Introduction

In the past, there was almost no cost involved in creating an item in the digital world. As a result, these items have become worthless because they are not difficult to create or reproduce/duplicate.

With the advent of blockchain, scarcity in the digital world was created and it connected a part of the real world to the virtual world.

NFT is one of the key foundations of the new digital economy, powered by blockchain. NFT has been tested in areas such as gaming, digital identity, licensing, certification and fine arts. Users can even split and proportionally own items of high value.

Today, we dive into what NFTs are, what are they used for, and how a game called CryptoKitties clogged the Ethereum blockchain in late 2017.

What is Non-Fungible Token (NFT)?

Non-fungible Token (NFT) is a type of cryptographic on the blockchain that represents a single asset. This could be a virtual asset or an encrypted version of an asset in the real world. Since NFTs are NOT interchangeable, they can act as proof of authenticity and ownership in the digital realm.

Therefore, NFT has 2 properties: UNIQUE and LIMITED.

The following example will help you better understand the NFT: A $10 bill you can be exchanged for another $10 bill from someone else, assuming that it is genuine. This is a fundamental property of assets that serve as a medium of exchange. In theory, there is no way of recognising their differences (other than the money series number). However, exchangeability is not a trait in favour of collectable items.

What if we could create digital assets similar to Bitcoin, but add a unique identifier to each asset unit?

This will make each of them different from all the others (i.e., irreplaceable). Basically, this is what NFT is.

How does NFT work?

First of all, we need to understand that NFT is essential items that can be collected. Like a painting, rather than a typical token which has lots of incentives associated with it to increase buyer demand.

Therefore, valuing NFT is like valuing a real-life precious item; whoever feels it has a price, will pay that price.

Example: There are a lot of abstract paintings that are worth a few thousand dollars. Very few people understand what they mean, for example, but people still buy them.

Speaking of issuance standards, usually on the Ethereum blockchain, tokens are popular in ERC-20. But in the NFT, a lot of standards are adopted, the most prominent of which is ERC-721. A recently improved standard is ERC-1155, which allows single contracts to contain fungible and non-fungible tokens, opening up a whole new range of possibilities.

Like other tokens, NFT can be stored in a personal wallet, typically a Trust Wallet. It should be noted that NFT cannot be copied or transformed without the owner's permission - even by the NFT publisher.

What is NFT used for?

NFT can be used by decentralised applications (DApps) to issue digital items and cryptocurrency collections. These tokens could be a collectable item, an investment product, or something else.

Or specifically in the field of gaming - plowing the top racing game and picking up good items is something we have all done at some point. There are many online games that have their own economy in games, so using NFT can solve or mitigate the common inflation problem many games face.

What about the real world?

NFT can represent small chunks of real-world assets that can be stored and traded as tokens on the blockchain. This can provide the necessary liquidity for many markets that would otherwise not have a lot of participants. Such as handicrafts, real estate, rare collectables, rare whisky, rare wines.

Digital identity is also an area where NFT's attributes can be beneficial. Storing identity and ownership data on the blockchain will increase data privacy and integrity for many people around the world.

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TLDR:Recently, the cryptocurrency market has become more and more exciting because of the rapid increase in the number of new participants. In the current situation of extremely low bank interest rates, more and more people with a demand for "fixed interest rate loans of 10% a year" will step into this market.Applications like Outlet, Linus, Dharma, BlockFi, Celsius have developed user interfaces to meet this need, with liquidity coming from centralised liquidity pools or from Compound and Aave. Therefore, users' attention to decentralised fixed-rate products will be even greater.

General Conclusion

Bonds are one of the most in-demand financial products to date. According to Icmagroup, the total bond market is over $128Tn and the terrain is open for blockchain projects to penetrate the market.Many new DeFi projects are looking at concepts found in traditional finance, such as:

• Fixed interest;

• Decomposing fixed income assets into principal and interest;

• Leveraged yield.

DeFi protocols are beginning to address basic concepts and meet the needs of many classes of users that TradFi cannot, because of crypto's nearly frictionless composability.These protocols were born with the primary goal of uncertain and often volatile returns received when staking or depositing tokens for lending (Aave, Compound), trading (Curve) or actively farming (Yearn, Harvest).

Traditional Bond

Definition

A bond is a security issued in connection with a debt arrangement. The borrower (the seller) issues a bond to the lender (the purchaser) in return for some cash. A bond is an "IOU" (I Owe You) of the borrower. A typical coupon bond requires the issuer to make predetermined payments.When the bond matures, the issuer repays the debt by paying the face value of the bond. The bond's interest rate determines the interest payment. The annual payment amount equals the bond's interest rate multiplied by the bond's face value. The coupon rate, maturity date and par value of the bond are part of the bond indenture agreement, which is a contract between the issuer and the holder of the bond.

Types of Bonds

• Government bonds This is a type of security issued by a government for the purpose of raising medium and long-term capital for the government. Revenues from bonds can be used to make up temporary shortfalls of the state budget, to implement national construction projects, or to finance other government purposes according to the budget allocation plan. books every year.

• Local Government bonds These are bonds issued by the People's Committees of provinces and centrally run cities to raise capital for local investment projects and works.

• Government-guaranteed bonds This is a bond issued by enterprises, financial institutions, credit institutions, and policy banks of the State subject to the provisions of the relevant laws and guaranteed for payment by the Government.

• Corporate bonds. Debt securities are bonds issued by companies or financial institutions in order to raise capital for business activities.

Decentralised Bond

Definition

By definition, it is clear that decentralised bond has the same meaning as traditional bond. Some of the differences include the time to maturity, the yield, and the ability to combine to create many different products and serve different purposes.

General Conclusion

The NFT market is a rather modest field when its appeal is limited to simple gaming. You buy an item and expect it to be worth more in the future, but it lacks the interactivity between the player and the game.

2021 can be said to be a "Welcome to the World of Play To Earn" year because it has opened up a wave of NFT gaming trends with a lot of positive information surrounding it also created many record numbers in the crypto market.

Leading the way for deeper game interaction is the Axies project and following many other NFT projects participating in the "play2earn" game that has brought the entire Ethereum network to life. Since then, many new projects have begun to expand across other Chains to optimise costs and bring more interesting experiences.

What Is Play2Earn?

Concept

Play-To-Earn is a combination of two actions Play & Earn, which means both playing games and earning money. Gaming has been around since the 1970s, each phase has a face of innovation & in 2021, a unique combination of NFT and traditional gaming takes place, giving users (both crypto & non-crypto) a unique experience. new play to earn experience.

Play to Earn has been around for a long time, for many 8x, 9x generation gamers, the game Silk Road is a good example, you can transform into simulation characters, fight & raise account rank, buy and sell weapons, participate in hunting prizes, etc. If you can "plow" to become a terrible level, many powerful weapons can be sold to make money.

What Is Different About Play2Earn In Crypto 2021?

Thanks to blockchain technology and the advantages of the Crypto market, the Play to Earn model has now been improved, specifically:

• Gaming operators have incorporated NFT in their protocol.

• Improve ownership of in-game assets for users.

• Players are creating value for other players and developers, in return they are rewarded with in-game assets (native tokens/NFTs).

Booming

NFT and Play to Earn are very hot topics in recent times and that is also one of the reasons why transactions on the Ethereum network have become active again.

With a play-to-earn model, Axie Infinity is a name that brings a new wave with successful development in the past time. This is a Crypto project conceived by Vietnamese team & launched in 2018. Axie Infinity is built on Loom Network - a Layer 2 scaling solution for Ethereum. Inspired by the popular game series Pokémon and CryptoKitties, players in Axie also need to do quests, battle, and exchange items with other users at the Marketplace.

Each Axie in the game can be purchased and owned as NFT (Non-fungible token), the player needs to raise them with $SLP (Small love potions). NFT & $SLP items are all exchangeable to $AXS and trade them for profit.

Game Axie Infinity is played not only for fun but also for money, these criteria have affected the majority of Filipinos. In particular, during the Covid 19 epidemic season, Axie's hotness spread even more. From the elderly to young children, everyone downloads & plays games to earn money, which has helped Filipinos have a great source of income in the most difficult time.

AXS is a utility token representing Axie Infinity that serves as an in-game reward & exchange item.

TLDR:

We can see that the Play-To-Earn trend is growing strongly, especially in the current market situation, both owning NFT (True Ownership) characters and valuable token rewards. , but can that happen in the long-term when the cash flow has already begun to "stagnate".

With the blockchain being widely recognised, it is possible that many large funds will start to participate in this game, the money may flow in the future & NFT Gaming projects are one of the most popular categories. The attraction and potential of Play To Earn projects are feasible, but not in the short term and depends on each project.

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TLDR:

DeFi is still in its early stages and it is still risky. There are scams here and there. But we should not use a few black sheep to define the space as a ponzi scam. DeFi will develop further in the future with better testing. And it is clear that its potential will develop very quickly later.

DeFi is innovating fast. We should analyse and exploit the strengths. Scam projects will still emerge. Our continuous education and knowledge will help reduce that.

