consolidating the learning it by sharing what I’ve discovered.
I’ve previously described the exact process I used to buy Bitcoin and my interpretation of the common terms and technologies used.
In this piece, I want to share some of the common objections, fears, and skepticism that many express regarding Bitcoin investing. I‘ve also unpacked why I think they’re unfounded or in many cases over-stated.
By design, Bitcoin has no physical manifestation, financial backing or centralised controlling organisation and many refuse to believe it can have any real value.
To take this view is to overlook that other currencies are essentially much the same.
Paper money issued by governments only has value because we all agree it does, and because we take part in the collective human system that exists around its use. When we check our bank balance online or at an ATM, we believe that the numbers on the screen represent monetary value even though we can’t touch them.
Throughout time, humankind has collectively signed-up to and accepted that anything from shells to pebbles and beads can be used to represent a store of value and purchasing power. Such collective acknowledgement is what makes systems of currency work — the same is true for Bitcoin.
Some might argue that gold has an innate and inherent value, and even if we stopped agreeing that gold has a high monetary value per ounce then it would have utility and hence value in electronics and for making jewellery.
The fact that it’s deemed so valuable is based in part on a collective agreement by humans that it is, but also due to it’s relatively scarcity and limited in supply (based on how much ore can be mined and processed).
Bitcoin shares this trait with gold and is much more akin to gold as a store of value than to money as we know it.
There will only ever be a maximum of 21 million Bitcoins in existence and in circulation. Those that are lost will never be replaced. Nobody will ever decide to create more (unlike paper money which governments have the freedom to print more of when they decide) as this constraint upon total numbers is built into the code and the protocols underpinning it.
Yes it does —volatility is an accepted behaviour of Bitcoin and cryptocurrency as they are traded today.
Investing in it isn’t for the fainthearted and if you are troubled by the potential for losing money invested then you should probably steer clear.
The volatility will likely calm down over time, particularly as it matures further. Major institutions (like Square, PayPal and MicroStrategy) are now engaging with Bitcoin either as payment processors or as investors. This should signify that it’s being taken more seriously and help to calm the volatility a little. When luminaries of investing like Bill Miller and Stanley Druckenmiller are taking an interest too, it signifies that changes are afoot.
Time will tell of course but consider the volatility a feature of crypto for now — accept that it’s a wild and exciting ride with ups and downs!
Much of the energy to maintain Bitcoin is used by the nodes which hold and maintain the ledgers of transactions and mine Bitcoins that haven’t yet been created.
Estimates suggest that Bitcoin consumes a comparable amount of energy as is required to run Switzerland each year — a staggering statistic.
My instinct was to contemplate the corresponding power used by banks and institutions that underpin the existing infrastructure of money with their offices, data centres, server farms and so-on. But the comparison is largely academic and certainly not like-for-like.
An interesting perspective on Bitcoin energy usage can be found in the 2020 letter to shareholders of Stone Ridge Asset Management from their CEO Ross Stevens. It’s essential reading for a rounded background on Bitcoin.
Stevens suggests that the technology underpinning Bitcoin and blockchain will likely be higher performing and more energy efficient than the infrastructure and legacy systems that support conventional banking. More significantly, he believes that opportunities will exist in the long term to locate new Bitcoin nodes where they can utilise clean energy (such as hydro-electric power generated from remote waterfalls and rivers).
As Stevens puts it:
“Before Bitcoin, the problem of energy has never been its scarcity, but only our ability to channel it geographically where it is needed most. Before Bitcoin, that was exclusively where humans lived. In contrast, Bitcoin’s mining energy is solving a different problem. Because of satellites and wireless internet connections, Bitcoin mining can be located anywhere.”
This flexibility of location means that the Bitcoin mining nodes can in future be located where green energy can be easily generated without having to then channel it to population centres where it is needed.
The power usage of Bitcoin could gradually represent less of a burden on energy supplies, reducing the production of environmental pollutants from non-renewable energy sources.
Banks, insurers and investment providers in the UK are regulated and guaranteed by the government, providing they meet criteria set out by the industry ombudsman.
If a bank in the UK goes bust with your money in it or if an institution mis-sells to you or commits fraud then the government will guarantee the return of your money (to a limit at least). The same is probably true in other countries too.
