Bitcoin Is Outperforming World Currencies As The Dollar Gets Stronger

As world currencies are tanking against the USD (US Dollar), Bitcoin is holding its ground. A strong USD is creating a debasement as the DXY hit an index high of 114.61. The strength of the USD has increased relative to a basket of other currencies (e.g. British Pound, Japanese Yen, etc.). Since the USD is the global reserve currency, a stronger dollar means higher costs for international trading. This affects prices of commodities that are paid for in USD, because of the exchange rate.

In the last 7 days (as reported on Fortune 9/28/22), Bitcoin has grown 6.3%, hitting $20K+ before eventually settling back to a lower level. Other currencies did not do as well. The biggest losses were the British Pound at -5.3% and the Euro at -3.5%. Even the Yuan was not spared, dropping -2.2%.

(Source Fortune)

Safe haven asset gold did just as poorly as the other world currencies. It has fallen by -1.7% against the USD, while Bitcoin has gone up. At this point it is risk off, and many investors are selling off assets in stocks/equities and moving to the USD. Crypto traders are likewise moving their assets from volatile cryptocurrency to stablecoins (e.g. USDT, USDC) that are pegged to the USD.

To further complicate matters, inflation is getting higher. The US has hiked interest rates in order to combat rising inflation, which kills demand and destroys risk on assets. For many investors crypto is being treated like tech stocks, so there have been many sell-offs regarding that. However, there are still those who believe that Bitcoin can be a way to solve that problem.

The idea behind Bitcoin (per maximalist thinking) is that it could or should be a hedge against inflation or economic uncertainties like currency debasement. That means that Bitcoin should be inversely correlated to inflation, but it has been more correlated to the traditional financial markets. Even though the founder Satoshi Nakamoto never stated that it was Bitcoin’s exact purpose to hedge inflation, it has opened that idea since it is outside the current financial system. It is not state controlled or corporation held, which makes it a neutral store of value. It also has a capped limit (21 million coins), so it cannot increase in supply. Despite this, there are large holders (i.e. whales) who can still manipulate prices.

It is interesting to see how this all plays out. It has been observed over the last few years that a stronger dollar equates to a weaker Bitcoin or BTC. At the moment we are seeing that it is not always the case. People who do not want to lose value in their wealth could start putting their money into crypto like BTC. What is slowly happening is that people from those countries where their currency is getting debased are exploring crypto as a way to preserve their wealth. Perhaps it is a short term trend, but if it remains stable within the next few weeks or months, this could be a sign that the value of BTC is being realized.

The Upcoming Ethereum Merge

Ethereum developers have announced that they are deploying the Ethereum Merge on its blockchain on September 19, 2022 (based on transcript from a conference call). The news has been received positively by the market, which led to a rally in ETH market price. This has been a long awaited event, which will consolidate the beacon chain with the main network to transition Ethereum’s blockchain from PoW (Proof-of-Work) to PoS (Proof-of-Stake).

There have been doubts about the merge since it was first delayed in the summer of 2022. Ethereum has a known history of delaying projects, with market panic when the developers cannot deliver on time. The expectations are sometimes too high for even what the developers can accomplish. When the deliverables do arrive, it usually turns sentiment back to bullish as was the case with EIP1559.

Before the merge can become a success, there are still some hurdles to clear. Tests are underway on testnets (e.g. Ropsten) to make sure that the protocols work properly. There are still major tests that will be conducted on the Sepolia and Goerli test networks. Once these chains have been transitioned successfully without much issues to PoS, then the next step is the Ethereum mainnet. This aims to improve the network to scale the number of transactions and lower fees for users.

Although a date has been set for the merge, it is not final. If there are problems during testing that are serious enough to address, then this could lead to further delays. The hope from ETH HODLers and investors alike is for a successful merge to occur in order to increase Ethereum’s value.

Disclaimer: The information provided is for reference and educational purposes only, and is not financial advice. Always DYOR to verify information.