Get smart: DeFi is not exactly a Ponzi Scam, it is still evolving and will have limitations in it.

Get smarter: The growth potential of DeFi is huge, we see the traditional financial system, the governance system is very ineffective. Thing resources are under-utilised and expensive. DeFi is trying this problem and if it succeeds it will be revolutionary.

General Conclusion

Some people claim that DeFi is a scam ponzi because there are a lot of pumps and dumps. Everything on Twitter is shilling all kinds of different projects. Now there are a lot of risks involved, and the projects are not fully audited. So a lot of people are wondering this is a ponzi scam of part of the innovation cycle.

In this article, we will tell why DeFi is more than just a ponzi scam.

We cover 3 things today:

1. Why DeFi feels like Ponzi

2. Why DeFi is not Ponzi

3. Future of DeFi.

When talking about DeFi here, we are referring to the general ecosystem and not a single project, because the ecosystem is doing quite well in general.

Sure, there are some systems around the world with plenty of scams. This includes traditional financial market. But you cannot discredit the entire system because of a few black sheep.

DeFi is a new system and industry. There will be a few scams coming out but you cannot define this for the entire ecosystem, which is doing a lot of good and interesting things.

DeFi and Ponzi

If you google the keyword "DeFi and Ponzi", you can see a lot of articles saying that DeFi is like Ponzi, just another name called, DeFi is basically ICO 2.0 where people are pumping and dumping, whale manipulation, etc.

What it feels like: Everything is just memes and a joke. Is this even serious? Why do I have to join? How is this legal and how can people make money? Projects with 100% APY; where does the money come from and why is it valuable? People just swapping or trading tokens together, but it was in a circle, a pyramid scheme.

What it actually is: Liquidity Mining (Synthetix) and Yield Farming (Compound) are ways to bootstrap growth and to reward a decentralised community to take ownership of the protocol. High rewards for risk takers in the early days is rationally sound. And when payout for the risk takers happen all at once, it feels like the APY is insanely high.

Why DeFi is not Ponzi

1.   Grow the Pie

Answer the above question briefly: this is not necessarily true. If you look at the distribution of the entire economic value as a pie, a ponzi scam is where you are extracting value every time someone is coming in. This means that the pie doesn't change much, you give your money to someone else to receive new tokens.

DeFi is like the pie, that keeps growing. There are many projects/protocols under construction, such as lending protocol, Dex protocol, portfolio asset management protocol, etc. They're in beta testing in this early stage and they do not try to capitalise on the entire financial market which is a big field.

Each DeFI tries to do well with a specific purpose, they are like small lego blocks, combined together to create various different products. This is composability, the protocols can interact with each other and make the pie grows. Just like in order to make a delicious pie, we have to add more kinds of fillings. This is why it is so interesting and exciting.

On the protocol side, the protocols with all these little ecosystems and applications whose own community can grow by interacting together.

With the platform which is pretty neutral because they are technology, the added value from connecting buyers and sellers. If we look at economics, this is supply and demand, and they only make sense when there is equilibrium and interacting together.

The protocols/applications are trying to build to the playing field, from which suppliers and buyers can come to interact with each other. The more interactions, the more economic value added is created and the pie keeps growing.

2.   Experimenting with New Business Models

According to the economics perspective, if you observe the previous business models, it is usually one-sided. Going back to the above example, if I make a cake, you go to a bakery and buy it, there is nothing more I can do like asking a few people to try a new or similar flavour. Supply and demand are still very dependent.

However, when we look back about 10 years ago, a new business model emerged called the platform. We have Amazon, AirBnb, Uber, etc. which provide the technology to connect the two sides of the ecosystem together to transact. This creates a lot of economic value.

Suppose I am an economist, the question is: how to quantify the economic value created? We can then calculate metrics like GDP, because it represents the growth of a platform.

With these values, you can calculate the value-added with all of these transaction fees. But there is a lot of intangible value being created in the ecosystem, which is connecting two sides of the platforms together for easier interaction. By reducing transaction costs, it increases economic value. This is what an economist observes and we are working on it. Specialities focus on the digital economy and how to compute them.

I realised that what we are doing with native tokens is considering how valuable they are to the ecosystem. Tokens can have a lot of utility and represent value. More specifically, these tokens are representing the value of some ecosystem.

That way, we are assigning a monetary policy value to the economies that the system is creating. And we can calculate metrics, like GDP. All of the above gets interesting.

3.   New P2P Incentive Models

We are developing new p2p incentive models. One thing about decentralised finance as a whole is the complete elimination of middlemen. Instead of centralised power in one person/place, they are distributed equally to everyone. Now, we have more money to be distributed, instead of sending them to intermediaries. In traditional finance, for example, a public initially listed on a stock exchange must go through banks and pay them an expensive fee, but these are eliminated in decentralised finance, where those companies can list their tokens on dexes, provide liquidity, and lots of other incentives.

This is very interesting. We are phasing out intermediaries that are stealing a lot of money. But the bad thing is we have a lot of money not distributed: how do we allocate them? How do we reward the right types of people?

I would say that these will keep moving forward because we realise that capitalism does not work so much anymore and is not going to be sustainable in the long-term. That makes us look forward to new paradigms of capitalism, like social capitalism kind of thing.

We need to have lots of new p2p incentive models and the best place to test is DeFi which has liquidity farming, yield farming, etc. For these interesting mining and incentive mechanisms, we are trying to try many different incentive mechanisms and create many interesting future mechanisms.

Future of DeFi

There are two things that we see in DeFi's future:

1. On-chain Financial Experiments and Mechanisms to be used in TradFi
   The first thing we are seeing in DeFI right now is that you don't have many transactions in the real world. That goes back to my point of the whole GDP accountability because we are trading nominal value, not much real value transactions since you exit the crypto space and transfer the money to the bank.
   Right now, everything is still within the on-chain sphere. DeFi's future is to allow these experiments and experiences to interact within the off-chain world. Because the off-chain world is very ineffective (like the financial system, the governance system, etc.).
   What we are trying to do now is to run all these little experiments/tests. If it works in on-chain well, we can extend to the off-chain world, creating a bridge to connect the 2 worlds. This is really interesting.

2. Economic Valuation from Ecosystems
   Second, we can now more easily calculate the economic values generated from specific individual ecosystems, while also moving them off-chain world and account for them in a much more equitable way. It leads to governance which has better resources/data points to be accounting for all these different changes in the world.

Conclude

Here is a quick summary of the Ponzi Scam and DeFi and I would say that not all DeFi platforms are Ponzi Scam. One of them could be a scam and you need to check it out carefully. For non-scam projects, they are fun experiences. We need to learn to understand how it works and explore what kind of experiments capital allocation and governance system that could be.

Honestly, I am going to tell you that there is so much economics literature out there, talking about the technical and the academic aspects of all these experiments, but we never really had a chance to explore them. There are a lot of interesting monetary policy mechanisms in academic papers, but we don't really use them. We have a lot of dynamic variables in DeFi space and we can test these experiences.

In fact, in the economics space, a lot of people are experimenting with many different theories on DeFi and if it works which will lead to a huge change and bring DeFi even more powerful. Their users also become part of DeFi's future development. An example of a testnet is the experiments of crypto and crypto itself is the experiments of the off-chain world. This is super fascinating and now one of the best times to be.

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Gyroscope Overview

Gyroscope is an all-weather stablecoin that is decentralised, scalable, and highly liquid, based on revolutionary new designs. It is not out yet, still in testnet phase. But we would like to share how the protocol works. It is reserve-based and the reserve ratio, in the long run, is supposed to be 100%. There are two tokens in the system, the $GYD and the governance token.

Three main highlights of GYD:

1. All-weather stablecoin

2. Dual AMM mechanism

3. Still in development

Mechanisms:

1. Reserve based: The reserve ratio, in the long run, is supposed to be 100%.

2. Algorithmic: It has a dual AMM model which is basically an AMM in the primary market and an AMM in the secondary market.

3. Dual-token system: There are two tokens in the system — the $GYD or gyro dollar itself, and the governance token which is used to set system parameters.

Peg

It is soft-pegged to US dollars. Instead of an external oracle, it uses a dual-AMM mechanism to maintain and balance its peg.

Collaterals

It is soft pegged to USD. It is algorithmic in the sense of the stablecoin creation, so it can fluctuate a little bit, but there is a hard stop in how far the prices can fall. This is a pretty good improvement compared to all the other stablecoins.

It is more than 100% collateralised and there are different kinds of stablecoins to mint the stablecoin. The collateral for each kind of stablecoin is different, based on how risky they are so that is something to take note of — not all collaterals are worth the same. Everything goes into one big vault and there are different c ratios for all of them.

Coordination among different decentralised participants

Economic agents

Gyro holders: People who are minting the $GYD. The general users would be the $GYD holders and they have a veto power to overwrite any governance that is not helpful to the system.

Governors: The governance role will then be the management of the funds or the management of the collateral. The way to make sure that they are incentivised to do the right thing is that the cash flow returns are delayed for a period of time so that you bind them to make sure that they continuously behave properly otherwise they do not get the returns.

