Degen WeeKly是我们做的一个新栏目，想的就是每周给大家快速介绍一些新项目，有的项目可能推特粉丝只有一两百人，属于非常早期，风险大，收益不确定，里面绝大多数也没有发币，所以全当给爱好者分析研究，不作为任何投资建议。

希望疫情快点结束，我要自由奔跑！

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Fortis Oeconomia

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作为 Cosmos 生态中的 Defi2.0，FOT 主要目的有二：燃烧和价值储存，FOT = Burn + Subsystem(s)。FOT 本身是没有价值的，燃烧只会让他更稀缺，目前它的市值=（bFOT 总供应-bFOT 燃烧量）币价。

1 个 FOT 换（燃烧）10BFOT，10000 bFOT 换 1 gFOT，gFOT 可以参与质押，在未来可以燃烧生成 sFOT。质押 gFOT 的收益为 FOT，FOT 不能直接交易，必须要换成 bFOT 才能交易。

除了交易外，bFOT 可以充当燃料。如果不是去绕少换成 gFOT 质押，没有持有意义。为了获取质押收益，被燃烧的 bFOT 将会变得越发稀缺。

https://www.fortisoeconomia.space/burnmodule

SithSwap

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SithSwap 是 StarkNet 上的下一代 AMM，具有即时波动和稳定的交换功能，具有超低的滑点和费用（最初没有 GAS），同时继承了以太坊的全部安全性。

SithSwap 的原生支持池规、第三方贿赂和 SITH 奖励，可以以完全可交易的 veSITH 代币的形式，以投票权为交换条件，用于获取和指导未来的协议排放。

SithSwap 的发布将分为两个主要版本，分别称为 Core 和 Rewards。前者将于 2022 年第二季度在 StarkNet Planets alpha 测试网上发布。后者将在核心发布后约 1 个月发布。

SithSwap 核心团队由 3 位经验丰富的以太坊开发人员组成，他们都具有 Solidity 专业背景，其中一位自 2015 年以来就活跃于加密货币领域。

SithSwap // 1.0.0

https://sithswap.com/

https://sithswap.com/

Levee

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Levee 是一个新 NFT 市场，旨在解决 NFT “即时流动性”的问题。他们已经确定了四个领域，可以帮助你更好地投标。

更好的搜索

通过提供在搜索、跟踪和评估新项目方面上的更好体验，Levee 可以帮助您找到您感兴趣的下一个系列。

更好的投标

最好的出价可能需要更加灵活的出价类型。Levee 将首先关注集合范围的出价：对集合中的任何 NFT 的出价，以及特定于特征的出价：对具有特定特征的集合中的任何 NFT 的出价。预计很快就会看到更灵活的出价类型。

更好的工具

竞标是一个持续和相互依赖的行动，所以能够进行和管理竞标需要良好的工具。在竞价工具方面，有很多地方需要改进。值得注意的是，如果你是一个零售买家，一个业余的炒家，或一个专业的做市商，工具可能是不同的。

激励措施

出价是市场功能的基本操作，Levee 认为它应该受到激励。为了证明这一点，Levee 将在未来几周内向 Levee 上的顶级流动性提供者的钱包提供 Levee 早期支持者通行证的白名单访问权限。要成为顶级流动性提供者， Levee 用户必须对任何 NFT（集合或特征）进行最高出价。

https://levee.bid/

Polyweave

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与区块链数据打交道是一个混乱的、令人困惑的过程。如果你去一个像 explorer.solana.com 这样的区块链浏览器，或者今天只是看一下你自己钱包里的数据，要弄清楚实际发生的事情是相当困难的。你所看到的都是一长串晦涩难懂的哈希值和公钥，没有任何背景。用户往往不知道他们在看什么。而 Polyweave，就为人类构建了可读的、丰富的区块链数据制作多链 API。

Polyweave 的团队在解决这些问题方面具有独特的优势，因为团队在建立和扩展世界级的系统方面具有丰富的经验，这些系统如今被数百万用户使用。在加入 Polyweave 之前，团队正在建设平台基础设施，为 Coinbase 的所有交易和价值数万亿美元的资金流动提供动力。

https://polyweave.xyz/

DarkFi

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DarkFi 是一个匿名的 DeFi 网络。它的目标是提供灵活的私有原语，可以用来创建任何类型的应用程序。DarkFi 利用零知识密码学的进展，创建了一种合同语言和开发人员工具包，旨在使开发人员可以轻松访问匿名工程。

迄今为止，匿名作为设计空间一直未被探索。DarkFi 正在为这扇大门敞开大门。在一个完全黑暗的匿名系统的公开环境中，加密货币有可能催生新的技术概念。这可以是一个创造性的、可再生的空间。

https://dark.fi/

AFAR

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AFAR 是一款独特的第三人称平台游戏，可通过 PC 或浏览器访问，将街机和射击游戏元素与区块链技术相结合。玩家可以建造、创造和相互竞争——在每回合的 4 分钟战斗中，奔向最终点，赢家可以乘坐下一艘离开地球的宇宙飞船。AFAR 每回合都包含障碍和射击的元素。

除此之外，玩家可以选择通过外观功能或其他虚拟所有权方式等多种方式对游戏进行战略性投资。

https://www.playafar.com/

ARBO

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ARBO 是一款回合制 PvP 策略游戏，且它的创世英雄具有独特的能力组合。

您可以在英雄之上使用一些协议（卡片）来增加游戏的深度。玩家可以磨练他们的策略，并争夺最高排名和奖励。随着他们的团队在战场上使用各种攻击和战略防御，他们的 ARBO 的力量和能力将进一步增强，并受到玩家每回合所使用协议的影响。这种游戏机制将确保提供生动、不可预测的游戏体验，将玩家带入一个令人兴奋且具有奖励经济（类似于游戏赚钱）的游戏世界。

整个团队非常关注社区成员，不断地处理问题和负面反馈/ppl。该团队目前已经完成种子轮总体，包括 ZeePrimeCap, Golden Ventures, Orthogonal, Fiskantes,ConvexMonster 以及其他。

https://arbo.world/story

两周前我们在《StarkNet + ECN 中文开发者 Meetup》向大家介绍了 StarkNet 有效性证明基本架构和生态。解答开发者诸多问题。理论和背景知识的基础打下后，我们就要开始上手了！这次我们仍旧邀请 StarkNet 开发推广大使 Henri Lieutaud 为大家在线详解 Cairo。

Cairo 是部署在 StarkNet 的图灵完备通用计算编程语言，支持部署任何用例和扩展性，不受业务逻辑限制。由 Nethermind 开发的 Warp 编译器，可将 Solidity 即时编译为 Cairo 语言，为开发者提供最大便利，使以太坊应用与 StarkNet 无缝连接。

本次指南讲解的内容包括：

• 如何阅读 Cairo 和 StarkNet 合约，

• 如何使用 Warp 进行 Solidity 向 Cairo 转译，

• 如何在 StarkNet 部署 ERC-20 和 ERC-721 合约...