We Were Warned About Terra LUNA

Prior to the great Terra LUNA meltdown of May 2022, there were warning signs to investors. This came from some notable crypto experts. The main problem was not about the team or developers. They actually have a solid project team with great ideas. It was more about the design of the stablecoin that worried critics. Terra developed an algorithmic stablecoin called UST (Terra USD) that has no actual commodity or asset backing its value. Instead it relies on minting tokens that peg its value to the US Dollar (USD).

In order to meet its peg to the USD, users must purchase Terra’s main coin called LUNA. UST is minted by burning LUNA, and users can hold UST in a DeFi protocol called Anchor to earn yields on interest up to ~20% (has fallen to 18% as of writing). It is a high earning interest rate that attracted investors to flock to UST. This includes many crypto influencers who also urged their followers to put their UST on the Anchor protocol and earn money.

The second problem with this system, is the sustainability of the Anchor protocol in being able to pay users the interest on their deposited UST. It turns out there were liquidity problems that exposed the protocol before. It was back in May 2021, during the cryptocurrency market crash that UST fell to as low as $0.96. That means a deposit of $1,000 would go down to $960 (a loss of $40) not including any yield on interest. This happened once again in May 2022, and this time the price of UST has gone well below the May 2021 mark. As of posting the value of UST was $0.1101 (Coinmarketcap). If you had deposited $1,000, the value will go down to $110.10 or about 90% of your money’s value was lost.

In order to return the peg back to $1, UST needs to be burned to mint more LUNA. During the meltdown that was what happened, but it hyper-inflated the supply of LUNA in the open market pumping into the trillions. This led to a drastic fall in LUNA prices as a “bank run” started with users dumping their UST. The Luna Foundation Guard (LFG) then stepped in by selling reserves in Bitcoin (and other assets supposedly) to try to mitigate the free fall of UST. It just was not enough because more users were selling off their UST than holding. On the Anchor protocol, the UST locked value fell from $14 Billion to under $5 Billion (and still falling as of writing).

Investment and crypto analyst Lyn Alden was one of the experts who warned about Terra’s UST. In a report from Daily HODL:

“Unlike a crypto-collateralized stablecoin, there is no specific threshold where UST breaks. However, if LUNA gets small relative to UST, the probability of an algorithmic bank run increases… Many of them would liquidate their BTC for cash since their positioning at the time was meant to be a stablecoin.” 

The fall of UST did affect Bitcoin prices, as the LFG had to sell off its reserves in BTC. The worst case scenario seems to have played out because it dragged several assets to the downside (UST, LUNA, ANC and Bitcoin). The LFG reserves would not be enough to cover restoring the peg to USD unfortunately.

She also cites some worries about the Anchor protocol:

“Then there’s the unsustainable Anchor yield timebomb. The time bomb is not about how well-managed the yield decline will be. It’s about what happens to UST demand structurally, when the primary demand driver (artificially high Anchor yields) no longer exists.”

In other words, Anchor did not appear to have the money to cover the interest payments. The payments would be coming from money borrowed using the protocol. However, there were more lenders than borrowers, so there was no balance. The yields were so high it could not be sustainable to pay in the long run.

Another warning about Terra LUNA came from Kevin Zhou of Galois Capital. He was one of the critics to sound the alarm and warned the public. Zhou told Coindesk:

“Even if it happened in slow motion, even if it was something like a bank walk, it was more about this thing not being solvent.”

Solvency was indeed an issue. To quote Zhou, “mechanism was flawed, and it didn’t play out as expected.”

There is also a crypto YouTube channel Coinsider that reported about the risk with Terra LUNA and UST. You can check the video which was made back in March 18, 2022 prior to the meltdown. The analysis was spot on and very informative. It may have also helped some people make the right decision of not investing in LUNA/UST or using the Anchor protocol.

