What is MCR cryptoruble and what is it needed for?

In the summer of 2020, the MCR stablecoin was launched. In this article, we will tell you what makes it unique and what it can be useful for.

What is MCR

MCR is the first decentralized stablecoin pegged to the Russian ruble. Its value is secured by the cryptocurrency locked in the smart-contract of the MonolithosDAO. This community driven DeFi platform issues MCR stablecoins. Such type of governance means that the creators don’t have the technical ability to influence the project after launch. For example, they can’t change the size of commissions or block stablecoins on someone’s wallet. 

Any decisions on MonolithosDAO and MCR are made through a vote among the owners of MDT governance tokens. At these votings, the community determined which cryptocurrency can be used as collateral and set the fees on the platform. MDT tokens for voting can either be obtained for using MonolithosDAO, or bought on cryptocurrency platforms.

On the Bitzlato platform, you can buy both MCR stablecoins and MDT governance tokens.

How MCR stablecoins are created

MCR stablecoins are created on the MonolithosDAO platform using cryptocurrency collateral. To issue MCR, you must leave a collateral in ETH or WBTC on the platform. The amount of the collateral must be at least 125% of the amount of MCR created. Since the stablecoin is pegged to the Russian ruble, the collateral percentage is calculated in Russian rubles. For example, if you want to issue 1000 MCR, your collateral in ETH or WBTC must be at least 1250 Russian rubles.

For the issue of MCR, the platform charges a 4% stability fee of the amount of stablecoins issued. This stability fee is automatically deducted from the collateral the moment you return the MCR. It is impossible to return your collateral and not pay the 4% stability fee.

If the rate of the collateralized cryptocurrency falls and the percentage of collateral for your issued stablecoins falls below 125%, then you will still have MCR stablecoins. What happens to the cryptocurrency collateral in that case:

  • the whole amount of the debt will be sold at auction to pay it off;
  • 4% will be debited as a stability fee;
  • 7% will be debited as a liquidation fee;
  • the remaining collateral amount will be returned to the wallet.

What is MCR suitable for

First, you can fix some of your assets in stablecoins. To do this, you leave ETH or WBTC as collateral on the MonolithosDAO platform and create MCR stablecoins. If the rate of the collateralized cryptocurrency falls, then you will still have created stablecoins, which will retain their value. And if the rate of the collateralized cryptocurrency grows, then you can issue even more MCR stablecoins or withdraw part of the collateral to your wallet and use it in any other way. For example, you can spend these MCR stablecoins to buy more ETH or WBTC and earn profit on their growth. On the one hand, you protect your assets against a fall in the cryptocurrency’s exchange rate. On the other hand, you keep the opportunity to earn money on the growth of the exchange rate.

Secondly, if you trade on several platforms, you can transfer funds between them in MCR stablecoins. These stablecoins run on the Ethereum blockchain and are transferred faster than Russian rubles through the banking system.

Summary

MCR is the first decentralized stablecoin of the Russian ruble. Its value is secured by a cryptocurrency collateral on the MonolithosDAO platform.

You can issue MCR stablecoins yourself. To do this, you will need to leave a collateral in the smart contract of the MonolithosDAO platform in the amount of 125% of the amount of MCR stablecoins issued. In November 2020, ETH or WBTC are accepted as collateralized cryptocurrencies. 

MCR stablecoins have 2 uses: 

  • protection against falling cryptocurrency rates;
  • fast transfer of funds between cryptocurrency platforms.

What is DAO — decentralized autonomous organization

In this article, we will talk about DAO — a type of protocol governance on the blockchain. We will explain how DAO works and give examples of such organizations.

What is DAO

DAO stands for Decentralized Autonomous Organization. It’s the technology that drives apps on the blockchain. With DAO, projects can be run autonomously and managed by the community. The creators only set the initial rules of work and release the app. After launch, they can no longer influence it. The DAO issues special tokens to users. The owners of these tokens can propose changes to the app or vote on other users’ proposals. For example, users can vote for a new interface, for a fee change, or for a bug fix.

DAOs can independently manage their capital, therefore they are actively used in the decentralized finance ecosystem. This form of governance increases the transparency of work and the level of trust in the project. The DAO code is open source and you can find it on GitHub. Users with programming knowledge can review a DAO code on their own. Therefore, anyone who sends a large amount of money under the DAO’s control can learn how the protocol will manage it. 

In 2020 DAOs are not legally binding in countries where there is legislation regarding cryptocurrencies. Only the companies that develop such projects have legal force, but not the projects themselves. However, there are attempts to create a DAO that will govern the actions of other DAOs. So far, this regulation is carried out through decentralized courts. For example, Aragon has created its decentralized Aragon Network Jurisdiction. If a project enters into this jurisdiction, it agrees to abide by certain rules. Aragon enforces these rules through smart contracts. In the event of a dispute, it will be resolved in the decentralized Aragon Court. The system will randomly select 5 judges among the volunteers and they will make a decision.

How DAO works

DAO is a complex smart contract that can manage simple smart contracts. Since it works on the blockchain, its work always involves cryptocurrency transactions. These transactions are automated by smart contracts. And to automate the smart contracts themselves, protocols use DAO.

