DeFi liquidity pool

A DeFi liquidity pool is a smart contract that locks tokens to make sure that those tokens are always available on a decentralised exchange. Users who give tokens to the smart contract are called "liquidity providers." 

DeFi liquidity pools came about as a new and automated way for decentralised exchanges to deal with the liquidity problem. They replace the traditional order book model used by centralised crypto exchanges, which was taken straight from the established financial markets.

 

In this model, the exchange acts as a market where buyers and sellers can meet and agree on prices for assets based on how much demand and supply there is for them. But this model only works if there are enough buyers and sellers to make the market liquid. So, the job of market makers is to make sure that there is always someone to meet the demand, which keeps prices fair by adding liquidity. 

For a decentralised exchange, the basic model has been shown to not work. Ethereum's high gas fees and slow block time make it unattractive to market makers.  Because of this, liquidity pools have become the go-to solution in decentralised finance because they offer decentralised trading platforms continuous, automated liquidity.

2.

How do DeFi liquidity pools work?

In its simplest form, a DeFi liquidity pool is just a smart contract that holds two tokens. These two tokens make up a trading pair. 

Let's use Ether (ETH) and USD Coin (USDC) as examples. To keep things simple, the price of ETH can be equal to 1,000 USDC. Liquidity providers put in the same amount of ETH and USDC. This means that if someone put in 1 ETH, they would also have to put in 1,000 USDC. 

Because of the liquidity in the pool, if someone wants to trade ETH for USDC, they can do so based on the funds that have been deposited instead of waiting for a trade partner to come along. 

The people who provide liquidity are rewarded for what they do. When they make a deposit, they get a new token called a "pool token" that represents their stake. In this case, USDCETH would be the pool token. 

All liquidity providers get their fair share of the trading fees paid by users who use the pool to swap tokens. This is done automatically based on the size of each liquidity provider's stake. So, if the trading fees for the USDC-ETH pool are 0.3% and a liquidity provider contributed 10% of the pool, they are entitled to 10% of 0.3% of the total value of all trades. 

When a user wants to get their money out of the liquidity pool, they have to burn their pool tokens and then they can get their money.

3.

What are the risks of DeFi liquidity pools?

The algorithm that decides how much an asset is worth could fail, slippage could happen because of big orders, smart contracts could fail, and more. 

The price of assets in a liquidity pool is set by an algorithm that keeps changing based on how much trading is going on in the pool. If the price of an asset is different from the price on the global market, arbitrage traders who make money from price differences between platforms will move to take advantage of the difference. 

When prices go up and down, liquidity providers can lose some of the value of their deposits. This is called a "temporary loss." Once a provider takes their deposit back, however, the loss is permanent. Depending on the size of the change and how long the liquidity provider has had their deposit at risk, transaction fee rewards may be able to make up for some or all of this loss. 

Smaller pools can lose money because of slippage if someone suddenly wants to make a big trade. This is because of how the pricing algorithm works. 

If the code that runs DeFi hasn't been audited or isn't fully secure, users face other risks, like smart contracts that don't work. Before you put any money in, make sure you know all the risks.

4.

What are the benefits of DeFi liquidity pools?

The most obvious benefit of liquidity pools is that they make sure that traders who want to use decentralised exchanges always have access to liquidity. They also give you the chance to make money with your cryptocurrency by becoming a liquidity provider and getting paid for transactions. 

Also, many projects and protocols will give liquidity providers extra incentives to make sure that their token pools stay big. This will lower the risk of slippage and make trading better. So, there is a chance to make more money by becoming a liquidity provider in exchange for yield farming reward tokens.

5.

How can I join DeFi liquidity pools?

Depending on the platform, there are different ways to join DeFi liquidity pools. In general, one would need to create an account on the platform of choice and then connect an Ethereum wallet like MetaMask or other Web 3.0 wallets from the homepage. Once that is done, tokens can be put into the appropriate liquidity pool. 

On platforms like MTX, a person would have to look for a specific pair they want to provide liquidity for and then connect their wallet. A user can put tokens into the pool after checking the returns, such as the pool ratio and the exchange rate.

What is Web 3.0?

Web3 is an idea, a vision, and a movement for a decentralised web that is almost free of third-party intermediaries that are run from a central location. This feature helps protect the privacy of a user's data and makes it more focused on the user instead of the platform or business. Tim Berners-Lee, who made the World Wide Web, came up with the idea in 1999. He called it a "Semantic web" that would use AI.

