Category Archives: Cryptocurrency

Best Ethereum Debit Cards You Should Use In 2021

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Spending your Bitcoin or Ethereum is quite a novelty in the real world — few stores and websites accept digital currencies at the moment, and for good reason. Retailers are scared about exchange rates, find blockchain technology too difficult to understand, or think cryptocurrencies are highly volatile assets. Thankfully, new products are popping up to solve all these problems — crypto debit cards.

A crypto debit card lets you spend your digital assets at locations where debit cards are accepted. Every time you use the crypto card, money is deducted from your wallet balance and converted into the merchant’s currency.

Benefits of Crypto Debit Cards

Switch Between Currencies

Most crypto debit cards let you access both digital currencies and fiat currencies with ease. You don’t have to switch between cards to make payments in different local currencies. This is a great draw if you’re a globe-trotter who doesn’t want to exchange currency each time you need to pay for something.

Cut the Card Costs

Crypto debit cards eliminate some of the unpleasant fees associated with bank-issued debit cards. Most promise zero foreign exchange fees, zero transaction fees, and zero monthly maintenance fees. Other crypto cards will waive the monthly fee if you maintain a specific account balance.

Security

Most crypto debit cards incorporate advanced security measures to protect your digital assets and transactions. Most cards have 2-factor authentication, 256-bit encryption, and round-the-clock fraud monitoring. Temporarily freeze or unfreeze your debit card if you detect an unrecognized transaction.

Here are the best ethereum debit cards you should use in 2021.

Tenx Debit Card 

TenX is one of the most sought-after Ethereum Debit Card because it is versatile and offers users multiple benefits. It does not charge any transaction fees, which is one excellent attraction to many users. As a user, you will earn 0.01% in cashback, and this platform offers you a reward system.

Features

1.It is a highly demanded debit card with a high success rate in the cryptocurrency market.
2.The TENX ICO has been sold out in a quick manner.
3.Its application is being available widely in the crypto market so that the users can buy and use it.
4.An attractive and appreciative feature of tenx is that it does not charge any fees for making transactions.
5.For each and every purchase of tenx tokens, this platform offers cashback of around 0.01% to its cardholders (users).

Token Debit Card

Compared to other debit cards, which are multi-level designed, Token cards operate off a blockchain technology, which moves without interruption for multiple currency management. Its app features are among its main strengths. It allows the user to switch between Fiat currencies and therefore is ideal for receiving international payments as well.

Features of Token card

1.It supports all kinds of tokens including the ERC 20 tokens.
2.It pools out a particular amount of cash upon every purchase made across this platform. This is usually referred to as ‘Cash and burn’ policy.

Wirex Debit Card

Wirex is a well-known and the trusted cryptocurrency debit card. Wirex card is available in Virtual and Physical form. These cards are powered by the Wirex crypto wallet that means each card is linked with the wallet. Currently, Wirex supporting more than 50 crypto coins including Ethereum. This card is accepted all over the world.

Features

1.Supporting more than 150 currencies and accepted at over 61 million locations.
2.Free fiat-to-fiat exchange and zero card or account fees. 
3.Wirex card lets you save money with free ATM withdrawals worldwide.

Bitwala Debit Card

The Bitwala Visa is a promising new Ethereum Debit Card powered by the Bitwala platform. It is based in Berlin and was launched in 2012. BitWala Visa boasts of over 15,000 regular users, spread across 120 countries. It offers fast international bank transfers, which makes it convenient to use for international traders and freelancers.

Features

1.You can easily trade your coins into euros and have funds ready in your wallet and on your card.
2.The Bitwala debit card also comes with a 3D secure feature.
3.A private code that provides an extra layer of security when making an online purchase.

Top 5 reasons why the cryptocurrency is so popular?

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The global economy is inevitably moving towards a digital ecosystem. From investment to money transfer, everything is going paperless. The newest and most promising addition to the digital payment sector is cryptocurrency. Over the last couple of years, the digital currency has been rapidly gaining the public eye. Here are some good reasons behind it.

Secure transaction

One of the biggest gripes for both customers and merchants has always been about making a safe and secure financial transaction in exchange for their products. With the fear of credit card info being fake or counterfeit always on the back of your mind, people are hesitant in most cases to purchase from online sources. But cryptocurrencies eradicated that problem.