What happened to Terra was catastrophic, and probably the worst if not one of the worst collapses in crypto history. Many people have lost money in the Anchor protocol with their UST deposits, while holders of LUNA now have a worthless (under $1) coin that once was valued at over $100 per coin. Regulators are aware of this problem and they could now begin to apply regulations that require money earning protocols to register or comply with financial rules for consumer protection.

The lesson from all this is to be careful when depositing your money into a DeFi protocol. Anchor was not the first protocol to fail like this. Iron Finance had their own meltdown that should have been another warning sign about high interest protocols. It was even endorsed by public personalities, making it more attractive to users which makes it even more problematic. The problem exposed in these systems is that during extreme market volatility, the algorithmic stablecoins were not able to keep the peg to USD. There was nothing the protocol can do when you have a bank run.

Sometimes when it sounds too good to be true (e.g. high interest on deposits), it probably is. It can be risky when big money is involved. Research the project thoroughly and listen to both sides to get a better understanding of the risks involved, and not just the benefits.

Disclaimer: This is opinion and not financial advice. The information provided is for reference and educational purposes only. Always DYOR to verify information.

Cross-Chain Swaps Using The Symbiosis Protocol

One of the main problems in DeFi (Decentralized Finance) is the seamless swapping of tokens. If a user wants to exchange one token for another, they can only do so if the wallet or exchange supports it with a token pairing. The issue here is that not all tokens are swappable with each other. You will need to find a token pair first, to make an intermediate exchange before you can swap for the token you need.

This is because there are many types of blockchains used by tokens and they are not all compatible with each other. The most liquid tokens are the easiest to pair because they have the most liquidity. When you want to swap from a lesser known token for another token, if it does not have a supported pair to swap, you will need to swap it first with a more liquid token. 

Swapping tokens can be frustrating with so many processes involved
(Photo Credit:Andrea Piacquadio)

For example, let’s say you have a token called X and you want to swap it for Z. You realize that you cannot swap them directly with each other. Token Z does not have a pairing with X, so you will have to swap it with another token first. You then decide to swap with token Y, which is paired with both X and Z. You will need to exchange X for Y, and then you can swap Y for Z. That is the best way to convert tokens, but it can also be more time consuming and cost more in terms of transaction fees.

It would be so much easier if things can take place on the backend. If a user can just send their order to swap X for Z, without having to perform any other intermediate step, it would save time and money. It would also be more convenient when it comes to user experience.

Symbiosis provides a solution to swapping tokens across different blockchains. It is a liquidity protocol that integrates the features of a multi-chain AMM (Automated Market Maker) and DEX (Decentralized Exchange). It is like a decentralized version of a digital exchange (e.g. Binance, Coinbase) that functions as an AMM (e.g. Uniswap). 

The Symbiosis app user interface.

With Symbiosis, users can swap any token across different blockchains with no additional software required. This provides interoperability between token swaps. As an AMM, it automates the order book system for unlimited token pairs with the best exchange rates offered. As a DEX, swapping of tokens is direct without requiring a trusted third-party like a payment processor or intermediary. 

Swapping allows the exchange of one token for another.

The process of swapping tokens from Symbiosis is called a cross-chain swap. This allows tokens to be traded across dissimilar blockchains without requiring the authorization from another exchange to process the transaction. Think of it as an open system that facilitates the flow of transactions. The tokens can also be on blockchains that are either EVM (Ethereum Virtual Machine) or non-EVM compatible. In order to get the best prices for swaps, Symbiosis routes transactions to other AMM DEXes like Uniswap or PancakeSwap. This allows for better price discovery by exploring the best options. Users also don’t have to pay different gas fees across blockchains since the protocol abstracts it into a single transaction fee.

An important benefit of Symbiosis is that it also addresses some issues that can occur during swaps. These are slippage and impermanent loss. A slippage occurs when there is a divergence in the price of the token from the time it was ordered and the fulfillment of an order. This can lead to what is called an impermanent loss. If the price recovers, then the loss is only temporary. However, if the price of a token does not recover right away and it is used for another transaction the loss becomes permanent. To address this, Symbiosis uses liquidity pools that includes stablecoins to offset market volatility with little to no slippage.

