xuanling11Crypto Paycheck
Photo by Mario Gogh on UnsplashEmployees will receive their paycheck in the period as a reward for their work. However, the employer wants to pay less to employees so that they can have maximum profits. The tension between working and anti-working has increased ever since. TL;DR Nobody wants to work unless they can pay fairly. Fiat payment may not be sustainable to satisfy what workers can contribute if the employer continues paying less and gaining more from profits. Employees will want thei...
xuanling11Stablecoin Crisis
Stablecoin is in the crisis mode. The most reputable stablecoin USDC is depegged. It is all triggered by the traditional bank collapse - Silicon Valley Bank or SVB collapse. Why traditional bank collapse impacts crypto stablecoin? Let's sort this out and reveal how stablecoin operates. First, why SVB collapse? The short answer is overleveraged. SVB is one of the 20 largest commercial banking in the United States. Some even estimate the bank owned half of startup assets. Bank operated in ...
xuanling11The only way
Technology isn't always directly translate to what we desire it to become. For example, we wish social media to become a place to keep in touch of others but it created another whole new level of distrust and misinformation that spread like a Pandemic. Be careful of your wishes! Like AI we think they can bring up a new level of the game in the creative industry and possibly to replace writers like you and me, but can they? It seems they are very powerful to execute what we want them to, ...
xuanling11Crypto Paycheck
Photo by Mario Gogh on UnsplashEmployees will receive their paycheck in the period as a reward for their work. However, the employer wants to pay less to employees so that they can have maximum profits. The tension between working and anti-working has increased ever since. TL;DR Nobody wants to work unless they can pay fairly. Fiat payment may not be sustainable to satisfy what workers can contribute if the employer continues paying less and gaining more from profits. Employees will want thei...
xuanling11Stablecoin Crisis
Stablecoin is in the crisis mode. The most reputable stablecoin USDC is depegged. It is all triggered by the traditional bank collapse - Silicon Valley Bank or SVB collapse. Why traditional bank collapse impacts crypto stablecoin? Let's sort this out and reveal how stablecoin operates. First, why SVB collapse? The short answer is overleveraged. SVB is one of the 20 largest commercial banking in the United States. Some even estimate the bank owned half of startup assets. Bank operated in ...
xuanling11The only way
Technology isn't always directly translate to what we desire it to become. For example, we wish social media to become a place to keep in touch of others but it created another whole new level of distrust and misinformation that spread like a Pandemic. Be careful of your wishes! Like AI we think they can bring up a new level of the game in the creative industry and possibly to replace writers like you and me, but can they? It seems they are very powerful to execute what we want them to, ...
Subscribe to xuanling11
Subscribe to xuanling11
Share Dialog
Share Dialog
<100 subscribers
<100 subscribers
Let’s continue learning Defi in part 3 and also reference my Notion page here for more details.
TL;DR
One of the most popular blockchain applications is the cryptocurrency
Smart Contract
Ether Gas Fee
Ethereum Request for Comments (ERC)
Oracles
Stablecoins
Decentralized Applications (Dapps)
Decentralized Autonomous Organization (DAO)
How DeFi provide service?
One of the most popular blockchain applications is the cryptocurrency
According to Eric Schmidt, the former CEO of Google made a statement in 2014 about Bitcoin that “is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.”
Cryptocurrency is an asymmetric key cryptography technology to prevent duplicates on the internet and solve the “double-spend” problem.
So, the more duplication internet can easily produce, the lower the value cryptocurrency will have and the lower the credibility cryptocurrency will have.
Smart Contract
Another crucial ingredient of DeFi is a smart contract platform.
When money flows within the contract with conditions pre-proposed, with an interest rate adjustment, money can become more valuable with a longer period of time of such contract is enforceable!
The smart contract makes cryptocurrency an enforceable contract with code and data that further pushes the possibility of the blockchain.
Many traditional business agreements with clauses now can enforce under algorithmically codified clauses to prevent breaching of contract agreements.
Ether Gas Fee
Remember blockchain was invented to fight Junk Mail by increasing the cost of massive distributing spam to receivers? Ether gas is a unit of computation power that costs money while letting miners validate each transaction. That is the nature of a decentralized trustless-based environment.
However, it leads to poor user experience, leads to worry about overpay/underpay or slow processing time of such transactions.
Because of the high gas fees, there are solutions to provide less gas fees such as Polygon, Cardano, or Litecoin. Or projects to provide gasless transactions such as Moralis.
Worth mentioning that even everyone hates high gas fees, the primary reason for gas is to prevent system attacks that generate an infinite loop of code. Similar to a car that depends on gas to reach a limited distance, Ether gas prohibits attackers to push the system to run exhaust without costing themselves more spending on attacking. This is commonly known as the halting problem.