Cryptocurrency exists outside of government control, regulation and ownership. It works as a system precisely because there is no single controlling entity governing or regulating it.
For this reason, I doubt that any government will ever provide guarantees for investors. They will certainly seek to control and influence it.
With that risk acknowledged, reputable companies such as crypto exchanges like Coinbase have sought registration with the authorities rather than trying to operate under the radar. I’d recommend utilising the bigger, more reputable names — not the fly-by-nights who offer discounts or preferential terms that seem too good to be true.
People lose money when they unquestioningly transact with firms set up to extort and deceive. Do your homework, act with diligence and protect your own interests — caveat emptor!
There’s a perception that hackers target cryptocurrency because it exists solely online. I’ve worked in IT Security in banking for over 9 years and can assure you that the bad guys are just as motivated to extract and extort ‘normal’ money from regulated banks as they are cryptocurrency.
The main additional risk for crypto is the lack of regulation (see above). If your Bitcoin is stolen online while being held on a crypto exchange then it’s likely gone for good — you won’t have any recourse from a regulator, nor will you be able to claim via insurance.
As far as loss offline — there have been many examples where investors have bought Bitcoin, diligently stored it in their offline encrypted hardware wallet and then promptly lost it, thrown it away or lost their password. Such losses are unfortunate of course, but in most cases probably also avoidable.
Remember too that people are robbed of cash and valuables every day. Conventional assets are lost, stolen or mislaid.
Like any item of value you have some duty to take care of what is valuable to you — Bitcoin is no different.
With Bitcoin having hit record highs in 2021 (when its price broke through $40,000) many will feel that they’ve arrived at the party too late to enjoy themselves.
In 2017 the price neared $20,000 before dropping to a little over $3,000 and past performance might indicate that another dip in price is due. I’ve no reason to think it will or won’t drop as radically as before, but my natural scepticism has me preparing for the worst.
If the price drops then I’ll likely seize the opportunity to buy more at a cheaper price. History would suggest it’s likely to go back up afterwards too.
As to whether you’ve missed the chance to make money by investing in Bitcoin, consider the example of Amazon stock.
The average person might have felt inclined to make a small investment in Amazon stock, recognising it as a company that’s continued to flourish and which most of us shop from. Since 2008 Amazon’s stock price has been increasing steadily year-on-year, from $50 per share at the end of 2008 to $3,200 per share at the end of 2020.
For over 12 years, a prospective investor could have convinced themselves that it was too late to get involved and that the profits had already been made. For 12 years they’d have regretted their inaction.
Financial institutions are starting to contemplate that Bitcoin has a long term future and predicting what it may yet be worth — JP Morgan Chase estimate it could reach $146,000 per Bitcoin while Citigroup predict a price of $300,000. Other more outlandish estimates guess range up to $1 million per coin — perhaps based more on hope and optimism than on science.
To some extent, Bitcoin is still in its relative infancy as an investment asset hence the continuing cycles up and down.
If you’ve got the stomach for having some exposure to such volatility and are keen to have a potential share of future gains whatever they might be, then there’s still an opportunity. You just need to be open to losses as well as gains.
Remember that the guiding principle of crypto right now is only to invest in what you would be willing to lose.
Some of the early expenditure of Bitcoin likely involved its use as an anonymous currency on the dark web where drugs and weapons are freely traded.
Many of us will also have received spam or phishing emails warning that their laptop has been compromised and threatening destruction, humiliation or a mix of both unless they pay a ransom to the sender in untraceable Bitcoin. While such scams are usually a case of opportunistic social engineering, it’s a further way that many are first exposed to Bitcoin — as a tool of criminality.
The anonymity of Bitcoin is undoubtedly appealing for such activities but I’d argue that traditional paper currencies and the electronic transfer of money have been as widely exploited for ransoms, extortion and blackmail (and continue to be).
Most of us have probably also encountered tradespeople who offer a discounted price for ‘cash-in-hand’ payment so they can avoid declaration of income and associated taxes. Cash money has its problems and detractors too!
While Bitcoin may have appeal to the criminal-classes, it doesn’t mean that’s the only use case for it. It doesn’t mean that all those who use it are complicit in criminality, nor are they any more likely to be singled out by criminals.
This objection comes from two sources.