Swaps are just one of the many features of Symbiosis, which users will find very useful. It provides a much simpler solution for moving liquidity across multiple chains without experiencing fragmentation due to the many interfaces and processes involved. Current systems make swapping more difficult to the average user. What Symbiosis offers is a one-stop-shop solution for swapping different types of cryptocurrencies with less difficulty.

Disclosure: This article was written for #SymbiosisDeFined. This is not in any way financial advice, but for educational purposes only. DYOR always to verify the information.

First Published At Publish0x (3/23/22)

Things To Know About Getting Paid In Bitcoin

Would you be willing to accept your salary in the form of Bitcoin (BTC)?

Some people are willing to accept their salary in the form of cryptocurrency like Bitcoin. These are not just ordinary people, but includes athletes, celebrities, social influencers and even politicians. It is becoming a popular way for some brands to gain exposure by building up the hype around Bitcoin and other cryptocurrency by using public figures as ambassadors.

In the sports world, you have athletes like Aaron Rogers, Odell Beckham Jr., Russell Okung and Sean Culkin who have agreed to accept some part of their salary in the form of Bitcoin. These athletes did not have to do that, but the incentives are great. Either they had done their own research or someone may have advised them on the value of Bitcoin.

Some politicians have also agreed to get paid in Bitcoin. One example is Miami mayor Francis Suarez, who agreed to get a paycheck in Bitcoin. This falls in line with the mayor’s own plans of transforming Miami into a cryptocurrency hub. Another example is the mayor of New York, Eric Adams, agreeing to have his first salary paid in Bitcoin. These moves could be politically motivated to promote their respective cities as being open to the crypto space. Nonetheless, it sends a positive signal.

There are countries that are also allowing Bitcoin as payment for salaries. At the top of this list is El Salvador, which is officially the first country to accept Bitcoin as a form of legal tender. Prior to El Salvador, New Zealand had been the first country to allow salaries in Bitcoin, back in 2019. Elsewhere in Latin America, there are proposals in Brazil to accept Bitcoin as an option for salary payments. 

Since the world has become more global in terms of business, Bitcoin is also providing a way for companies to pay for workers who are based overseas. There are now crypto payroll services that process such transactions. What is important here is that these services meet legal requirements, in order to be able to allow companies to pay their workers in Bitcoin. It is much easier with integration to Layer 2 payment rails like the Lightning Network (LN). The LN works with apps to allow Bitcoin payments to be made quickly and cheaply, so it is just like sending any electronic payment. This can be made using a smartphone app, which can help adoption since many users around the world own a smartphone.

Getting paid in Bitcoin is not yet common, but gaining popularity. What is important for anyone who accepts their salary in Bitcoin is to understand that this is a volatile asset. Prices are subject to swings, where the value can fall by 40%, but it can then suddenly recover much higher. This also does not excuse anyone from not paying taxes. Treating it more as an investment asset rather than as just another form of currency is the whole idea of Bitcoin. It may not be ideal if you need fast liquidity like cash, but more so for storing value in the long run.

Another important thing to know about getting paid in Bitcoin are tax laws in respective jurisdictions. In the US, this is a taxable event. An accountant or lawyer who has an understanding of virtual currency laws as it relates to cryptocurrency can help. The taxes are to be paid in fiat, unless the jurisdiction accepts BTC for tax payments. There are states like Arizona which will allow it, so if a payment is received in BTC, the taxes can also be paid in BTC that is commensurate to the fiat amount of that payment. For the most part, taxes are paid in fiat based on the conversion from the Bitcoin payment.