The private keys that are given to holders once they obtain the currency are the only thing that allows the holder to spend it or convert it. A holder without a key renders him/her useless.

Fees Are Very Low

One of the biggest reasons why the cryptocurrency is popular around the world is that there are very few fees associated with using it. When you’re using various other types of online payment options, you’re often going to incur large fees. The very low fees that you have to deal with when using various cryptocurrencies will be a much better deal for you. It makes sense for many people to use cryptocurrencies to pay for items online and lots of people also find it to be safe.

Potential for Profit

Of course, the potential for profit is another huge reason why people get involved with cryptocurrencies. If you buy Bitcoin while it’s at a low price, then you can potentially profit when that price rises. Lots of people who invested in cryptocurrencies before they got super hot wound up making huge profits. Investors are still making money from cryptocurrencies because the market has not cooled in recent years.

Cryptocurrency is Decentralized

One of the biggest reasons to put faith in cryptocurrency is because it isn’t associated with any government. Because it is a decentralized currency, it isn’t controlled by any firm or government. So people willingly invest in it without any fear of demonetization. Therefore, this currency has the power to remain stable, even if the economic situation isn’t healthy. The potential that cryptocurrency is the safest option In the future makes it even more appealing to everyone.

It is Easier to Get the Cryptocurrency

In simple words, it is easier to get cryptocurrency with time. Thanks to the online companies that are adopting it. You will be astonished to see, a lot of websites are accepting payment in cryptocurrency. This means, digital currency is our future and we are already heading towards it very fast. Although this might not appear to be widespread but is a rampantly thriving practice for sure. As the digital currency continues to get stronger, more people are going to use it as it is a safer option as well.

Bottom line

As crypto matures, we will achieve a lot of stability which will make it easily transferable, and a store of value that will make it more used by businesses, the government, and everyone as a part of everyday life.

Cryptocurrency is still a lot in its early stages and some people are still skeptical about it but it is here to stay and has been adapted into our lives and will be a currency used by everyone which is only a matter of time. With the acceptance and how widely talked about it is, the future of crypto is sure to be bright.

Cryptocurrency vs Fiat Currency – GAG Coders

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As the world is moving towards a cashless society, the payment system around us is transforming into a digital economy. Currently, only a small percentage of global money is expressed as physical forms of currency, with the majority of money being exchanged electronically through online payment apps, online, or using debit cards.

What is fiat money? 

Cash. Greenbacks. Cheddar. Loot. No matter what you call the money that’s in your wallet or bank account, chances are your “money” is a specific type of currency called fiat money. 

In its most basic form, fiat money appears as coins or paper bills, which are widely used throughout the world. The world’s most commonly used currencies, like the US Dollar, Euro, Japanese Yen, or the pound sterling are fiat currencies. Though there are many fiat currencies, all of them are issued by governments and none of them are backed by commodities like gold or silver.

About Cryptocurrency

A cryptocurrency is a form of payment that can be exchanged online for goods and services. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money that is carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database that describe specific transactions.

Major difference

Fiat CurrencyCryptocurrency
Fiat currency is backed by the Government and can be in the form of physical money or maybe represented electronically.A cryptocurrency is a digitally encrypted, decentralized currency that is not linked to or regulated by any government
Issued by the central bankOperates independently
Required to make transferNot required
Dollar, Rupee, Euro, PondBitcoin, Ethereum, Litecoin
Legal in all countriesIllegal in some countries
Fiat money may be used to make digital or physical payments or transfers of funds.Only a digital transfer of funds is possible with cryptocurrency.
Fiat currencies have a tangible appearance in the form of coins and notes.Cryptocurrencies cannot be touched or sensed in any way.

Bottom line

Greener alternatives in a financial system can promote an overall improvement in the global environment. By carefully regulating the number of carbon emissions, the financial system will thrive in a conducive environment and promote cost-effective financial services. 

Moreover, the global environment will be free from pollution, illnesses, and global warming, mainly avoiding eco-friendly options. While everyone must protect the environment, adopting a greener path will require a great collaborative effort from citizens, the monetary system, and the government.