First, there’s the argument that because it gains and loses value radically and frequently compared to other currencies, it doesn’t make sense to use it to buy goods. Today you might buy a pizza with Bitcoin. Tomorrow the same amount of Bitcoin might be worth enough to buy one hundred pizzas. To that extent the argument is correct and that part of the original use-case for Bitcoin, as an online currency to rival Dollars, Yen or GBP isn’t practical.
While the value of Bitcoin is still relatively volatile, it may well level out over time enabling its use as a stable currency. Regardless, it can be used in exchange for goods and services today, and via conventional channels including PayPal too should you wish.
The second objection to its status and viability as a currency is that the uptake and the time taken to complete transactions means that Bitcoin could never compete with online channels like Visa who claim capacity to process 150 million transactions per day. There is some substance to this view, but it’s not really a like-for-like comparison.
Certainly there are fewer Bitcoin transactions at present (around 400,000 per day in early 2021), although the volume of them is increasing gradually with platforms like PayPal and Square accepting Bitcoin.
The main difference is that Visa and Mastercard don’t process payments completely at the point at which the transaction completes online. Instead, the reconciliation and final transfer of funds between entities often takes a few days.
With a Bitcoin payment, the change of ownership of the Bitcoin (or fraction of a Bitcoin) is recorded in the blockchain and reconciled between a number of nodes on the network to confirm the transaction. The additional time taken to complete this processing represents the entire move of value from one party to the other.
While it takes longer, it’s more comprehensive and by permanently locking the details of the transaction into the blockchain in multiple ledgers, it makes it irrefutable and indisputable for all time.
The technical details of this are complicated, and still somewhat beyond my grasp, but hopefully the point is clear.
Future technological advances might speed up Bitcoin transactions but the price of Bitcoin may need to stabilise before it’s used more widely as a currency. In the meantime, I prefer to think of Bitcoin as an asset class or store of value in which to invest than as a currency to spend. Indeed, my strategy is to buy and hold for the long term (known as HODL in Bitcoin circles for reasons that I’ve yet to fathom!).
As I said at the outset, my purpose is not to convince you to invest in Bitcoin — it won’t suit everyone. But it sometimes helps to critically analyse perspectives that conflict with our own as a means of testing our understanding and our rationale.
If you’re in doubt over whether Bitcoin is for you, then I’d advise you continue to read around the subject. If you’re still in doubt as I was, maybe make a small investment as I did and see whether it captures your imagination.
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.
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Everyone in the world likes money and even better if you can earn with the money you already have. There has been a sharp rise in crypto price points in recent months so if you’re one of the many die-hard holders out there you are probably wondering how you can get a return from the holdings you already have. Thankfully as the industry has evolved so has the ability for investors to earn on their holdings of crypto assets. This article will talk about some of the ways you can try to make a return on investment for everything you currently have in your portfolio. Some of the earning ways are conventional and others require a little bit of work or substantial knowledge. Nevertheless here are some ways you can earn on your crypto portfolio.
Staking is the process of actively holding a small to substantial amount of funds in a designated blockchain wallet in order to support a proof of stake (PoS) blockchain protocol. Essentially the investor locks funds into a particular wallet to support the staking process of the blockchain which they are staking on. As with anything in life an individual only does something if they feel they will gain benefit from it so when it comes to staking a stakeholder in the proof of stake blockchain will only lock in their stake if they are going to receive a reward. Many blockchain platforms out there offer proof of stake rewards to those staking crypto in locked wallets and you can earn a staking reward from doing so. When staking you often do not only earn an income from locking in funds but the staking also offers the holder the ability to vote on the blockchains protocol updates. Think of it similar to having voting rights from holding stock in a public company, you will have the right to a proportional vote to your stake on the future of the blockchain protocol. It’s relatively easy to find a company that allows you to stake your crypto and even the big guys like Coinbase offer staking features on their platform.
Peer to peer lending has become an increasingly popular topic in the modern fintech sector these days and the normal financial channels often translate over into the cryptocurrency world. Like with conventional peer to peer lending the way you earn money from the transaction is through interest on the lending of assets. Unlike conventional peer to peer products, the cryptocurrency world offers substantially higher interest returns than its fiat (government issued currency) counterpart. This is not always the case however, but as a general rule of thumb you are set to earn more with a crypto-based lending house.
