Decentralized Finance

Dec 30 2021

Staking vs Yield Farming vs Liquidity Mining- What’s The Difference?

On your journey through the DeFi metaverse, you are likely to come across terms like staking, yield farming, and liquidity mining. They all refer to a client putting their resources on the side of a blockchain, DEX (decentralized exchange), shared security options, or some other potential applications that demand capital.

Despite sharing a lot of similarities in terms of practical applications, there are a lot of aspects that are different from one another.

Staking: An Overview

Staking is the most comprehensive amongst staking vs yield farming vs liquidity pools. However, unlike yield farming and liquidity pools, it consists of numerous non-crypto definitions that can guide you about your stake assets in a crypto network.

Staking one’s reputation on something is a common phrase. This implies that you risk your integrity favouring a cause you believe in. A stakeholder is somebody who has an interest in a company or organization. This can include shareholders, employees, consumers, and anybody else who has a stake in the company’s success or failure.

Let us understand staking from the following aspects:

Definition

Staking is the act of putting up collateral as proof of a party’s stake in the game in the crypto world. The staker’s actions are in good faith if they have exhibited a financial interest in the protocol’s future success.

Protocol support

Staking can be used to support various encryption and DeFi protocols in various ways. A shift from Proof of Work (PoW) to a Proof of Stake (PoS) is in progress in the Ethereum 2.0 paradigm. Validators will need to stake parcels of 32ETH instead of giving hashing power to the network to verify transactions on the Ethereum network and get block rewards.

Centralized platform support: Users can stake their digital assets on centralized platforms like Nexo, Coinbase, and BlockFi. These organizations are similar to commercial banks in that they accept consumer deposits and lend them out to people who need credit. Depositors receive a part of the interest paid by the creditors, and the bank keeps the remainder.

Polkadot network: Polkadot’s, Nominated Proof of Stake (NPoS) consensus method allows DOT holders to stake their tokens and designate validator nodes in exchange for an annual percentage yield (APY). Other protocols demand users to stake tokens in order to participate in governance decisions and vote.

Decentralized platform support: Other staking applications, such as PoS or centralized credit provision, work differently from CertiKShield’s model (a decentralized insurance alternative). It combines DeFi’s openness with the market’s most trusted security firm to create a whole new crypto industry: decentralized on-chain protection from losses and hacks. CTK stakers run the platform and get paid for the value they bring to the network. They can earn up to 30% APY by supplying liquidity to the collateral pool through CertiKShield. These tokens serve a vital economic purpose by underwriting the insurance policies taken out by other users who are willing to protect their assets in the case of a protocol attack or failure.

Need for Staking

The future stakers must reason considerably the need to stake before staking their assets. Some protocols require staking to prove a user’s stake in the game or enable critical financial activities, while others merely employ staking to reduce circulating supply to raise the price.

Yield Farming: An Overview

Yield Farming or YF is by far the most popular method of profiting from crypto assets. The investors can earn a passive income by storing their crypto in a liquidity pool. These liquidity pools are like centralized finance or the CeFi counterpart of your bank account. You deposit your funds that the bank utilizes to credit loans to others, paying you a fixed proportion of the interest gained.

Yield Farming is a more recent concept than staking, yet sharing a lot of similarities. While yield farming supplies liquidity to a DeFi protocol in exchange for yield, staking can refer to actions like locking up 32 ETH to become a validator node on the Ethereum 2.0 network. Farmers actively seek out the maximum yield on their investments, switching between pools to enhance their returns.

Consider the following aspects for a better understanding of yield farming:

Definition

Crypto assets are stored into a smart contract-based liquidity pool like ETH/USD by investors known as yield farmers, and the practice is known as Yield Farming. The locked assets are then made available to other protocol users. These tokens can be borrowed for margin trading by users of the lending platform.

Yield farmers serve as the cornerstone for DeFi protocols that provide exchange and lending services. They also help to keep crypto-assets liquid on decentralized exchanges (DEX). Yield farmers earn compensation in the form of an annual percentage yield (APY)

AMM support

Liquidity providers post two tokens — Token A and Token B, with Token B, typically being ETH or a stablecoin like USDC or DAI — in exchange for a share of the fees paid by users that use the pool to trade tokens.
The pool percentage that a depositor makes up determines the depositor’s returns. If their deposit equals one per cent of the pool’s depth, they will receive one per cent of the pool’s total fees.