Gas fee is a part of the decentralized solution since no one will shut down the system to identify malicious code yet incentivize highly efficient smart contract code with fewer resources and reduce the probability of failures that are beyond the benefits of the marketplace.
Ethereum Request for Comments (ERC)
ERC is Ethereum standard. They are proposals that officially adopt and implement into Ethereum Virtual Machine (EVM) to become one of their functionality/features (More technical background here).
One of the most important ERC that makes DeFi possible is ERC-20 TOKEN STANDARD. It is the standard for fungible tokens and defines an interface for tokens whose units are identical in utility and functionality (further reading here).
Another important ERC is EIP-721: Non-Fungible Token Standard. It makes cryptocurrency unique and often used for collectibles or assets such as peer-to-peer loans (further reading here).
Oracles
Unlike the word meaning itself, the oracle problem in crypto means completely different!
It refers to a problem of the blockchain that has limitations containing applications to Ethereum native contracts and tokens and to reduce the utility of the smart contract platform.
Simply, blockchain is an isolation system that separates itself from the real world (source).
Oracle acts as an authoritative data feeder (some degree of centralization) and provides blockchain or in smart contract cases, using data to help smart contracts to perform more closed to the real-time marketplace.
There are many ways oracles can implement and provide various DeFi applications and one of the well-known Oracle is Chainlink by using an aggregation of data sources with a reputation-based system. We will explore more on the Oracle-specific section.
Stablecoins
Stablecoin is to solve the cryptocurrency’s volatility problem. It is a bridge between cryptocurrency and fiat currency (source). The largest market cap of stablecoin is Tether (source).
It intends to figure out a way to maintain price parity with some target asset like USD, gold, some proportional crypto assets or artificial algorithms.
There are 4 types of stablecoins:
Fiat backed or fiat-collateralized stablecoins: 1:1 ratio as 1 stablecoin to 1 unit of currency. (i.e. Tether - USDT)
Commodity backed or commodity-collateralized stablecoins: commodities include gold, oil, real state, and various precious metals. (i.e. Digix Gold (DGX) - Singapore suspended the operation since Jan 24th, 2022 under the Singapore Payment Services Act )
Crypto backed or crypto-collateralized stablecoins: their value either hard or soft pegged) depends on the mechanism. (i.e. DAI from MarkerDAO)
Non-collateralized stablecoins: they purely operate under an algorithm to determine their valuation (i.e. AMPL)
Bonus: CBDCs or Central Bank Digital Currencies: are issued, controlled, and regulated by a country’s central bank or monetary authority, they are exchangeable on a 1:1 ratio with their equivalent fiat and are likely to be considered as legal tender.
Decentralized Applications (Dapps)
Similar to Apps in your Apple iPhone, Dapps just like an App except live on a decentralized smart contract platform.
Two primary benefits of Dapps are permissionlessness and censorship resistance (further reading here).
Decentralized Autonomous Organization (DAO)
An organization is fully autonomous and is not governed by a single person but through codes based on smart contracts and governance tokens which give an owner some percentage of the vote on future outcomes. (source)
How DeFi provide service?
Financial services are provided through Decentralized Applications (Dapps)
DeFi works as money LEGOs to add up layers with features for users to achieve their desired financial goals.
Layer 0 → Bitcoin → consensus, prevent double-spending
Layer 1 → Ethereum → Smart Contract to implement rules
Layer 2 → ERC -20 & ERC - 721 → Token, NFTs, Stablecoins, Governance Tokens
Layer 3 → Dapps → DEX, Lending & Borrowing, Derivatives, Governance, Insurance and more
Stay tuned for the next cheatsheet!
Let’s continue learning Defi in part 3 and also reference my Notion page here for more details.
TL;DR
One of the most popular blockchain applications is the cryptocurrency
Smart Contract
Ether Gas Fee
Ethereum Request for Comments (ERC)
Oracles
Stablecoins
Decentralized Applications (Dapps)
Decentralized Autonomous Organization (DAO)
How DeFi provide service?
One of the most popular blockchain applications is the cryptocurrency
According to Eric Schmidt, the former CEO of Google made a statement in 2014 about Bitcoin that “is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.”
Cryptocurrency is an asymmetric key cryptography technology to prevent duplicates on the internet and solve the “double-spend” problem.
So, the more duplication internet can easily produce, the lower the value cryptocurrency will have and the lower the credibility cryptocurrency will have.
Smart Contract
Another crucial ingredient of DeFi is a smart contract platform.
When money flows within the contract with conditions pre-proposed, with an interest rate adjustment, money can become more valuable with a longer period of time of such contract is enforceable!