Best Free Crypto Trading Bots in 2021

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Cryptohopper

Cryptohopper is considerably new in the market but has already gained immense popularity due to its wide range of features and technical leverage over other bots. Few highlighted features are:

Features:

  • One of the main limitations of earlier crypto trading bots is that they could only operate when the PC is on. Cryptohopper uses cloud-based technology wherein, you can run and trade with your bot on a cloud and use it any time of the day even when you are offline.
  • Cryptohopper allows you to run your bot in autopilot mode and set your trading signals. This is extremely useful for new users who often fail to set their own trading signals.
  • Cryptohopper is enriched with other special features like technical analysis which helps you to customize your bot’s settings and templates through which you can design a new setting for your bot.

Gunbot

Gunbot is a popular trading bot with over 6000 traders using its services daily. The app is available for Windows, Linux, and Mac operating systems. It offers paid plans in BTC. Few important features are listed below:

Features:

  • Gunbot supports 32 different trading strategies including Bollinger band, step gain, and ping pong.
  • To avail of the services of Gunbot, users have to pay a one-time lifetime charge of 0.05BTC to 0.125BTC depending on the features they use. The lite version is available at lesser fees.
  • The app comes with customer support and will resolve your issues within a day. However, users are advised to turn off their bot in case the market is too volatile to avoid the risk of losses.

3Commas

The 3Commas trading terminal and trading platform offer a wide range of automated trading bots with the ability to configure them for round-the-clock execution of the preferred strategy. Using the trading platform simplifies the process of trading and expands the opportunities available to traders.

Features

  • Automizes trading maximizes profit and avoids loss from trading.
  • The bot is hosted online and is available from anywhere and any device having an internet connection.
  • 3Commas is available in 3 package plans starting from $22 to $75 per month. However, users can use the bot for free if they have an account at the Huboi exchange.

Coinrule

Coinrule is a cloud-based crypto trading platform empowering traders to compete with professional algorithmic traders and hedge funds. It was founded in London by Gabriele Musella and Oleg Giberstein who discovered that trading cryptocurrencies were unnecessarily complicated.

Features

  • Coinrule is a user-friendly, automated, trading bot platform that caters to both new and experienced traders.
  • It comes with a wide range of tools that allow you to easily set and define rules and conditions for when and how to trade, with no coding required.
  • To get started, all you need to do is create an account and connect Coinrule to your favorite exchanges using an API link

TradeSanta

TradeSanta is a popular cloud-based trading bot software that allows users to make a profit at the time of market fluctuation. It provides automated trading with the help of algorithms and there are tools like filters, signals which are very much helpful to take decisions. 

Features:

  • Streamlined process, multiple tools, and user-friendly interface;
  • Top cryptocurrency exchanges are integrated such as Binance, Huobi, Bittrex, BitMex, Bitfinex, and many more.
  • Users will get flexible telegram notifications.
  • Bot templates are available to launch your trade bot in a minute.
  • Fee as well as paid plans available
  • Telegram community with 24/7 support

Best Cryptocurrencies to Invest in 2021

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Bitcoin (BTC)

Theories on Bitcoin’s utility differ, but there’s no denying that it’s been the dominant player in its field since its creation. Bitcoin’s growing adoption is its saving grace; both retail and institutional investors are primed to dip their toes into cryptocurrencies with Bitcoin first. Plus, some of today’s smartest business minds are increasingly gravitating toward the “digital gold.” Although Bitcoin’s price lost more than half within two months of hitting all-time highs of about $65,000. Bitcoin on its balance sheet earlier this year could serve to usher in more corporate treasury inflows over time.

Ethereum (ETH)

Next to Bitcoin, Ethereum is the second-largest cryptocurrency. It was launched in 2015 with just a supply of 72 million coins. Since last year, Ethereum has seen a 946.8% increase, and the new launches on its network are exciting market experts and experienced investors.

Tether (USDT)

Unlike some other forms of cryptocurrency, Tether is a stablecoin, meaning it’s backed by fiat currencies like U.S. dollars and the Euro and hypothetically keeps a value equal to one of those denominations. In theory, this means Tether’s value is supposed to be more consistent than other cryptocurrencies, and it’s favored by investors who are wary of the extreme volatility of other coins.