Risks with double-sided and single-sided liquidity pools

Temporary loss is one of the prime concerns of yield farming in double-sided liquidity pools. Take, for example, an ETH/DAI pool; because DAI is a stablecoin, its value basis is the US dollar.
However, the upward potential of ETH is limitless. As the value of ETH rises, the AMM adjusts the depositor’s assets’ ratio to ensure that their value remains constant.
The disparity between the value and the number of tokens deposited is where the temporary loss can arise. The number of Ether equal to the first DAI deposit lowers as ETH appreciates.
When the depositor withdraws their liquidity from the pool, this temporary loss becomes permanent. Therefore, if the temporary loss is more than the fees, a liquidity provider might better keep their tokens than depositing them to a pool.
Single-sided deposits with temporary loss protection are available from AMMs like Bancor. However, other yield farming and interest-bearing products, such as CertiKShield, cannot produce temporary loss by design.

YF glow point

Yield farming may be very profitable, especially early on in a project when your deposit likely makes up a significant portion of the pool. However, due to cryptocurrency’s intrinsic volatility and the inventive design of new financial instruments, there may be associated risks that the yield farmers need to consider before ploughing the yield fields.

Liquidity Mining

Liquidity mining is widely regarded as one of the most critical aspects of DeFi success and an effective mechanism for bootstrapping liquidity. Just as YF is a subset of staking, liquidity mining is a subset of YF. The primary difference is that liquidity providers are compensated with the platform’s own coin in addition to fee revenue.

Let us go through the following features for a better understanding of liquidity mining:

Definition

The practice of receiving remuneration in the form of protocol’s native tokens by the users of a DeFi protocol in exchange for participating with the system is liquidity mining.
It is the process of depositing or lending specific token assets with the goal of giving liquidity to the product’s fund pool while also earning money.
A liquidity miner can earn incentives in the form of the project’s native token or, in some cases, the governance rights it represents. In most cases, tokens are generated based on the protocol’s programming.
Even though most of them cannot be used outside of the DeFi platform that created them, the establishment of exchange markets and the excitement surrounding those tokens help drive up their value.

Supporting platforms

Compound was the first to introduce liquidity mining when it began rewarding users with COMP, its governance token. This additional stream of income for liquidity providers can help cover some or all of the temporary loss risk they take on.
Whereas COMP tokens flow not just to liquidity providers but also to debtors. For the first time ever, a borrower can receive a return on the loan they’re taking out thanks to liquidity mining incentives.

Liquidity mining requirement

LPs (Liquidity mining programs) can often stake the tokens they earn in pools, thus earning a return on their initial investment and the incentives they receive.
Liquidity mining for a DeFi platform has shown to be a successful method of attracting liquidity.
Liquidity mining methods are often limited to a set number of months or years: just enough time to get the protocol up and running. While token incentives are frequently inflationary, diluting hodlers, they are frequently limited to a set number of months or years.

An Outline of Staking Vs. Yield Farming Vs. Liquidity Mining

Staking Vs. Yield Farming Vs. Liquidity Mining

Conclusion

In general, liquidity mining is a derivative of yield farming, which is a derivative of staking. All the solutions are just methods for putting idle crypto-assets to use. The main goal of staking is to keep the blockchain network secure; yield farming is to generate maximum yields, and liquidity mining is to supply liquidity to the DeFi protocols.

The APYs are frequently lucrative, and there are hundreds of different alternatives available. It is always a precautionary measure to inquire about the associated risks, the reason for the requirement of your tokens and the mechanism to generate returns.

If you are wondering on how to learn blockchain, then blockchain council is available at your service. You can search out for various blockchain courses available, and choose the one that meets your eyes and become a certified professional.

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Blockchain Weekly Source

Dec 03 2021

How decentralized exchanges and aggregators drive DeFi growth

Decentralized exchanges (DEXs) are currently gaining a lot of attention, a part of Decentralized Finance (DeFi). The worldwide market capitalization of cryptocurrencies reached a new all-time high in 2021. In addition, new blockchain trends, such as Non-Fungible Tokens (NFTs), are propelling cryptocurrencies to the forefront of blockchain news.

DeFi is constantly garnering attention and rising in popularity, and so DeFi certification courses. The trading volume of DEXs topped $11 billion in August 2020. Although Centralized exchanges (CEXs) now dominate cryptocurrency trading, Decentralized exchanges (DEXs) are quickly gaining traction among techies and the blockchain community. Uniswap, for example, is a DEX that processes $2 billion in transactions every day.