One trusted example of a medium for lending is Nexo. Nexo offers credit lines to a borrower that are secured against crypto collateral. This collateralized method does away with the need for traditional credit checks since the crypto acts as the bridge of trust if and when the borrower is unable to pay. So you are always safe as a lender in that regard. Nexo clients who deposit funds in fiat or stablecoins can expect to earn returns of up to 12%, whereas clients who directly deposit crypto can earn interest of up to 10% of their holdings. Lenders who hold a minimum percentage of their portfolio in NEXO tokens, and choose to receive payouts in their token are eligible to receive higher returns than those who do not.
If you are interested in mining for more crypto, another option is to hold shares in an active cryptocurrency mine. Mining is the backbone of the entire cryptocurrency ecosystem. So by investing into a mine you are not only using your crypto to make more crypto, but you are also supporting the entire blockchain community through mining activities.
Advertisement & &
Miners solve complex mathematical equations using graphics processors. Once the mathematical equation is solved, the block is validated and a reward is sent to the miner. Pylon Finance is said to have the largest active ETH mine in North America with return rates for investors of up to 250% per year.
The easiest way of all to earn money from your crypto may be to deposit your funds into a platform that offers you an annual percentage yield (APY) on the money you hold on their platform. This is similar to depositing money into a savings account at a bank that gives you an annual percentage return on what you hold in your bank account. You can check out the different DeFi depositing options on DeFi Pulse and start earning on your holdings immediately.
What is important to consider however is that depositing can only be done with crypto assets and altcoins and not fiat currency so this is only a valuable way to earn returns if you are insisting on earning on just your crypto holdings.
In a similar fashion to earning from DeFi, many crypto exchanges offer earnings programs. These again are similar to depositing into bank accounts and earning interest with the key difference being that the interest earned is usually substantially higher than one would earn from a conventional bank account. That coupled with compounding interest and the gains in the crypto market in recent months makes this option very attractive. Companies such as Crypto.com offer interest on the major cryptocurrencies up to 8% and pay out interest on a weekly basis. Along with being paid weekly you also have your interest accrued daily so you know whatever you are holding is always earning you money, even if your portfolio fluctuates.
Although it isn’t conventionally set to make you money, you can look to the slot machines and roulette table for extra returns. If you’re a rainman at blackjack, Fortunejack is the oldest Bitcoin casino in the world – so why not try to make some tasty returns there?
Get Daily Crypto News On Facebook | Twitter | Telegram | Instagram
DISCLAIMER Read More
The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.
Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Check out Nord
Make your Money Grow with Mintos
Source: https://zycrypto.com/how-to-earn-on-crypto-youre-hodling-in-2021/
Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Source: https://coingenius.news/mike-novogratz-mark-cuban-shouldnt-accept-doge/?utm_source=rss&utm_medium=rss&utm_campaign=mike-novogratz-mark-cuban-shouldnt-accept-doge
Advertisement & &
Everyone in the world likes money and even better if you can earn with the money you already have. There has been a sharp rise in crypto price points in recent months so if you’re one of the many die-hard holders out there you are probably wondering how you can get a return from the holdings you already have. Thankfully as the industry has evolved so has the ability for investors to earn on their holdings of crypto assets. This article will talk about some of the ways you can try to make a return on investment for everything you currently have in your portfolio. Some of the earning ways are conventional and others require a little bit of work or substantial knowledge. Nevertheless here are some ways you can earn on your crypto portfolio.
Staking is the process of actively holding a small to substantial amount of funds in a designated blockchain wallet in order to support a proof of stake (PoS) blockchain protocol. Essentially the investor locks funds into a particular wallet to support the staking process of the blockchain which they are staking on. As with anything in life an individual only does something if they feel they will gain benefit from it so when it comes to staking a stakeholder in the proof of stake blockchain will only lock in their stake if they are going to receive a reward. Many blockchain platforms out there offer proof of stake rewards to those staking crypto in locked wallets and you can earn a staking reward from doing so. When staking you often do not only earn an income from locking in funds but the staking also offers the holder the ability to vote on the blockchains protocol updates. Think of it similar to having voting rights from holding stock in a public company, you will have the right to a proportional vote to your stake on the future of the blockchain protocol. It’s relatively easy to find a company that allows you to stake your crypto and even the big guys like Coinbase offer staking features on their platform.