DAO’s special feature is its governance system. The creators have no influence over the project after the launch. Any changes can only be made by voting, which requires special governance tokens. These tokens can be obtained by using the basic app functions. For example, users can obtain them in exchange for the liquidity providing, taking out or providing loans. In other words, the app can be influenced by those who use it. But governance tokens have their own value, so they can also be bought or sold on cryptocurrency exchanges.

Let’s draw an analogy with a joint-stock company. Such companies are managed by a board of directors. Shareholders can vote on decisions. Shares can be bought or received for working in the company. In the case of DAO, a governance token is used instead of a share. And instead of the board of directors — the owners of these tokens. An important difference is that shares give not only the right to vote, but also the right to a share of the profits. And governance tokens are intended solely for voting, although they have a value.

DAO examples

The DAO is the first decentralized autonomous organization that emerged in 2016. It is an analogue of an investment fund. Users could send money to The DAO smart contract and receive governance tokens in return. With these tokens, they voted on how The DAO would invest their money. In the same 2016, hackers found an error in the project’s code and used it to withdraw funds to their wallets.

MakerDAO is an analogue of a bank. In this DAO you can take out a loan in DAI stablecoins. This loan is secured by cryptocurrency. Users can vote with the governance tokens on the terms on which loans will be issued. For example, they can choose the size of the interest rate and the amount of the liquidation fee.

Summary

DAO is a decentralized autonomous organization. It’s a form of governance that is used in decentralized finance protocols.

The peculiarity of this form of governance is in autonomous work. The developers create the protocol and after launch it works independently. The creators don’t have the technical ability to influence the project after the launch.

Changing the DAO’s rules or fixing errors in the DAO’s code is possible only by voting. Only owners of the governance tokens can vote. These tokens can be obtained either for using the main functions of the app, or bought on cryptocurrency platforms.

Why transactions take a long time to process

Cryptocurrency users have probably come across the transactions that took more than an hour. In this article, we will tell you why cryptocurrency transactions can take a long time to process, what determines their speed, and how to speed up cryptocurrency transactions.

How blockchain affects transaction speed

All cryptocurrencies are based on blockchain technology. Each coin has its own blockchain, so the speed differs for different cryptocurrencies. This technology has 2 parameters that affect the time of transaction:

  • time to generate a new block. The cryptocurrency transaction will be completed only when the information about this transaction is included in the new block of the blockchain. The faster the blocks are generated, the higher the transaction speed;
  • block size to transaction size ratio. The more transactions blockchain can write in one block, the faster the transactions of all users will be processed.

For example, the average time to create a Bitcoin block is 10 minutes. That is, the transaction will not be completed in less than 10 minutes. If there are many transactions, then the transaction confirmation time will increase. On the Ethereum blockchain, the average block generation time is 13-15 seconds. 

Dash is intended for everyday purchases, so its developers initially foresaw the problem with the block generation time. The blockchain generates new blocks every 2.5 minutes, but it takes only 1 second to complete the transaction. To complete the transaction, the blockchain doesn’t need to wait for the transaction to be included in the block, it is enough to confirm the transaction by miners.

How the fee affects the transaction speed

The cryptocurrency transaction will be completed only after validating by miners. Without this confirmation, the transaction cannot be included in the block. The block size is limited and there are situations when there are more users willing to make a transaction than the block can accommodate. There is a queue for checking and validating transactions. The position in this queue depends on the fee that the user charged for the transaction. The higher the fee, the faster the miners will validate the transaction.

The transaction fee amount is dynamic and depends on the load on the blockchain network at the moment. The more users make transactions, the higher the queue and fees can be. Therefore, it is impossible to name one amount of the transaction fee, which will always be relevant.

You can see the relevant fee amount on the blockchain explorer website of the cryptocurrency you are sending. For example, you can view the recommended bitcoin transaction fee on the blockchain explorer website. Depending on the fee, the transaction can take from 10 minutes to several days. In November 2020, Bitcoin transaction fees in terms of US dollars range from $0.2 to $11.2.

Ethereum blockchain developers have created a separate unit of account for transaction fees called gas. You can check the current fees on the dedicated page of the Ethereum blockchain explorer. It shows 3 options for transaction fees: low, medium and high, and the transaction speed for these options. For the user’s convenience, the cost of gas for these options is indicated in US dollars. There is also a scale on which you can specify the fee yourself and see how long this transaction will take. In November 2020, the average Ethereum transaction fee in terms of US dollars is between $0.9 and $ 2.3.

Dash transaction fees are charged in a separate unit of account called Duff. Average Dash transaction fee in November 2020 in US dollars is between $0.002 and $0.003.

Most cryptocurrency wallets set an average transaction fee. If your priority is the speed of the transaction, then you need to manually set the fee above the average value. And if your priority is savings, then you need to set the fee below the average value.