The smart contract makes cryptocurrency an enforceable contract with code and data that further pushes the possibility of the blockchain.
Many traditional business agreements with clauses now can enforce under algorithmically codified clauses to prevent breaching of contract agreements.
Ether Gas Fee
Remember blockchain was invented to fight Junk Mail by increasing the cost of massive distributing spam to receivers? Ether gas is a unit of computation power that costs money while letting miners validate each transaction. That is the nature of a decentralized trustless-based environment.
However, it leads to poor user experience, leads to worry about overpay/underpay or slow processing time of such transactions.
Because of the high gas fees, there are solutions to provide less gas fees such as Polygon, Cardano, or Litecoin. Or projects to provide gasless transactions such as Moralis.
Worth mentioning that even everyone hates high gas fees, the primary reason for gas is to prevent system attacks that generate an infinite loop of code. Similar to a car that depends on gas to reach a limited distance, Ether gas prohibits attackers to push the system to run exhaust without costing themselves more spending on attacking. This is commonly known as the halting problem.
Gas fee is a part of the decentralized solution since no one will shut down the system to identify malicious code yet incentivize highly efficient smart contract code with fewer resources and reduce the probability of failures that are beyond the benefits of the marketplace.
Ethereum Request for Comments (ERC)
ERC is Ethereum standard. They are proposals that officially adopt and implement into Ethereum Virtual Machine (EVM) to become one of their functionality/features (More technical background here).
One of the most important ERC that makes DeFi possible is ERC-20 TOKEN STANDARD. It is the standard for fungible tokens and defines an interface for tokens whose units are identical in utility and functionality (further reading here).
Another important ERC is EIP-721: Non-Fungible Token Standard. It makes cryptocurrency unique and often used for collectibles or assets such as peer-to-peer loans (further reading here).
Oracles
Unlike the word meaning itself, the oracle problem in crypto means completely different!
It refers to a problem of the blockchain that has limitations containing applications to Ethereum native contracts and tokens and to reduce the utility of the smart contract platform.
Simply, blockchain is an isolation system that separates itself from the real world (source).
Oracle acts as an authoritative data feeder (some degree of centralization) and provides blockchain or in smart contract cases, using data to help smart contracts to perform more closed to the real-time marketplace.
There are many ways oracles can implement and provide various DeFi applications and one of the well-known Oracle is Chainlink by using an aggregation of data sources with a reputation-based system. We will explore more on the Oracle-specific section.
Stablecoins
Stablecoin is to solve the cryptocurrency’s volatility problem. It is a bridge between cryptocurrency and fiat currency (source). The largest market cap of stablecoin is Tether (source).
It intends to figure out a way to maintain price parity with some target asset like USD, gold, some proportional crypto assets or artificial algorithms.
There are 4 types of stablecoins:
Fiat backed or fiat-collateralized stablecoins: 1:1 ratio as 1 stablecoin to 1 unit of currency. (i.e. Tether - USDT)
Commodity backed or commodity-collateralized stablecoins: commodities include gold, oil, real state, and various precious metals. (i.e. Digix Gold (DGX) - Singapore suspended the operation since Jan 24th, 2022 under the Singapore Payment Services Act )
Crypto backed or crypto-collateralized stablecoins: their value either hard or soft pegged) depends on the mechanism. (i.e. DAI from MarkerDAO)
Non-collateralized stablecoins: they purely operate under an algorithm to determine their valuation (i.e. AMPL)
Bonus: CBDCs or Central Bank Digital Currencies: are issued, controlled, and regulated by a country’s central bank or monetary authority, they are exchangeable on a 1:1 ratio with their equivalent fiat and are likely to be considered as legal tender.
Decentralized Applications (Dapps)
Similar to Apps in your Apple iPhone, Dapps just like an App except live on a decentralized smart contract platform.
Two primary benefits of Dapps are permissionlessness and censorship resistance (further reading here).
Decentralized Autonomous Organization (DAO)
An organization is fully autonomous and is not governed by a single person but through codes based on smart contracts and governance tokens which give an owner some percentage of the vote on future outcomes. (source)
How DeFi provide service?
Financial services are provided through Decentralized Applications (Dapps)
DeFi works as money LEGOs to add up layers with features for users to achieve their desired financial goals.
Layer 0 → Bitcoin → consensus, prevent double-spending
Layer 1 → Ethereum → Smart Contract to implement rules
Layer 2 → ERC -20 & ERC - 721 → Token, NFTs, Stablecoins, Governance Tokens
Layer 3 → Dapps → DEX, Lending & Borrowing, Derivatives, Governance, Insurance and more
Stay tuned for the next cheatsheet!
No activity yet