Peer to peer lending has become an increasingly popular topic in the modern fintech sector these days and the normal financial channels often translate over into the cryptocurrency world. Like with conventional peer to peer lending the way you earn money from the transaction is through interest on the lending of assets. Unlike conventional peer to peer products, the cryptocurrency world offers substantially higher interest returns than its fiat (government issued currency) counterpart. This is not always the case however, but as a general rule of thumb you are set to earn more with a crypto-based lending house.
One trusted example of a medium for lending is Nexo. Nexo offers credit lines to a borrower that are secured against crypto collateral. This collateralized method does away with the need for traditional credit checks since the crypto acts as the bridge of trust if and when the borrower is unable to pay. So you are always safe as a lender in that regard. Nexo clients who deposit funds in fiat or stablecoins can expect to earn returns of up to 12%, whereas clients who directly deposit crypto can earn interest of up to 10% of their holdings. Lenders who hold a minimum percentage of their portfolio in NEXO tokens, and choose to receive payouts in their token are eligible to receive higher returns than those who do not.
If you are interested in mining for more crypto, another option is to hold shares in an active cryptocurrency mine. Mining is the backbone of the entire cryptocurrency ecosystem. So by investing into a mine you are not only using your crypto to make more crypto, but you are also supporting the entire blockchain community through mining activities.
Advertisement & &
Miners solve complex mathematical equations using graphics processors. Once the mathematical equation is solved, the block is validated and a reward is sent to the miner. Pylon Finance is said to have the largest active ETH mine in North America with return rates for investors of up to 250% per year.
The easiest way of all to earn money from your crypto may be to deposit your funds into a platform that offers you an annual percentage yield (APY) on the money you hold on their platform. This is similar to depositing money into a savings account at a bank that gives you an annual percentage return on what you hold in your bank account. You can check out the different DeFi depositing options on DeFi Pulse and start earning on your holdings immediately.
What is important to consider however is that depositing can only be done with crypto assets and altcoins and not fiat currency so this is only a valuable way to earn returns if you are insisting on earning on just your crypto holdings.
In a similar fashion to earning from DeFi, many crypto exchanges offer earnings programs. These again are similar to depositing into bank accounts and earning interest with the key difference being that the interest earned is usually substantially higher than one would earn from a conventional bank account. That coupled with compounding interest and the gains in the crypto market in recent months makes this option very attractive. Companies such as Crypto.com offer interest on the major cryptocurrencies up to 8% and pay out interest on a weekly basis. Along with being paid weekly you also have your interest accrued daily so you know whatever you are holding is always earning you money, even if your portfolio fluctuates.
Although it isn’t conventionally set to make you money, you can look to the slot machines and roulette table for extra returns. If you’re a rainman at blackjack, Fortunejack is the oldest Bitcoin casino in the world – so why not try to make some tasty returns there?
Get Daily Crypto News On Facebook | Twitter | Telegram | Instagram
DISCLAIMER Read More
The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.
Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Check out Nord
Make your Money Grow with Mintos
Source: https://zycrypto.com/how-to-earn-on-crypto-youre-hodling-in-2021/
Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Source: https://coingenius.news/mark-cuban-sees-1-written-in-doges-tea-leaves/?utm_source=rss&utm_medium=rss&utm_campaign=mark-cuban-sees-1-written-in-doges-tea-leaves
Aave is a decentralized, open-source, non-custodial liquidity protocol that enables users to earn interest on cryptocurrency deposits, as well as borrow assets through smart contracts.
Aave is interesting (pardon the pun) because interest compounds immediately, rather than monthly or yearly. Returns are reflected by an increase in the number of AAVE tokens held by the lending party.
Apart from helping to generate earnings, the protocol also offers flash loans. These are trustless, uncollateralized loans where borrowing and repayment occur in the same transaction.
Assets on Aave as of 3/7/21 (source: aave homepage)
The following article explores Aave’s history, services, tokenomics, security, how the protocol works, and what users should be wary of when using the Aave platform.
How Does Aave Work?
The Aave protocol mints ERC-20 compliant tokens in a 1:1 ratio to the assets supplied by lenders. These tokens are known as aTokens and are interest-bearing in nature. These tokens are minted upon deposit and burned when redeemed.
These aTokens, such as aDai, are pegged at a ratio of 1:1 to the value of the underlying asset – that is Dai in the case of aDai.