In this post, we will be discussing DEX in detail.

Understanding DEX

A DEX (decentralized exchange) is a cryptocurrency exchange that works independently of a central authority of a third party. A user maintains complete control over assets held or exchanged on DEXs. DEXs are more secure than CEXs (centralized exchange). Ethereum smart contracts are required to run decentralized exchanges built on the Ethereum blockchain.

Difference between DEX and CEX

To have a proper understanding of DEX, let us first understand the difference between DEX and CEX.

An autonomous financial protocol supported by smart contracts and peer-to-peer payment systems, such as PancakeSwapm or Uniswap, is DEX. Traders can send digital assets to others through DEXs, and all transactions are recorded and visible on the blockchain. It does not require an intermediary to clear transactions. Instead, smart contracts are used to execute and verify them. Meanwhile, CEXs, such as Binance, are online trading platforms that connect buyers and sellers through an order book. They are popular and dominant online trading platforms based on the concept of online brokerage. Centralization and ownership are the critical differences between DEXs and CEXs.

Centralization

The areas where instructions are coordinated and implemented are referred to as centralization. Whereas all services in DEXs are managed and controlled by smart contracts or relayers that form a network of trustworthy nodes.

Order books in CExs are responsible for assessing and confirming incoming orders to ensure that users match appropriately. The transaction’s execution proceeds further by the exchange software and servers in the second stage. DEXs, on the other hand, do not utilize any intermediary and facilitate crypto-asset exchanges by trading through smart contracts.

Ownership

Ownership is the authorized control of the keys to accounts on exchanges. Users own all assets in their personalized wallets when trading on decentralized exchanges. Users retain control of their private keys when transacting on a non-custodial DEX platform. They can use their wallets to choose, submit and confirm trades, treating exchanges as a matching service. Users can make a match and then cancel it using a smart contract on a non-custodial exchange.

CEX, on the other hand, is custodial. As a result, users do not have complete control over their crypto assets. Users that purchase Bitcoin on a CEX, for example, do not yet own the coins. Therefore before purchasing Bitcoin, they must request to add the coin to their external wallet address.

Need for DEX aggregators

The launch of the 1inch MVP proves the need for DEX aggregators. At the ETH New York hackathon in 2019, Anton Bukov and Sergej Kunz produced the 1inch MVP in 18 hours. They did it merely because they required it for personal reasons. ” The primary consumers of 1inch were Sergej and I,” according to Anton, the company’s CTO.

Manually checking for the best trading prices on all the DEXs like Uniswap, Kyber, and 0X, before transacting was inefficient and tedious.

A practical algorithm was required to scan every DEX for the best trade price and offer an optimal deal instantly, just like other crypto users.

To attain the best and economical price for an exchange, you must search across all the DEXs for the best price. However, screening manually is inefficient and does not allow for sophisticated trade networks and routes. Therefore, DEX algorithms play a crucial role in reducing exchange costs. As a result, DEX aggregators have witnessed tremendous growth in recent months keeping in line with DEX volume growth.

How do DEX Aggregators work?

The primary goal of a DEX aggregator is to provide a customer with better exchange rates than any other platform with minimum transaction time. In addition, protecting consumers from cost effects and reducing the probability of transaction failure are some other significant goals of DEX.

DEX aggregators pool liquidity from multiple DEXs, allowing users to achieve higher token exchange rates than they could on a single DEX.

DEX aggregators have the potential to optimize token pricing, wastage, and trade fees resulting in a better valuation for users. An exchange contract split among numerous DEXs, for example, can get a user significantly better pricing than trade on a single exchange.

DEX aggregator integrations are often beneficial to DEXs as they rope in additional users and volume. According to recent research, high-volume traders are increasingly using DEX aggregators, while retail users continue to use DEXs directly.

The DeFi boom and the DEX aggregators

DEX aggregators are a comparatively fresh idea emerging as a result of the continuous developments in DEX. However, they have grown increasingly essential to consumers during the recent DeFi boom. This is because more and more people are prioritizing decent trade deals.

Understanding Pathfinder

1inch, a DEX aggregator, just unveiled the second version of its protocol. The new version includes Pathfinder, an API with a new revelation and navigation technique. Pathfinder can aggregate trades over the 21 liquidity protocols it supports and use multiple market depths within the exact mechanism if essential.

Why use ‘Market Depths’?