通过本次学习开发者可以在 StarkNet 轻松开始开发之旅 ⛵

讲解过后，如果还有疑问，还可以进行现场 AMA 哦！

本次活动由 StarkNet 中文社区与 ECN 以太坊中文社区合办，dApp Learning 和登链协办。

关于 StarkWare / StarkEx / StarkNet

StarkWare 团队研发了基于 STARK 加密证明的 zk-Rollup，目前提供 StarkEx 和 StarkNet 两种以太坊扩容方案。

StarkEx 是 StarkWare 开发的独立运行的非托管式 zk-Rollup 扩容方案。创新性地支持一系列区块链应用场景，包括衍生品交易、AMM 市场、现货交易、支付、DeFi 资金池及 NFT 铸造和交易等。其中衍生品市场 dYdX 日交易量最高超过 20 亿美元。Sorare NFT 总交易量达三亿美元。使用 StarkEx 的应用累计交易量超 5000 亿美元。

StarkNet 采用 STARK Validity-Rollup，旨在构建一个无需许可、去中心化的 ZK-Rollup 网络。StarkNet 使用安全、可扩展性最强的 STARK 加密证明系统，使其在延续以太坊自身安全性和可组合性前提下，为 dApp 运行带来无限可扩展性，为用户带来最流畅的区块链产品体验。

目前 StarkNet 生态有钱包、DeFi、NFT、游戏等超过五十个项目在 StarkNet 网络中开发。合作伙伴包括 Erigon、Equilibrium、OpenZeppelin、Consensys、OKX 等业内资深团队和公司。StarkWare 获得 Paradigm、Polychain、Scalar Capital、红衫资本、Vitalik Buterin 等机构和个人投资。

活动内容

主题：StarkNet Cairo 初学指南

时间：北京时间 3 月 31 日 19:00

直播平台：Bilibili ( 以太坊中国：http://live.bilibili.com/22351743)

相关资源

Cairo Playground - https://www.cairo-lang.org/playground

Cairo 文档 - https://starknet.io/docs/hello_cairo/index.html

Cairo 指南 - https://github.com/starknet-edu/starknet-cairo-101

Warp (Solidity -> Cairo 转译器) - https://github.com/NethermindEth/warp

在 StarkNet 上进行 ERC20 和 ERC721 部署的教程 -

https://github.com/starknet-edu/starknet-erc20

https://github.com/starknet-edu/starknet-erc721

The term credit default swap (CDS) refers to a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse the lender in the case the borrower defaults. Most CDS contracts are maintained via an ongoing premium payment similar to the regular premiums due on an insurance policy. A lender who is worried about a borrower defaulting on a loan often uses a CDS to offset or swap that risk.

KEY TAKEAWAYS

• Credit default swaps are credit derivative contracts that enable investors to swap credit risk on a company, a country, or another entity with a different counterparty.

• Lenders purchase CDSs from investors who agree to pay the lender if the borrower ever defaults on its obligation(s).

• CDSs are traded over-the-counter and are often used to transfer credit exposure on fixed income products in order to hedge risk.

• There are normally three parties involved in a CDS: the debt issuer, the buyer, and the seller of the CDS.

• Contracts are customized between the counterparties involved, which makes them opaque, illiquid, and hard to track for regulators.

What if you had started investing years ago?

Find out what a hypothetical investment would be worth today.

SELECT A STOCK

TSLA

TESLA INC

AAPL

APPLE INC

NKE

NIKE INC

AMZN

AMAZON.COM, INC

WMT

WALMART INC

SELECT INVESTMENT AMOUNT

$

SELECT A PURCHASE DATE

              2 years ago                      5 years ago                      10 years ago         

CALCULATE

How Credit Default Swaps (CDSs) Work

A credit default swap is a derivative contract that transfers the credit exposure of fixed income products. It may involve bonds or other related securities—basically loans that the issuer receives from the lender. If a company sells a bond with a $100 face value and a 10-year maturity to a buyer, the company agrees to pay back the $100 to the buyer at the end of the 10-year period as well as regular interest payments over the course of the bond's life. Because the debt issuer cannot guarantee that it will be able to repay the premium, the debt buyer assumes the risk.

CDSs require at least three parties:

• The first party is the institution that issues the debt. This party is also known as the borrower.

• The debt buyer is the second party, who will also be the CDS buyer if the parties decide to engage in the contract.

• The CDS seller is the third entity involved in the CDS. This entity is most often a large bank or insurance company that guarantees the underlying debt between the issuer and the buyer.

Debt securities often have longer terms to maturity, making it harder for investors to estimate the risk of the investment. That's why these contracts are an extremely popular way to manage risk. The buyer makes payments to the seller until the contract's maturity date. In return, the seller agrees that (in the event that the debt issuer defaults or experiences another credit event) the seller will pay the buyer the security's value as well as all interest payments that would have been paid between that time and the maturity date.

The credit event is a trigger that causes the buyer of protection to terminate and settle the contract. Credit events are agreed upon when the trade is entered into and are part of the contract. The majority of single-name CDSs are traded with the following credit events as triggers:

• Reference entity bankruptcy

• Failure to pay

• Obligation acceleration

• Repudiation

• Moratorium

Credit default swaps are traded over-the-counter (OTC), which means they are non-standardized and not verified by an exchange. That's because they are complex and often bespoke. There is a lot of speculation in the CDS market, where investors can trade the obligations of the CDS if they believe they can make a profit.

Size of the Credit Derivatives Market

Special Considerations

Although CDSs guarantee payments through maturity, they do not necessarily need to cover the entirety of the bond's life. For example, imagine an investor is two years into a 10-year security and thinks that the issuer is in credit trouble. The bond owner may choose to buy a credit default swap with a five-year term that would protect the investment until the seventh year when the bondholder believes the risks will fade.

It is even possible for investors to effectively switch sides on a CDS to which they are already a party. For example, if the seller of a CDS believes that the borrower is likely to default, that party can buy their own CDS from another institution or sell the contract to another bank in order to offset the risks. The chain of ownership of a CDS can become very long and convoluted, which makes tracking the size of this market difficult.

Here's another thing to remember about CDSs. When a credit event occurs, the contract may be settled physically, which has historically been the most common method, or by cash. In a physical settlement, sellers received an actual bond at part by the buyer. Cash settlement, though, became the more preferred method when the purpose of CDSs shifted from hedging tools to speculation. In this type of settlement, the seller is responsible for paying the buyer for losses.