Before we go any further, here's a simple example to help you learn more about the decentralised web. At some point in our lives, we have all heard that our information was leaked, sold, or hacked, and nothing could be done to stop it.

Why? Even if it belongs to us, we don't own it. Once our information is online or shared through centralised digital channels, people or companies can do whatever they want with it, which has a direct effect on our everyday lives. For example, the AI could use our data and preferences to show us ads that it thinks are relevant based on what it knows about us.

But what if we really owned all the information about us and could use it however we wanted? We will be able to do this with the help of a decentralised web. Not only will we be able to do this, but we will also be able to trade, transact, communicate, and work better without the help of a government, corporation, or other influencer.

To keep its vision alive, Web3 relies heavily on cryptocurrencies and blockchain. We hear a lot these days about the NFT hype or how some countries are making crypto a legal form of currency. Even though there is no set date for when these might be used, we can still see many companies and platforms building the infrastructure pieces that are important to Web3. For example, Konstellation is a platform that wants to make a decentralised capital market. It also lets different blockchains work together, so you can do transactions between them. It sounds interesting, doesn't it?

Everything we do today, all over the world, is based on money. At the moment, if you want to trade or transact, you need a third party. In the next few years, decentralised finance (DeFi) will be the way of the future, and platforms like Konstellation will help build hubs for DeFi.

How Will Web 3.0 Work in Real Life?

As regular people, we might not have to do much to use Web3. Organizations and platforms like Ethereum and Konstellation will take care of most of the services. If we think about it, it will be like the web version we use now, but it will be more efficient, open-source, trustless, and decentralised.

Take the case of sending money. If you need to send $1,000 to someone in another country or change it into a different currency, the process can take a long time and could cost you money. To finally finish the deal, you have to go through a long process and pay a large fee. Since Web3 will be based on blockchain and cryptocurrency, there will be a direct transfer of funds through borderless, global decentralised applications (dApps) and services. This will make the process quick and cheap.

Web 3.0: Internet of Our Online Future

The way we use language and the things we do shape who we are. We hope that the new age of the Internet will do the same for us. Even though many famous people have different ideas, Web3 is sure to change the way we use the Internet in the future once it is fully operational (currently under development).

Platforms like Konstellation are built on the same ideas and support Web3 to make it easier to use and more popular. There are many changes happening in space, and it will be interesting to see how things turn out for all of us in the days and years to come.

The Top Ten Countries For Crypto Activity

 

Based on their methodology, Chainalysis’s ‘Geography of Cryptocurrency Report for 2020’ ranked countries as follows:

1. Vietnam

2. India

3. Pakistan

4. Ukraine

5. Kenya

6. Nigeria

7. Venezuela

8. United States

9. Togo

10. Argentina

Source: https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index/

On the surface, the list is surprising, but keep in mind that this is an index of adoption, not actual numbers of users, which would represent GDP per capita and population.

According to the Chainalysis Index, the top country for crypto adoption is Vietnam, a young and tech-savvy country with a speculative culture that favours gambling and investment and where remittances are a substantial component of GDP (just over 6% in 2020 according to World Bank estimates). This creates a favourable environment for bitcoin adoption.

It's not surprising that India and Pakistan are ranked second and third in the worldwide crypto adoption ranking. Remittances are essential in both nations, which have young populations, increasing mobile coverage, and growing middle classes that are well-educated and financially savvy but lack options to invest in currencies other than national currencies.

Four of the top ten countries – Nigeria, Venezuela, Argentina, and Kenya – demonstrate crypto potential as a hedge against hyperinflation to varied degrees. Except for the United States, all of the countries on the list rely heavily on remittances, for which crypto is increasingly vying with comparatively expensive conventional solutions such as Western Union or Moneygram.

DAO - Decentralized Autonomous Organization

Using blockchain technology, a decentralised autonomous organisation, or DAO, is a unique way to connect people. Users with similar goals and a desire to work together are quickly drawn to its structure. DAOs are new and different because they give each member the same amount of power.

Every day, new DAOs start up. A DAO could be the way to go if you want to use NFTs to grow your investments or give money to a good cause. This guide takes the mystery out of DAOs by explaining how they work, how they use blockchain technology, and how they are better than other types of organisations.

What Is a DAO?