Litecoin (LTC)

Litecoin is one of the most valuable cryptos in the industry, with a market cap of over $9.2 billion. It was created through a fork in the Bitcoin blockchain and is one of the oldest cryptos in the market. It has gained an incredible 215% in the past 12 months. However, it has stumbled quite a bit of late. In the past week, though, LTC has shown signs of a rebound, which indicates a reversal of its fortunes.

Similar to BTC, LTC is open-sourced and highly decentralized. Additionally, it is also quicker than BTC, as it takes only 2.5 minutes per transaction, rather than nine minutes. Its transactions are also at least 40% cheaper than Bitcoin.

Binance Coin (BNB)

Binance Coin is a utility cryptocurrency that operates as a payment method for the fees associated with trading on the Binance Exchange. Those who use the token as a means of payment for the exchange can trade at a discount. Binance Coin’s blockchain is also the platform that Binance’s decentralized exchange operates on. 

Binance Coin was initially an ERC-20 token that operated on the Ethereum blockchain. It eventually had its own main net launch. The network uses a proof-of-stake consensus model. As of January 2021, Binance has a $6.8 billion market capitalization with one BNB having a value of $44.26.

Dogecoin

For any cryptocurrency to survive over the long run, it needs to have a real-world purpose. Dogecoin, though, doesn’t have much of competitive advantage in the industry.

The vast majority of merchants do not currently accept Dogecoin as a form of payment, and there are several other cryptocurrencies with lower transaction fees than Dogecoin. The primary reason its price has exploded over the past several months is that it gained a large fan following. But once those investors inevitably move on to something new, Dogecoin’s price will plummet.

Cardano (ADA)

Because of its flexible network and fast transactions, Cardano is expected to remain one of the most popular cryptocurrencies. Scalability, interoperability, and sustainability are among its chief selling points. The recent update finally brought the ability to build smart contracts on Cardano’s network. Cardano has always been a venture that takes its time and accomplishes things gradually.

VeChain 

If you’re looking for a cheap digital coin to invest in, then VeChain may be the best answer for you. The VeChain currency is based on the VeChain Thor Blockchain. It’s a blockchain specifically designed for handling supply chain management and various business processes with the help of distributed ledgers. 

Cryptocurrency Trading Bots – Advantages

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Cryptocurrency trading is an emerging business and with more and more crypto traders flocking the market, the growth of digital currency exchange has risen to a whole new level. However, many new investors especially the novice find it extremely difficult to evaluate the cryptocurrency market conditions and to cope up with the volatile nature of the market. 

The cryptocurrency trading bots are relatively a new concept and have made crypto trading easy and popular especially among novice traders. Cryptocurrencies can be traded directly from crypto exchange platforms or through the help of crypto trading bots. Due to the volatile nature of the crypto market, many investors are gradually relying on trading bots to do the job for them.

What Are Crypto Trading Bots?

Crypto trading bots are a set of programs designed to automate cryptocurrency trading on your behalf. Typically, The investor/trader will have to pay attention to market statistics that play a crucial role in practicing trading and then pick which cryptocurrency to buy/sell and at what time. Crypto trading bots can easily automate the analysis and interpretation of market statistics. They can gather market data, interpret it, calculate the potential market risk, and execute buying/selling cryptocurrency assets. 

How do Bots work?

Investors can subscribe to free bot programs to aid in their cryptocurrency trading. On the other hand, many bots have user fees, some of which can be quite steep. Typically, investors seek out the bot or bots that will be most useful for them and then download the code from a developer. Each bot includes different requirements in terms of software and hardware.

Bots can be incredibly helpful, although there remains an ongoing debate about whether they should be permitted in cryptocurrency trading. In order to maximize the impact of a bot, however, an investor must know how to best utilize the tool. For instance, investors must have the proper accounts set up across digital currency exchanges.

They must stock those accounts with cryptocurrency holdings. In many cases, they must still make investment decisions such as when to buy or sell. A crypto bot is not a get-rich-quick solution for an investor unwilling to put in the time and effort necessary for success.

The Benefits of Using a Crypto Trading Bot

Save Time 

New cryptocurrency traders, investors, and miners quickly figure out that going into cryptocurrency is more or less a 24-hour gig. To be an effective trader, it is essential to monitor and stay on top of recent developments in the crypto world. Since cryptocurrency technology is expanding so fast, this would mean monitoring market insights every 10 minutes or so to keep track of relevant trends. 

