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What is Compound Token? What is this DeFi craze? Is it worth the risk?

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Compound Token Review

Compound Token listed on the CoinmarketCap on June 17, 2020 at around $74 then lost XX% value to land at $64 then it quickly shot upto $334 in less than 3 days. At the time of this writing Compound is coasting at around $200.

What is the craze behind this DeFi token? 

If you want to understand What DeFi is, use cases, advantages, etc., click here

What to expect in this article?

  • What is Compound?
  • How does Compound work?
  • How to Lend and Borrow on Compound?
  • How does Liquidity Mining work on Compound?
  • How much interest can I receive?
  • Advantages and Disadvantages of Compound
  • Red Flags you need to consider
  • How to earn interest on Compound using Coinbase Wallet?
  • How to earn interest on Compound using Exodus Wallet?
  • How to earn interest on Compound using MetaMask wallet?
  • How to earn Interest on Compound using Ledger?
  • Conclusion

What is Compound?

Compound is a Decentralized Finance (DeFi) project that allows you to place your crypto assets as collateral to earn interest and even take a loan against your crypto collateral.

There are many DeFi projects out there that let you deposit your crypto to earn interest, however, what makes Compound special is the ability to earn a spread between your deposit vs. your loan while earning COMP tokens. The COMP token is currently trading at over $234 dollars.

How does Compound work?

To get started with Compound you will need to have some crypto.  As of today, the cryptos that are accepted on the Compound platform are:  0x, Augur, Basic Attention Token, DAI, Ether, USD Coin, USDT, Wrapped BTC.

For every cryptocurrency you deposit on Compound platform you receive a receipt of deposit in the form of cTokens. That means, for example, if I deposit Ether on the platform, I will receive cEther. These ERC20 cTokens are proof that you have deposited money on Compound. When you are ready to take your money out, you simply exchange your cTokens for the underlying asset.

You can check how many cTokens you can receive from your crypto assets.

Compound Ether

For example, cETH is valued at .02001216 ETH which simply means that for every 1 Ethereum(ETH) we deposit on Compound we get 50 cETH.  You will always retain this 50 cETH until you are ready to redeem your ETH.  

When you redeem your 50 cETH you might receive 1.1 ETH, the extra represents the interest you have accrued for the time you have supplied your crypto asset to the platform. In theory, cTokens increase in value over time based on the interest that gets accrued into the cTokens.  In addition, you would have accrued COMP tokens throughout the duration of your deposit.

How to lend (supply) money on Compound?

To get started, you need to click on the App button on the Compound website.

Compound finance 01

You will then be prompted to connect with one of your wallets to transfer the funds.  Right now, there are three options:  Coinbase Wallet, Ledger and Metamask.

Compound Finance App

Click on the option that best suits you. Once connected, you can transfer the money into your Compound account.

How to borrow on Compound?

Once you have supplied the assets on the platform, Compound lets you borrow against your collateral.  Generally, there is a collateral to borrow limit, that means, for every $100 you supply to the platform you will be able to borrow a certain % (depending on the asset), in this case, let’s say the limit is 75% then you can borrow $75. 

How does Liquidity Mining work on Compound?

Liquidity Mining is a concept that has evolved in the past year with the DeFi projects. 

Incentivizing users for providing liquidity to the platform is termed as Liquidity Mining.   Liquidity mining replaces the rigs and PoW with the ‘usage of platform and creating value on the platform.’  

Let’s use an example.  For a platform like Compound to run it needs two parties: those who are willing to put their assets on the platform and those who are willing to take loans from the platform.  Because most DeFi platforms require ‘collateral’ to borrow, the users act as borrowers as well as lenders. 

In other words, the users create liquidity on the platform by both supplying their assets and then taking loans against their assets. For creating liquidity on the platform they are rewarded with COMP tokens.  While the increasing price of the COMP tokens is definitely a factor in wanting to access more, these COMP tokens also provide them with ‘voting’ rights so that people who have provided the most to the platform can also have a voice in how the platform operates.  

To avoid 51% attack, Compound keeps 50% of voting rights with the core team while assigning 50% voting rights to those who acquire most COMP tokens by providing liquidity to the platform.  

Bubble in the making?