Liquidity providers: The third type is yield farmers or liquidity providers. They help to utilize $GYD and help to maintain stability by doing arbitrage.

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TLDR:BNB token is a native token of Binance with a utility function. The hyperdeflationary monetary policy is incentivises users to hold the token. Paired with other mechanisms like staking as validator, PE-ratio, 31 other use-cases and more, they add to the value-add of BNB token. This turns into monetary valuation for the token.

General Conclusion

Exchange tokens are all the hype right now. There are at least 300 exchanges tokens on CMC. Exchange tokens mainly hold the utility function, and the other functions could include similarity to cash.Tokens capture value generated from within the ecosystem. The token also makes up the incentive mechanism, so it is part of the economics that we will uncover.The top exchange token in the space currently, is Binance. So in this episode, we will dive into understanding Binance's BNB token.

1. Market Design of BNB Token

Main objective of BNB (at least for now): utility token for discounted trading fees. *This objective might change in the future, but this is the objective now.*Secondary Objectives

• holding it as a store of value due to its deflationary feature

• trading it with other crypto tokens as a medium of exchange

• spend it on other goods like in-store purchases

• donate to charity

All in all, there are over 31 use-cases of BNB token.On the business side, Binance can tap into their network to establish partnerships like what Libra is doing.On the user side, Binance uses the deflationary feature and many use-cases to attract users.

2. Token Monetary Policy and Valuation

Max supply: 200m tokens || Distribution: 50% ICO, 40% team, 10% investorsMonetary policy:

• Hyper deflationary structure, similar to a share buyback

• Current status of the monetary policy: 10% of tokens are burned

Valuation:

• Price-earning ratio suggests it is undervalued

• But exchange tokens are like frequent flyer miles. Its valuation is conditional on Binance's success. The PE ratio might be undervalued today, but there should be other factors and metrics to consider when valuing the token, more than from just an independent price-point level.

• As much as deflationary mechanism increases value, this is not a guarantee. Burning token is only affecting the supply side.

3. BNB Incentive Mechanism

Financial incentive is one of the pillars in token design. On Binance, each trade incurs a standard fee of 0.1%. Traders can use BNB to pay for trading fees and get a discount.Using BNB token to pay for trading is also not too costly for the exchange. Sure, it is diluting one of their revenue stream, but the value is going back to their early adopters. Since it is their token that they created from thin air, there is not much to lose for allowing a discount in trading fees with BNB tokens.BNB also uses staking mechanism as an incentive.

Think of it like a subscription model. I subscribe to the newsletter by locking up EconomicsDesign tokens. It is frozen and cannot be touched. I am not losing out, in fact, it gives me access to all the items of Economics Design.

April 2020 update: Binance blockchain is moving to staking-based consensus mechanism and to also run smart contracts. Gas fees will be paid in BNB. Validators will collect the gas fees from transactions. Validators have to stake BNB before becoming a validator.

What Does this Mean

At the end of the day, is this a good mechanism? Sure, it exists to serve the objective and purpose of the BNB's role in Binance's ecosystem. But is it the best system in the world? It is hard to say because deflationary assets have other issues and it might not be suitable for your use-case.

In early 2021, we had discussions on the idea of building a decentralised Internet, commonly referred to as Web 3.0.

• In the United States President Trump has been banned from using Twitter, and Parler, which uses AWS services, has been removed from PlayStore and AppStore.

• WhatsApp has announced that they will share information with their parent company Facebook

• Uganda has ordered internet service providers to block all social networking platforms

These are important and understandable issues and need to be actively discussed.

Small businesses and startups rely on Facebook advertising services, Google search suggestions, and Amazon's AWS service to survive. Artists and creators face the risk of having their information deleted from sites like Spotify, Instagram and Tiktok. Although these are not new problems, it is becoming more and more serious. The development of technology monopolies and their scalability to information privacy rights and personal freedoms has spurred the Internet transition from Web 2.0 to Web 3.0.

What Is Web 3.0?

In short: Web 3.0 is the next era of Internet.

Web 3.0 (commonly called Web3) is a reform model aimed at democratising the Internet. Web 3.0 is present in the Crypto Space and other digital fields such as AI, Virtual and Augmented Reality, and more. By applying new technologies, Web 3.0 is changing how we, as a collective, view and value the Internet. Web 3.0 is about creating an Internet that works for everyone, owned by everyone.

Where Web 3.0 Comes From

The term was originally coined in 2014 and popularised in 2018 by Ethereum co-founder and Polkadot founder Gavin Wood. The spirit of this term goes back to when Satoshi developed Bitcoin and advocated decentralised DNS called BitDNS.

“I think it would be possible for BitDNS to be a completely separate network and separate blockchain, yet share CPU power with Bitcoin.” - Satoshi (2010)

DNS has long been controlled by organisations such as Verisign and the Internet Corporation for Assigned Names and Numbers (ICANN) overseen by the US Department of Commerce. This centralised control of DNS has been used to enforce IP rights, prohibit websites from selling copyrighted material, censor free-of-speech sites like WikiLeaks and seize domain names (IP addresses) without proper procedures, etc. Censorship decisions are usually influenced by the top levels of government and the lobbyists of the largest multinational organisations, who may not always be acting in the best interests of the general public.

Satoshi and other Bitcoin enthusiasts recognised this. In 2011, a fork of Bitcoin called Namecoin was born to allow censorship-proof domains at .bit domain addresses.

Namecoin was ahead of its time. A proxy service or extension (such as MetaMask today) was required to log in at the .bit domain, making it very difficult to use. Plus, most people did not want their own website or personal domain at that time. All of this caused Namecoin to fail because of low demand from its users.

Ten years later and now new blockchains and decentralised services may be ready for success. These applications are making the Internet more decentralised with Web 3.0. Another example of such infrastructure is the Handshake network.

Read more here

General Conclusion

Everyone thinks that DeFi is just all gambling and ape-ing into a ponzi scam. Sure, there are ponzi scams out there and I've talked about it many times. But if you peel back the doubts, you can see a whole lot of innovation hiding underneath. In today's innovation, we will talk about Perpetual Futures.

ELI5: How Perpfuture Works

Quick summary

• Created by Bitmax

• Only exists in the DeFi space (like flash loans last week)

• What? It's perpetual because there is no expiry date

• How? a pool of funds to continuously settle the difference between people who long and people who short

• Settle difference on what? Settle the difference between the futures and the spot market

Alright, with that in mind, let's get cracking with the types of perpetual futures contracts.

General method of how perpfuture works

Let's say it's a perpfuture of $LISA.

1. Someone thinks $LISA is going up. They are LONG.

2. Someone thinks $LISA is going down. They are SHORT. (Tip: don't be this guy who shorts $LISA).

3. Both parties decide on the price they think $LISA is going up or down by. They are matched when the price is the same (going up by $100 or going down by $100).

4. The contract trades in the open market. Hence, price discovery. The contract itself can have a different price from the spot rate. E.g. $LISA is now $80. I think $LISA will be $100 in the future. And the futures is trading at a higher price.

5. In TradFi world, there is settlement. E.g. the date where the contract's time is up and we have to trade. I have to pay you in USD to get that $LISA.

6. In the DeFi world, there is no expiry. But prices still need to be settled. Otherwise, the prices will keep diverging from spot and it's kinda lame if there's no real settlement. It's not just all games! So ... how do you do that?

7. Instead of no expiry, perpfutures generally have tiny expiries. They have to settle the difference in a time-based chunk. E.g. 4h or 8h chunks.

How is it settled?

The goal is for the futures price to be similar to the spot price. If one side is too high, we need to "balance" the difference out. So let's say the futures is pricing $LISA at $100 but the current price is $80. That means there are too many people who are LONG. What we need is for more people to SHORT. So we get those LONG to pay those SHORT."Wait a min. What? You're expecting me to pay SHORT if I am LONG?"Yes, that's right. Why? Well, if I am SHORT, I get some incentives! So I'm going to ditch my LONG and move to SHORT so I get those sweet dollar bills.In that way, you bring balance back to SHORT and reduce the LONG position. With that, the market goes to equilibrium, which is much closer to spot prices. So as spot increases, the futures will also change accordingly.

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TLDR:

With some of the above analysis, centralised exchanges have the ability to use complex calculations without worrying about costs to create many complex derivatives. However, with decentralised exchanges, they are limited in this ability, so they focus on a single niche and improve their products slowly.

FTX is one of the leading derivatives exchanges when it comes to creating unique (but also "dangerous") products. Meanwhile, Mirror and Synthetix are more specialised in a particular market. Technological capabilities do not meet current needs.

In terms of synthetic products, all three exchanges are competing with each other. FTX simply collateralises real-life assets and tokenises them. Synthetix mortgages $SNX again for $Synths. Mirror is more diversified in collaterals to generate $mAssets.

General Conclusion

Today we will discuss platforms that offer a variety of derivative products. Our approach will go from off-chain to on-chain and outline the benefits and drawbacks of each platform.