If you withdraw cryptocurrency from a wallet on the Bitzlato platform to an external wallet, then the transaction will be confirmed by the network within 10-15 minutes. Withdrawals from the Bitzlato wallet are made from a collective address in order to reduce the transaction fee. The size of this fee may differ depending on the network load and the specific cryptocurrency. You can see the current transaction fees on the wallet statistics page or in the withdrawal menu.

Summary

 The speed of processing a cryptocurrency transaction depends on:

  • the cryptocurrency you are transferring. Blockchains of different coins generate new blocks at different rates;
  • transaction fees. If you want your transaction to go faster, then you need to see the average transaction fee on the blockchain explorer’s website and set a fee at which the transaction goes through quickly;
  • load on the blockchain network. It directly affects the cost of the transaction fee. The more people make transactions, the higher the load and the fees.

How Yearn Finance works and can you make money on it

Yearn Finance cover

Yearn Finance is in the top 10 DeFi platforms in terms of the locked value. Its governance token, YFI, set a record yield of 140,000%. From this article you will learn what kind of protocol it is, how it works and whether you can make money on it.

What is Yearn Finance

It is an ecosystem of several DeFi protocols. The first protocol is yearn.finance. It has been operating since February 2020 and is intended to make money by providing liquidity to other DeFi projects. In August 2020, the developers implemented the Yearn Vault system into the protocol

During 2020, the project team is working to create the Yearn Finance ecosystem. They released several projects in test mode. It includes the yTrade decentralized exchange and the yborrow.finance protocol, in which you can borrow and provide loans. While these projects are at the testing phase, the developers don’t recommend using them to make money.

How yearn.finance works

Yearn.finance protocol has already passed the testing phase and technical audits. You can deposit only stablecoins to it. When the user deposits assets, he gets yTokens. For example, if you’ve deposited DAI, then you’ll receive yDAI. If you’ve deposited USDT, then you’ll receive yUSDT. These tokens are needed to withdraw your funds from the app along with the yield.

When you deposit stablecoins in yearn.finance, the protocol is able to move them between liquidity pools of other DeFi projects. With the help of oracles, the system tracks the yield in liquidity pools and automatically moves them to the pool with the highest yield. 

The yTokens’ rate takes yield into account. For example, you deposited 100 DAI and received 100 yDAI. The yield can change with each new Ethereum block, so liquidity pools usually calculate the average yield. Suppose that for the year the yield averaged 3% per annum. You have decided to receive your income so you return 100 yDAI to yearn.finance. In exchange you will receive 103 DAI. That is, you will receive the entire amount, taking into account the yield accumulated during this time. 

If you would like to try yearn.finance on your own, you can buy USDT stablecoins with fiat money on the Bitzlato platform.

How Yearn Vaults invests your assets

Many DeFi projects’ developers motivate liquidity providers not only with yield, but also by issuing governance tokens. These tokens give owners the right to vote on protocol changes. The more tokens you have, the more opportunity you have to influence the app. Therefore, governance tokens have their own value. They are traded on cryptocurrency exchanges and can rise and fall in price. Given these tokens, the most profitable liquidity pool is not necessarily the one with the highest yield.

To track the real efficiency from liquidity providing, Yearn Finance creator Andre Cronje created Yearn Vaults. Unlike the original yearn.finance protocol, the Vault has more options for working with user’s assets. It can: 

  • provide liquidity to liquidity pools;
  • collect governance tokens as a reward for the liquidity providing and sell them;
  • leave user’s funds as collateral in other protocols and take loans in more profitable coins.

Each Vault follows a specific investment strategy. A strategy is a smart contract that performs a set of actions on a user’s assets. For example, a user has deposited USDC stablecoins in a vault. It provides stablecoins in the Compound liquidity pool and receives yield and governance tokens. The Vault then sells these tokens on Uniswap in exchange for USDC stablecoins. As a result, it returns the profit in USDC to the user.

Users can propose their own investment strategies and vote for other users’ strategies on a dedicated community platform. You need a YFI token to vote. The strategy creator gets 0.5% of the storage transactions that contain the «harvest ()» function. These are transactions that collect profits. Therefore, users with the skills of writing smart contracts’ code can also make money by creating investment strategies. At the same time, the strategy has no time frame. If someone proposes a more profitable strategy and the community supports it, then the Vault will change its strategy. And, if another person offered it, then he will be the one receiving 0.5%. 

In the Vaults, you can block not only stablecoins, but also cryptocurrency. For example, an ETH Vault investment strategy starts with using MakerDAO. The Vault will move your assets to MakerDAO and borrow DAI from it. Then the Vault will invest these DAI according to the strategy. For example, it will move them to the liquidity pool with the highest yield. It should be borne in mind that loans in MakerDAO are secured by collateral. The Vault leaves your assets as a collateral, which is 200% of the loan amount. For example, if you’ve deposited 200 ETH, then the Vault will only be able to borrow DAI in the amount of 100 ETH. Therefore, it is more profitable to deposit stablecoins to a Vault.