The number of open buy and sell orders is used to calculate market depth, which measures supply and demand for liquid assets like cryptocurrencies.

This more complicated strategy results in measurable benefits for the user. For example, 1inch offers an exchange rate for 1 sBTC-sUSD over 98 percent better than Uniswap, owing to enhanced quotes.

The usage of ‘market depths’ is a significant optimization of the protocols of the previous version. The new algorithm takes a more complex approach than just aggregating an exchange across several protocols. It also includes different ‘market depths’ acting as a sort of bridge between the source and destination tokens.

Partial and Dynamic Fill Tools

Pathfinder’s partial and dynamic fill mechanism is 1inch’s strategy for minimizing the frequency of unsuccessful transactions.

When a customer seems to make a trade on 1inch, the aggregation of transaction conducts amongst different protocols. Aggregation provides the user with the rates that were initially displayed in the UI. However, before completing the trade, the rate on one of the protocols can change, making it less appealing to the customer. This is where the term ‘partial fill’ comes to play. This feature can partially fill the order, and the channel where the rate alters or several other routes can be effortlessly terminated.

Partial fill is set to default in Pathfinder. However, it can be turned off in the ‘advanced settings’ menu. Using this option is recommended to protect users against price slippage and unsuccessful transactions, particularly obvious for large exchange volumes. Due to this, the consumer successfully avoids failed transactions, and their unswapped coins simply return to their wallet. However, the consumer solely pays the exchange fee in such circumstances. Furthermore, consumers can save extra bucks by consuming Chi gas tokens. Chi gas tokens can slash gas expenditures by 43 percent.

In the same way, the dynamic fill option may help prevent unsuccessful transactions by switching parts to a different protocol in the split or path.

For example, consider an algorithm aggregating an exchange between the protocols Uniswap, Sushiswap, and Balancer. If the Uniswap exchange fails, the entire swap will shift to Sushiswap and Balancer. However, the exchange will still progress, giving the user the rate they had seen earlier and accepted in the interface.

Flexibility

The idea behind the development of PathFinder is to provide a highly flexible algorithm that could accommodate a wide range of protocols. Curve, Chai, Balancer, Uniswap V1, Uniswap V2, Sushiswap, Kyber, Mooniswap, Oasis, Compound, Yearn, Bancor, and Aave, are presently supported by 1inch, thanks to Pathfinder.

Apart from this, Pathfinder is built in such a manner that it can handle blockchains other than Ethereum. Furthermore, there are plans to add support for Binance smart chain, a parallel Binance chain.

In the meantime, the Pathfinder can be upgraded to allow for collaboration with a centralized exchange. As a result, startups would have entirely new business potential to build on top of the 1inch protocol. They may, for example, develop products that act as a bridge between CEX and DEX.

Collateral Tokens

The capability to deploy collateral tokens from lending protocols Aave and Compound as part of the exchange path is another significant feature of Pathfinder.

Other tokens are bundled into collateral coins by Aave and Compound, like Compound’s USD-pegged coins, cUSD. The consumers used the loan protocol that generated the coins to pack or unpack back into collateral coins. The reason is the unavailability of the utilization of collateral coins in exchange networks on the 1inch platform.

Pathfinder may now relocate, pack, or unpack a user’s collateral tokens in a single transaction, saving time and money. In addition, since packing and unpacking are automated, users can quickly trade collateral tokens from the reserves.

Lowest Gas and Maximum Return Options

Finally, Pathfinder gives the users the option to choose between the “maximum return” and “lowest gas” features. The maximum return feature has the switch taking complicated routes to obtain the best value for the user. On the other hand, in the lowest gas option, swaps are carried at market rates without splits across several exchanges. However, the customer pays the lowest feasible gas fee.

Evolution of DEX

The first decentralized exchange surfaced in 2014, but it gained popularity when decentralized financial services based on blockchain gained attention. Even the AMM technology helped alleviate the liquidity issues that DEXs has experienced.

Since there is no central authority authenticating the information shared with centralized platforms, it is difficult for such platforms to enforce KYC and Anti-Money Laundering checks. However, regulating bodies may still try to impose controls on decentralized systems. Custodian regulations don’t apply to these services, as those that do allow user deposits still require user-signed blockchain messages to move funds from the platform.

Users can now borrow funds to leverage their positions or supply liquidity to collect trading fees on decentralized exchanges. More use cases may be generated in the future because these platforms are autonomous smart contracts based. Flash loans, are the loans acquired and repaid in a single transaction, are the best example of decentralized finance innovation.