The lending-borrowing mechanism of the Aave lending pool dictates that lenders will send their tokens to an Ethereum blockchain smart contract in exchange for these aTokens — assets that can be redeemed for the deposited token plus interest.
atokens on Aave
Borrowers withdraw funds from the Aave liquidity pool by depositing the required collateral and, also, receive interest-bearing aTokens to represent the equivalent amount of the underlying asset.
Each liquidity pool, the liquidity market in the protocol where lenders deposit and borrowers withdraw from, has a predetermined loan-to-value ratio that determines how much the borrower can withdraw relative to their collateral. If the borrower’s position goes below the threshold LTV level, they face the risk of liquidation of their assets.
Humble Beginnings as ETHLend
Aave was founded in May 2017 by Stani Kulechov as a decentralized peer-to-peer lending platform under the name ETHLend to create a transparent and open infrastructure for decentralized finance. ETHLend raised 16.5 million US dollars in its Initial Coin Offering (ICO) on November 25, 2017.
Kulechov, currently serving also as the CEO of Aave, has successfully led the company into the list of top 50 blockchain projects published by PWC. Aave is headquartered in London and backed by credible investors, such as Three Arrows Capital, Framework Ventures, ParaFi Capital, and DTC Capital.
ETHLend widened its bouquet of offerings and rebranded to Aave by September 2018. The Aave protocol was formally launched in January 2020, switching to the liquidity pool model from a Microstaking model.
To add context to this evolution from a Microstaking model to a Liquidity Pool model, Microstaking was where everyone using the ETHLend platform. Whether one is applying for a loan, funding a loan, or creating a loan offer, they had to purchase a ticket to obtain the rights to use the application, and that ticket had to be paid in the platform’s native token LEND. The ticket was previously a small amount pegged to USD, and the total number of LEND needed varied based on the token’s value.
In the liquidity pool model, Lenders deposit funds to liquidity pools. Thus creating what’s known as a liquidity market, and borrowers can withdraw funds from the liquidity pools by providing collateral. In case the borrowers become undercollateralized, they face liquidation.
Aave raised another 4.5 million US dollars from an ICO and 3 million US dollars from Framework Ventures on July 8th and July 15th, 2020.
Aave Pronunciation
Aave is typically pronounced “ah-veh.”
Aave’s Products and Services
The Aave protocol is designed to help people lend and borrow cryptocurrency assets. Operating under a liquidity pool model, Aave allows lenders to deposit their digital assets into liquidity pools to a smart contract on the Ethereum blockchain. In exchange, they receive aTokens — assets that can be redeemed for the deposited token plus interest.
Borrowers can take out a loan by putting their cryptocurrency as collateral. The liquidity protocol of Aave, as per the latest available numbers, is more than 4.73 billion US dollars strong.
Flash Loans
Aave’s Flash loans are a type of uncollateralized loan option, which is a unique feature even for the DeFi space. The Flash Loan product is primarily utilized by speculators seeking to take advantage of quick arbitrage opportunities.
Borrowers can instantly borrow cryptocurrency for a matter of seconds; they must return the borrowed amount to the pool within one transaction block. If they fail to return the borrowed amount within the same transaction block, the entire transaction reverses and undo all actions executed until that point.
Flash loans encourage a wide range of investment strategies that typically aren’t possible in such a short window of time. If used properly, a user could profit through arbitrage, collateral swapping, or self-liquidation.
Rate Switching
Aave allows borrowers to switch between fixed and floating rates, which is a fairly unique feature in DeFi. Interest rates in any DeFi lending and borrowing protocol are usually volatile, and this feature offers an alternative by providing an avenue of fixed stability.
For example, if you’re borrowing money on Aave and expect interest rates to rise, you can switch your loan to a fixed rate to lock in your borrowing costs for the future. In contrast, if you expect rates to decrease, you can go back to floating to reduce your borrowing costs.
Aave Bug Bounty Campaign
Aave offers a bug bounty for cryptocurrency-savvy users. By submitting a bug to the Aave protocol, you can earn a reward of up to $250,000.
Aave Tokenomics
The maximum supply of the AAVE token is 16 million, and the current circulating supply is a little above 12.4 million AAVE tokens.