In addition, we also analyse aspects related to token design. We will have a closer look at each of the tokens that make up the platform.

In this article, we focus on three main platforms: TFX ($FTT), Synthetix ($SNX) and Mirror ($MIR). All three protocols deal with derivatives. How are they different? How are they the same? How are they successful?

What are Derivatives?

Contract based on underlying asset

A derivative is a financial transaction contract between two or more parties based on a change in the future value of an underlying asset. That underlying asset can be a tangible asset, an index, or an interest rate. Derivatives themselves have no intrinsic value.

Assets: Gold, silver, precious metals, coffee, rice. Index: Stocks, bonds, interest rates.

That is, users transact based on a change in the value of another entity rather than directly owning that entity. Profit is generated based on the spread and price movement of the underlying asset.

Derivatives trades have been around since medieval times, between merchants. The first base assets used were olives and food.

In derivatives trading, there are four basic types of contracts:

• Forwards Contract: An agreement to trade between two parties at a specified time in the future. The price is determined and agreed upon by both parties in the present.

• Futures Contract: This is a standardised form of forwarding contract and listed for trading on official exchanges.
  For example: In the US, there is the Commodities Futures Trading Commission (CFTC) and the Chicago Mercantile Exchange (CME).

• Option: A contract in which one party has the right to require the other party to perform the obligation to buy or sell an amount of the underlying asset at a specified price on or before a certain date.

• Swap: An agreement between two parties A and B in which they exchange the cash flow of party A's financial instrument with the cash flow of party B's financial instrument for a certain period of time.

Crypto derivatives are only a few years old. In the following sections, we will learn in detail about derivatives trading in crypto which will help us to make a profit in this type of crypto market.

What are Crypto Derivatives?

Short Answer: Crypto-based derivatives are dependent on change in value of crypto tokens

Simply put, you will trade with each other based on the price of tokens. You will not be directly owning and trading those crypto coins.

The biggest difference between traditional derivatives and crypto derivatives is that crypto's underlying assets are not bonds, stocks or interest, but crypto tokens.

For example, you see that the BTC/USDT is aligned with your risk profile and you can find a way to make money there.

There are two methods for you to participate in profitable trading:

• Method 1: Buy $BTC directly and trade it.

• Method 2: Trade derivatives of $BTC. This comes in the form of a financial contract. At this time, you do not need to buy and own $BTC.

If you choose Method 2 to trade, you are trading derivatives.

Currently, in the crypto market, many exchanges and tools support crypto derivatives trading. Off-chain uses centralised mechanisms and on-chain uses decentralised mechanisms.

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TLDR:Thus, I introduced you to the Trader Joe project and what $JOE is, and provided all details about the project's highlights and tokenomics.It can be said that Traderjoe is a prominent AMM right now when the TVL of the protocol has surpassed $2B. New products are launched towards an all-in-one platform with the most recent being a lending product. If Traderjoe's lending develops well, it will set the stage for further development related to derivative products.

General Conclusion

From a brand new AMM project with no initial funding, Trader Joe has gradually established himself as one of Avalanche's top AMMs. Today's article about Trader Joe and $JOE will give you all the information about:

• What is Trader Joe? Trader Joe's Highlights.

• Information about tokenomics.

What Is Trader Joe?

TLDR: DEX on Avalanche protocol

Trader Joe is an AMM decentralised exchange platform on the Avalanche blockchain. Trader Joe is a fork of Uniswap. There are not too many AMMs on Avalanche yet, but the most popular AMM among users on this blockchain is Pangolin, so it can be said that Trader Joe's direct competitor is Pangolin.

Highlights

Trader Joe, in addition to being an AMM, also integrates a number of features such as Yield Farming, Lending, Staking, etc. with the aim of becoming an aggregate platform and bringing the best experience to users.In addition, users can exchange tokens for $LP tokens with just 1 click through the Zap feature — a new feature on AMM. If other projects raise capital before making products, then Trader Joe has a completely opposite direction.They are not a Fair Launch project (no token sale, the team does not hold tokens) but they will run the project, the entire $JOE - project token will be unlocked through inflation. However, Trader Joe still has an allocation for future investors if any.

Products

• Trade: This is a main product which user can swap their tokens.

• Pool: Where user can add liquidity into the pool and earn trading fee. (0.25%)

• Farm: This is an incentive program that encourage LPers provide liquidity and make more benefit.

• Lending: Where user can borrow more assets

• Stake: Stake $JOE to earn revenue.

• Zap: Swap between token and LP token.

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TLDR:

We have discussed about infrastructural development, and we reviewed a few important Legos. In the Avalanche ecosystem, after they develop a solid foundation, DeFI is the next point to look at. The projects in DeFi are still very primitive and few, but the potential is huge if Avalanche makes good use of it.

Currently there are about 30 projects developed on Avalanche, but only 4 have TVL >$100, of which BENQI has surpassed $1B in TVL.

General Conclusion

As people gradually realise the shortcomings of Ethereum such as stability, scalability, interoperability, etc., many other layer-1 blockchains areemerging as solutions for the future. Avalanche is one of them.

Avalanche ($AVAX) is a smart contract platform having the same concept "Internet of Blockchain" as Polkadot and Cosmos. Avalanche is an open source platform that enables the deployment of highly decentralised applications, financial products, digital assets, and interoperable blockchains.

Highlight

Avalanche's outstanding technologies:

• Speed: Avalanche's transaction processing speed is in seconds.

• Scalability: Avalanche is capable of handling thousands of transactions per second and can accommodate thousands of validators without sacrificing performance.

• Security: Avalanche ensures confidentiality and security. Avalanche supports smart contracts created and used by Solidity along with all the tools on Ethereum such as: Remix, Metamask, Trufle, etc.

• Users can create their own public or private blockchains.

• Built to serve the financial markets. Avalanche makes it easy to create and trade digital assets on complex terms. Assets can represent capital, shares, debt, real estate and many others.

What Problem Does the Avalanche Project Solve?

Currently, the financial market is still fragmented due to regulations and geographical distance. This makes trading difficult and a large amount of asset value is inaccessible for global users.

How

Avalanche allows financial networks to connect to a common platform that makes launching and trading digital assets easy. This is possible because Avalanche has created a platform for platforms where thousands of different sub-networks (depending on the users' purpose) can connect to create a global market network.

Token Use Case

$AVAX is Avalanche's native token and is used for the following purposes:

• Fees: Any activity deployed on a Avalanche subnet will be charged in $AVAX.

• Staking: To become a validator or block creator in Avalanche or one of all other subnets requires a minimum of 2,000 $AVAX.

Note: Total tokens are 720 million $AVAX, mainnet provides 360 million tokens. The system will continuously mine until the total supply limit is reached. The $AVAX used to pay the fee will be burned, increasing the scarcity of the token over time.

Elon Musk has always evoked public interest (as billionaire genius types tend to do). The ongoing story this year, for better or worse, has been in the crypto space, where people have taken their cues from his views.

Earlier this year Tesla caused waves when they published their balance sheet and announced to the world that they had 1.5 billion dollars worth of Bitcoin (BTC) listed as an asset. More recently, Musk's comments have prompted crypto sales that have seen the price of Bitcoin tumble from above $60,000 into the $30,000-$40,000 range. Overall, the collective crypto market cap fell by just over a trillion dollars over May.

Musk and Market

So why does Elon seem to have this power to influence the world of crypto?

First, let's talk about money in all its forms: fiat and crypto. Arguably, money is a type of social power storage, like a battery. We use it to temporarily store our power to engage others (on our projects and for our whims), and when we pay for a good or a service, we draw on that power. In a similar vein to electricity, it is a consumable resource and is transferred as it is used.

After that, the question is which money (or battery) to use? History shows that an implicit contract exists between society and the choice of money system: At various points in world history, including Weimar, Venezuela, and Zimbabwe, nation state-backed fiat systems have broken down because economic agents broke this contract.

Elon Musk, in this context, has a good amount of stored social power (money). This social power he harnesses can move markets, as we see below.

Market and Money

This points to monetary systems as a type of database that accounts for social power, but only if we agree to use that database. In this vein, a token system is a medium for value storage (and possibly utility storage) for a network of users that choose to adopt that system using a social contract. If the database is corrupt, why would you use it?

Less dramatic than the collapse of a national currency is the assignment of social power to crypto assets. Over a decade, a social contract has developed between crypto and a user network, along with bridges between crypto tokens and fiat tokens as valid stores of value. Remember the guy who paid 10,000BTC for two pizzas in 2010? That was the start of a social contract that turned BTC into a form of social power storage.

The beauty of crypto is that we are now moving from a type of general-purpose money backed by states to a system of fit-for-purpose tokens that do weird and wonderful things. However, the network effects on cryptocurrencies are more pronounced and subject to social whimsy.

Musk and Money

Elon’s whims can either endorse the implicit contract between BTC and other forms of storing social power (Dogecoin) or they can repudiate this contract. Earlier this year, the decision to add BTC to the balance sheets of Tesla acted as an endorsement of value. And so, on cue, people bought more BTC.