The U.S. Comptroller of the Currency issues a quarterly report on credit derivatives and in a report issued in December 2021, it placed the size of the entire market at $3.9 trillion, of which CDS accounted for $3.3. trillion.1

Mitigating the Risk

A credit default swap is effectively an insurance policy against non-payment. The buyer can shift some or all that risk onto an insurance company or other CDS seller in exchange for a fee. By doing this, the buyer receives credit protection while the seller guarantees the creditworthiness of the debt security. This means the buyer is entitled to the par value of the contract by the seller along with any unpaid interest if the issuer ever defaults.

Remember, the credit risk isn't eliminated. Rather, it is shifted to the CDS seller. If the debt issuer does not default and if all goes well, the CDS buyer ends up losing money through the payments on the CDS. The buyer, on the other hand, stands to lose a much greater proportion of their investment if the issuer defaults and didn't buy a CDS. As such, the more the holder of a security thinks their issuer will default, the more desirable a CDS becomes. As such, it ends up costing more.

A credit default swap is the most common form of credit derivative and may involve municipal bonds, emerging market bonds, mortgage-backed securities (MBS), or corporate bonds.

Example of a CDS

Here's a hypothetical example to show how credit default swaps work. Let's assume there is a CDS that earns $10,000 quarterly payments to insure a $10 million bond. The company that originally sold the CDS believes that the credit quality of the borrower has improved so the CDS payments are high. The company could sell the rights to those payments and the obligations to another buyer and potentially make a profit.

Alternatively, imagine an investor who believes that Company A is likely to default on its bonds. The investor can buy a CDS from a bank that will pay out the value of that debt if Company A defaults. A CDS can be purchased even if the buyer does not own the debt itself. This is a bit like a neighbor buying a CDS on another home in her neighborhood because she knows that the owner is out of work and may default on the mortgage.

If Lender A advances a loan to Borrower B with a mid-range credit rating, Lender A can increase the quality of the loan by buying a CDS from a seller with a better credit rating and financial backing than Borrower B. In this case, the risk doesn't go away, but it is reduced through the CDS.

Great Recession

CDSs played a key role in the credit crisis that eventually led to the Great Recession. One of the primary causes of the meltdown stemmed from the risk that CDS sellers defaulted at the same time the borrower defaulted. CDS sellers like Lehman Brothers, Bear Stearns, and AIG all defaulted on their CDS obligations.2

European Sovereign Debt Crisis

Credit default swaps were widely used during the European sovereign debt crisis.3 In September 2011, investors believed that Greece's government bonds had nearly a 100% probability of default.4 Many hedge funds even used CDS as a way to speculate on the likelihood that the country would default.

How Does a Credit Default Swap Work?

A credit default swap is a financial derivative contract that shifts the credit risk of a fixed income product to a counterparty in exchange for a premium. Essentially, credit default swaps serve as insurance on the default of a borrower. As the most popular form of credit derivatives, buyers and sellers arrange custom agreements on over-the-counter markets which are often illiquid, speculative, and difficult for regulators to trace. 

What Is an Example of a Credit Default Swap?

Consider that an investor buys $10,000 in bonds with a 30-year maturity. Because of its lengthy maturity, this adds a layer of uncertainty to the investor because the company may not be able to pay back the principal $10,000 or future interest payments before expiration. To ensure themself against the probability of this outcome, the investor buys a credit default swap.

A credit default swap essentially ensures that the principal or any owing interest payments will be paid over a predetermined time period. Typically, the investor will buy a credit default swap from a large financial institution, who for a fee, will guarantee the underlying debt.

What Are Credit Default Swaps Used for?

Credit default swaps are primarily used for two main reasons: hedging risk and speculation. To hedge risk, investors buy credit default swaps to add a layer of insurance to protect a bond, such as a mortgage-backed security, from defaulting on its payments. In turn, a third party assumes the risk in exchange for a premium. By contrast, when investors speculate on credit default swaps, they are betting on the credit quality of the reference entity.

Kids In Parents' Pockets Eroding Retirement Savings (KIPPERS) is a slang term for adult children who are still living at home with their parents even after finishing school and reaching working age. Their parents face the challenges of managing their own finances and planning for retirement while dealing with the added expense of housing and feeding their adult offspring.

KIPPERS are also known as boomerang children.

KEY TAKEAWAYS

• Kids in Parents' Pockets Eroding Retirement Savings (KIPPERS) is a slang term for adult children who are still living at home with their parents even after finishing school and reaching working age.

• Parents may enjoy having their KIPPERS at home, but it can cause a financial strain due to the added costs of housing one or more children.

• It may also force them to delay their own big decisions, such as downsizing, moving to a better climate, and retiring.

• Parents should help their KIPPERS prepare for independent life by establishing rules, charging rent, and helping them manage costs and debt.

Understanding Kids in Parents' Pockets Eroding Retirement Savings (KIPPERS)

According to some studies, most parents find that having KIPPERS in the house is a pleasant experience. They like living with their adult children and the opportunity to build deeper relationships with them now that they are adults. The extra time spent at home allows for a closer relationship, in many instances.

However, it usually results in the parents spending more and saving less than they otherwise would as they approach retirement age. Additional costs include extra groceries for feeding additional mouths, continuing to stay in a larger house as opposed to downsizing when the kids have moved out, and other possible costs depending on the situation of the child, such as an additional car or spending money. They may also postpone retirement itself, working many more years just to support their children.

Contrast this to the situation of a married dual-income couple with no children at home, whose discretionary income is often higher, and who find saving for retirement easier. This demographic group is sometimes referred to as Dual Income No Kids (DINKs).

Millennials on the Couch

A Pew Research Center study in 2016 found that nearly one-third of 18- to 34-year-olds lived with at least one parent, up from just 20% in 1960. "For the first time in 130 years, shacking up with Mom and/or Dad was the most common living arrangement for young adults, edging out being married/cohabitating, living alone, or living with someone other than a parent," Consumer Reports noted.1

2

In 2020, Pew Research showed that 52% of young adults in the U.S. were living with their parents. This was a direct result of the COVID-19 pandemic. However, the number was still high before the pandemic in February 2020, at 47%.3

For parents struggling to save for retirement and contain costs, Consumer Reports offered these tips:

• Don't allow freeloading. Make sure your adult children are financially responsible by setting goals, discussing household costs, and assigning their share, even if they don't have the money to pay for them right now.

• Talk about timelines for leaving the nest, and educate them about the costs of living.

• Encourage your children to establish credit of their own so that one day they'll be able to qualify for their own place.

• Consider charging rent.

Why Are They Here?

There are many factors that result in adult children living with their parents. Millennials were hard hit with the financial crisis of 2008 and now by the pandemic caused by the Coronavirus. These two events caused many young adults to be laid off, losing out on time to build savings.

In addition, the jobs many younger people can get don't pay well enough to allow them to live on their own. Combine this with the large levels of student debt in the U.S., it is simply just cost-effective to live with your parents rather than on your own, particularly in such cities like New York, whose rents have skyrocketed in the last twenty years.