Some industry voices have raised concern that the Compound’s model of creating value by exchanging one asset to ‘game’ the system to generate more COMP tokens will not sustain in the long term.  For instance, one could take a $1450 USDT loan against crypto collateral of $1500 and receive COMP for bringing their assets to the platform as collateral and for taking the loan. However, some people are now taking that 1450 in USDT back to the platform (as a supply) and taking a loan against this USDT in USDC (for example, $1400), thus getting paid for lending and borrowing again.   

In this situation, the liquidity on the platform will show as if it has a supply of $2950 and lending of $2850, however, in reality the total assets on the platform are only $1500 and total lending is still $2850.  In other words, total asset collateral is much less than the money lent.

And we have only run 1 iteration. People have been playing multiple iterations of this gaming model to inflate the value on the Compound platform.  

This is very close to the broken fractional reserve model that Banks use in the traditional financial markets and having this model in a place that is highly unregulated is somewhat disconcerting.  

Advantages of Compound

Elite team backing the project

This is what distinguishes Compound from other DeFi projects (some may even be superior to Compound) but Coinbase and the VC relationships that Compound has is quite crazy.  This is why Compound got listed on Coinbase so quickly bringing exposure to a big trading base.  

Interest income

The US Banks pay almost no interest on your deposits.  In certain cases, you are charged with ‘maintenance’ fees while the bank turns around and makes money on your money.  The DeFi changes this equation and provides an opportunity for your money to work for you.  DeFi platforms like Compound and Celsius Network help you earn interest on your cryptos.

No lock-ins

The thing we like the most about the up and coming DeFis’ including Compound is that there is no lock-in period.  You will earn interest for the time you held your cryptos on the platform.  You will have complete control on when you get in and get out.

Liquidity

When you are in a fix for some immediate cash but don’t want to sell your crypto wealth – platforms like Compound can be of immense help (don’t forget to look at market volatility aspect below in the disadvantages).

No credit checks to borrow

Traditional financing options are available to people with good credit history.  People who do not have good credit history are penalized with massive interest rates.  DeFi takes away the need for credit checks to borrow money.

Economical

Compared to the loan sharks in the traditional market the interest rates on the DeFi platforms are quite reasonable.   The only drawback is that you need to have collateral to avail the loans which is counter-intuitive for many people in need.  In the future, when the non-crypto assets are brought to the DeFi platforms – they could upend the existing loan shark practices with the roots.

Disadvantages of Compound

Market volatility

What happens if there is a flash crash and a quick recovery?  Between March 10 through 12th of 2020, Bitcoin fell from $8000 to $4900, a crash of 40%.  In the next 30 days or so Bitcoin cruised through its $8000 price point.  If you had taken a loan using Bitcoin as Collateral (let’s say you took $6000 against $8000 Bitcoin, when the price tumbled, your bitcoin would have been liquidated to cover the $6000 loan.  You could have lost in the eventual recovery.    The whole point of using Crypto as collateral is to AVOID liquidation of your favorite cryptos but that is exactly what will happen if the market faces a flash crash.  You must be aware of this before putting your assets as collateral.

Same is true if the value of the asset you borrow increases.  For instance, let’s say you put your $1000 in DAI as collateral and borrow Ethereum.  Let’s assume that on the day $750 (maximum loan) was equal to 3 Ethereum at $250 each.  If Ethereum’s price shoots up to $500 each, you would have experienced a partial liquidation since the asset you borrowed has gone over the underlying ‘collateral’.

Auto-Liquidation of crypto

This is a no no for longterm crypto hodlers who never want to liquidate their crypto wealth and if the market takes a nosedive (like it did in March 2020) you will run into the risk of auto-liquidation of your crypto wealth to cover the ‘loan’.  You cannot do anything about it as these smart contracts are executed automatically when the value of your collateral goes to a certain level you agreed to when taking out the loan.

No customer support in case sh*t hits fan

If you run into problems or there is loss of funds either during transfer or after transferring the funds for whatever reason, your options to get help might be limited to none.

Collateral, instead of credit rating

If you have Bitcoin but need USD – you could simply sell your Bitcoin to avail the USDT.  The real value of a loan is where people are short on money.  Compound doesn’t address this market since it needs people to have collateral.  Compound model works for people who have cryptos that they don’t want to dispose of because they expect the prices to go up, as such, they could use a platform like Compound to take care of short-term cash flow issues through a collateral based loan.