A DAO is an organisation that is run by its community members and is controlled by blockchain. It doesn't have a CEO or a board of directors who run it. The foundational rules of the collective are set by smart contracts, and each member has an equal vote on changes or additions.
Members can come up with ideas to improve the DAO's protocol at any time, and then everyone in the community gets to vote on them. Based on the rules in the smart contract, proposals that get a certain number of votes will be accepted and put into action.
Members of the community have reasons to approve proposals that help the protocol. As long as a protocol is healthy and can be kept up for a long time, people with similar ideas will want to join the community. This, in turn, makes more people want to buy DAO tokens, which raises the value of the tokens that members own. Because of this, it is in the best interest of each member to make sure the protocol works so that they can also be successful.

Types of DAOs

A DAO is meant to bring together people who want the same things into a group that doesn't need a leader. Operations are run by the community and follow rules based on the blockchain. Decisions are made in the DAO by making proposals and voting on them. This makes all activities clear for all members to see.
Each DAO has its own tokens and decentralised way of running things. Users can now make DAOs with a wide range of goals because blockchain technology is getting better. Here are some examples of DAOs and what they can be used for.

Philanthropy DAO

Philanthropy DAOs focus on promoting social responsibility projects and other charitable causes. Using cryptocurrency, they use several different ways to collect and distribute money.
Their goal is to make a difference by using fundraising methods that are sustainable and can be used all over the world. One example is UkraineDAO, which collects money for the soldiers of Ukraine. Another is Popcorn, which gives money to a number of charities chosen by POP holders.

What Is the Purpose of a DAO?

There are many reasons why users might want to make a new DAO. Usually, each DAO token holder has the same amount of voting power as the number of tokens they hold. This means that a person with 50 tokens has 50 times as much voting power as a person with only one token. People think that someone with a bigger financial stake in a DAO would be more motivated to make sure it does well. So, this practise is a safety measure to make sure that users who don't have as much money in the DAO can't act in bad faith and bring it down.
DAOs are important because they let people pool their money and support projects without relying on third parties. Instead, after a vote on a proposal, people trust that codes will automatically carry out a smart contract. This means that every transaction can be checked by any member on the blockchain, while a traditional organisation might not be as open.

Advantages of a DAO

Even though each DAO is built in a different way, they all have the same main benefits. The decentralised and independent structure makes it easy to run things smoothly and work together. Here are some more reasons why DAOs are better than traditional organisations.

What is foreign exchange?

The exchange of one country's currency for another is known as foreign exchange, or FX. A currency's worth in a free market economy is determined by supply and demand. That is to say, the value of one currency can be set in relation to another currency, such as the U.S. dollar, or to a group of currencies. The government of each given country may also decide what value its currency will have.

However, many countries float their currencies freely against those of other countries, which keeps them in constant fluctuation.

Factors Affecting Currency Value

Market dynamics based on commerce, investment, tourism, and geopolitical risk determine the value of any given currency. When traveling internationally, it is customary to use the local currency when making purchases. Consequently, a visitor needs to shift some of their home currency into the local currency. This type of foreign exchange is a key driver of currency demand.

Foreign companies interested in doing business in a country are another significant driver of demand. Typically, the overseas firm will be required to pay in the currency of the domestic enterprise. Sometimes, nevertheless, it makes sense for a foreign investor to put money into a company based in a different country, and that investment must be denominated in the host country's currency. With so many varied uses, it's no wonder that the forex market is so massive.

How Inflation Affects Foreign Exchange Rates

A country's currency and its exchange rate with other currencies can be severely impacted by inflation. Inflation is simply one of several factors, but it tends to have the most detrimental impact on the value and exchange rate of a currency. No inflation rate is safe from having an unfavorable effect on the value of a currency's exchange rate, although high inflation rates almost always have the opposite effect.

A Digital Wallet for All Your Web3 Needs

From foreign exchange to crypto to NFTs and beyond, accessing a wealth of DeFi platforms is simpler than you might think. With MTX, an inclusive leading digital asset financial service provider, you can access world-class security as you trade and store assets. With a copy trading service, you can enjoy profits of up to 60% for 45 days. Not only that, but being an active participant might give you the chance to win up to 100 USDT of cash vouchers. Learn more and sign up today.

What are Commodities?

 

What Is a Commodity?

A commodity is a basic good that can be traded for other commodities of the same type. Most of the time, commodities are used as parts to make other goods or services. So, a commodity is usually a raw material that is used to make something else. On the other hand, a product is the finished item that is sold to consumers.