The hold harmless clause is a statement in a legal contract that absolves one or both parties in a contract of legal liability for any injuries or damage suffered by the party signing the contract.

A business may add a hold harmless agreement to a contract when the service being retained involves risks that the business does not want to be held responsible for legally or financially.

This clause is also known as a hold harmless provision.

How a Hold Harmless Clause Works

Businesses that offer high-risk activities, such as skydiving sessions, commonly use a hold harmless clause. Although it is not an absolute protection from liability, it indicates that the customer has acknowledged certain risks and agreed to take them. This hold harmless clause may be in the form of a letter.

KEY TAKEAWAYS

• A hold harmless clause is used to protect a party in a contract from liability for damages or losses.

• In signing such a clause, the other party accepts responsibility for certain risks involved in contracting for the service.

• In some states, the use of a hold harmless clause is prohibited in certain construction jobs.

The hold harmless clause may be unilateral or reciprocal. With a unilateral clause, one party to the contract agrees not to hold the other party liable for injuries or damages incurred. With a reciprocal clause, both parties to the contract agree to hold the other harmless.

The hold harmless clause is not absolute protection against lawsuit or liability.

Examples of Hold Harmless Clauses

The hold harmless clause is common in many less obvious situations than a contract for skydiving lessons.

An apartment lease may have a hold harmless clause stating that the landlord is not responsible for any damage caused by the tenant. A homeowner hiring a roofer might request a hold harmless clause to protect against a lawsuit if the roofer falls off the roof. A sports club may include a hold harmless clause in its contract to prevent its members from suing if they are injured in the course of participating in tennis matches. In this example, the hold harmless clause might require the participant to accept all risks associated with the activity, including the risk of death.

Contractors often add hold harmless clauses to their contracts to protect their businesses against potential liability arising from their work. For example, a contractor hired to add a deck to a private home may add the clause to preempt a lawsuit if an injury occurs on the deck at a later date. The homeowner, in turn, may add a hold harmless clause to prevent a lawsuit if the contractor suffers an injury during the course of the work.

The first situation described above represents a unilateral hold harmless clause. The contractor is the only one demanding to be held harmless. The second example represents a reciprocal clause. The homeowner is also requesting indemnity from the contractor.

Special Considerations

A hold harmless clause does not always protect against lawsuit or liability. Some states do not honor hold harmless agreements that are nebulous in language or overly broad in scope. Moreover, the clause may be deemed null and void if signers present a strong case that they were coerced or beguiled into signing a hold harmless clause.

The Jensen's measure, or Jensen's alpha, is a risk-adjusted performance measure that represents the average return on a portfolio or investment, above or below that predicted by the capital asset pricing model (CAPM), given the portfolio's or investment's beta and the average market return. This metric is also commonly referred to as simply alpha.

KEY TAKEAWAYS

• The Jensen's measure is the difference in how much a person returns vs. the overall market.

• Jensen's measure is commonly referred to as alpha. When a manager outperforms the market concurrent to risk, they have "delivered alpha" to their clients.

• The measure accounts for the risk-free rate of return for the time period.

Understanding Jensen's Measure

To accurately analyze the performance of an investment manager, an investor must look not only at the overall return of a portfolio but also at the risk of that portfolio to see if the investment's return compensates for the risk it takes. For example, if two mutual funds both have a 12% return, a rational investor should prefer the less risky fund. Jensen's measure is one of the ways to determine if a portfolio is earning the proper return for its level of risk.

If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's alpha means a fund manager has "beat the market" with their stock-picking skills.

Real World Example of Jensen's Measure

Assuming the CAPM is correct, Jensen's alpha is calculated using the following four variables:

Using these variables, the formula for Jensen's alpha is:

Alpha = R(i) - (R(f) + B x (R(m) - R(f)))

where:

R(i) = the realized return of the portfolio or investment

R(m) = the realized return of the appropriate market index

R(f) = the risk-free rate of return for the time period

B = the beta of the portfolio of investment with respect to the chosen market index

For example, assume a mutual fund realized a return of 15% last year. The appropriate market index for this fund returned 12%. The beta of the fund versus that same index is 1.2, and the risk-free rate is 3%. The fund's alpha is calculated as:

Alpha = 15% - (3% + 1.2 x (12% - 3%)) = 15% - 13.8% = 1.2%.

Given a beta of 1.2, the mutual fund is expected to be riskier than the index, and thus earn more. A positive alpha in this example shows that the mutual fund manager earned more than enough return to be compensated for the risk they took over the course of the year. If the mutual fund only returned 13%, the calculated alpha would be -0.8%. With a negative alpha, the mutual fund manager would not have earned enough return given the amount of risk they were taking.

Special Consideration: EMH

Critics of Jensen's measure generally believe in the efficient market hypothesis (EMH), invented by Eugene Fama, and argue that any portfolio manager's excess returns derive from luck or random chance rather than skill. Because the market has already priced in all available information, it is said to be "efficient" and accurately priced, the theory says, precluding any active manager from bringing anything new to the table. Further supporting the theory is the fact that many active managers fail to beat the market any more than those that invest their clients' money in passive index funds.

In finance, the margin is the collateral that an investor has to deposit with their broker or exchange to cover the credit risk the holder poses for the broker or the exchange. An investor can create credit risk if they borrow cash from the broker to buy financial instruments, borrow financial instruments to sell them short, or enter into a derivative contract.

Buying on margin occurs when an investor buys an asset by borrowing the balance from a broker. Buying on margin refers to the initial payment made to the broker for the asset; the investor uses the marginable securities in their brokerage account as collateral. 

In a general business context, the margin is the difference between a product or service's selling price and the cost of production, or the ratio of profit to revenue. Margin can also refer to the portion of the interest rate on an adjustable-rate mortgage (ARM) added to the adjustment-index rate.

KEY TAKEAWAYS

• Margin is the money borrowed from a broker to purchase an investment and is the difference between the total value of an investment and the loan amount.

• Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker.

• A margin account is a standard brokerage account in which an investor is allowed to use the current cash or securities in their account as collateral for a loan.

• Leverage conferred by margin will tend to amplify both gains and losses. In the event of a loss, a margin call may require your broker to liquidate securities without prior consent.

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Margin

Understanding Margin

Margin refers to the amount of equity an investor has in their brokerage account. "To margin" or "buying on margin" means to use money borrowed from a broker to purchase securities. You must have a margin account to do so, rather than a standard brokerage account. A margin account is a brokerage account in which the broker lends the investor money to buy more securities than what they could otherwise buy with the balance in their account.

Using margin to purchase securities is effectively like using the current cash or securities already in your account as collateral for a loan. The collateralized loan comes with a periodic interest rate that must be paid. The investor is using borrowed money, or leverage, and therefore both the losses and gains will be magnified as a result. Margin investing can be advantageous in cases where the investor anticipates earning a higher rate of return on the investment than what they are paying in interest on the loan.