Monitoring cryptocurrency trends all on your own can be rather time-consuming and overwhelming. Meanwhile, trading bots allow you to limit the amount of time you spend monitoring the market, as the artificial intelligence behind the bot will do that for you. 

Bots Lower the Barrier to Entry 

As you may already know, cryptocurrency trading is an exhausting process. Newcomers have to do a lot of research about the industry and the latest trends before they stand a chance to make effective trading decisions. Further, the nature of the crypto trading game is that even with adequate preparation, long-term success is not guaranteed. 

While crypto trading bots do not guarantee long-term success either, they certainly lower the barrier to entry for newcomers. By utilizing a trading bot to ease their way into crypto trading, newcomers can copy the actions of some of the more successful traders. 

24-Hour Trading 

Although cryptocurrency trading can be a full-time gig, even the most successful traders need to sleep, eat, and take care of daily chores. However, while you are off living your life, the crypto trading game does not sleep as crypto traders remain active worldwide, constantly shifting trends in one direction or the other. 

Perhaps the main advantage of a crypto trading bot is that it allows for much more effective time management for crypto traders. The crypto trading bot can be optimized so that it runs the trading process in the background at all hours. This allows traders to partake in the trading process 24 hours a day without being present in front of their computer screen without a break. 

Bottom line

Cryptocurrency trading bots are useful for automated trading and can be very profitable if used carefully. There is some trading software such as the bitcoin era platform which can be used for trading purposes. It is very much recommended to use any platform with proper knowledge and research and choose only reputed and secure bot software.

What is tezos? – Advantages & Disadvantages

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Tezos is a decentralized, open-source energy efficient Proof of Stake blockchain network that can execute peer-to-peer transactions and serve as a platform for deploying smart contracts. The native cryptocurrency for the Tezos blockchain is the Tez which has the symbol XTZ.

Understanding Tezos

Like Bitcoin and Ethereum, Tezos is a decentralized ledger that makes use of blockchain technology. Like Ethereum, Tezos is designed to make use of smart contracts. The term “Tezos” is ancient Greek for “smart contract,” according to the developers.

However, Tezos goes beyond previous offerings. It takes the smart contract concept “one step further by letting participants directly control the rules of the network.

Tezos is intended to be an evolving network. This flexibility is seen as a crucial aspect of its system. In particular, the lack of flexibility and scalability in Bitcoin has saddled it with numerous difficulties and growing pains. Ethereum has grown in large part because of its flexibility, and Tezos continues in that direction.

How does Tezos work?

The Tezos blockchain enables many features common to cryptocurrencies.

Developers can use its software to run custom programming logic (smart contracts) and design new programs (decentralized applications) meant to replicate products and services. 

Yet, its voting features required a different design.

More specifically, the Tezos blockchain would be broken into two parts:

Shell – The code that amends itself based on user voting, is also responsible for interpreting transactions and administrative operations.

Protocol – The code responsible for sending proposals to the shell for review. 

Pros

  • Tezos utilizes the Proof-of-Stake consensus mechanism in which participants provide only the necessary computational resources to keep the network working. This is inexpensive as compared to other blockchains that use PoW and other PoS processes.
  • Tezos blockchain allows any stakeholder to participate in the consensus mechanism and rewards for contributing to the security and stability of the network.
  • Like other blockchain platforms, it allows blockchain developers to create smart contracts and develop dApps. Michelson, Tezos’s native smart contract language, facilitates formal verification, which is commonly used in mission-critical environments like aerospace, nuclear, etc.
  • When it comes to safety and code correctness, Tezos claims to provide both for high-value use cases.
  • Tezos aims to provide the safety and code correctness required for assets and other high-value use cases.
  • Tezos possesses a modular architecture and formal upgrade mechanism. Or we can say that it is self-amendment that allows the network to propose and adopt new technological innovations smoothly as they emerge.
  • It offers formal and systematic procedures for stakeholders to reach an agreement on proposed protocol amendments.