Yearn Vault strategy example
Yearn Vault strategy example

Also, you shouldn’t forget about the volatility of the cryptocurrency when investing ETH in the Yearn Vault. If the ETH rate falls and the collateral in MakerDAO is less than 150% of the loan, then the collateral will be sold. The user can add ETH or return all or part of the loan with interest to avoid this. Since the Vault takes the loan instead of the user, it independently monitors changes in the ETH rate and in the amount of loan collateral. If the collateral is at 150% of the loan, the smart contract will automatically return part of the borrowed DAI in order to increase the collateral amount.

Otherwise, the way Yearn Vaults work is similar to the main Yearn Finance protocol. You also deposit your assets to the Vault and receive yTokens in exchange. When you return yTokens, you receive deposited assets with a yield. If the Vault strategy includes receiving governance tokens, then the protocol will exchange them for a deposited asset. For example, you have deposited ETH, and the Vault provides your funds to the Compound liquidity pool in exchange for yield and COMP tokens. In such a case, the Vault sells these COMP tokens in exchange for ETH. When you return yTokens, you will receive the entire amount in ETH only.

If you want to try making money by using Yearn Vaults, you can buy ETH with fiat currency on the Bitzlato platform.

How Yearn Vault uses MakerDAO
How Yearn Vault uses MakerDAO

Vaults are used by other protocols in the Yearn ecosystem as well. For example, the yinsure.finance insurance protocol is powered by two Vaults, one holding the insured assets and the other holding the premiums from which the insurance is paid.

The YFI token as an investment asset

Yearn Finance gained its popularity mostly after the release of the YFI governance token. In 2.5 months, the token increased in price from $90 to $40,000, and its yield was more than 140,000%. The project’s creator, Andre Cronje, couldn’t explain such an increase in cost. According to the developer, the token is intended for voting only and shouldn’t be considered as an investment asset. By November 2020, the cost of YFI is in the range of $7,000-$14,000.

YFI token distribution
The YFI token distribution

It’s no longer possible to receive YFI tokens for providing liquidity. They can only be bought on centralized and decentralized platforms. The YFI token distribution took place in July 2020 and consisted of 2 stages. First, it was necessary to put yTokens in the Yearn Finance liquidity pools jointly with other projects. At the second stage, Andre Cronje added two more liquidity pools joint with the Balancer project to the distribution. The project distributed 10,000 tokens to each of these pools. The total issue was 30,000 tokens and no further distribution of YFI is planned.

Summary

Yearn Finance is an ecosystem of multiple DeFi protocols that provides several earning opportunities:

  • users can deposit stablecoins in yearn.finance protocol and it will automatically move them to liquidity pools with the highest yield;
  • users can deposit cryptocurrency or stablecoins in the Yearn Vaults. They will collect not only the yield, but also governance tokens;
  • users with the skills to write smart contract code can write an investment strategy for the Vault. If the community supports it, the strategy creator will be receiving 0.5% of the transactions which collect profits.

If you want to check yearn.finance yourself, you can buy USDT stablecoins or ETH cryptocurrency with fiat currency on the Bitzlato platform.

What is Yield Farming and how to make money on it

One of the most popular strategies for earning money in DeFi is so-called Yield Farming. In this article, we will tell you what it is and give you examples of earning this way.

What is Yield Farming

The term «Yield Farming» appeared from comic posts on Twitter. Now this is the name of the earnings strategy, relying on using assets to obtain tokens for DeFi projects. DeFi projects are an ecosystem of applications with functionality similar to traditional financial instruments. Such applications work automatically, using smart contracts and blockchain technology. Therefore, to change a DeFi project, you need to vote. In order to vote, you need governance tokens. Their main function is the voting right, but they have their own value and are traded on cryptocurrency platforms.

Governance tokens can be purchased or obtained for performing certain actions. For example, for locking funds in the protocol at interest or for getting a loan. The exact rules depend on the specific protocol in question. The first effective use of this system was in the Compound project. Every day, the protocol distributes 2312 COMP governance tokens between those who provide loans and take loans in a 50/50 ratio. Distribution between specific users is proportional to the amount of funds locked. The cost of one COMP token as of November 2020 is about $90.

In addition to managing tokens, DeFi projects give users tokens that you can use to get your funds back from a locked smart contract. For example, Aave gives aTokens, Compound gives cTokens, and Synthetix gives sTokens. If you want to return your funds from the liquidity pool, you return these tokens to the protocol. 

Yield Farming means getting the maximum return from using your asset. For example, you locked ETH in Compound and received cETH. While you earn interest, you take cETH tokens and lock them in another protocol and get a return from there. At the same time, you also get COMP management tokens for locking ETH in Compound. Thus, you get the maximum profit from your ETH asset. 

Supply of liquidity to DeFi projects

This is a popular way to earn tokens. Many DeFi protocols need liquidity to work successfully — assets that users lock in the app’s smart contract. Initially, for providing liquidity, the smart contract paid only an interest, the amount of which depends on the specific DeFi project and the locked asset. But the volume of liquidity was insufficient when this model was used. Therefore, developers began to reward supplying liquidity not only with an interest but also with the project’s governance tokens. Thus, a fair system is created — the more liquidity you supply, the more tokens, and therefore votes you get.