For example, if you have an initial margin requirement of 60% for your margin account, and you want to purchase $10,000 worth of securities, then your margin would be $6,000, and you could borrow the rest from the broker.

Buying on Margin

Buying on margin is borrowing money from a broker in order to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally. To trade on margin, you need a margin account. This is different from a regular cash account, in which you trade using the money in the account.

By law, your broker is required to obtain your consent to open a margin account. The margin account may be part of your standard account opening agreement or may be a completely separate agreement. An initial investment of at least $2,000 is required for a margin account, though some brokerages require more. This deposit is known as the minimum margin.1

Once the account is opened and operational, you can borrow up to 50% of the purchase price of a stock. This portion of the purchase price that you deposit is known as the initial margin. It's essential to know that you don't have to margin all the way up to 50%. You can borrow less, say 10% or 25%. Be aware that some brokerages require you to deposit more than 50% of the purchase price.1

You can keep your loan as long as you want, provided you fulfill your obligations such as paying interest on time on the borrowed funds. When you sell the stock in a margin account, the proceeds go to your broker against the repayment of the loan until it is fully paid.

There is also a restriction called the maintenance margin, which is the minimum account balance you must maintain before your broker will force you to deposit more funds or sell stock to pay down your loan. When this happens, it's known as a margin call. A margin call is effectively a demand from your brokerage for you to add money to your account or close out positions to bring your account back to the required level. If you do not meet the margin call, your brokerage firm can close out any open positions in order to bring the account back up to the minimum value. Your brokerage firm can do this without your approval and can choose which position(s) to liquidate.

In addition, your brokerage firm can charge you a commission for the transaction(s). You are responsible for any losses sustained during this process, and your brokerage firm may liquidate enough shares or contracts to exceed the initial margin requirement.

Special Considerations

Because using margin is a form of borrowing money it comes with costs, and marginable securities in the account are collateral. The primary cost is the interest you have to pay on your loan. The interest charges are applied to your account unless you decide to make payments. Over time, your debt level increases as interest charges accrue against you. As debt increases, the interest charges increase, and so on. Therefore, buying on margin is mainly used for short-term investments. The longer you hold an investment, the greater the return that is needed to break even. If you hold an investment on margin for a long period of time, the odds that you will make a profit are stacked against you.

Not all stocks qualify to be bought on margin. The Federal Reserve Board regulates which stocks are marginable.2 As a rule of thumb, brokers will not allow customers to purchase penny stocks, over-the-counter Bulletin Board (OTCBB) securities, or initial public offerings (IPOs) on margin because of the day-to-day risks involved with these types of stocks. Individual brokerages can also decide not to margin certain stocks, so check with them to see what restrictions exist on your margin account.

A Buying Power Example

Let's say that you deposit $10,000 in your margin account. Because you put up 50% of the purchase price, this means you have $20,000 worth of buying power. Then, if you buy $5,000 worth of stock, you still have $15,000 in buying power remaining. You have enough cash to cover this transaction and haven't tapped into your margin. You start borrowing the money only when you buy securities worth more than $10,000. 

Note that the buying power of a margin account changes daily depending on the price movement of the marginable securities in the account.

Other Uses of Margin

Accounting Margin

In business accounting, margin refers to the difference between revenue and expenses, where businesses typically track their gross profit margins, operating margins, and net profit margins. The gross profit margin measures the relationship between a company's revenues and the cost of goods sold (COGS). Operating profit margin takes into account COGS and operating expenses and compares them with revenue, and net profit margin takes all these expenses, taxes, and interest into account.

Margin in Mortgage Lending

Adjustable-rate mortgages (ARM) offer a fixed interest rate for an introductory period of time, and then the rate adjusts. To determine the new rate, the bank adds a margin to an established index. In most cases, the margin stays the same throughout the life of the loan, but the index rate changes. To understand this more clearly, imagine a mortgage with an adjustable-rate has a margin of 4% and is indexed to the Treasury Index. If the Treasury Index is 6%, the interest rate on the mortgage is the 6% index rate plus the 4% margin, or 10%.34

What Does It Mean to Trade on Margin?

Trading on margin means borrowing money from a brokerage firm in order to carry out trades. When trading on margin, investors first deposit cash that then serves as collateral for the loan and then pay ongoing interest payments on the money they borrow. This loan increases the buying power of investors, allowing them to buy a larger quantity of securities. The securities purchased automatically serve as collateral for the margin loan.

What Is a Margin Call?

A margin call is a scenario in which a broker who had previously extended a margin loan to an investor sends a notice to that investor asking them to increase the amount of collateral in their margin account. When faced with a margin call, investors often need to deposit additional cash into their account, sometimes by selling other securities. If the investor refuses to do so, the broker has the right to forcefully sell the investor’s positions in order to raise the necessary funds. Many investors fear margin calls because they can force investors to sell positions at unfavorable prices.

What Are Some Other Meanings of the Term Margin?

Outside of margin lending, the term margin also has other uses in finance. For example, it is used as a catch-all term to refer to various profit margins, such as the gross profit margin, pre-tax profit margin, and net profit margin. The term is also sometimes used to refer to interest rates or risk premiums.

Open market operations (OMO) refers to the Federal Reserve (the Fed) practice of buying and selling U.S. Treasury securities, along with other securities, on the open market in order to regulate the supply of money that is on reserve in U.S. banks. The Fed purchases Treasury securities to increase the supply of money and sells them to reduce long-term interest rates.1

The objective of OMOs is to adjust the level of reserve balances to manipulate the short-term interest rates and that affect other interest rates.1 The Federal Reserve conducts open market operations to achieve the desired target federal funds rate by buying or selling government bonds from or to commercial banks.2

KEY TAKEAWAYS

• Open market operations (OMO) refers to a central bank buying or selling short-term Treasuries and other securities in the open market in order to influence the money supply.

• In the U.S., open market operations are a method the Fed uses to manipulate interest rates—specifically the federal funds rate used in interbank loans.

• Buying securities adds money to the system, making loans easier to obtain and interest rates decline.

• Selling securities from the central bank's balance sheet removes money from the system, making loans more expensive and increasing rates.

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Open Market Operations Explained

Understanding Open Market Operations (OMO)

To understand open market operations, you first have to understand how the Federal Reserve, the central bank of the U.S., dictates the nation's monetary policy.

