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It is important to understand that the cyber attacks that take place in the realm of cryptocurrencies are not to be taken lightly. These types of attacks are a serious issue that can have far-reaching consequences for both individuals and organizations, The aim of this article is to educate on the potential risks associated with cryptocurrency, provide guidance on how to mitigate these risks to ensure the safe and secure use of cryptocurrencies. This article has been adapted from its original form:

https://www.coindesk.id/berita/peretasan-kripto-terbesar-sepanjang-2022

Crypto exploitation comes in various forms and sizes since the advent of crypto in 2016. The presence of hacking has reaped earnings from the total crypto value reaching USD 5.92 trillion, with USD 4.99 trillion in Decentralized Finance (DeFi) and Bridges contributing a portion of USD 2.53 trillion that was hacked. This shows the need for a more robust and secure infrastructure for the crypto ecosystem. Let’s dive to research on stolen funds in order to provide context and depict the current crypto situation.

Historically, Crypto Hacking

Amid trust crisis, tense conditions, and unstable market in the crypto industry, hacking has become the peak performance and a stage of crypto vulnerability throughout 2022. This year has become a big time for digital thieves. Hackers have stolen with a cumulative total of almost USD 3.2 billion or the equivalent of IDR 49.8 trillion from crypto users, surpassing the value last year of USD 2.99 billion or IDR 46.2 trillion. Reports from Chainalysis, which delves into pressing issues at the intersection of crypto assets and crime, have made interesting points, particularly on stolen funds:

Total Stolen Crypto Value Based on Attack Types

Crypto theft cannot be separated from the result of security violations, making exploitation of a code to access the victim's private key has become a common occurrence. A key can indeed be obtained through various techniques, such as phishing, keylogger, social engineering, or other techniques. From 2019 to 2021, almost 30% of all stolen crypto asset value only came from this type of hacking.

An interesting case occurs with the emergence of the widespread Decentralized Finance (DeFi) innovation and the increasing capability of smart contracts. In 2021, exploitation of code and flash loan attacks—exploitation involving price manipulation—contributed nearly the majority of the stolen asset value at 49.8%.

Vulnerability of Hacking in Platforms

In 2020 and 2021, crypto platforms have become very vulnerable. How could it not, lending platforms such as yield farming protocols experienced the greatest losses, with a total of USD 923 million stolen and 64 theft incidents, while infrastructure services were in second place, with DEXs and DAOs also showing significant theft.

Targeted Stolen Funds

After committing crypto theft, hackers typically flow the stolen funds to various places. In general, hackers flow the funds to Centralized Exchanges, but 2021 data shows low interest—only 15% due to tight AML and KYC procedures at some renowned exchanges. DeFi platforms, however, have become the primary target for hackers to flow funds as much as 51%, followed by 25% high-risk services.

Crypto Hacking Framework

The numerous incidents that have occurred this year and in the past are undeniable forms of hacking that have had a negative impact on the growth and attraction of crypto and have drawn more malicious actors to wreak havoc. It is time to reflect on past mistakes and change the way security is handled in this industry.

Before any changes can be made, it is essential to first identify vulnerabilities in each layer to understand how hacking mechanisms operate in the crypto industry. The following framework visualizes the categorization of hacking in crypto:

Ecosystem

Many of the most impactful crypto hacks exploit interactions between multiple applications. The most common variant occurs when a hacker exploits a logic flaw in one protocol using funds borrowed from another protocol to escalate the attack.

Protocol

At the protocol layer, attacks take the form of exploiting business logic flaws in an application. For example, if a hacker discovers a flaw, they can use it to trigger unintended behavior by the application developer.

Smart Contract

Hacks at this layer exploit weaknesses in smart contract languages such as Solidity and can be reduced by following best programming practices.

Infrastructure

Exploits at the infrastructure layer refer to weaknesses in the underlying systems that support crypto applications. This includes the blockchain used for consensus, internet service providers used in the frontend, and tools used for private key management.