Supplying liquidity to DeFi projects is similar to a bank deposit. You also provide your assets in exchange for interest. But there are a few differences:

  • You can withdraw funds from the DeFi protocol at any time and save the interest received during this time;
  • The interest on DeFi projects is dynamic and depends on the asset you are locking and the balance of supply and demand at a given time.

Interest rates are similar to rates of bank savings accounts. For example, the average interest rate in the Aave and Compound protocols is 1-3% per annum.

Application for automation of Yield Farming

With the growing popularity of earning money on supplying liquidity, dedicated applications have appeared that simplify this method of earning money. The first such app was Yearn Finance. This project tracks the yield in the Aave, Compound, and dYdX liquidity pools and automatically moves the user’s assets to the pool where the yield is higher at the moment.

Yearn Finance solved the problem with the dynamic interest rate of liquidity pools. Instead of constantly checking where the yield is higher, the protocol can perform the same actions. Users lock their assets in the smart contract, and then Yearn Finance performs all the work independently. 

The project was created by one developer — Andre Cronje. When he released the project and added YFI governance tokens to it, they showed record profitability. The cost of YFI increased from $90 to $40,000 in 2.5 months, but dropped later. As of November 2020, the YFI token is worth about $10,000.

Summary

Yield Farming is one of the strategies for making money on DeFi projects. Its goal is to earn DeFi projects’ tokens. Governance tokens give the right to vote for changing the project. You can get them for using the app’s features, such as getting a loan or providing a loan.

DeFi projects need user assets — liquidity — to work correctly. In exchange for supplying liquidity, protocols pay interest. DeFi projects work automatically, so the interest rate for liquidity changes dynamically. However, you can withdraw funds from the protocol at any time and save all the interest accrued during this time.

There are DeFi projects dedicated to yield farming. For example, Yearn Finance, which tracks the yield of several DeFi projects and automatically moves the user’s assets to where the yield is higher.

Prospects and risks of investing in DeFi

In 2020, DeFi is the main trend in the blockchain industry. For the year, the amount of funds blocked in DeFi increased by $10 billion. Why is DeFi so attractive to investors, and why is it worth investing in? Find out in this article.

What is DeFi

DeFi is a branch of the blockchain industry that includes applications that work independently and provide financial services. The main purpose of DeFi is to simplify classical financial instruments, such as lending, money transfers, trading on exchanges, and insurance. The advantages of decentralized finance are that they eliminate intermediaries that are present in traditional finance. The absence of intermediaries increases the speed of operations and reduces transaction fees due to automation.

DeFi in 2020

By November 2020, the total value of funds locked in smart contracts was over $11 billion. For comparison, on January 1, 2020, $675 million was locked in DeFi.

Most DeFi protocols run on the Ethereum blockchain and use the ERC20 token standard. DeFi is one of the reasons for the growth of Ethereum in 2020. The value of the ETH cryptocurrency increased from $130 on January 1, 2020 to $386 by November 2020. And the number of addresses in the Ethereum network has increased by 25% over the past year.

In September, the decentralised exchange Uniswap issued the UNI governance token in order to attract liquidity. As a result, Uniswap ranked first among other DeFi projects in terms of the volume of locked assets. Also, Uniswap is in the top 5 in terms of trading volumes among all cryptocurrency exchanges, including centralised ones. At the end of September, the amount of funds locked in the protocol exceeded the $2 billion mark, and by November it reached $2.7 billion. The reason for this success lies in the way the UNI token is distributed. 15% of the issue occurred with the help of airdrop-distribution of coins to users who perform certain actions. In the case of Uniswap, the tokens passed into the wallets of all users of this exchange who managed to make transactions before September 1. The total issue volume is 1 billion tokens. This number of tokens will be distributed over 4 years. The price of the UNI token rose to $6.59 shortly after its introduction, but then fell and is in the range of $2-3.

Another example of DeFi’s success in 2020 is the YFI governance token of the Yearn Finance project. The cost of the token at the start of sales in July 2020 was about $90. By mid-September, the token was worth $40,000, meaning, it surpassed the value of Bitcoin. Subsequently, its price began to decline and by November it is about $10,000.

DeFi development prospects

The main difference between decentralized applications and traditional services is the absence of a single central authority that manages all processes. For example, in the financial system, such bodies can be banks, commercial and state organizations. The functions of a centralized organization are performed by blockchain and smart contracts.

The blockchain provides DeFi with a certain level of trust. Protocols and smart contracts are automatic. The source code of the application is publicly available and any investor who knows the programming language can study it. The system is transparent, and blockchain encryption protocols provide protection against data forgery.

The decentralization of protocols forced developers to come up with a mechanism for attracting the liquidity needed for projects to work. As a result, users were able to lock their assets in smart contracts of DeFi protocols and earn a percentage of profitability. In some projects, users receive not only a percentage of profitability, but also governance tokens, which also have a value. Using projects such as Uniswap, Compound, and Yearn Finance, the community saw that people like the idea of being rewarded for providing capital. It turned out to be a convenient investment tool.