Limited crypto options

Compound may add more assets in the future but for now they have limited options which could deter many potential clients from using the platform.  

Meager interest rates for non-Stablecoins

Compound’s model is based on demand and supply.  Since most people want to avail loans in stablecoins like USDT and USDC the volume for those stablecoins is through the roof while other good cryptos lack demand on the platform, this in turn limits the interest rates on these crypto collaterals.

Gas fees

Every transaction on Compound costs you gas (fees in ethereum). You have to keep an eye on the fees you are paying each time you transact on the platform.

Red Flags with Compound to consider

Hacks/future vulnerabilities in smart contracts

You don’t know what you don’t know. This is particularly true about the smart contracts and system vulnerabilities in the crypto space. What happens if someone finds an exploit in the code to mine Comp or what happens if the system is hacked by brute force?  What happens to the coins that are collateralized on the platform?  There were some concerns about the Compound code that was brought to the company’s attention.

Connecting your wallets to withdraw might be risky

You are connecting your Coinbase/Metamask wallets to Compound. What happens if there is a glitch in the contract or someone deliberately attacks through brute force to execute unauthorized transfers?

Not fully decentralized

Don’t let the name DeFi fool you.  Compound aspires to be a fully Decentralized Finance platform in future, however, it is not fully decentralized at the moment.  This means, in theory, the team can override the control on the assets on the platform to walk away with your funds, again this is in theory not that the team will do such a thing.

What happens if and when Comp token value falls down?

People are getting creative and choosing to get paid in Comp tokens.  When people have accumulated Comp tokens and dump it on the market, what happens?  If the value of Comp falls down drastically, it could disrupt the entire model on which the current framework works.

How to Earn Interest on Compound using Exodus?

Earn Interest with Exodus Wallet & Compound Finance

Exodus cryptocurrency wallet now allows users to connect to the Compound Finance DeFi platform, so you can now earn interest on your Dai tokens. ► Want to fi…


How to Earn Interest on Compound using Coinbase Wallet?

You can easily connect to coinbase through compound app and start lending your chosen coin and earn interest.Coinbase compound finance

Compound coinbase

Coinbase compound finance

Source: Coinbase

How to Earn Interest on Compound using MetaMask?

Compound Finance – How to Lend Dai & Eth Tokens | Passive Income

A short video guide explaining the basics of how to lend on the Compound Finance platform. In this guide I’ll take you step by step through every process and…

How to Earn Interest on Compound using Ledger?

Using Compound Finance with a Ledger Nano S | DeFi Security

If you have over $1,000 worth of value in your Compound Finance or other DeFi accounts, you need to add another layer of protection with a Ledger Nano S hard…

Conclusion

Compound is an interesting project.  We are not fully convinced about its future sustainability and for that reason we are sticking with Celsius Network for now until this hype cycle dies down with Compound and then we will come back to test it out for ourselves. 

Many Compound fans might think that we are missing out on an awesome project and they may be right, however, we have decided not to FOMO a long time back even if it means missing out on a few good opportunities.

You do what is right for you.

Thank you for reading and sharing this article. We appreciate you.

Resources:

Compound Whitepaper

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Thank you for reading and sharing this article. Stay safe and healthy!

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Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

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Chasing the Micro Cap Crypto Gems #4 – Skrumble Protocol – Why We Changed Our View On This?

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Micro Cap crypto Gems

The tricky thing about finding micro-cap gems is that we have to find something that fits our crypto framework criteria and still be under $10 Million in the market cap.   

The project that we picked today had a few flags while we were researching and we promptly reached out to the team to clarify.   

You will see our initial views/opinions based on publicly available information and the response from the company.

What is Skrumble Network?

What is Skrumble NetworkThe core concept behind Skrumble Network is that when data is stored in one centralized location (like a Server) it poses the greatest security when it gets hacked.

However, if your data is fragmented and stored on decentralized servers, even that particular decentralized server gets hacked, your data is still secured because the fragmented piece that got hacked is usually incomprehensible.

Skrumble Network helps decentralize the communication protocol by using Blockchain technology.

Skrumble Network helps facilitate File transfers, secure messaging, Video streaming and calling.

how Skrumble network works

Whitepaper describes: “Skrumble Network is a secure, communication-centric blockchain, decentralized communication application and a communication layer for developers to add into any application. With no middle entity or centralized server host in between to censor, block or manipulate any data, Skrumble Network will enable open, global private communication and transactions that are truly community owned and operated.”