It is easy to just convert Bitcoin to fiat currency after every paycheck. However, it has future price appreciation in valuation for holders which is just like stocks. You also get the benefits of a non-confiscatable store of value that grows over time. If you custody your own Bitcoin in your own digital wallet, it cannot be frozen or taken by anyone. As more people realize that there is more to Bitcoin than currency, perhaps they will be more open to considering it for their next paycheck.

(Photo Credit by David McBee)

Disclaimer: This is not financial advice. The information provided is for reference and educational purposes only. DYOR always to verify any information.

Crypto Takes The Spotlight At Super Bowl LVI

The Super Bowl is perhaps the most watched American sporting event. It is the championship game between the two best teams in the NFL (National Football League), a professional football sports organization. In 2022 it was the Los Angeles Rams against the Cincinatti Bengals, played at the SoFi Stadium in Inglewood (a Los Angeles suburb). This gave the Rams a home turf advantage in a stadium with a capacity of 70,000 but expandable to 100,240 for events like the Super Bowl. The viewership projection for the Super Bowl in 2022 comes from data analytics firm PredictHQ.  They estimate that the event will attract 117 million viewers on NBC’s network. If the international market is included that could bring figures between 125 -150 million viewers.

That is great exposure for ads, and that is the reason why many are shown during the game’s broadcast. Getting to a large target market and demographic helps keep brands relevant, and does well for marketing to new consumers. With that as a reason for advertising, the crypto (i.e. cryptocurrency) industry took the spotlight with ads  for more exposure to a mainstream audience in 2022.

In Super Bowl LVI, crypto-related fintech companies like FTXCrypto.com, Coinbase and EToro used this opportunity to release their commercials.  The market is not entirely in a boom phase quite yet. The market still has plenty of room to grow and we are at the early stages of adoption. Commercials that reach out to so many people, who actually watch them during the Super Bowl, is one way to get the message across. That is especially true for attracting new customers and crypto users. What is significant is that these companies are an important on-ramp to crypto.

The thing is, commercials for the Super Bowl need to be creative and engaging. This is probably the only time an audience will actually watch commercials because of the entertainment value it also brings during the event. Brands have learned that making their ads the most entertaining and engaging for the Super Bowl is how to capture their target market among the audience. For example we see the usual beer commercials and junk food items. Only this time with popular celebrities and public figures doing the endorsement since this adds more value and reputation to the brand. It is all about brilliant marketing with the theatrics of Hollywood.

How did the crypto ads do? I think they got the message across, but let’s be honest. Probably most of the audience have never before heard about crypto or simply do not understand or care about it. The commercials this year have become more engaging to try to make the target audience more curious and interested, at the very least. In one of their ads, FTX features Super Bowl champion QB Tom Brady (“Tom Brady Wants A Trade“). They feature a familiar face using a not so familiar app for crypto trading. Likewise, Crypto.com had their “Big Game Preview with LeBron James” commercial, as part of their “Fortune Favors The Brave” campaign.

These would be very expensive spots for even a few seconds, but perhaps it will be worth it. NBC was selling 2022 Super Bowl ads for record deals, closing at $6.5 million per 30-second commercial. Companies like FTX and Crypto.com will have no problem paying that amount. These are successful crypto exchanges earning billions in revenues who are willing to advertise. Advertising is a tried and tested formula for capturing new markets. For crypto it can help to bring in more adoption.

All I Want Is Bitcoin For Christmas!

What better idea to give for Christmas than Bitcoin! The premier digital asset is a gift to behold. There will only be 21 million BTC in existence, so having at least one or a fraction of BTC will be very valuable. Here are ways on how you can gift your friends, family and loved ones with the number one cryptocurrency in an easy and secure way.

Bitcoin ATM Voucher

Give a voucher to redeem BTC from a Bitcoin ATM (BTM). Go to the BTM to purchase Bitcoin.  A printed receipt will be given that contains the wallet address of the Bitcoin(s) purchased. The BTC can be redeemed at any time. Best to give with a Christmas or holiday greeting card. This is the best way to give Bitcoin to first time holders.