In an effort to keep the U.S. economy on an even keel and to forestall the ill effects of uncontrolled price inflation or deflation, the Board of Governors of the Federal Reserve sets what's called a target federal funds rate.3 The federal funds rate is the interest percentage that depository institutions charge each other for overnight loans. This constant flow of vast sums of money allows banks to keep their cash reserves high enough to meet the demands of customers while putting excess cash to use.4

The federal funds rate also is a benchmark for other interest rates, influencing the direction of everything from savings deposit rates to home mortgage rates and credit card interest.3

Basically, open market operations are the tools the Fed uses to reach that target federal funds rate by buying and selling securities in the open market. The central bank is able to increase the money supply and lower the market interest rate by purchasing securities using newly created money. Similarly, the central bank can sell securities from its balance sheet and take money out of circulation, putting upward pressure on interest rates.1

Open market operations allow the Federal Reserve to buy or sell Treasuries in such large quantities that it has an impact on the supply of money distributed in banks and other financial institutions around the U.S.1

Types of Open Market Operations (OMO)

In short, the Board of Governors of the Federal Reserve sets a target federal funds rate and then the  Federal Open Market Committee (FOMC) implements the open market operations to achieve that rate.5

There are two types of OMOs. Permanent open market operations (POMO) refers to the Fed (or any central bank) constantly using the open market to buy and sell securities in order to adjust the money supply. POMO has been one of the tools used by the Federal Reserve to implement monetary policy and influence the American economy.

In contrast, temporary open market operations are used to add or drain reserves available to the banking system on a short-term basis, addressing reserve needs that are deemed to be transitory in nature. Unlike POMOs, which involve outright purchases or sales, these operations are either repurchase agreements (repos) or reverse repurchase agreements (reverse repos or RRPs). This means that the Fed undertakes the transaction with an agreement to do the opposite—buy back if it sells, or resell if it buys—in the future.1

U.S. Treasuries are government bonds that are purchased by many individual consumers as a safe investment. They are also traded on the money markets and are purchased and held in large quantities by financial institutions and brokerages.

Up or Down?

There are only two ways Treasury rates can move, and that's up or down. In the Federal Reserve's language, the policy is expansionary or contractionary.6

If the Fed's goal is expansionary, it buys Treasuries in order to pour cash into the banks. That puts pressure on the banks to lend that money out to consumers and businesses. As the banks compete for customers, interest rates drift downwards. Consumers are able to borrow more to buy more. Businesses are eager to borrow more to expand.6

If the Fed's goal is contractionary, it sells Treasuries in order to pull money out of the system. Money gets tight, and interest rates drift upwards. Consumers pull back on their spending. Businesses trim their plans for growth, and the economy slows down.6

Why Does the Federal Reserve Conduct Open Market Operations?

Basically, open market operations are the tools the Federal Reserve (the Fed) uses to achieve the desired target federal funds rate by buying and selling, mainly, U.S. Treasuries in the open market. The Fed can increase the money supply and lower the market interest rate by purchasing securities using newly created money. Similarly, the central bank can sell securities from its balance sheet and take money out of circulation, thereby pressuring market interest rates to rise.

What Are Permanent Open Market Operations (POMO)?

Permanent open market operations (POMO) refers to a central bank practice of constantly using the open market to buy and sell securities in order to adjust the money supply. It has been one of the tools used by the Federal Reserve to implement monetary policy and influence the American economy. POMOs are the opposite of temporary open market operations, which involve repurchase and reverse repurchase agreements that are designed to temporarily add or drain reserves available to the banking system.7

How Does the Federal Funds Rate Affect Banks?

By law, commercial banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. Any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall. The interest rate the lending bank can charge for these loans is called the federal funds rate, or fed funds rate. Banks often base their interest rates for consumer or business loans on the federal funds rate.

The term trust fund refers to an estate planning tool that establishes a legal entity to hold property or assets for a person or organization. Trust funds can hold a variety of assets, such as money, real property, stocks and bonds, a business, or a combination of many different types of properties or assets. Three parties are required in order to establish a trust fund: the grantor, the beneficiary, and the trustee. Trusts can take many forms and can be established under different stipulations. They offer certain tax benefits as well as financial protections and support for those involved.

KEY TAKEAWAYS

• A trust fund is designed to hold and manage assets on someone else's behalf, with the help of a neutral third party.

• Trust funds include a grantor, beneficiary, and trustee.

• The grantor of a trust fund can set terms for the way assets are to be held, gathered, or distributed.

• The trustee manages the fund's assets and executes its directives, while the beneficiary receives the assets or other benefits from the fund.

• Trust funds can be revocable and irrevocable trusts and there are several variations that exist for specific purposes.

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Trust Fund

How Trust Funds Work

Estate planning is a process that involves determining how an individual's assets and other financial affairs will be managed once they become incapacitated and how any property they have is distributed after they die. This includes any bank accounts, investments, personal property, real estate, life insurance, artwork, and debt. While wills are the most common estate planning tools, trust funds are also popular legal entities.

The following three parties are involved in establishing a trust fund:

• The grantor, who sets up the trust and populates it with their assets

• The beneficiary(s) or the person (people) chosen to receive the trust fund assets

• The trustee, who is a neutral third party (an individual or a trust bank) charged with managing the assets in the trust

The grantor generally creates an arrangement that, for a variety of reasons, is carried out after they are no longer mentally competent or alive. As the appointed fiduciary, the trustee is responsible for carrying out the interests of the grantor. This usually includes allocating living expenses or even educational expenses, such as private school or college expenses, while they are alive. Or they can pay out a lump sum directly to the beneficiary.

Trust funds provide certain benefits and protections for those who create them and to their beneficiaries. For instance:

• They keep assets held away from any creditors in the event they decide to pursue the grantor for unpaid debts.

• They avoid the need to go through probate, which is the process of analyzing and distributing assets after someone dies without leaving any instructions behind.

• They reduce the amount of estate and inheritance taxes owed after the grantor dies and assets are distributed to the beneficiary(s).

An estate tax is levied on the value of an estate after the grantor dies while inheritance taxes are applied to the total amount a beneficiary inherits from an estate.

Special Considerations

Wealth and family arrangements can grow quite complicated when millions (or even billions) of dollars are at stake for multiple generations of a family or entity. As such, a trust fund can contain a surprisingly complex array of options and specifications to suit the needs of a grantor. 

But contrary to what most people believe, trust funds aren't just for the ultra-rich. In fact, they can be useful for just about anyone, regardless of their financial situation. Discuss your needs with a financial professional to find out what kind of trust is well-suited for you and your personal needs.

Revocable Trust Funds vs. Irrevocable Trust Funds

Revocable Trust Fund

A revocable trust lets a grantor better control assets during the grantor’s lifetime. Once assets are placed into the trust, they can then be transferred to any number of designated beneficiaries after the grantor's death. Also called living trust, a revocable trust can be used to transfer assets to children or grandchildren.

The primary benefit of this kind of trust is that the assets avoid probate, which leads to the quick distribution of assets to the listed beneficiaries. Living trusts are not made public, meaning an estate is distributed with a high level of privacy. 

Changes can be made to the trust while the grantor is alive. The trust can also be revoked in its entirety prior to the grantor's death.