One of the distinguishing factors about this project was that it was initially developed with an established company behind this crypto that has been in the business for more than half-a-decade and they know how to deliver a product that is used in the real business world.

Applying our framework

As is our custom, let’s apply the CryptoTapas framework around this project.

Problem

The security around our communications is as old of an issue as the internet itself.

This concern has become more pronounced in the recent years with the news of hacks and breach of confidentiality, and utter disregard for privacy.

Now that COVID has completely changed the way we work (especially working from home), the security around communications is now taking the spotlight again.

If Skrumble Network addresses this issue in a novel, scalable and easy to implement way – it might have a great chance at this massive problem.

Team

Eric Lifson seems to be working on Skrumble Network for over 3 years now, and he was quite accommodative when we reached out to him with questions. 

When we looked at the team page on the Skrumble’s website, with the exception of three members, everyone who is listed on their team’s page is no longer with the company (some since July 2019) and this disappoints us that they have not updated their own team’s profile.

Skrumble Network team

More importantly, if everyone jumped the ship, who is behind the project now?

The flagship app on Skrumble Protocol, GetAlly, shows the team members that are also associated with Skrumble Protocol, however, most of these team members are no longer with Skrumble.

Question for Skrumble Team: Who is working on this project? What is the current team structure?  

[Update: The project informed us that all these people have at one point worked on the project. While the team has downsized to a team of about 6 core people, SKM has a strong brand and past and present members prefer to maintain recognition of their achievements. Moreover, several are still contributing, just not on a full-time basis. Any who do not, the team offers to remove them at any time. This is now more in line with how ongoing DAOs (Decentralized Autonomous Organizations) seem to be operating.]

Partnerships

Skrumble Network’s Ally dApp claims to have a 150K user base.  They also teased about the upcoming partnership to take the DeFi initiative forward.

We actually like the advisor profile associated with the Skrumble Network project one of whom is Anthony Di Iorio, co-founder of Ethereum.

Apart from Anthony, Skrumble has Jeff Pulver who is the co-founder of $3 Billion communication company, Vonage.

That is quite a respectable name association with Skrumble.

Question for Skrumble team: Have there been any changes in the Advisor group (similar to team changes?).

[Update: No. We also still Jin Tu – former CTO of Aion, OAN boardmember and Cofounder of Axis DeFi, who is an Expert Blockchain Architect. 

Redouane Elkamhi,
PhD, Associate Professor at Rotman
Leader in Fintech & Blockchain at the University of Toronto 

Kevin Hsu,
Founder Partner at BlockVC
Investor in Ontology, RSK & QTUM 

Jiangang Wu, PhD
Co-Founder of Fusion
Professor of Finance & Blockchain Economics at Shanghai University] 

Addressable market size

Secured communications, whether it is simple file sharing service or video streaming or chatting is a huge market.

It has only exploded in value in the past few months when people were forced to communicate over the internet instead of in-person meetings.

This trend will only become the norm as the internet becomes more accessible (Elon’s Starlink reality) and companies start restricting travel.

File transfers, messaging, video streaming and calling verticals market size is in $100s of Billions, if not trillions.

Revenue model

Question for Skrumble team: How does Skrumble Network generate revenue?

[Update: The core problem for SKM has actually been the volatility of the utility token model in general. We will address this in more detail later.]

DeFi + Communication?

Skrumble Network’s official blog was silent since October of 2019, although remained very active on Telegram, and resurfaced with an announcement that Skrumble Network is going DeFi. 

The announcement about a partnership with Juggernaut reads “unique custom financial modelling and DeFi deployment, it can enable token projects to have real, sustainable, and modular business models built around their utility model.”

Is this another attempt to exploit the market craze around DeFi?

We asked the team this question directly.

Skrumble Network Roadmap

Question for Skrumble Network Team: What drove this decision to look at DeFi and what unique attributes do you think will help Skrumble succeed in this space? 

How does this Juggernaut help Skrumble’s vision?

[Update: Really, we see two sustainable business models so far in the space – 

  1.     platform tokens (for exchanges) with only room for a few like Huobi or Binance
  2.     DeFi due to the collective staking, lockup and general collateralization of new directions and ability to focus on new industries.