Cons 

  • The primary pitfall associated with Tezos is a delay in token issuance, causing several users to miss out on their rewards without being informed.
  • Although investors and delegators can spend on XTZ tokens, they are sticking to other popular coins such as Bitcoin, Ethereum, etc. There is a lack of commercial support with Tezos.
  • Presently, blockchain developers consider Tezos as an immature network as it is difficult to predict what its transaction fees and speeds will be once the platform becomes more widespread.
  • Due to the delay in token issuance and other reasons, Tezos has dealt with behind-the-scenes drama and other conflicts which act as a barrier to its popularity.

Future of Tezos

The future of Tezos was once again looking bright in 2021. Though the rapid rise in the price of tez suggests caution in the short term, record highs resolve some problems. In particular, all of those who want their money back could simply sell their tez on the market for a profit. More importantly, Tezos proved its staying power by surviving the bear market and reaching new highs.

What is a bitcoin loan and how does it work? – Pros & Cons

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What is a Bitcoin Loan?

Bitcoin loans are pretty much like any other loan where you can borrow specific amounts from a lender and pay them at certain interest rates. The only difference is that in this type of loan, cryptocurrencies serve as your collateral or the item or asset used to secure the loan. 

The rapidly changing value of Bitcoin is the clear reason why it isn’t easy to just borrow Bitcoin from someone you know. In cases like this, the lender and borrower need reassurance that the requirements from both parties can and will be met. So if you want to either borrow or lend crypto securely and reliably, exploring crypto or Bitcoin lending platforms might be the most appropriate solution for you. 

How does Bitcoin lending work?

A bitcoin-backed loan uses digital currency as collateral, similar to a securities-based loan. The basic principle works like a mortgage loan or auto loan — you pledge your crypto assets to obtain the loan and pay it off over time. You can get this type of loan through a crypto exchange or crypto lending platform.

While you retain ownership of the crypto you’ve used as collateral, you lose some rights, such as the ability to trade it or use it to make transactions. Also, if the value of your digital assets drops significantly, you may end up owing back much more than you borrowed should you default on the loan.

People may consider crypto loans because of the benefits they provide and because they have no intention to trade or use their crypto assets shortly. The acronym HODL, which stands for hold on for dear life, is a common refrain in crypto-focused online forums.

Advantages & Disadvantages

ProsCons
Bitcoin lending involves borderless online transactions and it is one of the pioneering cryptocurrencies to be accepted in almost every part of the world.Bitcoin lending faces tough competition from other emerging crypto lending services.
Bitcoin runs on a decentralized blockchain and is not controlled by any central authority. Due to its decentralized nature, BTC assets are not vulnerable to the governance-based manipulation of political bodies, banks, and other financial institutions. Bitcoin lending faces issues due to the infamous volatility of BTC prices. If the price drops dramatically to an all-time low, the Bitcoin lending platform faces complications in serving its lenders and borrowers. Therefore, this unpredictable price swing makes Bitcoin lending risky for investors. 

How do you get a Bitcoin loan?

To get a Bitcoin loan, one can browse through multiple Bitcoin loan sites. These websites are the Bitcoin lending platforms that can provide instant Bitcoin loans to their users. In these platforms, the process of lending Bitcoin in the form of cash loans is simplified in many ways. This is done to make Bitcoin loans more accessible for the greater public. By following these steps, one can get a Bitcoin loan without losing time on traditional loan procedures.

Step 1 – Select a Bitcoin lending platform
Step 2 – Create a user account by verifying the trust score and cryptocurrency support
Step 3 – Select the type of Bitcoin loan based on the collateral requirement, interest rate, DeFi/CeFi, etc
Step 4 – Submit the loan application or accept the loan offer and get the loan in a few hours after the borrower accepts the loan terms

Important things required for Bitcoin loan application

  • Proof of being a registered user of the lending platform
  • Documented proof of age (18+ years)
  • Digital verification of email and phone number
  • Documented proof of Bitcoin holdings (crypto wallet, crypto exchange, etc.)

Applying for Bitcoin loans is easier for registered users of crypto lending platforms. Moreover, it is easy for registered users of leading cryptocurrency exchanges such as Binance. Such users have enough verified data to prove their identity during the application. While borrowing crypto loans, it is equally important to check the cryptocurrencies and the fiat currencies supported by the Bitcoin lending platform.

Bottom line

With all the things we’ve discussed so far, you’re probably thinking about whether trying your hands on crypto loans is a good idea or not. So here are other key points you might want to look into to help you come to a decision.