Hardware Wallets

Purchase a hardware wallet (e.g. Trezor, Ledger) for storing a Bitcoin address private key. This in itself is enough for the gift, but you can also add some BTC to the wallet address. Ideal gift for more advanced users who may already have a hot wallet (i.e. online wallet) on an exchange. Hardware wallets allow users to have full custody of their Bitcoin(s).

Direct P2P (Peer-to-Peer)

Gift Bitcoin the way it was intended to be used, peer-to-peer. Just get the recipient’s wallet address and send the Bitcoin from your wallet. This is now simpler thanks to smartphone apps (e.g. CashApp, Coinbase) which have features for sending cryptocurrency like Bitcoin to other users. You can also use Lightning Network apps (e.g. Strike), which makes it faster to send BItcoins.These apps are  easy to use, but do be wary of transaction fees. It could be a little more expensive during the holidays when the network is busier than usual. 

Crypto-Gifting

Some crypto companies like Coinbase offer a crypto-gifting service. You must have an account on their platform to do this. This will allow you to choose the cryptocurrency of your choice (choose Bitcoin!) and send it as a gift. Provide the recipient’s e-mail address and instructions will be sent on how to claim their Bitcoin present.

Bitcoin Is A Gift That Keeps On Giving

The overall value of Bitcoin is everlasting. It can be worth more than it is currently priced in the future due to demand and supply. It is even more scarce than gold. It is also something that cannot be easily confiscated or restricted, because of its decentralized nature. Bitcoin’s properties make it a good asset to own for storing value.

The takeaway here is to give Bitcoin(s) responsibly. Recipients should be educated on cryptocurrency in general, not just Bitcoin. Spend some time with them to help them learn. With that understanding, you can make sure they will be responsible enough to never reveal a private key and that once it is lost the Bitcoin might never be recovered.  It is about safety and security first in order to enjoy Bitcoin this holiday season.

Disclaimer: This is not financial advice. The information provided is for reference and educational purposes only. DYOR always to verify any information.

The Anchor Protocol For The Terra Network Blockchain

This article provides information about the Terra network and the Anchor Protocol. This will allow access to the Terra blockchain ecosystem, which provides users with access to DeFi (Decentralized Finance) applications.


Terra Blockchain

Anchor is a savings protocol offering low-volatile high yields on Terra stablecoin (UST) deposits. While banks are offering less than 0% interest on savings, Anchor offers between 19 – 20% APY. The Anchor protocol makes use of the Terra blockchain ecosystem to earn users higher yields on their deposits. 

The protocol is decentralized. There are no required sign-ups other than access to a wallet. There are no minimum deposits, account freezes and users can immediately withdraw funds at any time. 

Anchor also lets users borrow against their digital assets as the collateral. The borrower is issued Terra stablecoins based on an LTV (Loan-to-Value) ratio. The higher the LTV for borrowing against collateral, the higher the risk of liquidation if the borrower is not able to maintain the ratio. The good thing about it is that this provides liquid assets to users without losing their original assets. As long as they pay back what was issued, they can recover their collateral.

Users can also stake ANC tokens to earn more tokens. This can also be provided to liquidity pools for the ANC/UST token pairing. The protocol’s simplest earning product is a UST savings deposit, which can earn up to 20% APY.


Participants

The participants are the users of the Anchor protocol. There are 4 main types.

  1. Lenders – Deposits Terra stablecoin UST for lending to earn % APR. In return they receive a token bond issued as aTerra. This is used to redeem the deposit along with accrued interest.
  2. Borrowers – Deposits collateralized digital assets in the form of bonded assets or bAssets (e.g. bETH or bLUNA) in order to borrow money based on an LTV ratio. The borrowed money is against the borrower’s collateral and is in UST stablecoins.
  3. Liquidators – Purchases liquidated collateral from bidding. When a lender is about to default or has reached the threshold LTV, the liquidation process allows for bids to liquidators.
  4. Liquidity Providers – Provides liquidity to a pool for token pairing of UST/ANC. In return, liquidity providers earn from transaction fees made from the liquidity pool.