Users are also attracted to the ease of access. Banks usually have high requirements, they refuse people with an unfavourable credit history and low income. When working with DeFi, these factors do not matter. Loans are secured by collateral. Therefore, the protocols will not suffer from the fact that someone does not pay off their loan. Also, users, with rare exceptions, do not need to register and pass verification to use DeFi projects. Exceptions include a few DeFi projects, such as the Nexus Mutual smart contract insurance platform. In order to use it, you need to pass KYC verification.

Risks associated with investing in DeFi

The market for decentralised finance is relatively young — the first DeFi project MakerDAO appeared in 2016. And the active growth of the segment began only in 2020. Therefore, it is becoming increasingly difficult to predict the future of DeFi. Now, at the time of active growth of the direction, there are more and more projects and tokens of these projects. As of November 2020, there are already more than 200 DeFi applications. Many of them simply copy existing ones in order to make money on the trend. With this diversity, it is becoming increasingly difficult to choose a DeFi project. Tokens of already popular projects can fall in value, like YFI and UNI. Other projects stop working as soon as they attract the first users, such as YAM Finance.

Decentralization of DeFi projects gives investors not only advantages, but also risks. Thus, the reliability of the protocol and the safety of funds locked in it depend entirely on the program code. There are still risks of hacking by fraudsters or losing funds due to an error in the code. Due to the absence of a central governing body, it is not possible to quickly fix the error or stop hacking. Any changes to the protocol code are made exclusively by voting among the owners of governance tokens. At the same time, even projects that have passed serious technical audits and have a high reputation among the community cannot provide 100% guarantees of the safety of your funds.

Also keep in mind that some projects, such as SushiSwap, are anonymous. If in the case of fraud on the part of ordinary organisations, you can bring them to justice, then in the case of anonymous DeFi projects it is more difficult to do this.

Summary

DeFi is an ecosystem of applications that copy the functionality of traditional financial instruments. These applications use blockchain technology to work. In 2020, the amount of funds blocked in DeFi projects increased from $600 million to $11 billion.

DeFi projects are interesting to investors for several reasons:

●     DeFi has prospects due to the elimination of intermediaries and the use of blockchain technology;

●     Ease of use;

●     The opportunity to earn an interest rate for freezing assets in smart contracts;

●     The ability to earn governance tokens that have their own value. 

Investing in DeFi has its own risks:

●      Because DeFi is a trend, the number of such projects becomes too large and many of them are not trustworthy;

●      Blockchain technology does not guarantee protection against hacking;

●      The process of making changes to DeFi projects requires voting, which can be critical if a vulnerability is found in the project code;

●      Some DeFi projects are created by anonymous developers, which makes it more difficult to hold them accountable in case of fraud.

Features of Bitcoin mining in 2020

The cryptocurrency market is rapidly changing and developing. Back in 2010, just running a special program on a PC was enough for mining. We tell you what factors need to be taken into account in order for Bitcoin mining to be profitable in 2020.

Consequences of Bitcoin Halving in 2020

In 2020, there was a Bitcoin halving that had a direct impact on the profitability of Bitcoin mining.

Halving is a process embedded in the Bitcoin code, when every 210 thousand blocks the reward for the added block is reduced by 2 and the number of coins issued is reduced.

Unlike Fiat Money, the number of Bitcoins which could be mined is limited — 21 million coins. Today, 18.5 million or 88% of them have already been extracted. Halving occurs every four years in order to control the number of Bitcoins issued to prevent excessive inflation.

If the rate of appearance of new Bitcoins decreases, and the demand remains the same, the Bitcoin price should be increased. At least, this trend was observed earlier:

  • The first halving was in 2012. The price for a new block has been reduced from 50 BTC to 25 BTC. During the year, the Bitcoin rate increased by 120 times.
  • The second halving was in 2016. The price for a new block decreased from 25 BTC to 12.5 BTC. During the year, the Bitcoin rate increased by 130 times.
  • The third halving was in 2020. The price for a new block decreased from 12.5 BTC to 6.25 BTC. Experts’ opinion on the possible impact on the exchange rate were divided.

The consequences of halving for mining are mixed. It becomes unprofitable for miners with outdated equipment to mine blocks for 6.25 BTC. On the other hand, you can expect long-term profitability from the increase in the Bitcoin exchange rate.

Profitability from mining is difficult to predict, as it depends on the following number of factors. Among them:

  • Features of Bitcoin: rate, sale price per block, the power of the blockchain, the difficulty of the extraction
  • Equipment parameters: price, power, and energy efficiency
  • Farm maintenance: electricity cost and other expenses
  • Choosing the right mining pool

The features of Bitcoin in 2020 were most affected by halving, which we have just described. Let’s take a closer look at the remaining three factors.

Mining Equipment

In addition to the situation on the cryptocurrency market, the profitability of mining is determined by the equipment.

The hype around mining has passed, so it is cheaper to build a farm in 2020. Two years earlier, equipment was in short supply and was sold at inflated prices. The actual problem is now not so much related to the cost of equipment, but rather to the choice of the appropriate equipment.