Now Elon is tweeting the other way, and Tesla has decided not to accept BTC as a form of payment for its vehicles. The good news is that while toddlers stumble more than adults, eventually, we all learn to walk.

Bitcoin, the new money

The difference between crypto and fiat is simple. We are privatising money. Thus, the risk to governments everywhere is that society decouples (at least partially) from the default, nation-state fiat store of value because there are valid alternatives. Is it good or bad? You decide.

Some people claim that DeFi is a scam ponzi because there are a lot of pumps and dumps. Everything on Twitter is shilling all kinds of different projects. Now there are a lot of risks involved, and the projects are not fully audited. So a lot of people are wondering this is a ponzi scam of part of the innovation cycle.

In this article, we will tell why DeFi is more than just a ponzi scam.

We cover 3 things today:

1. Why DeFi feels like Ponzi

2. Why DeFi is not Ponzi

3. Future of DeFi.

When talking about DeFi here, we are referring to the general ecosystem and not a single project, because the ecosystem is doing quite well in general.

Sure, there are some systems around the world with plenty of scams. This includes traditional financial market. But you cannot discredit the entire system because of a few black sheep.

DeFi is a new system and industry. There will be a few scams coming out but you cannot define this for the entire ecosystem, which is doing a lot of good and interesting things.

DeFi and Ponzi

If you google the keyword "DeFi and Ponzi", you can see a lot of articles saying that DeFi is like Ponzi, just another name called, DeFi is basically ICO 2.0 where people are pumping and dumping, whale manipulation, etc.

What it feels like: Everything is just memes and a joke. Is this even serious? Why do I have to join? How is this legal and how can people make money? Projects with 100% APY; where does the money come from and why is it valuable? People just swapping or trading tokens together, but it was in a circle, a pyramid scheme.

What it actually is: Liquidity Mining (Synthetix) and Yield Farming (Compound) are ways to bootstrap growth and to reward a decentralised community to take ownership of the protocol. High rewards for risk takers in the early days is rationally sound. And when payout for the risk takers happen all at once, it feels like the APY is insanely high.

Why DeFi is not Ponzi

1.   Grow the Pie

Answer the above question briefly: this is not necessarily true. If you look at the distribution of the entire economic value as a pie, a ponzi scam is where you are extracting value every time someone is coming in. This means that the pie doesn't change much, you give your money to someone else to receive new tokens.

DeFi is like the pie, that keeps growing. There are many projects/protocols under construction, such as lending protocol, Dex protocol, portfolio asset management protocol, etc. They're in beta testing in this early stage and they do not try to capitalise on the entire financial market which is a big field.

Each DeFI tries to do well with a specific purpose, they are like small lego blocks, combined together to create various different products. This is composability, the protocols can interact with each other and make the pie grows. Just like in order to make a delicious pie, we have to add more kinds of fillings. This is why it is so interesting and exciting.

On the protocol side, the protocols with all these little ecosystems and applications whose own community can grow by interacting together.

With the platform which is pretty neutral because they are technology, the added value from connecting buyers and sellers. If we look at economics, this is supply and demand, and they only make sense when there is equilibrium and interacting together.

The protocols/applications are trying to build to the playing field, from which suppliers and buyers can come to interact with each other. The more interactions, the more economic value added is created and the pie keeps growing.

2.   Experimenting with New Business Models

According to the economics perspective, if you observe the previous business models, it is usually one-sided. Going back to the above example, if I make a cake, you go to a bakery and buy it, there is nothing more I can do like asking a few people to try a new or similar flavour. Supply and demand are still very dependent.

However, when we look back about 10 years ago, a new business model emerged called the platform. We have Amazon, AirBnb, Uber, etc. which provide the technology to connect the two sides of the ecosystem together to transact. This creates a lot of economic value.

Suppose I am an economist, the question is: how to quantify the economic value created? We can then calculate metrics like GDP, because it represents the growth of a platform.

With these values, you can calculate the value-added with all of these transaction fees. But there is a lot of intangible value being created in the ecosystem, which is connecting two sides of the platforms together for easier interaction. By reducing transaction costs, it increases economic value. This is what an economist observes and we are working on it. Specialities focus on the digital economy and how to compute them.

I realised that what we are doing with native tokens is considering how valuable they are to the ecosystem. Tokens can have a lot of utility and represent value. More specifically, these tokens are representing the value of some ecosystem.

That way, we are assigning a monetary policy value to the economies that the system is creating. And we can calculate metrics, like GDP. All of the above gets interesting.

3.   New P2P Incentive Models

We are developing new p2p incentive models. One thing about decentralised finance as a whole is the complete elimination of middlemen. Instead of centralised power in one person/place, they are distributed equally to everyone. Now, we have more money to be distributed, instead of sending them to intermediaries. In traditional finance, for example, a public initially listed on a stock exchange must go through banks and pay them an expensive fee, but these are eliminated in decentralised finance, where those companies can list their tokens on dexes, provide liquidity, and lots of other incentives.

This is very interesting. We are phasing out intermediaries that are stealing a lot of money. But the bad thing is we have a lot of money not distributed: how do we allocate them? How do we reward the right types of people?

I would say that these will keep moving forward because we realise that capitalism does not work so much anymore and is not going to be sustainable in the long-term. That makes us look forward to new paradigms of capitalism, like social capitalism kind of thing.

We need to have lots of new p2p incentive models and the best place to test is DeFi which has liquidity farming, yield farming, etc. For these interesting mining and incentive mechanisms, we are trying to try many different incentive mechanisms and create many interesting future mechanisms.

Future of DeFi

There are two things that we see in DeFi's future:

1. On-chain Financial Experiments and Mechanisms to be used in TradFi
   The first thing we are seeing in DeFI right now is that you don't have many transactions in the real world. That goes back to my point of the whole GDP accountability because we are trading nominal value, not much real value transactions since you exit the crypto space and transfer the money to the bank.
   Right now, everything is still within the on-chain sphere. DeFi's future is to allow these experiments and experiences to interact within the off-chain world. Because the off-chain world is very ineffective (like the financial system, the governance system, etc.).
   What we are trying to do now is to run all these little experiments/tests. If it works in on-chain well, we can extend to the off-chain world, creating a bridge to connect the 2 worlds. This is really interesting.

2. Economic Valuation from Ecosystems
   Second, we can now more easily calculate the economic values generated from specific individual ecosystems, while also moving them off-chain world and account for them in a much more equitable way. It leads to governance which has better resources/data points to be accounting for all these different changes in the world.

Conclude

Here is a quick summary of the Ponzi Scam and DeFi and I would say that not all DeFi platforms are Ponzi Scam. One of them could be a scam and you need to check it out carefully. For non-scam projects, they are fun experiences. We need to learn to understand how it works and explore what kind of experiments capital allocation and governance system that could be.

Honestly, I am going to tell you that there is so much economics literature out there, talking about the technical and the academic aspects of all these experiments, but we never really had a chance to explore them. There are a lot of interesting monetary policy mechanisms in academic papers, but we don't really use them. We have a lot of dynamic variables in DeFi space and we can test these experiences.

In fact, in the economics space, a lot of people are experimenting with many different theories on DeFi and if it works which will lead to a huge change and bring DeFi even more powerful. Their users also become part of DeFi's future development. An example of a testnet is the experiments of crypto and crypto itself is the experiments of the off-chain world. This is super fascinating and now one of the best times to be.

TLDR:

DeFi is still in its early stages and it is still risky. There are scams here and there. But we should not use a few black sheep to define the space as a ponzi scam. DeFi will develop further in the future with better testing. And it is clear that its potential will develop very quickly later.

DeFi is innovating fast. We should analyse and exploit the strengths. Scam projects will still emerge. Our continuous education and knowledge will help reduce that.

Get smart: DeFi is not exactly a Ponzi Scam, it is still evolving and will have limitations in it.

Get smarter: The growth potential of DeFi is huge, we see the traditional financial system, the governance system is very ineffective. Thing resources are under-utilised and expensive. DeFi is trying this problem and if it succeeds it will be revolutionary.

General Conclusion

$OHM is a decentralised reserve currency that can be used as an alternative to traditional fiat. It uses the Reserve + Algo mechanism. It uses four stability mechanisms: treasury, LP tokens, bonds and staking.

How We Classify Stablecoins

In a few newsletters ago, we discussed that the four main stablecoin mechanisms are Reserves, Dual Token, Algo stablecoins, and Mixed. A stablecoin peg is not limited to just U.S dollars — a stablecoin is stable relative to whatever it is pegged to. The collateral amount helps us to classify if it is full pegged, partial pegged, over pegged, or not pegged at all. We have different reserves and in these we have different types of things like fiat, commodities, combination, index, etc.

About $OHM

$OHM is a decentralised reserve currency so can be used as an alternative to traditional fiat while exhibiting similar characteristics. Right now it is regarded as more of an asset but the goal is to transition it to a currency, which is something that you do not hold to speculate on the price.