Conclusion

If you are planning to upgrade or build your DEX platforms, you can look for suitable solution platforms and seek professional guidance. However, if you want to have the basic knowledge or become an expert, you can learn DeFi. You can search through various cryptocurrency learning or Blockchain certification courses. In addition, several organizations are providing DeFi training and DeFi certification courses.

Other than this, you can search for companies that provide services like web app development, crypto exchange development, NFTs development, DEX development, or DeFi solution development. Choose the one that provides the best and economical solutions.

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Blockchain Weekly Source

Nov 17 2021

DAY LONG NEWS ROUNDUP: LATEST NEWS 17/11/21

We cover the crazy world of blockchain and cryptocurrencies and bring you the latest updates from 17/11/2021 to help you stay informed of the insane things that are shaping the future of finance and business around the world.

AMC Theatres to accept Shiba Inu via Bitpay in the upcoming two to three months

Adam Aron, the CEO of the famed AMC Theatres in the United States, announced on a Twitter post yesterday that the company is willing to incorporate Shiba Inu for their online payment services. It was declared that the feature will be available for use in the upcoming two to three months only.

According to the Twitter post, the integration plan was created when BitPay stated that they are about to provide support for the memecoin on their payment platform. BitPay is a renowned payment service provider in the cryptocurrency domain. They have been operational since 2011 and are quite adept in managing transactions with really high volumes.

The news was previously reported by the VR Soldier but the Tweet coming from the CEO himself has given the news a lot of traction. For those who are wondering why they did not see a major jump in the price of the cryptocurrency today, this is because the news was already out during the previous week itself. The saying in crypto goes that it is always wise to buy the rumour, and sell the news instead. Therefore it is understandable that the Shiba Inu prices may undergo a bearish trend today.

Polygon launches scaling solution for deploying DApps

Polygon is a globally popular layer two scaling solution for blockchains compatible with Ethereum. They have recently launched their own Midden Virtual Machine powered by the zk-STARK for developing DApps or better known as Decentralized Applications.

zk-STARK is basically an abbreviation for zero knowledge Scalable Transparent Argument of Knowledge. In simpler terms, this technology allows an individual to prove that they are capable of storing private data, such as passwords, without making sure that they do not leak anyhow. STARK is one of the methods or ways in which one can prove, obfuscate or even verify this data.The Polygon blockchain has invested over an amount of $1 billion in order to develop the zk technology.

A zk-STAR application is being widely used in complex Decentralized Finance (DeFi), healthcare products and decentralized car insurance services for the purpose of identity verification. This technology can redact critical information from digitized assets and even manipulate their size for quicker verification, for instance passport or driver’s license.

Sandeep Nailwal, the co-founder of the Polygon Blockchain network, stated that this technology would help overcome privacy issues and establish trust in products related to DeFi.

Deloitte and Avalanche Blockchain together forms a strategic alliance

Deloitte is undoubtedly one the biggest accounting firms in the world securing a place among the “big fours”. They are working in collaboration with some of the best companies around the world.

At present Deloitte is working in close association with the Federal Emergency Management Agency which is popularly known as FEMA. They are working on the execution of applications concerning disaster reimbursement for local and state government agencies. In order to carry out this task, they take the help of a tool known as CAYG or Close As You Go.

It is a cloud oriented tool that serves as a cost efficient, decentralized and transparent solution for the government partners. The Avalanche blockchain will help add efficiency, speed and authentication measures to the system, thereby enhancing it. Deloitte stated that the reason why they chose Avalanche is because of their eco-friendly advantages as a technology.

The Ava Labs will now focus their attention on the CAYG system and enhance it for better document retention, risk mitigation, cost effectiveness, reducing administrative hassles and most importantly, developing a resilient system on the whole.

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Blockchain Weekly Source

Nov 12 2021

Decentralized Finance 101 : A Complete Guidebook

Decentralized Finance 101 A Complete Guidebook (1)

The term DeFi in a broader sense refers to Decentralized Finance. Basically, it refers to the wide ecosystem of digital financial tools empowered by Blockchain technology. The term DeFi also refers to a host of peer-to-peer financial services that involve crypto trading, interest accounts, loans, and so much more. DeFi is very much incumbent on public blockchains such as Ethereum and cryptocurrencies.