You can calculate the profitability of a particular device using special calculators, such as www.whattomine.com or www.nicehash.com. Consider the situation with the most popular equipment:

  • Antminer S9. A commonly used but an old hardware is now running at a loss. In order for devices with similar characteristics to make a profit, the Bitcoin price should increase to $15,000.
  • Antminer S17. The profitability of this device for mining is about $100 per month, and the ROI period is 15 months. The break-even point under current conditions is about $6,000. If the market situation is favorable, this margin of safety may last until the next halving.
  • Whatsminer M30S++. This is the most profitable device after halving. It can bring in about $10 per day with an electricity cost of $0.03 kW while a bitcoin rate of $11,400.
  • Antminer S19 Pro. The daily profit will be just under $10. For comparison, in the same conditions, the S9 model will bring about $0.60 per day.

Therefore, after halving the mining is profitable only while using the new-generation equipment. The profitability of devices can vary from the low maintenance cost, electricity cost, and other factors.

Electricity cost

The easiest way to determine the impact on the profitability of mining is the electricity cost. It’s simple — the cheaper the electricity, the higher the profit.

Let’s take Russia for example. The electricity cost in Russia varies depending on the region: from $0.0149 per kWh in Irkutsk to $0.0721 per kWh in Moscow. On average, profitable mining is possible at a rate below $0.0607 per kWh.

The energy efficiency of mining devices is determined by the number of calculations per joule consumed. Currently, the most effective are:

* M30 Whatsminer — 38 J/T

* Antminer S17-40 — J/T

* Innosilicon T3+ — 42 J/T

For comparison, the already outdated Antminer S9 device has 98 J/T. Only access to a free power outlet can compensate for the use of such inefficient equipment. Modern models provide profitability at higher rates.

Although electricity is the main item of expenditure, there are a lot of other items to consider. Large farms may require additional setup, rental, security, staff, and cooling costs.

How to Choose the Mining Pool

Almost all Bitcoin mining is carried out by mining pools. Pools combine the computing power of miners, and then divide profits.

These pools are so large that the chances that someone will be able to beat them to create a block on their own are almost zero. More than a quarter of the total capacity of the bitcoin network is accounted for by the two largest pools:

  • Poolin. The official website www.poolin.com partially supports 7 different languages. In addition to BTC, you can mine 8 other cryptocurrencies. The commission from each extracted block is 5%.
  • F2Pool. On www.f2pool.com you can mine not only BTC, but also 37 other coins. The Commission is paid when withdrawing funds, for bitcoin it is 2.5%. There are smaller pools, such as BTC.com, AntPool and Huobi.pool.

Small pools may have better conditions, but you should carefully evaluate their reliability. For example, not all developers provide a protection mechanism against DDoS attacks.

Summary 

We looked at how halving changed the situation in the bitcoin market. Overall, reducing the block reward by half didn’t make mining unprofitable. Factors such as the correct choice of equipment, the electricity cost, and the complexity of mining in the pool still have a decisive weight.

How do stablecoins preserve your assets in an unstable economy

How stablecoins preserve assets cover

Stablecoins play an important role in the cryptocurrency industry. In this article we will tell you what stablecoins are and give you examples of how to use them to your advantage.

What is stablecoin

This is a cryptocurrency whose value is tied to the value of an asset from the real world, such as fiat currencies, precious metals and oil. For example, there are stablecoins, the value of which is tied to the US dollar, euro, British pound or Russian ruble.

Examples of stablecoins
Examples of stablecoins of various fiat currencies

Stablecoins can be divided into two categories. The first category is centralized. Such stablecoins are produced by a specific company. It secures a value of the stablecoin due to the presence of fiat currency in the company’s accounts. For example, the Tether company produces USDT stablecoins and secures them with US dollars in the company’s accounts. Such companies keep strict reporting to the regulatory authorities and may block the stablecoin owners’ wallets by court order. Other examples of centralized stablecoins are USDC of the Center consortium, BUSD of Binance, EURS of Stasis. 

Centralized and decentralized stablecoins
There are 2 categories of stablecoins: centralized and decentralized

The second category is decentralized stablecoins. They are produced by smart contracts and secured by a collateral in cryptocurrency and smart contract algorithms. The advantage of decentralized stablecoins is that they don’t have an owner company so they can’t be blocked remotely. They can also work on different cryptocurrency platforms and are only limited by the blockchain their smart contract is based on. For example, DAI stablecoins work only with projects on the Ethereum blockchain, and USDJ stablecoins work only with projects on the TRON blockchain.

Stablecoin lending

This is one of the ways to earn money with the help of stablecoins. There is a DeFi trend in a blockchain industry. It consists of apps with functionality similar to traditional banking tools. One of these tools is loan. Some DeFi apps give out loans in stablecoins. For example, MakerDAO gives loans in the US dollars stablecoins DAI, and MonolithosDAO gives loans in the stablecoins of the Russian ruble MCR. 

Here is an example from MonolithosDAO. If you want to take out a loan in MCR stablecoins, you will need to leave a collateral in ETH or WBTC. The amount of collateral must be greater than the loan amount by at least 25%. For example, if you want to take out a loan of 1,000 MCR, then you must leave a collateral in cryptocurrency for the amount of at least 1,250 rubles at the current rate. It is recommended to leave a collateral of more than 125% of the loan amount to protect the collateral from the volatility of cryptocurrency. If the rate drops and your collateral will be less than 125%, it will be sold at auction and will be deducted 4% of the stability fee and 7% of the liquidation fee. The rest will be returned to your wallet. 