Tokens

There are 5 types of tokens involved in the Anchor protocol.

UST (USD Terra) – The Terra stablecoin that is pegged to the USD (US Dollar) in price.

– 1 UST = 1 USD

aTerra (Anchor Terra) – Represent the deposited UST stablecoins. 

– Redeemable for initial deposit D and accrued interest i

aTerra = D + i

– To receive aTerra, a user must deposit their digital asset as bAssets. 

The aTerra is then issued based on the LTV ratio. 

bAssets (Bonded Assets) – The locked collateral

– Locks the value of assets from collateral

  • Bonded Luna (bLuna) – Token backed by Luna
    – CW20 compliant for fungible tokens (ERC20 based)

– exchangeRate = lunaBonded / bLunaSupply

  • Bonded ETH (bETH) – Token backed by ETH
    – CW20 and ERC20 standard

– ETHexchangeRate = stETHbalance / bETHSupply

Anchor (ANC) – Governance Token

– Allows token holders to participate in digital governance for  policy making decisions and development of the protocol.

ANC-UST LP – Liquidity Pool (LP) token issued for users who provide ANC/UST token pair.


How to Earn From Anchor 

There are 4 DeFi products that allow users to earn from Anchor.

  1. Deposit UST to earn up to 20% APY (subject to change)
    • Users deposit their UST to earn % interest APY.
    • Users receive a bond of their deposit as aTerra.
    • The longer the user keeps their deposit in savings, the more interest they can earn.
    • Withdrawals can be made at any time.
  2. Stake ANC and earn ANC
    • Users stake their ANC governance tokens.
    • There is a % APY of staking rewards given to ANC stakers.
    • Rewards from staking are claimed when users unstake their ANC.
  3. Provide liquidity for ANC/UST token pair, earn ANC
    • Users provide equivalent amounts of ANC and UST for liquidity.
    • Their pool contribution is issued as ANC-UST LP token.
    • Users earn from transaction fees from the pool.
    • The ANC-UST LP token is used to redeem the user’s earnings, when liquidity is removed by burning the LP tokens.
    • Users receive the amount of the ANC and UST they provided along with the earnings, depending on the number of LP tokens burned.
  4. Collateralize bLUNA or bETH to borrow UST and earn ANC
    • Users provide digital assets (ETH or LUNA) as bonded assets for collateral.
    • Users can borrow against their collateralized assets using an LTV ratio.
    • Users can borrow until the loan’s LTV ratio reaches the MAX LTV, calculated based on collateral types, their prices, and deposit amount.
    • Users can use the money they borrow to earn ANC.


Liquidation Contracts

  • The higher the LTV, the higher the risk of liquidation.
  • Manages collateral liquidations of loans at risk of under collateralization.
  • Used by liquidators to purchase liquidated collateral.


Synopsis

Anchor allows users to earn by allowing deposits of their UST for % APY.

They can also borrow for collateralized lending using bETH and bLUNA tokens.

Staking allows users to stake ANC tokens for yields and claim rewards.

Contribute to liquidity, allowing users to provide ANC-UST token pairs to a liquidity pool and earn from transaction fees.

Disclaimer: This is not financial advice. The information provided is for educational and reference purposes only. Do your own research always to verify facts.

The Ethereum Altair Upgrade – Merging PoS With The Beacon Chain

The Ethereum Altair upgrade was completed on October 28, 2021. This is part of the transition to ETH 2.0, as PoS (Proof-of-Stake) consensus mechanism merges with the Beacon Chain.

The upgrade implements the following:

  • light-client support to the core consensus.
  • Setup of beacon state incentive accounting.
  • Fixes validator incentives issue.
  • Penalties for offline or inactive validator nodes per EIP 2982.