In 2020, the Decentralized Finance market climbed to a staggering amount of $13 billion from $00 million. According to industry experts and analysts, the market has reached a mammoth amount of $40 billion this year.

As the global financial system transforms digitally, DeFi is showing tremendous growth, attracting worldwide banks and investors. However, before investing in any asset class, it is critical to understand the asset, its position in the market, and how to invest in it.

DeFi Assets

According to experts, one of the best ways to invest in Decentralized Finance is to conduct trades with DeFi assets. It can be done using tokens that represent DeFi protocols or applications and networks, which entails purchasing low and selling high. However, experts warn that this is not meant for the faint of hearts and requires detailed analysis and study. This is due to the highly volatile conditions, and as a result, there are risks involved. However, there are hosts of opportunities in this domain. Some examples include Terra (LUNA), Unswap (UNI), Chainlink (LINK), and Wrapped Bitcoin (WBTC).

DeFi Staking

Staking is just another way of generating passive income by investing in Decentralized Finance. Users can either choose to lock or even hold their allocated funds in a digital crypto wallet. In doing this, they automatically participate in maintaining the operating procedures of a Proof of Stake or POS Blockchain system. As a result, the users will receive a predefined rate of interest. Getting a decent rate of return in exchange for retaining your digital assets seems like a smart alternative in a world where interest rates appear to be dropping in most banks and other places. As of the data gathered back in January 2021, the total worth of cryptocurrency assets staked on DeFi platforms is worth around $23 billion.

DeFi yield farming

Yield Farming is also a great way of generating passive income from crypto holdings. Yield farmers make money by providing liquidity through the crypto assets to a DEX (decentralized exchange). The DEX then uses this liquidity to carry out the orders created by token swappers who basically pay the fees. Based on the degree of their contributions, these farmers earn a percentage of these fees.

One can even choose to do this through AMM or automated market maker protocol that executes the transactions automatically. Several DeFi projects engaged to yield farming are currently running in the market. For instance, Aave, Yearn Finance, and Compound are projects where individuals can earn passive income through yield farming.

Lending and DeFi lending protocol

These DeFi lending platforms enable the users to lend their crypto holdings to someone and earn interest on the loan they have extended. This kind of loan lending can be highly beneficial to both the borrower as well as the lender. Margin trading is possible on these lending platforms. It also enables high-profile investors to lend large sums of money and earn greater interest rates over a longer period of time. This feature also allows the users to leverage benefits like fiat currency credit if they are willing to borrow loans at interest rates much lower than DEX. Furthermore, users have the option of selling it for a cryptocurrency of their choice on any centralized exchange platform, after which they can easily lend it to a DEX.

DeFi Funds

Funds and trusts are other great ways of investing in the entire DeFi ecosystem. According to specialists, this is the most user-friendly strategy for newbies and the most passive means of introducing oneself to the DeFi domain. The DeFi Index Fund from Bitwise, the Diversified DeFi Fund from Grayscale, and the DeFi Index Tracker Fund from Galaxy Digital are excellent examples.

Conclusion: Reward vs. Risk in DeFi?

The diverse investment opportunities, coupled with the rapid and continuous growth of the market, have resulted in DeFi being a really attractive option for investors. However, it should be kept in mind that with any investments, there are risks associated with them. Individuals must do thorough research before doing so. A blockchain certification, cryptocurrency course, or a DeFi certification would necessarily provide users with the fundamentals of this domain.

Even beyond the risks associated with the volatility of cryptocurrencies, it is important to note that DeFi can also pose other risks. These risks mostly have to do with the security aspects where DeFi protocols run on smart contracts. Some vulnerabilities can be misused or exploited by miscreants.

However, with the inevitable regulations and advancements in technology associated with DeFi, these vulnerabilities will be lowered, which will bolster the DeFi space to emerge in a more attractive and lucrative manner. Therefore, the ideal course of action would be to be smart, patient and never let a good opportunity pass by.

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Blockchain Weekly Source

Oct 28 2021

Why are NFTs booming in 2021 and why it is expected to do a lot more

The term ‘cryptocurrency’ instilled doubt among the general population some years back, but now that is in the past. Cryptocurrencies have now gone mainstream in 2021 with popular celebrities, social media influencers and news channels promoting the next generation of technology that is taking the world by storm. However, from the immense popularity of the cryptocurrencies, one particular area has seen a massive surge above many others.