Irrevocable Trust Fund

An irrevocable trust is very difficult to change or revoke. Because of this arrangement, there can be considerable tax benefits for the grantor to effectively give away control of the assets to the trust fund. Irrevocable trusts most often avoid probate.

People often use the terms trust fund and trust interchangeably. While they are very similar, there are a few differences between them. A trust fund is a legal entity but a trust is a legal agreement that outlines how assets are to be treated, managed, and distributed.

Types of Trust Funds

In addition to the common revocable and irrevocable trust arrangements, there are other types of trust funds. A tax or a trust attorney may be your best resource for understanding the intricacies of each of these trust funds.

• Asset Protection Trust (APT): This trust protects a person's assets from their creditors' future claims.

• Blind Trust: In a blind trust, the beneficiary is not aware of who holds power of attorney (POA) for the trust. This is generally the trustee.

• Charitable Trust: A charitable trust benefits a particular charity or the general public. This includes a Charitable Remainder Annuity Trust (CRAT) that pays a fixed amount each year. A Charitable Remainder Unitrust (CRUT) passes assets to a specified charity once the trust expires, and gives the donor a charitable deduction as well as a fixed percentage of income to the beneficiary during the trust's life.1

• Generation-Skipping Trust (GST): This kind of trust contains tax benefits when the beneficiary is one of the grantor’s grandchildren, or anyone at least 37½ years younger than the grantor.

• Grantor Retained Annuity Trust (GRAT): Establishing a GRAT helps to avoid gift taxes.

• Individual Retirement Account (IRA) Trust: An IRA trust can minimize taxes on qualified assets within the trust.

• Land Trust: A land trust allows the trust to manage property held in the trust.

• Marital Trust: This trust is funded at one spouse's death and is eligible for the unlimited marital deduction.

• Medicaid Trust: Elderly individuals avoid tax and probate issues for assets related to Medicaid matters and payments.

• Qualified Personal Residence Trust: A qualified personal residence trust moves a grantor’s residence out of the estate.

• Qualified Terminable Interest Property Trust: A qualified terminable interest property trust benefits a surviving spouse but allows the grantor to make decisions after the surviving spouse’s passing. 

• Special Needs Trust: A special needs trust is created for a person who receives government benefits so as not to disqualify the beneficiary from such government benefits.

• Spendthrift Trust: A spendthrift trust beneficiary cannot sell, spend, or give away trust assets without specific stipulations.

• Testamentary Trust: A testamentary trust leaves assets to a beneficiary with specific instructions following the grantor’s passing.

What Is a Trust Fund Baby?

A trust fund baby is someone whose parents set up a trust fund in their name. The term is often used negatively. When people use the expression, there's an implication that beneficiaries are born with silver spoons in their mouths, are overly privileged, and don't have to work to live.

It's true that trust funds can provide beneficiaries with security. But in reality, many so-called trust fund babies don't live luxuriously or in high society.

How Do Trust Funds Work?

Trust funds are legal entities that provide financial, tax, and legal protections for individuals. They require a grantor, who sets up the trust, one or more beneficiaries, who receive the assets when the grantor dies, and the trustee, who manages the trust and distributes the assets at a later date.

Trust funds are designed to carry out the wishes of the grantor. This means that the trustee is in charge of managing the assets while they are still alive. After their passing, the trustee can pass on the assets to the beneficiary(s) as per the grantor's instructions, whether that's through a regular income stream or a lump sum payment.

How Do I Start a Trust Fund?

In order to set up a trust fund, you'll need to figure out which one is best suited for you, so make sure you figure out the exact purpose of the fund. Then, decide how you'll fund the trust. Figure out who you want to appoint as your trustee. This person may be able to help you draft up all the documents and go through the legal process. The final step is to fund the trust fund.

As with any other financial venture, make sure a trust fund is the best choice for you, your beneficiary, and your financial situation.

The yearly rate of return method, commonly referred to as the annual percentage rate, is the amount earned on a fund throughout an entire year. The yearly rate of return is calculated by taking the amount of money gained or lost at the end of the year and dividing it by the initial investment at the beginning of the year. This method is also referred to as the annual rate of return or the nominal annual rate.

KEY TAKEAWAYS

• Yearly rate of return is computed by looking at the value of an investment at the end of one year and comparing it to the value to the beginning of the year.

• The rate of return for a stock includes capital appreciation and any dividends paid.

• A disadvantage of the yearly rate of return is that it only includes one year and does not consider the potential for compounding over many years.

The Formula for Yearly Rate of Return

\begin{aligned} &\text{Yearly Rate of Return} = \Big ( \frac {\text{EYP} - \text{BYP} }{\text{BYP} } \Big ) \times 100 \\ &\textbf{where:} \\ &\text{EYP} = \text{End of year price} \\ &\text{BYP} = \text{Beginning of year price} \\ \end{aligned}​Yearly Rate of Return=(BYPEYP−BYP​)×100where:EYP=End of year priceBYP=Beginning of year price​

Example of Yearly Rate of Return Method Calculation

If a stock begins the year at $25.00 per share and ends the year with a market price of $45.00 a share, this stock would have an annual, or yearly, rate of return of 80.00%. First, we subtract the end of year price from the beginning price, which equals 45 - 25, or 20. Next, we divide by the beginning price, or 20/25 equals .80. Lastly, to arrive at a percentage, .80 is multiplied by 100 in order to arrive at a percentage and the rate of return 80.00%.

It should be noted that this would technically be called capital appreciation, which is only one source of an equity security’s return. The other component would be any dividend yield. For instance, if the stock in the earlier example paid $2 in dividends, the rate of return would be $2 greater or, using the same calculation, roughly 88.00% over the one-year period.

As a measure of return, the yearly rate of return is rather limiting because it delivers only a percentage increase over a single, one-year period. By not taking into consideration the potential effects of compounding over many years, it’s limited by not including a growth component. But as a single period rate, it does serve its purpose.

Other Return Measures

Other common return measures, which may be an extension of the basic return method, include adjusting for discrete or continuous time periods, which is helpful for more accurate compounding calculations over longer time periods and in certain financial market applications.

Asset managers commonly use money-weighted and time-weighted rates of return to measure performance or the rate of return on an investment portfolio. While money-weighted rates of return focus on cash flows, the time-weighted rate of return looks at the compound rate of growth of the portfolio.

In an effort to be more transparent with investors, particularly retail, measuring and disseminating investment performance has become its niche within capital markets. The CFA Institute, a worldwide leader in the advancement of financial analysis, now offers a professional Certificate in Investment Performance Measurement (CIPM) designation.

According to the CIPM Association, the CIPM program was developed by the CFA Institute as a specialty credentialing program that develops and recognizes the performance evaluation and presentation expertise of investment professionals who "pursue excellence with a passion."