The Largest Crypto Hacks of 2022: What We Can Learn

The crypto industry has seen a significant number of exploits in recent times, leading to a need for a safer ecosystem. In light of this, I present a summary of the fifteen largest crypto hacks of 2022.

Ronin Network

Key Takeaways

• Lost funds: USD625 Million

• Category: Service Infrastructure

• Type: Bridge

• Method: Private Key Stolen

• Chain: Ronin

This crypto hack is one of the largest in 2022, with the gaming-focused Ronin Network reporting a loss of more than USD625 million, equivalent to Rp9.6 trillion, in the form of USDC and ether (ETH) on March 23, 2022. The network's bridge was reportedly drained for six days without anyone noticing.

According to an official Substack blog post by Ronin, the exploit impacted Ronin validator nodes at Sky Mavis, the popular game publisher Axie Infinity, and Axie DAO. The theft will be remembered not only for its size but also for the lack of awareness shown by the Ronin team. Since then, Ronin Bridge has used more validators, though the game still made many users suffer losses.

BNB Bridge

Key Takeaways

• Lost Funds: USD568 Million

• Category: Protocol

• Type: Bridge

• Method: Verifier Proof Bug

• Chain: BSC

On (06/10/2022), 2 million BNB was stolen in a hack attack. With the BNB price at the time touching USD293 at the time of the hack, an amount equivalent to USD586 million or Rp9 Trillion was lost.

Instead of dumping BNB directly and drawing attention to price movements in the market, the funds were stored by the hacker and used as collateral on the BSC lending platform on the Venus Protocol.

This lending dumping tactic initially made some believe that this could be whales moving funds. But when users started noticing high slippage exchanges and Tether blacklisted funds, it was clear that something was wrong.

The hacker eventually managed to escape using another chain with USD127 million before losing access to the remaining funds. After realizing the "irregular activity," Binance temporarily suspended activities for 8 hours.

FTX-SBF

Key Takeaways

• Lost Funds: Rp7.3 Trillion

• Category: Infrastructure

• Type of Service: Centralized Exchange

• Method: Private Key Stolen

• Chain: -

The downfall of FTX has already been one of the most spectacular disasters in crypto history and in the financial world. It didn't stop there, the incident that occurred on October 12, 2022 has exacerbated the crypto's bearish sentiment as there was about hundreds of millions of dollars drained from the FTX cryptocurrency trading platform after going bankrupt.

The reason behind the USD633 million wipeout from FTX on November 12 was deemed to be a desperate act. On the other hand, the Bahamian authorities claim that they have instructed the FTX wallet to be drained. It is unclear whether this refers to the USD477 million or the "saved" funds. The FTX Account Drainer's address has since changed as the FTX, a centralized exchange, suffered a major loss in 2022 when USD 633 million was drained from the platform.

The reason behind the removal of the funds on November 12 is believed to be a desperate act. On the other hand, the Bahamian authorities claim that they instructed the draining of the FTX wallet. It is unclear whether this refers to the USD 477 million or the "saved" funds. The FTX account drainer's address has since changed hands multiple times, leading to suspicions of a large-scale money laundering operation.

The FTX hack highlights the importance of decentralized infrastructure and the need for better security measures in centralized exchanges. It is crucial for the crypto community to remain vigilant and take necessary steps to safeguard their assets in the future.

Wormhole

Key Takeaways

• Lost Funds: USD400 Million

• Category: DeFi

• Type of Service: Yield Farming Platform

• Method: Smart Contract Exploit

• Chain: Ethereum

On February 2nd, 2022, the decentralized finance (DeFi) platform, Wormhole, experienced a security breach in which a hacker was able to manipulate the system to print Wrapped Ethereum (WETH) through a bridge on Solana. The estimated value of the unauthorized WETH printing is USD326 million or IDR 5.2 trillion.

The incident was immediately reported to the Wormhole team, who then swiftly issued a statement acknowledging the issue and assuring the community that the network was undergoing maintenance to investigate the potential exploitation.