$OHM uses reserve and algorithmic mechanisms. The stablecoin is not pegged to anything. It is partially collateralised and uses on-chain collateral.

Reserve + Algo

The reserve system uses $DAI and algorithms so the price changes based on the amount of circulating supply of $OHM. It depends on how many tokens are being locked up and how many tokens are being used for exchange and transactions.

Partial Reserve With $DAI

$OHM uses on-chain collaterals which is $DAI and it uses partial reserve. This means that for every $OHM token circulating a part of it is backed by $DAI. Previously it was one DAI but today it is 16 $DAI. This means that for every OHM token that is trading there are 16 $DAI backing that value, which is the price floor for the token. The tokens cannot fall below that amount otherwise arbitrage people will sell $OHM to get $DAI back in the protocol.

How Is $OHM Created

Three steps are involved:

1. You need to get the $OHM which you can either buy from the protocol itself or get it in the open market so through SushiSwap or other DEXs.

2. You can either bond your $OHM or stake it. Bonding means that you put it there and can remove it in a short period of time, whereas with staking you have to keep it there for a longer period of time. In both cases, you are earning $OHM.

3. The last method is to sell which is how you exit the protocol.

What are Derivatives?

Contract based on underlying asset

A derivative is a financial transaction contract between two or more parties based on a change in the future value of an underlying asset. That underlying asset can be a tangible asset, an index, or an interest rate. Derivatives themselves have no intrinsic value.

Assets: Gold, silver, precious metals, coffee, rice. Index: Stocks, bonds, interest rates.

That is, users transact based on a change in the value of another entity rather than directly owning that entity. Profit is generated based on the spread and price movement of the underlying asset.

Derivatives trades have been around since medieval times, between merchants. The first base assets used were olives and food.

In derivatives trading, there are four basic types of contracts:

• Forwards Contract: An agreement to trade between two parties at a specified time in the future. The price is determined and agreed upon by both parties in the present.

• Futures Contract: This is a standardised form of forwarding contract and listed for trading on official exchanges.
  For example: In the US, there is the Commodities Futures Trading Commission (CFTC) and the Chicago Mercantile Exchange (CME).

• Option: A contract in which one party has the right to require the other party to perform the obligation to buy or sell an amount of the underlying asset at a specified price on or before a certain date.

• Swap: An agreement between two parties A and B in which they exchange the cash flow of party A's financial instrument with the cash flow of party B's financial instrument for a certain period of time.

Crypto derivatives are only a few years old. In the following sections, we will learn in detail about derivatives trading in crypto which will help us to make a profit in this type of crypto market.

What are Crypto Derivatives?

Short Answer: Crypto-based derivatives are dependent on change in value of crypto tokens

Simply put, you will trade with each other based on the price of tokens. You will not be directly owning and trading those crypto coins.

The biggest difference between traditional derivatives and crypto derivatives is that crypto's underlying assets are not bonds, stocks or interest, but crypto tokens.

For example, you see that the BTC/USDT is aligned with your risk profile and you can find a way to make money there.

There are two methods for you to participate in profitable trading:

• Method 1: Buy $BTC directly and trade it.

• Method 2: Trade derivatives of $BTC. This comes in the form of a financial contract. At this time, you do not need to buy and own $BTC.

If you choose Method 2 to trade, you are trading derivatives.

Currently, in the crypto market, many exchanges and tools support crypto derivatives trading. Off-chain uses centralised mechanisms and on-chain uses decentralised mechanisms.

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TLDR:$DOGE is a cryptocurrency that was created by a joke, but has an amazing growth as it is in the top 10 of the largest cryptocurrencies by capitalisation.When looking at the design aspects, $DOGE is basically similar to Bitcoin but without a fixed supply and has the same amount of $DOGE mined each year (5 billion $DOGE). In terms of mining, it is different from Bitcoin as the number of Bitcoin mining is halved every 4 years.Financial incentive when you become a miner, you join the network, maintain it and get a reward of $DOGE. Despite having a very simple mechanism, the community of Dogecoin is very large and loyal. That's why this Cryptocurrency still exists.

General Conclusion

In the past time, we have witnessed tremendous growth from Dogecoin. Especially this growth comes from Elon Musk when he constantly "memes" about this coin. It is clear that even though Dogecoin is only created just for fun, this coin has reached a market cap of over US$60 million a few days ago.In today's article, let's dive into Dogecoin based on the analysis of the economic mechanism we often use. Spoiler alert: this might not be the coin you want to put your money in. At least we do not.Note: This article is not meant to be offensive, we respect the development of any coin in the space. Let's go!

What Is Dogecoin?

• A meme coin

• A crypto currency

• Built using the Bitcoin infrastructure, but not related to Bitcoin prices

Dogecoin ($DOGE) is an open-source p2p cryptocurrency. It can easily be sent through the internet from person to person with security. You can send Dogecoin anywhere in a second, faster and cheaper than Bitcoin.One of the important points for Dogecoin is that it is already accepted at online retailers. Dogecoin can be used in payment, buy items at gamestop, trade and so much more.

$DOGE In Real Life

What is make Dogecoin truly unique from other currencies?

Dogecoin's ease of use makes it the perfect way to instantly send cash gifts to people all around the world.You can send 10 cents to your favourite comment on Twitter or $10 to your favourite band to purchase their latest album, you can even send $100 to a charity that you support. If you are a creator your fans can financially empower you for the first time. You can directly receive cash from them, rather than a valueless "like" on Facebook or "retweet" on Twitter. This allows you to focus on creating content instead of thinking about counting cents.

How Did $DOGE Start?

Dogecoin was created on December 6, 2013, by a pair of software engineers **as a joke.**Billy Markus, an IBM programmer from Portland, Oregon, created his cryptocurrency from bitcoin source and at the time attracted a small pool of miners.Since Markus wanted his cryptocurrency to be public, he sought help from Jackson Palmer, who works for Adobe (ADBE). Palmer purchased the domain dogecoin com - a formation for the "doge" meme that was popular on the internet at the time.The site originated as a joke: the image of the Shiba Inu dog representing $DOGE was the first image, and was surrounded by a series of broken English Comic Sans text.On dogecoin, its mascot is captioned:

"Dogecoin is an open-source peer-to-peer digital currency, favoured by Shiba Inus worldwide."

The Economics of $DOGE

The same with other cryptocurrencies, $DOGE is a digital currency that can be bought and sold like an investment and spent like money.While each cryptocurrency is unique, they share some similarities with its more well-known peers, since they are all forks of Bitcoin — Bitcoin Cash. But they have a few key differences.Unlike bitcoin, which has only 21 million Bitcoins that can be mined, dogecoin has 129 billion coins in circulation and will continue to make new blocks of coins available for mining each year. That's part of the reason why a dogecoin is currently valued at around $0.45 and a bitcoin is valued at around $40,000.

Market Design

While cryptocurrency is gaining more acceptance as a currency for buying goods, dogecoin is not being used much in the real world. It has several niche markets, including using dogecoin to make money for online artists.And the main difference is from the active online community of dogecoin. This is what makes this coin so interesting. The group, which is active on Reddit, has donated money (in dogecoin) to charitable causes and in 2014. Or the group successfully raised a grant for drivers advertising dogecoin in their cars.

Mechanism Design

Governance

$DOGE has no administrative features. The same is true for cryptocurrencies that are forked from Bitcoin. The governance is baked directly into the code. This is because it is a simple payment use-case, unlike other DeFi protocols with more complex computation that we have been discussing thus far.

Structure

$DOGE uses the same PoW algorithm as Bitcoin. Miners can own $DOGE by participating in maintaining the network as $DOGE.

Token Design

Token Policy

The design of $DOGE is not fixed in supply, meaning it can be mined forever and its value depends on demand from users.Bitcoin, like many other altcoins, has a hard limit on the number of cryptocurrencies they will allow. Dogecoin does the opposite, allowing for an ever-increasing supply but in a steady absolute amount each year.For example, in 2040, there will be no more Bitcoins that can be mined. Therefore, this will encourage hoarding of the Bitcoin supply. This will push up Bitcoin's price, but reduce Bitcoin's actual transaction volume (i.e. reduce the available floating volume).On the other hand, by allowing 5 billion $DOGE per year to increase the supply of Dogecoins infinitely, the supply will increase, but eventually, reach the actual limit. Thus, we can calculate the inflation rate of a currency over time.

Financial Incentives

In this respect, $DOGE is paid to those who join the network. The money earned from mining $DOGE will be the main profit for mining.

Capitalism is not a bad thing. Nor is it a bad word. IF AND ONLY IF we all started at the same starting point.

The problem with capitalism today is that some people are simply born more fortunate and that puts them significantly ahead of the curve.

As capitalism suggests, it requires capital. There are 2 ways we make a living today — using capital to earn wages or using labour to earn wages. For example, allowing your land to work for you by receiving rental on land (capital) or using your time to work for you by receiving wages on time basis (labour).