Hypothesis testing is an act in statistics whereby an analyst tests an assumption regarding a population parameter. The methodology employed by the analyst depends on the nature of the data used and the reason for the analysis.

Hypothesis testing is used to assess the plausibility of a hypothesis by using sample data. Such data may come from a larger population, or from a data-generating process. The word "population" will be used for both of these cases in the following descriptions.

KEY TAKEAWAYS

• Hypothesis testing is used to assess the plausibility of a hypothesis by using sample data.

• The test provides evidence concerning the plausibility of the hypothesis, given the data.

• Statistical analysts test a hypothesis by measuring and examining a random sample of the population being analyzed.

How Hypothesis Testing Works

In hypothesis testing, an analyst tests a statistical sample, with the goal of providing evidence on the plausibility of the null hypothesis.

Statistical analysts test a hypothesis by measuring and examining a random sample of the population being analyzed. All analysts use a random population sample to test two different hypotheses: the null hypothesis and the alternative hypothesis.

The null hypothesis is usually a hypothesis of equality between population parameters; e.g., a null hypothesis may state that the population mean return is equal to zero. The alternative hypothesis is effectively the opposite of a null hypothesis (e.g., the population mean return is not equal to zero). Thus, they are mutually exclusive, and only one can be true. However, one of the two hypotheses will always be true.

4 Steps of Hypothesis Testing

All hypotheses are tested using a four-step process:

1. The first step is for the analyst to state the two hypotheses so that only one can be right.

2. The next step is to formulate an analysis plan, which outlines how the data will be evaluated.

3. The third step is to carry out the plan and physically analyze the sample data.

4. The fourth and final step is to analyze the results and either reject the null hypothesis, or state that the null hypothesis is plausible, given the data.

Real-World Example of Hypothesis Testing

If, for example, a person wants to test that a penny has exactly a 50% chance of landing on heads, the null hypothesis would be that 50% is correct, and the alternative hypothesis would be that 50% is not correct.

Mathematically, the null hypothesis would be represented as Ho: P = 0.5. The alternative hypothesis would be denoted as "Ha" and be identical to the null hypothesis, except with the equal sign struck-through, meaning that it does not equal 50%.

A random sample of 100 coin flips is taken, and the null hypothesis is then tested. If it is found that the 100 coin flips were distributed as 40 heads and 60 tails, the analyst would assume that a penny does not have a 50% chance of landing on heads and would reject the null hypothesis and accept the alternative hypothesis.

If, on the other hand, there were 48 heads and 52 tails, then it is plausible that the coin could be fair and still produce such a result. In cases such as this where the null hypothesis is "accepted," the analyst states that the difference between the expected results (50 heads and 50 tails) and the observed results (48 heads and 52 tails) is "explainable by chance alone."

ZCash emerged in 2016 when a group of scientists decided they wanted to create a cryptocurrency similar to Bitcoin but with some additional features. They developed a fork of the Bitcoin blockchain, with enhanced user security and anonymity. The scientists first invented Zerocoin, which became Zerocash not too long after its initial release. Eventually, the cryptocurrency was renamed ZCash.

KEY TAKEAWAYS

• ZCash is a Bitcoin fork with a different hashing algorithm and security protocols.

• ZCash started as Zerocash; it was later improved upon by the Electric Coin Company and rebranded ZCash.

• ZCash verifies ownership of coins and transactions more anonymously than Bitcoin, thus providing more security for users.

• Zcoin can be mined on devices and computers, but the currency is best mined on dedicated systems called application-specific integrated circuits.

Understanding ZCash (ZEC)

ZCash is forked from the original Bitcoin codebase. In 2014, Eli Ben-Sasson, Alessandro Chiesa, Christina Garman, Matthew Green, Ian Miers, Eran Tromer, and Madars Virza believed there were security flaws in the way transactions were tracked through Bitcoin's blockchain. In their whitepaper outlining their ideas, they called their cryptocurrency Zerocash.

The scientists created the Zerocoin Electric Coin Company in 2015. In 2016, the name changed to Zcash, and the company rebranded as itself Electric Coin Company.

ZCash uses the zk-SNARK security protocol to ensure the parties involved in a transaction are verified without revealing any information to each other or the network.1

ZCash is an altcoin, a category of cryptocurrency that shares many of the characteristics of Bitcoin. Many altcoins are different in their purpose and intended uses.

Zk-Snark allows for fully shielded transactions in which the sender, recipient, and amount are encrypted. This feature is a large deviation from other cryptocurrencies, where transaction transparency is an underlying concept aside from securing user information.

How Is ZCash Different from Bitcoin?

The Bitcoin community prides itself on transparent transactions while maintaining anonymity. However, anyone interested or who has a stake in a transaction could trace the parties within it.

ZCash doesn’t eliminate transaction information. Instead, it encrypts it so that it cannot be tracked. The ZCash blockchain is still encrypted, but the security protocol zk-SNARK adds additional user security and anonymity.

Bitcoin uses the hashing algorithm SHA-256. ZCash uses Equihash, which is incompatible with hardware and software designed for Bitcoin mining. It also has larger blocks and increased hashing times, which increases the network's hash rate. A cryptocurrency’s hash rate is the processing power of the network of miners—it's a measure of how fast the transactions can be verified and validated to open a new block.1

Joining a mining pool is one of the best ways to benefit from ZCash mining. Efficiency and opportunities to earn are increased when resources are pooled together.

Hashing is the process used to convert data into a string of alphanumeric characters. The string of numbers is unique because it is created from the data in the block. Once hashed, it cannot be replicated. The hashing algorithm is the mathematical method used to create the alphanumeric string, also called the hash.

Goals of ZCash

ZCash was designed to be efficient, safe, and anonymous. The developers behind ZCash also promote complying with regulatory requirements. Additionally, you can choose full transparency when you use ZCash, in which case its transparency is similar to that of Bitcoin when transfers are conducted.

How to Mine ZCash

New coins are produced by mining. You can use an application-specific integrated circuit (ASIC) miner or your computer if it has a graphics card capable of mining. Operating systems supported by ZCash are Docker, Debian/Ubuntu, Mac, and other Linux flavors. However, ZCash recommends using an ASIC miner and mining pool because the network difficulty has gotten high enough that PC mining is not worth the time and costs.1

ZCash uses a proof-of-work mining algorithm, which requires miners to compete against each other to produce a new block by racing to solve the hash. The first miner to find the solution opens a new block and receives the block reward.

How Many ZCash are Left?

ZCash has a maximum supply of 21 million coins, with 13.7 million in circulation. Once there are 21 million ZCash in circulation, no more can be mined, and you’ll only be able to acquire them by purchasing them on an exchange or from an individual.12

Is ZCash Safe?

ZCash is safe in the sense that it hides and protects your information.

Does ZCash Use Proof of Work?

Yes, it uses Equihash, a proof-of-work mining algorithm based on the Generalized Birthday Problem concept.

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