A two-token solution is the only way to do something meaningful and sustainable in my opinion with a utility token. One for utility and one for profit sharing. They are missing the sustainable business model. They don’t have enough usage to reach a critical mass and the DeFi synthetic at least has a chance to have something closer a traditional ‘share’ balanced approach. 

Most proof of stake with inflation models will reach a point where one has to ask where any utility token can be able to sustain beyond initial interest 

This is why we must change the game. 

Basing anything on a pure utility token that fluctuates is basically unsustainable. This is because when people are in the money they just leave to the next hot project. People who operate in DAOs want something more stable to base their livelihoods on. They want something closer to USD that can be more stable and scalable. 

This is an overview of how we see DeFi becoming a crucial component going forward:https://medium.com/juggernaut-defi/skm-partners-with-jgn-to-develop-first-defi-communication-network-20ba9a3ccf38 

What do we like about Skrumble?

We like the fact that Skrumble Technologies has been a technology company since 2014 and it has leveraged some technology and strategic guidance from them in their initial inception.  It has real business with actual clients in the market.  How many of the 6500 cryptos can claim that? 

Additionally, the company has patents to its name and helps them deploy proprietary solutions in the market. 

In addition, we like that the co-founder is quite active in working on building Skrumble Network up. 

You can go to the Telegram and see him responding to the questions posed by the community. 

When we reached out to Eric, he provided a quick ‘highlight’ of Skrumble for someone who is new to the project, we have reproduced what Eric shared with us below (we have not independently verified this information): 

Skrumble Network is reshaping freedom of speech and data privacy with a communication-centric blockchain due to our unique PoA architecture, formidable global community, robust proprietary chain, accomplished advisors, and top-tier exchanges. 

🤝PoA consensus model: Aligning incentives and encouraging active community participation

💪Innovative chain and base layer: Enabling other dApps to be built on top of Skrumble Network. First dApp- Ally already has 150k+ users with more coming soon

🙋🏻‍♂️Industry-leading advisors: Including Anthony Di Iorio (Co-Founder of Ethereum) and Jeff Pulver (Co-Founder of $3B Vonage), Jin Tu (CTO of Aion), Redouane Elkamhi, PhD (Lead of Fintech & Blockchain at the University of Toronto), Kevin Hsu (Partner, BlockVC)

🥇Trusted and premier exchanges. Won Huobi FastTrack vote last week with over 40 million votes. Counting Gate.io, Huobi Global, Bittrex, LBank, Coinbene etc as our exchange partners

🎖Ranked by ICO Drops for both top 5 global community and ROI in Q22018

🗳Won Huobi FastTrack with 40M+ votes on June 27 19

👑Massive dApp ecosystem coming soon with innovative token economic details

🦁DeFi component / partnership incoming 

Things to consider

Apart from the general risk that is inherent with the crypto space, consider the following when you DYOR on Skrumble Network. 

Competition

Few blockchain/crypto companies have tried to take a stab at the ‘secured communication’ aspect using blockchain. 

We have not yet heard the great success story in this space. 

This is good news and not so at the same time. 

It is good news because Skrumble Network could be THE project that penetrates the ‘success resistance’ in space. 

It is not so good news because the same reasons that lead to the failure of previous projects could plague Skrumble Network. 

Team changes

Exodus of team members from the Skrumble Network is a point of concern for us.  We are going to update this section with the response from the Skrumble Network team (without removing this concern from here). [Update: It seems that several are still involved in a part time basis, and they claim to have streamlined their operation. They are also actively working with the Juggernaut (JGN) team to implement the DeFi rewards system. For more details on JGN please see here: https://jgndefi.com/ 

Token supply

While the market cap is what matters the most in terms of the potential multiples, crypto space seems to be very touchy about the token supply. 

Token supply on Skrumble Network (SKM) is 1.5 Billion and might be looked at as quite high.

All tokens have been released to the market. In this space, the actual token supply amounts are becoming far less important. This was a pretty standard number in 2018 and was advised to the team. 

Team is expected to release more token utility and use cases as per the information alluded to by Eric and depending on the future use cases the market might respond positively. 

Moving to a more stable way of incentivizing operators may innovate the DeFI space beyond pure finance and into other industries as we rediscover how we share and perceive value. 