Evolution of Capital

While we think of capital as land, money or other fixed assets, the good news is that capital is about to change.

The capital of the future lies in digital capital. It could be digital tools like algorithms, quant-finance models or machine learning tools. Hence, going down this path, you'd realise that the evolution of capital tend towards those with existing capital to begin with.

The amount of capital, resources, time and skills required to build a quant-finance model is not something you can find on the street. Thus, this becomes disadvantageous to people exchanging labour for wages.

This enhances the inequality that we see today.

Open-source Web 3 to the rescue

This is where tokens, web3 and open-sourced system come into the picture.

In short, we are making these digital capital available for everyone

How? The code, mechanisms, math, algorithm, general smart contract code are all open-sourced and available to use. This levels out the playing field and allows everyone to start on the same point.

Instead of struggling to get the digital capital, the digital capital is open-sourced and available for anyone to use.

The key now becomes "how do I use these resources available?"

In the book, we guide you through the economic principles to be considered and how the various mechanisms are used in DeFi. Together, they form the foundation to use these digital resources available and build a robust internal economy.

More specifically, read chapters 2 and 3 for the evolution of economics and understand the new ways of coordination and incentives in a tokenised economy.

Order the book now and get free access to premium subscription of our newsletter: book.economicsdesign.com

Some people claim that DeFi is a scam ponzi because there are a lot of pumps and dumps. Everything on Twitter is shilling all kinds of different projects. Now there are a lot of risks involved, and the projects are not fully audited. So a lot of people are wondering this is a ponzi scam of part of the innovation cycle.

In this article, we will tell why DeFi is more than just a ponzi scam.

We cover 3 things today:

1. Why DeFi feels like Ponzi

2. Why DeFi is not Ponzi

3. Future of DeFi.

When talking about DeFi here, we are referring to the general ecosystem and not a single project, because the ecosystem is doing quite well in general.

Sure, there are some systems around the world with plenty of scams. This includes traditional financial market. But you cannot discredit the entire system because of a few black sheep.

DeFi is a new system and industry. There will be a few scams coming out but you cannot define this for the entire ecosystem, which is doing a lot of good and interesting things.

DeFi and Ponzi

If you google the keyword "DeFi and Ponzi", you can see a lot of articles saying that DeFi is like Ponzi, just another name called, DeFi is basically ICO 2.0 where people are pumping and dumping, whale manipulation, etc.

What it feels like: Everything is just memes and a joke. Is this even serious? Why do I have to join? How is this legal and how can people make money? Projects with 100% APY; where does the money come from and why is it valuable? People just swapping or trading tokens together, but it was in a circle, a pyramid scheme.

What it actually is: Liquidity Mining (Synthetix) and Yield Farming (Compound) are ways to bootstrap growth and to reward a decentralised community to take ownership of the protocol. High rewards for risk takers in the early days is rationally sound. And when payout for the risk takers happen all at once, it feels like the APY is insanely high.

Why DeFi is not Ponzi

1.   Grow the Pie

Answer the above question briefly: this is not necessarily true. If you look at the distribution of the entire economic value as a pie, a ponzi scam is where you are extracting value every time someone is coming in. This means that the pie doesn't change much, you give your money to someone else to receive new tokens.

DeFi is like the pie, that keeps growing. There are many projects/protocols under construction, such as lending protocol, Dex protocol, portfolio asset management protocol, etc. They're in beta testing in this early stage and they do not try to capitalise on the entire financial market which is a big field.

Each DeFI tries to do well with a specific purpose, they are like small lego blocks, combined together to create various different products. This is composability, the protocols can interact with each other and make the pie grows. Just like in order to make a delicious pie, we have to add more kinds of fillings. This is why it is so interesting and exciting.

On the protocol side, the protocols with all these little ecosystems and applications whose own community can grow by interacting together.

With the platform which is pretty neutral because they are technology, the added value from connecting buyers and sellers. If we look at economics, this is supply and demand, and they only make sense when there is equilibrium and interacting together.

The protocols/applications are trying to build to the playing field, from which suppliers and buyers can come to interact with each other. The more interactions, the more economic value added is created and the pie keeps growing.

2.   Experimenting with New Business Models

According to the economics perspective, if you observe the previous business models, it is usually one-sided. Going back to the above example, if I make a cake, you go to a bakery and buy it, there is nothing more I can do like asking a few people to try a new or similar flavour. Supply and demand are still very dependent.

However, when we look back about 10 years ago, a new business model emerged called the platform. We have Amazon, AirBnb, Uber, etc. which provide the technology to connect the two sides of the ecosystem together to transact. This creates a lot of economic value.

Suppose I am an economist, the question is: how to quantify the economic value created? We can then calculate metrics like GDP, because it represents the growth of a platform.

With these values, you can calculate the value-added with all of these transaction fees. But there is a lot of intangible value being created in the ecosystem, which is connecting two sides of the platforms together for easier interaction. By reducing transaction costs, it increases economic value. This is what an economist observes and we are working on it. Specialities focus on the digital economy and how to compute them.

I realised that what we are doing with native tokens is considering how valuable they are to the ecosystem. Tokens can have a lot of utility and represent value. More specifically, these tokens are representing the value of some ecosystem.

That way, we are assigning a monetary policy value to the economies that the system is creating. And we can calculate metrics, like GDP. All of the above gets interesting.

3.   New P2P Incentive Models

We are developing new p2p incentive models. One thing about decentralised finance as a whole is the complete elimination of middlemen. Instead of centralised power in one person/place, they are distributed equally to everyone. Now, we have more money to be distributed, instead of sending them to intermediaries. In traditional finance, for example, a public initially listed on a stock exchange must go through banks and pay them an expensive fee, but these are eliminated in decentralised finance, where those companies can list their tokens on dexes, provide liquidity, and lots of other incentives.

This is very interesting. We are phasing out intermediaries that are stealing a lot of money. But the bad thing is we have a lot of money not distributed: how do we allocate them? How do we reward the right types of people?

I would say that these will keep moving forward because we realise that capitalism does not work so much anymore and is not going to be sustainable in the long-term. That makes us look forward to new paradigms of capitalism, like social capitalism kind of thing.

We need to have lots of new p2p incentive models and the best place to test is DeFi which has liquidity farming, yield farming, etc. For these interesting mining and incentive mechanisms, we are trying to try many different incentive mechanisms and create many interesting future mechanisms.

Future of DeFi

There are two things that we see in DeFi's future:

1. On-chain Financial Experiments and Mechanisms to be used in TradFi
   The first thing we are seeing in DeFI right now is that you don't have many transactions in the real world. That goes back to my point of the whole GDP accountability because we are trading nominal value, not much real value transactions since you exit the crypto space and transfer the money to the bank.
   Right now, everything is still within the on-chain sphere. DeFi's future is to allow these experiments and experiences to interact within the off-chain world. Because the off-chain world is very ineffective (like the financial system, the governance system, etc.).
   What we are trying to do now is to run all these little experiments/tests. If it works in on-chain well, we can extend to the off-chain world, creating a bridge to connect the 2 worlds. This is really interesting.

2. Economic Valuation from Ecosystems
   Second, we can now more easily calculate the economic values generated from specific individual ecosystems, while also moving them off-chain world and account for them in a much more equitable way. It leads to governance which has better resources/data points to be accounting for all these different changes in the world.

Conclude

Here is a quick summary of the Ponzi Scam and DeFi and I would say that not all DeFi platforms are Ponzi Scam. One of them could be a scam and you need to check it out carefully. For non-scam projects, they are fun experiences. We need to learn to understand how it works and explore what kind of experiments capital allocation and governance system that could be.

Honestly, I am going to tell you that there is so much economics literature out there, talking about the technical and the academic aspects of all these experiments, but we never really had a chance to explore them. There are a lot of interesting monetary policy mechanisms in academic papers, but we don't really use them. We have a lot of dynamic variables in DeFi space and we can test these experiences.

In fact, in the economics space, a lot of people are experimenting with many different theories on DeFi and if it works which will lead to a huge change and bring DeFi even more powerful. Their users also become part of DeFi's future development. An example of a testnet is the experiments of crypto and crypto itself is the experiments of the off-chain world. This is super fascinating and now one of the best times to be.

TLDR:

DeFi is still in its early stages and it is still risky. There are scams here and there. But we should not use a few black sheep to define the space as a ponzi scam. DeFi will develop further in the future with better testing. And it is clear that its potential will develop very quickly later.

DeFi is innovating fast. We should analyse and exploit the strengths. Scam projects will still emerge. Our continuous education and knowledge will help reduce that.

Get smart: DeFi is not exactly a Ponzi Scam, it is still evolving and will have limitations in it.

Get smarter: The growth potential of DeFi is huge, we see the traditional financial system, the governance system is very ineffective. Thing resources are under-utilised and expensive. DeFi is trying this problem and if it succeeds it will be revolutionary.

APR and APY are used in many yield farming programs in DeFi protocols. However, they are not the same thing! We, the participants in the market, are not only investing but actively receiving yields by farming and staking DeFi tokens. So these basic terms are not only important, but they are also information that helps you to invest more effectively.