If you’re a newbie in the crypto space and want to have fractions of BTC by not taking the trading route, you can opt to borrow Bitcoin to get started. Sending and receiving money through cryptos is much cheaper and faster than with many banks and other third-party financial institutions. 

Steps To Avoid Impermanent loss – DeFi

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If you’ve been involved with DeFi at all, you almost certainly heard this term thrown around. Impermanent loss happens when the price of your tokens changes compared to when you deposited them in the pool. The larger the change is, the bigger the loss.

DeFi protocols like Uniswap, SushiSwap, or PancakeSwap have seen an explosion of volume and liquidity. These liquidity protocols enable essentially anyone with funds to become a market maker and earn trading fees. Democratizing market-making has enabled a lot of frictionless economic activity in the crypto space.

What is Impermanent Loss?

Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.

An Example of Impermanent Loss

Consider our example of depositing 50% ETH and 50% UNI on Uniswap. When the price of ETH increases, it creates an arbitrage opportunity to make a profit at the expense of liquidity providers. Let’s say the price of ETH grows by 5%, here arbitrageurs can buy ETH on Uniswap at a price 5% lesser than the external market. The decentralized exchange (DEX) then rewards them for selling UNI for ETH until the ratio of both tokens is equal. It leads to LPs losing out on a portion of their liquidity deposited to a specific pool.

How to avoid the impermanent loss

In a volatile marketplace, the impermanent loss is almost guaranteed when staking cryptocurrency assets within a standard liquidity pool. Exchange prices are always going to move. However, there are ways that the effects of impermanent loss can be mitigated.

Trading fees

Trading fees are collected from traders using the liquidity pool and a share of those fees are then rewarded to liquidity providers. These fees are sometimes enough to mitigate and offset any impermanent loss. The more trading fees collected, the less impermanent loss there will be. Past a certain point, if a pool collects enough fees an investor will have gained more from staking assets in a liquidity pool compared with holding them.

Low volatility pairs

Impermanent loss is likely to occur for the most volatile cryptocurrency pairings. However, the impermanent loss can be mitigated by choosing a cryptocurrency pairing where the exchange price is not volatile. Therefore, significant price movements between the pair are unlikely. If price volatility does not exist, the impermanent loss can be avoided.

Complex liquidity pools

One of the main reasons for impermanent loss is due to the 50:50 split that is required by most liquidity pools. To overcome this issue, some decentralized exchanges such as Balancer offer users a variety of liquidity pool ratios. They also offer pools with more than two digital assets. Price changes in pools that have a higher ratio, such as 80:20 or 98:2, do not result in as much impermanent loss when compared with pools that have a 50:50 split.

One-sided liquidity pools

Impermanent loss occurs in a standard liquidity pool where two different cryptocurrency assets must be deposited. However, some exchanges such as Bancor have developed liquidity pools that offer users the opportunity to stake only one side of the pool. The other side of each liquidity pool on Bancor is made up of the native Bancor token, BNT. 

Bancor has also recently integrated price feeds via the decentralized oracle, Chainlink. By tying liquidity pools with a live market price, they can automatically adjust when significant price changes occur. This is not possible in standard liquidity pools.

Other things you need to know about impermanent loss

While the basics of impermanent loss have been covered, there are a couple of extra details that are worth knowing before staking liquidity in DeFi protocols.

Impermanent loss can occur regardless of price direction. An investor can only withdraw digital assets that have not suffered an impermanent loss if the exchange price happens to be exactly the same at the time of withdrawal.

Secondly, an impermanent loss is only realized when funds are withdrawn. It is “impermanent” because prices could return to the initial exchange price at any time. If prices returned, the impermanent loss would no longer exist. The loss is only permanent if an investor withdraws their funds from the liquidity pool.

Bottom line


The incentives for liquidity providers in the DeFi sector are strong. However, they are strong for a reason. Each protocol needs to provide users comfort that they will not lose out to impermanent loss. While an impermanent loss is inevitable when staking liquidity in standard liquidity pools, there are alternatives that investors can use to mitigate the risk.