This is an overview of how we see DeFi becoming a crucial component going forward: https://medium.com/juggernaut-defi/skm-partners-with-jgn-to-develop-first-defi-communication-network-20ba9a3ccf38   

Conclusion

Our first impression is that Skrumble Network looks like a project with a lot of potential.  However, potential means nothing until it is ‘realized’. 

Will Skrumble Network realize its potential?  We do not know and that is the dilemma we have to ‘risk’ when dealing with micro-cap gems.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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5 questions we want XRP army to answer!

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xrp investing news

What follows is our opinion.  

Let’s not be hostile.  

Top 5 Cryptocurrencies 2020

We are simply posing some questions based on the information we came across and our own limited interpretation. 

It is quite possible that the sources we are referring to are at fault or our interpretation is. Either way, just answer these questions for us so that we can learn new things about XRP that we did not know.

Our readers know that we have been anti-XRP for a long time. We got trolled, mocked and called ignorant. Well, to each their own.

Our questions to the entire XRP army are simple, here they are:

Question 1: If crypto was to replace (or at least reshape) the entire banking business then what does a token whose sole business model is based on ‘accommodating’ banks have any future?

To put differently, when the world starts conducting commerce via text messages why do we need banks and Ripple which wants to serve banks?

Our basis for this question: 

In the future when we will start doing business with each other over text messages, wallets and email signatures, why do we need a payment gateway from Ripple?

We know that WeChat payment enables users to transact over chat.  Other companies are trying to catch up with this (primarily why Facebook was looking at creating its own currency, Libra).

However, once we have a digital dollar, we do not even need an outside stablecoin since one could, in theory, use the digital dollar directly.                  

Question 2: Why do you have to pay businesses to use XRP if it is so superior?

Our basis for this question: 

Financial Times reported that Ripple paid Moneygram to use Ripple technology.

Here is a direct quote:

It turns out Ripple has been paying a significant amount of subsidies cash to MoneyGram’s business since buying into the company in June. In the third and fourth quarter alone the Ripple benefits amounted to $11.3m.

What’s more, until a consultation with the SEC**, MoneyGram had been more than happy to book these cash flows as revenues. Due to the SEC guidance, however, it has now had to restate fourth-quarter guidance to account for Ripple payments as “contra expenses”.

XRP Twitter

Question 3: What is Ripple’s revenue worth without the ‘selling’ XRP?

Our basis for this question: 

The question seems to be answered by the XRP’s CEO himself. Here is an excerpt:

Asked if XRP was keeping everything cash flow positive at Ripple Labs, Mr Garlinghouse answered: “Well XRP is one source. I don’t know how to answer that because if you took away our software revenues, that would make us less profitable. If you took away all our XRP, that makes us less profitable. So I don’t think about it as one thing.” 

He clarified later: “We would not be profitable or cash flow positive [without selling XRP], I think I’ve said that. We have now.”

In our opinion, we think that the only reason Ripple (XRP) is even operational is because of the billions upon billions of XRP tokens that they keep dumping on the unassuming investors.  

Is this a wrong assumption?

Question 4: If Ripple does not need XRP, why is XRP needed?

Our basis for this question: 

This is based on our understanding that Ripple’s technology can be used by the businesses without having to use XRP.  It is recommended but not ‘required’.

Is this accurate?

Ripple’s solutions can work without XRP (its native token).  So, if XRP is not a utility token in strict sense, how are its creators able to mint and sell them at will without tripping any security laws?

Question 5: If Ripple [XRP] is to act as the ‘stable’ value while the transactions take place on Ripple network, why should anyone trust XRP which is backed by nothing instead of stablecoins like USDC that are backed by real world assets?

Our basis for this question: 

We would personally trust USDC more or even Facebook’s Libra rather than XRP which is backed by nada.

This is what Demelza’s opinion was during our interview:

“The main point is that if XRP were able to back their currency with financial assets and stabilize the purchasing power of the currency, then that would mean XRP coins should have no price appreciation. In fact, only the equity shares of Ripple Labs would profit from XRP’s adoption as a global reserve currency. But Ripple Labs is a privately held company. After fully understanding what XRP is, one realizes that XRP’s investment pitch does not make sense at all.”