Further investigation by Certus One, the team behind Wormhole, revealed the presence of a security breach and prompted an on-chain message to be sent to the hacker, offering a white hat agreement with a bug bounty reward of USD10 million or IDR 159 billion.

This event serves as a reminder of the importance of security measures in DeFi platforms and raises questions about the future direction of the DeFi industry. As DeFi continues to grow, it is crucial for platforms to prioritize security measures to prevent similar incidents from occurring. Furthermore, this incident sheds light on the need for a multi-chain or cross-chain approach in DeFi to provide greater security and decentralization.

Nomad Bridge

Key Takeaways

• Lost Funds: USD200 Million

• Category: Protocol

• Type of Service: Bridge

• Method: Trusted Root Exploit

• Chain: Ethereum

The cross chain token bridge platform, Nomad, was exploited in August 2022, draining almost all funds within the protocol with a total crypto value reaching nearly USD200 million, equivalent to IDR 2.9 trillion, despite the fact that the hackers eventually returned USD9 million to Nomad.

Further damage was unavoidable, impacting other dependent chains such as Moonbeam, EVMOS, and Milkomeda, resulting in significant blows to their Total Value Locked.

Similar to other cross chain bridge platforms, Nomad enables users to send and receive tokens between various blockchains. The attack incident has once again raised questions about the security of cross chain bridges as they remain a weakness point for DeFi and a vulnerable target for attackers.

Beanstalk

Key Takeaways

• Lost Funds: USD181 Million

• Category: Ecosystem

• Type of Service: Stablecoin

• Method: Flashloan Attack

• Chain: Ethereum

On August 17, 2022, Beanstalk Farms, an Ethereum-based stablecoin protocol, suffered an exploit resulting in a loss of approximately USD 181 million, equivalent to IDR 2.7 trillion. Blockchain security firm PeckShield discovered the attack, reporting that the attacker managed to acquire at least USD 80 million, approximately IDR 1.2 trillion, in crypto.

The governance proposal hack was facilitated by a combination of flash loan techniques and the absence of a delay feature in the protocol's governance proposal execution. As a result, the attacker temporarily gained sufficient voting rights to swiftly execute an emergency governance proposal and drain the protocol. Although the attack appeared to be instant, the attacker required prior preparation to transfer all assets to themselves.

It is surprising that such vulnerabilities were not addressed, given that flash loans are not a new threat to DeFi governance systems. Delaying on-chain proposal executions is one means of prevention. However, the damage incurred by the protocol is substantial. The market for Beanstalk's BEAN stablecoin plummeted following the attack, with the token declining 86% from USD 1, according to CoinGecko data.

This incident may prompt all stakeholders to monitor governance proposals with increased caution. The protocol was temporarily suspended for auditing and fundraising, but plans to reopen deposits in early August

Wintermute

Key Takeaways

• Lost Funds: USD160 Million

• Category: Infrastructure

• Type of Service: Centralized Finance (CeFi)

• Method: Multisig Exploit on Cross Chain

• Chain: Optimism

On September 20th, 2022, the decentralized finance (DeFi) ecosystem was faced with a security breach affecting Wintermute, an algorithmic market maker (AMM). The attack resulted in a significant loss of USD 160 million or IDR 2.5 trillion. In response, Wintermute CEO, Evgeny Gaevoy, made a formal announcement confirming the loss.

This security incident raises several questions regarding the security measures put in place by the AMM and the broader DeFi sector. As the DeFi industry continues to grow, it is imperative that adequate security measures are put in place to mitigate such risks and protect the interests of investors.

In conclusion, the Wintermute security breach serves as a reminder of the importance of robust security measures in the DeFi sector. It is crucial for industry participants to prioritize the implementation of effective security protocols to ensure the long-term stability and growth of the industry.

Mango Markets

Key Takeaways:

• Lost Funds: USD116 Million

• Category: Ecosystem

• Type of Service: Decentralized Exchange (DEX)

• Method: Oracle Price Attack

• Chain: Solana

The Mango Market, a decentralized exchange (DEX) on the Solana network, has suffered a loss of over USD 116 million in liquidity, equivalent to approximately IDR 1.7 trillion, due to a hack.