Let’s say you expect the ETH rate to grow and take out a loan in MCR secured by your ETH: 

  • If the rate grows, the value of the collateral in the smart contract will also increase
  • If the rate drops, the collateral value will also drop. But MCR stablecoins will retain their value
  • If the rate falls below the liquidation value, the collateral will be sold, and the liquidation and stability fees will be deducted from it. But you will still have MCR stablecoins, which were not affected in any way by the fall of ETH. 
What happens to the collateral and stablecoins in the event of an increase or decrease in the ETH rate
What happens to collateral and loans in stablecoins in the event of a fall or rise in the price of ETH

You can also use credit stablecoins as a leverage to buy more cryptocurrency on them. For example, you left a deposit in ETH and took a loan from MCR. Then you bought more ETH from the MCR. If ETH rises, you will earn more profit than without the leverage. For example, you took a loan of 10,000 MCR on bail 0,42 ETH at a rate of 30,000 rubles. At 10,000 MCR you bought another 0,33 ETH. Suppose that the rate of ETH increased to 35,000 rubles:

  • Without a leverage, your 0,42 ETH will increase in value by 2,100 rubles
  • With leverage you already have 0,75 ETH. Taking into account the stability fee 4%, your profit will be 3,250 rubles. 

Using leverage increases not only profits in the case of growth of the cryptocurrency rate, but also losses in the case of its fall. 

Conversion of cryptocurrency into stablecoins

This conversion has 2 applications. The first one is portfolio fixation. For example, you trade bitcoins and earn on the difference in price during the exchange. You have closed the trading day and aren’t sure that the bitcoin rate will not fall. You convert 1 BTC into USDT stablecoins and the value of your assets will not change. When you continue trading, you will convert them back at the new rate. If the bitcoin rate drops, you will get more bitcoins than you have converted. And if the rate has increased, you will get less bitcoins. In any case, the value of your assets in fiat currency will remain the same. 

The second reason to convert cryptocurrency into stablecoins is to earn money on the fall of the cryptocurrency rate. For example, you expect the bitcoin rate to fall. And suppose you have converted 1 BTC to 11,000 USDT and now expect the rate to fall. When the bitcoin rate drops from $11,000 to $10,000, you convert 11,000 USDT back and get 1,1 BTC. When the bitcoin exchange rate rises again, so does the value of your assets.

Special tool on Bitzlato

Bitzlato telegram-bots have a separate tool called «2Monolith». With this tool, you can instantly convert cryptocurrency to stablecoins at the current rate of the Bitzlato exchange. The tool frees you from the need to enter the exchange, convertation happens inside the telegram-bot. Then you can convert stablecoins back to the cryptocurrency at the rate that will be relevant now. 

Concreting
«2Monolith» tool helps protect assets from falling cryptocurrency rates

As an example, we will show you how to convert BTC to USDT in a telegram-bot @BTC_CHANGE_BOT:

1. In the main menu of the telegram-bot, click on the button «2Monolith».

2Monolith button

2. The bot will send the 2Monolith menu. Choose which stablecoin to convert your assets to. For example, take BTC-RUBM.

Stablecoins selection menu

3. Select the amount you want to convert or write it in manually. For example, take 0.001 BTC. If you want to write the amount manually, press the «Other» button.

Converting amount menu

4. The bot will ask you to choose a rate at which the conversion will take place.

Choosing a rate confirmation

5. The bot will write you the amount you will receive in the stablecoins and the rate in which the conversion will take place. Click «Yes» to confirm the conversion.

Confirmation of selling BTC for USDT

6. The bot will write to you that the order will be placed on the exchange within a few seconds When it is executed, the number of stablecoins you selected will appear in your wallet. The cryptocurrency you are converting will be blocked until the order is executed.

Notification about the order

7. To check the stablecoins balance press the «2Monolith» button again in the main bot menu. The 2Monolith menu will display the number of your stablecoins.

Balance after using 2Monolith

Summary

Stablecoins are cryptocurrencies, the value of which is equal to the value of an asset from the real world. For example, US dollar or Russian ruble. There are centralized and decentralized stablecoins. Centralized ones are issued by companies and secured by assets on their accounts. Decentralized companies issue smart contracts and provide them with cryptocurrency locked in the smart contract.

Stablecoins give users two advantages:

  1. Ability to fix the value of its assets in fiat currency. In this case, you don’t have to worry about falling rates.
  2. Ability to earn on the rise or fall of the cryptocurrency rate. You can earn on the growth of the rate of cryptocurrency with the help of loans in stablecoins. Earn on the fall of the rate of cryptocurrency can be with the function «2Monolith» in Bitzlato telegram bots. 

On the Bitzlato platform you can also buy decentralized MCR ruble stablecoins or ETH cryptocurrency, with which you can take a loan in stablecoins.