Initially, AAVE had 1.3 billion tokens in circulation. But in a July 2020 token swap, the protocol swapped the existing tokens for newly minted AAVE coins at a 1:100 ratio, resulting in the current 16 million supply. Three million of these tokens were kept in reserve allocated to the development fund for the core team.
Aave’s price has been fairly volatile, with an all-time high of $559.12 on February 10, 2021. The lowest price was $25.97 on November 5th, 2020.
Aave Security
Aave stores funds on a non-custodial smart contract on the Ethereum blockchain. As a non-custodial project, users maintain full control of their wallets.
Aave governance token holders can stake their tokens in the safety module, which acts as a sort of decentralized insurance fund designed to ensure the protocol against any shortfall events such as contract exploits. In the module, the stakers can risk up to 30% of the funds they lock in the module and earn a fixed yield of 4.66%.
The safety module has garnered $375 million in deposits, which is arguably the largest decentralized insurance fund of its kind.
Final Thoughts: Why is Aave Important?
Aave is a DeFi protocol built on strong fundamentals and has forced other competitors in the DeFi space to bolster their value propositions to stay competitive. Features such as Flash loans and Rate switching offer a distinct utility to many of its users.
Aave emerged as one of the fastest-growing projects in the Summer 2020 DeFi craze. At the beginning of July 2020, the total value locked in the protocol was just above $115 million US dollars. In less than a year, on February 13, 2021, the protocol crossed the mark of 6 billion US dollars. The project currently allows borrowing and lending in 20 cryptocurrencies.
Aave is important because it shows how ripe the DeFi space is for disruption with new innovative features and how much room there is to grow.
Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Check out Nord
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Source: https://coincentral.com/what-is-aave/
Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Source: https://coingenius.news/873407-2/?utm_source=rss&utm_medium=rss&utm_campaign=873407-2
Aave is a decentralized, open-source, non-custodial liquidity protocol that enables users to earn interest on cryptocurrency deposits, as well as borrow assets through smart contracts.
Aave is interesting (pardon the pun) because interest compounds immediately, rather than monthly or yearly. Returns are reflected by an increase in the number of AAVE tokens held by the lending party.
Apart from helping to generate earnings, the protocol also offers flash loans. These are trustless, uncollateralized loans where borrowing and repayment occur in the same transaction.
Assets on Aave as of 3/7/21 (source: aave homepage)
The following article explores Aave’s history, services, tokenomics, security, how the protocol works, and what users should be wary of when using the Aave platform.
How Does Aave Work?
The Aave protocol mints ERC-20 compliant tokens in a 1:1 ratio to the assets supplied by lenders. These tokens are known as aTokens and are interest-bearing in nature. These tokens are minted upon deposit and burned when redeemed.
These aTokens, such as aDai, are pegged at a ratio of 1:1 to the value of the underlying asset – that is Dai in the case of aDai.
The lending-borrowing mechanism of the Aave lending pool dictates that lenders will send their tokens to an Ethereum blockchain smart contract in exchange for these aTokens — assets that can be redeemed for the deposited token plus interest.
atokens on Aave
Borrowers withdraw funds from the Aave liquidity pool by depositing the required collateral and, also, receive interest-bearing aTokens to represent the equivalent amount of the underlying asset.
Each liquidity pool, the liquidity market in the protocol where lenders deposit and borrowers withdraw from, has a predetermined loan-to-value ratio that determines how much the borrower can withdraw relative to their collateral. If the borrower’s position goes below the threshold LTV level, they face the risk of liquidation of their assets.
Humble Beginnings as ETHLend
Aave was founded in May 2017 by Stani Kulechov as a decentralized peer-to-peer lending platform under the name ETHLend to create a transparent and open infrastructure for decentralized finance. ETHLend raised 16.5 million US dollars in its Initial Coin Offering (ICO) on November 25, 2017.
Kulechov, currently serving also as the CEO of Aave, has successfully led the company into the list of top 50 blockchain projects published by PWC. Aave is headquartered in London and backed by credible investors, such as Three Arrows Capital, Framework Ventures, ParaFi Capital, and DTC Capital.
ETHLend widened its bouquet of offerings and rebranded to Aave by September 2018. The Aave protocol was formally launched in January 2020, switching to the liquidity pool model from a Microstaking model.