Those new to liquidity provision should stick with low volatile cryptocurrency pairings or stablecoin liquidity pools. Alternatively, investors can utilize some of the more complex liquidity pools to mitigate the impact. For the more advanced cryptocurrency user, yield farming techniques can be implemented to ensure returns always stay far ahead of impermanent losses.

Promise and the Current State of DeFi (Decentralized finance) – pros & Cons

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Decentralized finance, or DeFi, has become a popular buzzword, especially with proponents of distributed ledger technology, blockchain, and cryptocurrency. Just as cryptocurrency was designed to ultimately take control of money away from governments, DeFi aims to take control of personal finance away from banks and investment firms.

What is DeFi?

Decentralized finance refers to a category of online financial platforms where one or more function is managed via smart contracts or other decentralized, blockchain-enabled, automated processes, rather than by a centralized system. However, as of this writing, there is no DeFi platform that is 100% truly decentralized. Each one still involves some degree of centralization in one or more aspects of its management.

The Current State of DeFi in 2021

Decentralized finance as we know it today is focused on one thing and that is to eliminate the middleman from financial transactions. As such, DeFi mainly relies on Ethereum as the blockchain that is easy to use and tailor according to the needs of a specific system.

What can a typical DeFi platform do today? The range of DeFi products varies significantly, but most systems guarantee the following functions:

1. Cryptocurrency exchange markets are free from central authorities
2. The ability to borrow or land digital coins
3. Near-instant payments from peer to peer
4. Advanced asset management through tokenization
5. The option of predicting asset fluctuations and capitalizing on your predictions

The Promise of Decentralized Finance

The aim of decentralization is to take control away from the establishment. Whether that establishment is a national government, regulators, or a centuries-old bank, proponents of decentralization see institutions as inherently corrupt and believe that people deserve greater freedom of how they store or spend their money. They also believe that the layers of bureaucracy slow things down to a pace that is not congruent with modern life, making it too difficult to send money across national borders or secure a loan to take advantage of a narrow window of opportunity.

The current bank customers may not even be the primary target audience for DeFi platforms. Many DeFi solutions are looking to engage with the unbanked or underbanked — people who currently have limited access to traditional financial services. This includes those in developing countries, rural areas, and people working in shadow economies.

Benefits of DeFi

Decentralized financial systems are not just a theoretical concept with little to no use, but rather highly practical inventions with tons of real-world benefits. Some of the major advantages of DeFi include:

  • The lack of centralized authority that monitors and controls financial transactions strictly. With DeFi, users’ deposits are free from external interventions.
  • Every participant in the DeFi system gains his own portion of financial sovereignty and democratic control. You know how the system works and you know that nothing can interfere with the process.
  • DeFi can reach the highest level of accessibility because, in theory, it only takes the Internet connection to gain access to the system regardless of your location.
  • Decentralization and the blockchain-powered platform make DeFi much safer and more difficult to penetrate by traditional hackers and malicious activities.

Cons of Decentralized Finance

Scalability 

DeFi projects encounter formidable difficulties in the scalability of host blockchain from various perspectives. First of all, the DeFi transactions require unbelievably extended periods of time for confirmation. 

At the same time, the transactions on DeFi protocols could become highly expensive during the period of congestion. For example, Ethereum could showcase capabilities for processing almost 13 transactions every second with Ethereum at full capacity. On the contrary, the centralized counterparts for DeFi could accommodate thousands of transactions in the concerned period.

Uncertainty      

The concerns of uncertainty also make a mark in the advantages and disadvantages of decentralized finance. In event of instability in a blockchain hosting a DeFi project, the project could automatically inherit instability from the host blockchain. As of now, the Ethereum blockchain is going through various changes. For instance, the mistakes committed during the transition from PoW consensus to the new Eth 2.0 PoS system can lead to risks. 

Shared Responsibility

The shared responsibility factor works negatively for users. The DeFi projects do not take responsibility for your mistakes. All they do is taking away the intermediaries, and it is the users who have to take responsibility for their funds and assets. Therefore, DeFi space needs tools that could prevent possibilities of human mistakes and errors.

Bottom line

Decentralized finance has become a promising favorite for transforming the conventional benchmarks of financial services. Most important of all, DeFi could foster the application of blockchain in the financial services sector. With the value benefits of transparency, immutability, and decentralization, DeFi space still has to encounter obstacles like scalability.  

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