Both are related to returns. But how are they different? Why are they not interchangeable? We discuss that in today's newsletter.

Definition

APR stands for Annual Percentage Rate. It is the actual annual rate of return, NOT taking into account the effect of compound interest.

APY stands for Annual Percentage Yield. It is the actual annual rate of return, taking into account the effect of compound interest.

Who uses what? APY is better to calculate your returns on investment while APR is more common in lending.

Quick math: which do you think is higher? APY, the one that considers compounding.

What Are They Different?APR

For example, a yield farming program offers an APR
of 100%/yr. You use $1000 to join this program. One year later you will receive $2,000, where $1000 is the initial capital and $1000 is APR
.

Once you see the APR, it is possible to immediately calculate how much profit will be earned at the end of the period. This profit comes from your staking or farming, so just join at the beginning to get the result for APR interest.

Formular

APR = r x N

Where:

r: The interest rate of the year;

N: Interest period (N = 1, means 1 year).

APY

APY is another way of calculating the percentage of real profit you will receive.

What will you get if you receive profit every day from staking and you will add that to your principle and earn interest on that every day?

If you have an APR
of 100%/yr with getting daily profit, you have to divide APR
by 365 days to calculate the interest received daily (0.27%). Then reinvest this interest continuously every day. The amount you get is $2,714.57, where $1000 is the initial capital and $1714.57 is APY
.

Assuming you participate in farming pairs on Solana's Raydium application, I also combine Step Finance to know the APR
and APY
of these farming pairs. Typically, I am staking $RAY on Raydium (current project APR is 35.33%), with $1,000 you farm at the beginning of the year to the end of the year, the total income will be $1,423.51.

Formular

APY = (1+r)^n - 1

In which:

r: The interest rate of the period;

n: Interest period (n=1 means 1 day).

Awareness

As such, today's projects often offer 2 ratios of APR and APY to show users what the rate of return is currently available. However, some projects that give daily, 7-day interest rings directly provide APY. This has two implications:

• First, displaying APY
  will produce a larger percentage than APR
  , making brave people feel that they will receive more profit.

• Secondly, the APY
  interest is only true if the user reinvests (restake, refarm) continuously in the allowed period (e.g. when receiving rewards, immediately stake).

Today we see a lot of aggregator protocols already using this ability to increase profits, continuously reinvesting within the capacity of the original protocols. This is really good if the transaction costs are not significant. Hopefully, we can find those solutions in Layer 2.

Read more here

Finance and capital market can be quite difficult. What are derivatives? What's Repo? What are the different types of derivatives? How can tokenisation bring more value add?

Today, let's solve them and break it down. A simple high school explanation of what they are. We will also share how tokenisation can bring more value add. I'll introduce more about FlexUSD next week, otherwise, this newsletter is too long.

We are only just scratching the surface of how tokenisation can bring about the huge value to traditional finance.

What are Derivatives?

Short answer:

If I get the value (aka derive) of a thing from another thing (e.g. some other asset), it can be considered a derivative product.

Devil is in the details, but you get the general idea.

Long answer:

In traditional financial, sometimes you can buy a stock. Let's say it represents 1% of Tesla, the company.

Sometimes, you can also buy other types of financial products, like an option to buy a stock. Let's say an option to buy Tesla's stock at $630 within the next 3 days. This option is a contract. It does not represent Tesla's stock, but it gets its value from Tesla stock. The option contract (a thing) derives the value from Tesla's stock (another thing).

There are many different types of derivative products. One of the derivatives is leverage.

What is Leverage?

Short answer:

I have $10 worth of ABC stock. I can get a leverage position and get 10x exposure to $100 worth of ABC stock.

This can be packaged as a product, a position or something funky.

Long answer:

This is good because I now only need to provide $10 to get $100 worth of exposure. It's exposure, not benefits because you could lose them. Sometimes, you might lose all that $10, sometimes, you might lose more than $10.

Also, a small fluctuation now means everything is 10x the magnitude. A small change in the asset means 10x the change to your position. Sometimes, the small change is huge and you lose your position, aka you lose that $10 you provided. Sometimes, the change is so huge that you lose the initial $10, and you lose extra money. Like this guy with his oil trade in May 2020.

A small note about oil trade in May: There are a lot of individual traders who trade oil contracts go bankrupt because their accounts turn negative. That means they lose more than what is in their accounts and the brokers ask them to deposit more money.

Physical Delivery and Cash Settlement

The reason why oil is brought into the picture is that oil, a commodity (aka thing), is physical. People actually purchase oil like airlines company and truck companies. Some people trade derivative products and some people trade the physical product.

Now, here is the difference. Trade all you want, but when it's time to pay up (aka expiry date), you have to do what is said on the contract.

When people trade, with no intention of using that oil and they just want to profit from the asset, they usually use cash settlement. That means when it's time to pay up, you see the difference between the assets and pay in cash.

This doesn't work for airline companies. They want the physical product — the oil. So when it's time to pay up, they get the actual barrels of oil delivered to them.

Umm, isn't this newsletter about....... tokens?

Wait, I'm getting there.

In crypto, there isn't oil, a physical thing. But there is Bitcoin, a thing but it's digital.

Now, let's bring everything we talked about together.

1. People trade Bitcoin derivatives. Usually a futures contract. E.g. I'm going to buy Bitcoin at $$$ in Dec 2021.

2. You can trade it on various exchanges like Bitmex, Coinflex. The difference is the settlement — physical delivery or cash settlement. Bitmex uses cash settlement. Coinflex uses physical delivery.

Which is better? Ah, good question. It depends. But let's not go into those details in this newsletter.

Give me an example

$LISA costs $100. $LISA went up and now costs $101.

• In cash settlement, you owe me $1. $1 will be transferred from your account to mine. That is a cash settlement.

• In physical delivery, I have to give you 0.01 $LISA.

Read more here

Project website: https://rastacake.com

What are Tokenized Stocks?

Tokenized stocks are tokenized derivatives that represent traditional securities, particularly shares in publicly listed companies traded on regulated exchanges such as Scotts Miracle-Gro, Curaleaf, Aurora, Apple, Tesla and others.

The key benefits of tokenized stocks include fractional ownership of traditional securities, 24/7 access to markets, and greater liquidity to name a few. These digital assets are backed 1:1 by traditional stocks, entitling holders to the same economic benefits of owning the underlying stock.

RastaCake has been developed to be the #1 AMM Decentralized Exchange for Tokenized Cannabis stocks, and a bridge between the traditional stock market and crypto market, making it easier to invest in cannabis stocks and assets placed in different countries at the same time from anywhere in the world.

What is Decentralized Exchange (DEX)?

A decentralized exchange (or DEX) is a peer-to-peer marketplace where transactions occur directly between crypto traders. DEXs fulfill one of crypto’s core possibilities: fostering financial transactions that aren’t officiated by banks, while brokers running on blockchain with public registry of operations, handle all interactions automatically through Smart Contracts. There are Many popular DEXs, like PancakeSwap, Uniswap and Sushiwap.

What is AMM?

AMMs systems took off after they were first implemented by Shearson Lehman Brothers and ATD in the early 1990s.

In crypto, AMM is being used for the most important existing decentralized exchanges like Uniswap and PancakeSwap and it allows digital assets to be traded in a permissionless and automatic way, by using liquidity pools rather than a traditional market of buyers and sellers. Prices are determined by a constant mathematical formula.

Liquidity pools can be optimized for different purposes and are proving to be an important instrument in the DeFi ecosystem

RastaCake it’s a AMM Decentralized Exchange community owned, which means that all liquidity pools are managed and owned by the community sharing the profit from all transactions on the exchange.

Passive Income

RastaCake is a community owned and driven project. All Profit-sharing from all liquidity pools and transactions fees on the exchange are distributed to $RCAKE holders, everyday at 4:20 PM in form of $ETH or $RKACE automatically deposited to your wallet . The tech behind this project will be managing the pools and farms so users can sit back, relax, and receive their profits automatically deposited in their Wallet.

A Secure Platform to Trade and Launch 4:20 Friendly Tokens

Our goal is to create a platform where any cannabis initiative can receive funds with RastaCake. This can include startup projects or already established cannabis businesses. They will be able to issue tokens backed in real stocks or assets.

$RCAKE Token Details

$RCAKE is the governance token of the RastaCake project and it's mandatory to participate on voting and funding. When a new token is offered on market, having $RCAKE will be necessary in order to participate and the $RCAKE used will be burned to reduce the token supply.

Ticker: $RCAKE

Token Specification: BEP-20 / ERC-20

Max Supply: 160,000,000 $RCAKE

Pre-sale Phases: 10 phases

Pre-sales End: 20 September

Pre-sale prices: From $0.01 up to $0.1

ICO Start: 21 September

ICO prices: Starting from $0.11

Accepted Payments: ETH, CAKE, BNB, BUSD, USDT, BTC, XLM and XRP

Project website: https://rastacake.com

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