To add context to this evolution from a Microstaking model to a Liquidity Pool model, Microstaking was where everyone using the ETHLend platform. Whether one is applying for a loan, funding a loan, or creating a loan offer, they had to purchase a ticket to obtain the rights to use the application, and that ticket had to be paid in the platform’s native token LEND. The ticket was previously a small amount pegged to USD, and the total number of LEND needed varied based on the token’s value.
In the liquidity pool model, Lenders deposit funds to liquidity pools. Thus creating what’s known as a liquidity market, and borrowers can withdraw funds from the liquidity pools by providing collateral. In case the borrowers become undercollateralized, they face liquidation.
Aave raised another 4.5 million US dollars from an ICO and 3 million US dollars from Framework Ventures on July 8th and July 15th, 2020.
Aave Pronunciation
Aave is typically pronounced “ah-veh.”
Aave’s Products and Services
The Aave protocol is designed to help people lend and borrow cryptocurrency assets. Operating under a liquidity pool model, Aave allows lenders to deposit their digital assets into liquidity pools to a smart contract on the Ethereum blockchain. In exchange, they receive aTokens — assets that can be redeemed for the deposited token plus interest.
Borrowers can take out a loan by putting their cryptocurrency as collateral. The liquidity protocol of Aave, as per the latest available numbers, is more than 4.73 billion US dollars strong.
Flash Loans
Aave’s Flash loans are a type of uncollateralized loan option, which is a unique feature even for the DeFi space. The Flash Loan product is primarily utilized by speculators seeking to take advantage of quick arbitrage opportunities.
Borrowers can instantly borrow cryptocurrency for a matter of seconds; they must return the borrowed amount to the pool within one transaction block. If they fail to return the borrowed amount within the same transaction block, the entire transaction reverses and undo all actions executed until that point.
Flash loans encourage a wide range of investment strategies that typically aren’t possible in such a short window of time. If used properly, a user could profit through arbitrage, collateral swapping, or self-liquidation.
Rate Switching
Aave allows borrowers to switch between fixed and floating rates, which is a fairly unique feature in DeFi. Interest rates in any DeFi lending and borrowing protocol are usually volatile, and this feature offers an alternative by providing an avenue of fixed stability.
For example, if you’re borrowing money on Aave and expect interest rates to rise, you can switch your loan to a fixed rate to lock in your borrowing costs for the future. In contrast, if you expect rates to decrease, you can go back to floating to reduce your borrowing costs.
Aave Bug Bounty Campaign
Aave offers a bug bounty for cryptocurrency-savvy users. By submitting a bug to the Aave protocol, you can earn a reward of up to $250,000.
Aave Tokenomics
The maximum supply of the AAVE token is 16 million, and the current circulating supply is a little above 12.4 million AAVE tokens.
Initially, AAVE had 1.3 billion tokens in circulation. But in a July 2020 token swap, the protocol swapped the existing tokens for newly minted AAVE coins at a 1:100 ratio, resulting in the current 16 million supply. Three million of these tokens were kept in reserve allocated to the development fund for the core team.
Aave’s price has been fairly volatile, with an all-time high of $559.12 on February 10, 2021. The lowest price was $25.97 on November 5th, 2020.
Aave Security
Aave stores funds on a non-custodial smart contract on the Ethereum blockchain. As a non-custodial project, users maintain full control of their wallets.
Aave governance token holders can stake their tokens in the safety module, which acts as a sort of decentralized insurance fund designed to ensure the protocol against any shortfall events such as contract exploits. In the module, the stakers can risk up to 30% of the funds they lock in the module and earn a fixed yield of 4.66%.
The safety module has garnered $375 million in deposits, which is arguably the largest decentralized insurance fund of its kind.
Final Thoughts: Why is Aave Important?
Aave is a DeFi protocol built on strong fundamentals and has forced other competitors in the DeFi space to bolster their value propositions to stay competitive. Features such as Flash loans and Rate switching offer a distinct utility to many of its users.
Aave emerged as one of the fastest-growing projects in the Summer 2020 DeFi craze. At the beginning of July 2020, the total value locked in the protocol was just above $115 million US dollars. In less than a year, on February 13, 2021, the protocol crossed the mark of 6 billion US dollars. The project currently allows borrowing and lending in 20 cryptocurrencies.
Aave is important because it shows how ripe the DeFi space is for disruption with new innovative features and how much room there is to grow.
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Source: https://coincentral.com/what-is-aave/
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