Conclusion

We are trying to convince ourselves as to why we need Ripple in the crypto space if:

  • Future of payments is going to be ‘self-bank’ & over the chat
  • There are better stablecoins in the market 
  • Ripple itself as a technology doesn’t need its own native token, XRP

For this very reason, our opinion is that the money will flow out of XRP and the creators will keep dumping their bags into the market until the market can no longer absorb it and then it will be ‘lights out’.

We await for the XRP army to provide us insights that we did not know and our opinion changes…

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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DeFi is Not the Holy Grail of Crypto, Here is Why

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Defi Yfi

DeFi has been making millionaires overnight and turning millionaires broke at the same speed.

Those who are on the bandwagon are rejoicing and those who either missed out or got burned by one of the fake projects are yelling ‘Scam’ at DeFi.

Top 5 Cryptocurrencies 2020

Our views are a bit different on the subject.

We do think DeFi is going to be a successful vertical among the blockchain (and crypto) solutions.

It will not be THE holy grail for the redemption of crypto status though.

Supply Chain, Crypto Lending, Insurance, Financial Services, Accounting, Identity, and many more verticals will collectively take blockchain and crypto to the masses.

Shifting our focus back on DeFi, here are some of our thoughts on the current state of DeFi. We do appreciate you dropping any insights you have that we might have missed.

DeFi is not a ponzi, here is why

If the DeFi project you are eyeing meets the following conditions, it is not a ponzi:

  • Audited code: Is the code on which DeFi runs is audited by reputable blockchain auditors? 
  • Reliable team: Who is behind the project? Do they have the know-how? Do they have a history of running scams or leading successful projects? 
  • Actual (sustainable) revenue model: What is the revenue model?  Is it too ‘scammy’ sounding or is it based on sound mathematical (and algorithmic) models?
  • No lock-in periods: Is it easy to get in and out of the platform without any restrictions or lock-in periods?

If you answered yes to ALL of these questions then there is a 100% certainty that the DeFi you are dealing with is not a ponzi (or scam).

However, a caveat is due here.  

Just because the project is not a ponzi doesn’t guarantee its success. Lot of well intentioned companies fail, that’s just the nature of business.

So, do not be one of those guys who sells their home to invest in crypto or DeFi (and that itself is not advice, just an opinion).

If you don’t want to hear it from us, listen to what Yearn Finance creator has to say about DeFi tokens (not all, obviously) having ZERO value.

Source: Crypto Culture

DeFi on Ethereum is not sustainable, here is why

Ethereum DefiMost, if not all, DeFi projects that are making the news today are on Ethereum. 

Ethereum is not a reliable blockchain when it is overloaded.  It gets choked and crashes.  

People are already complaining about exorbitant fees on the network due to the DeFi craze.  

DeFi itself as a crypto vertical is quite new and we are sure there are going to be a lot of ‘killer apps’ that will show up on the scene.

We are currently looking at the DeFi solutions that are being built on other blockchain networks (subscribe for free to know when we post that article).

PolkaDOT is not the end all be all, here is why

Polkadot Defi EcosystemMany are turning to the DOT as the next big thing after Ethereum.

It may very well be.

However, it has not had the chance to prove itself, not yet.

Ethereum’s resilience (or lack thereof) was revealed only during the ICO craze (and then later during CryptoKitties debacle).

What monsters lie in the DOT’s belly?  We don’t know and we would be weary of anyone who claims to know with certainty.

Other things to consider

Entire DeFi space is pretty new and we do not know what we do not know about potential vulnerabilities.

While this is true of Bitcoin itself, Bitcoin has withstood assault for over a decade and still stands stronger.  

Same cannot be said about DeFi.  

Can you imagine someone investing their life-savings into DeFi only to have funds taken because of a bug in the code?

Needless to say, many folks are exploiting the looping system in the DeFi where they take loan against their deposit then lend it back to the platform to take another loan against their deposit, and ad infinitum.

This is causing the DeFi systems to show more liquidity than what truly is.

Conclusion

We think DeFi is an exciting development, however, we still put it alongside ICO craziness for now.

When this space matures and we see reliable solutions emerge – DeFi has the potential to drive a trillion dollar vertical on its own.  

That is just the potential, all the trials and tribulations that we have to go through to get there is going to be one hell of a ride.  

So buckle up and enjoy (and please do not lose your shirts on the ride)!

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

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IMPORTANT DISCLAIMER

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We do not endorse or guarantee the accuracy of the information and claims made.

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