Over 95% of the network participated at the time of the upgrade’s first epoch. This is the first upgrade to the Beacon Chain since going online in December 2020 and could also be the last before the merge with PoS on the Ethereum mainnet.

According to IntoTheBlock researcher Lucas Outumuro:

Through the Altair upgrade, Ethereum sets the base for this vision, enabling the upcoming merge of the proof-of-work chain and the Beacon Chain. Finally, these are expected to benefit Ether holders and stakers by making it deflationary while offering higher returns to validators.”

The recent London Hard Fork had introduced a base fee as part of EIP 1559 with a coin burning mechanism that adds a deflationary feature to Ethereum. During the first 48 hours of that upgrade, $30 million in ETH were burned from the network’s circulation. As of 10/30/21, 681,030 ETH have been burned that is valued at $3,013,073,269. This puts pressure on supply as it decreases and drives the price of ETH higher due to market demand.

With ETH 2.0 set for deployment in 2022, Altair is part of the preparation. Altair is a hard fork, which means that the 250,000+ validator nodes who didn’t upgrade are now considered offline. Their ETH will then slowly diminish at about 10% per year. This was included in Altair as a sort of way to push for moving towards the upgrade. This not only benefits the validators, but the network as a whole as it comes to an agreement to pave the way for Ethereum’s next phase.

London Hard Fork Brings The Burn To Ethereum

The Ethereum network has activated the London Hard Fork successfully (12:34 UTC, Block# 12,965,000, 8/5/2021). In the first two days, $30 Million of ETH (Ether) were burned. That amount of ETH burned, removes approximately 3,000+ ETH from circulation. This is part of the EIP 1559 specification in which a certain portion of the transaction fee is burned per transaction. The hard fork also makes transaction fees on the Ethereum blockchain more predictable. This creates lower gas fees that can bring the costs of transactions down since there is now a base fee.

The introduction of a base fee addresses the volatility in transactions. This is regarding the cost of gas prices during times of network congestion. When the network is at its busiest, the cost of gas can suddenly increase which is why recent transaction costs on the Ethereum network has been high. With a base fee, this can prevent gas prices from suddenly shooting up to levels where it makes more sense to send large transactions than lower ones.

Since Ethereum uses an inflationary currency model, the burning introduces a deflationary system for the first time. This puts a check on the amount of ETH in circulation, which can affect prices to the upside. This has become controversial since it affects miner rewards, but the Ethereum network is moving away from mining (Proof-of-Work) consensus. A protocol difficulty bomb is part of the design for Ethereum 2.0 (ETH2.0) that will make mining more difficult, encouraging validators to move towards staking (Proof-of-Stake) consensus. The London Hard Fork will delay this at the moment to allow time for transition.

In a nutshell the London Hard Fork has enabled the following features:

  • Establish a base fee for transactions
  • Provide more transparency and predictability to transaction fees
  • Make ETH a more deflationary asset with a burning mechanism

Here are other EIPs activated during the London Hard Fork:

EIP 3554 delays the “difficulty bomb”.

EIP 3529 reduces gas refunds. Gas tokens (e.g. Chi) will become obsolete.

EIP 3198 allows users to return the base fee opcode.

EIP 3541 enables future upgrades to the Ethereum Virtual Machine (EVM)

Overall this introduces steps that will bring Ethereum closer to a minerless future. This gives time for miners to transition to staking, but once the difficulty bomb is activated it begins the “Ice Age” for mining. The new structure for transaction fees is also a positive development in light of the skyrocketing costs to run a transaction on the Ethereum blockchain. It doesn’t exactly lower gas prices, but makes it more manageable with a base fee. At least users will not have to deal with sudden increases when all they want to do is transfer ETH to another wallet or swap tokens. ETH will also be headed towards a more deflationary asset as well, with the burning of portions of its transaction fees. All of this creates positive market signals that drives further utility on the Ethereum blockchain.

(Photo Credit by Chris Schippers)