Non Fungible Tokens or popularly known as NFTs have emerged as a sensation this year. It is grabbing headlines everywhere and introducing the world to a brand new era of digital art and collectibles. Undertaking a course in Blockchain or a cryptocurrency course can give people a really good idea about digital assets. People around the world are extremely overwhelmed with NFTs and the insane level of opportunities this new technology has opened up for them. They are now interested in truly learning NFT. But why are NFTs becoming so popular? And, what exactly is happening in the NFT space that is driving such excitement?

What makes NFTs such a big thing?

For the uninitiated, NFTs are digital assets which are unique in nature and are represented through the ERC-721 tokens which basically serve as a verifiable and undeniable proof of ownership of these digital assets. NFTs can vary and come in different forms such as videos, images, music and other types of media and different artwork.

What are the use cases for NFTs?

To put it mildly and simply, the word ‘Non Fungible’ means that which cannot be duplicated or replaced with anything else. Inherently an NFT is a unique item unlike any existing in the market. As a result they are primarily used as collectibles which can be traded on various NFt marketplaces.

The primary point of difference between traditional collectibles (such as sports memorabilia or classic trading cards) and NFTs is that NFTs are digitized and they can serve a whole range of other functions other than just serving as collections meant for trading. Users can actually unlock their verifiability and immutability owing to the benefits of the blockchain technology. In addition to that, they can even earn rewards based on DeFi capabilities. IT is important to note that the blockchain here provides the much needed proof of authenticity as it holds the link that would point out where the NFT is stored, rather than holding the actual contempt of the NFT itself on the blockchain.

Nowadays owing to the decentralized nature of the popular marketplaces such as OpenSea or Rarible, anyone can possibly create and even mint an NFT. What this means is that there is universal access now for users, giving people an equal opportunity in terms of making money from their digital artworks.

What led to the huge surge in NFTs in 2021?

It was during the month of January in 2021, when NFTs started gaining immense traction, even though it could not be pointed out for certain as to what led to this incredible boom. However, studying the market, there could be a few reasons which contributed to this growth.

Bitcoin prices started rising during the first quarter of 2021 and it sent a hype across the entire crypto ecosystem and throughout the market. This surge further attracted a host of retail investors and general crypto users.
NFT space witnessed the emergence of innovative and unique characters and avatars, such as Cool Cats or Bored Apes, which helped create close knit online communities that gave people a compelling sense of purpose and enough reason to purchase these NFTs.
Also, a lot of buzz was created surrounding Elon Musk in relation to Shiba Inu and Dogecoin which drew the attention of millions of people worldwide.

According to the experts, this intense hype somehow translated and seeped in through every corner of the digital assets ecosystem, including that of the NFTs and contributed immensely to its hype.

Gradually decentralized marketplaces such as OpenSea and Rarible started attracting a lot of attention as they were providing a lot of convenient ways for artists and creators to mint, view, share and collect their own NFTs among a group of like-minded individuals interested in the same revolutionary technology. In addition to that, the applicability of Decentralized Finance (DeFi) helped in enhancing the way they used NFTs and gradually artists and content creators started earning handsome passive income for their work. Eventually when these earnings reached ludicrous amounts of money by selling top NFT tokens, word began to spread out like wildfire and everybody wanted a taste of how all this works. This resulted in a rapid boom of the NFT space leading to the creation of some of the best NFTs.

Some key statistics to put things in perspective:

Let’s look at some of the data to understand how rapid and massive the NFT boom has been:

The amount of NFT sold in 2020 amounted to a staggering $250 million, which was a staggering jump of 82% from the $141 million sales during the previous year of 2019.
During the first quarter of this year itself, the sales reached a volume of over $2 billion.
‘Everydays: The First 5000 Days’ by Beeple was the most expensive NFT ever sold for a price tag of $69 million.

Conclusion: The future of NFTs

Some believe that the craze surrounding NFTs is nothing more than an ephemeral bubble. But no matter what they say, it is pretty evident that NFTs are here to stay for the time being as we have seen multiple luxury brands, racing car manufacturers and really big companies like CocaCola all dipping their shoes in the NFT space.

This is one technology that is revolutionizing the way we perceive the need and usage for art in our lives. For the first time in history, the art and collectible market is being fully digitized and not just that, some companies and platforms are even making it possible to stake one’s own NFTs to earn interests on them. So the technology much like cryptocurrencies themselves are evolving and with it, the concepts and the necessities are also going through a transformation.

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Blockchain Weekly Source