The quality of a given good may vary slightly from one producer to the next, but it is mostly the same. When commodities are traded on an exchange, they also have to meet certain minimum standards. This is called a "basis grade."

Understanding Commodities

Commodities are the things that are used to make goods. They could also be basic foods, like certain farm products. The most important thing about a commodity is that there isn't much, if any, difference between the same commodity from one producer and the same commodity from another producer. No matter who makes it, a barrel of oil is pretty much the same thing. A bushel of wheat or a tonne of ore are also the same. On the other hand, a consumer product's quality and features will often be very different depending on who makes it (e.g., Coke vs. Pepsi).

Grains, gold, beef, oil, and natural gas are all common types of commodities. In recent years, the definition has grown to include financial products like indexes and foreign currencies. New kinds of goods are also being traded in the marketplace because of changes in technology. For example, minutes and bandwidth on a cell phone.

As financial assets, commodities can be bought and sold on exchanges that are just for that. There are also well-developed derivatives markets where contracts for these commodities can be bought (e.g., forwards, futures, and options). Some experts say that investors should hold at least some commodities in a well-diversified portfolio because they don't have a lot in common with other financial assets and could help protect against inflation.

Buyers and Producers of Commodities

Most of the time, people buy and sell commodities through futures contracts on exchanges that set minimum standards for the amount and quality of the commodity being traded. For example, the Chicago Board of Trade (CBOT) says that one wheat contract is for 5,000 bushels and says what grades of wheat can be used to fulfil the contract.

Commodity futures are traded by two kinds of traders. The first group is made up of buyers and sellers of goods who use commodity futures contracts to protect themselves, which is what they were made for. When the futures contract ends, these traders either make or take delivery of the real goods.

For example, a wheat farmer who plants a crop can protect himself from losing money if the price of wheat drops before the crop is harvested. When the crop is planted, the farmer can sell wheat futures contracts that guarantee a certain price for the wheat when it is picked.

What Determines Commodity Prices?

Like the prices of all other assets, the prices of commodities are set by supply and demand. For example, if the economy is doing well, there might be more demand for oil and other energy goods. There are many things that can change the supply and demand of commodities, like economic shocks, natural disasters, and investor appetite (investors may purchase commodities as an inflation hedge if they expect inflation to rise).

What Is the Difference Between a Commodity and a Security or Asset?

Commodities are things that can be eaten or used in the process of making other things. On the other hand, assets are things that can be used but don't get used up. Money or a piece of machinery, for example, are used to make things, but they still exist as they are used. Security is a form of money that is not a physical thing. It is a legal document (like a contract or claim) that shows how some cash flows from different activities (such as a stock representing the future cash flows of a business).

What are stocks?

 

What Are Stocks?

A stock, also known as equity, is a security that represents the ownership of a fraction of the issuing corporation. Units of stock are called "shares" which entitles the owner to a proportion of the corporation's assets and profits equal to how much stock they own. 

Stocks are bought and sold predominantly on stock exchanges and are the foundation of many individual investors' portfolios. Stock trades have to conform to government regulations meant to protect investors from fraudulent practices.

How Do You Buy Stock?

Most often, stocks are bought and sold on stock exchanges, such as the Nasdaq or the New York Stock Exchange (NYSE). After a company goes public through an initial public offering (IPO), its stock becomes available for investors to buy and sell on an exchange. Typically, investors will use a brokerage account to purchase stock on the exchange, which will list the purchasing price (the bid) or the selling price (the offer). The price of the stock is influenced by supply and demand factors in the market, among other variables.

How Can You Earn Income From Owning Stock?

There are two ways to earn money by owning shares of stock is through dividends and capital appreciation. Dividends are cash distributions of company profits. If a company has 1,000 shares outstanding and declares a $5,000 dividend, then stockholders will get $5 for each share they own. Capital appreciation is the increase in the share price itself. If you sell a share to someone for $10, and the stock is later worth $11, the shareholder has made $1.

Is It Risky to Own Stock?

All investments have a degree of risk. Stocks, bonds, mutual funds, and exchange-traded funds can lose value if market conditions decline. When you invest, you make choices about what to do with your financial assets. Your investment value might rise or fall because of market conditions or corporate decisions, such as whether to expand into a new area of business or merge with another company. Historically, stocks have outperformed most other investments over the long run.

Article from : Investopedia