The attacker was able to increase the price of the MNGO Mango Market token due to its low liquidity and volume by engaging in countertrading against positions from other accounts, driving the price from USD 0.03 to USD 0.91. While the MNGO price remained high, the attacker was able to drain the lending pool using unrealized profits from the positions as collateral. The hacker then left the protocol with a default debt of USD 116 million involving lending applications such as Solend and Mango.

During the price manipulation, over 4,000 liquidations occurred briefly, and the Solana network's total value locked (TVL) dropped by over 20%.

Tarbell, formerly of the FBI's cyber space team in New York, told CoinDesk TV that the Mango Market exploit was "better described as market manipulation" rather than a failure of the oracle. Mango Market later confirmed in a statement that the incident was not a failure of the oracle, but rather market manipulation.

Harmony Bridge

Key Takeaways

• Lost Funds: USD100 Millio

• Category: Infrastructure

• Type of Service: Bridge

• Method: Compromised Private Key

• Chain: Ethereum and BSC

On June 23rd, 2022, the Horizon Bridge platform experienced a security breach resulting in the theft of assets worth USD 100 million. The hack was executed through a targeted attack on the hot wallet, where the private key was compromised through two of the five multisig Harmony Bridge addresses.

An investigation into the breach reveals that the Harmony Bridge system design had inherent vulnerabilities that made it possible for attackers to exploit the network. The mechanism relied on a group of validators to verify when a user locked liquidity in one of the networks, leaving the system open to manipulation by unauthorized parties.

The hack has raised concerns among the platform's users, as the company has yet to announce any compensation plans for those affected by the breach. A thorough security audit is necessary to prevent similar incidents from occurring in the future and to restore user confidence in the platform.

In conclusion, the Horizon Bridge hack highlights the importance of implementing robust security measures to prevent unauthorized access to valuable assets in the blockchain industry. The incident serves as a cautionary tale for platforms to continually assess and enhance their security measures to ensure the protection of their users' assets.

Fei Rari

Key Takeaways

• Lost Funds: USD80 Million

• Category: Ecosystem

• Type of Service: Stablecoin

• Method: Reentrancy Flashloan

• Chain: Ethereum and Arbitrum

In April 2022, the DeFi lending industry was hit by a significant security breach, with two platforms, Rari Capital and Fei, being targeted. The attack resulted in a loss of USD80 million, equivalent to IDR 1.2 trillion.

An analysis of the incident reveals that the attackers exploited a reentrancy vulnerability in the Rari Fuse lending protocol, allowing them to manipulate the system and take out loans while withdrawing the collateral that was meant to secure those loans.

Rari Capital promptly acknowledged the hack and suspended all loans globally to prevent further losses. Fei Protocol, which had a partnership with Rari, made an unprecedented offer to the attacker, offering a reward of USD10 million if the remaining stolen funds were returned.

The incident highlights the need for greater security measures within the DeFi lending sector and raises questions about the reliability and robustness of these platforms. As the DeFi space continues to grow, it is imperative that measures are put in place to prevent similar incidents from occurring in the future.

Conclusion

It is crucial to acknowledge the current state of cyber attacks on cryptocurrencies highlights the need for a comprehensive approach towards securing the crypto ecosystem. This requires a concerted effort from all stakeholders in the industry to effectively mitigate the risks and consequences of such attacks.

The continued growth and development of the crypto market is contingent upon the ability to provide robust and secure systems for users, and failure to do so could have far-reaching implications for the future of this industry. It is imperative that the industry takes this challenge seriously and invests in the necessary resources to ensure the safety and stability of the crypto ecosystem.

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The purpose of this article is solely to provide general information that does not intend to offer any investment advice or recommendations and has been translated from its original form:

https://www.coindesk.id/berita/sorotan-nft-di-2022

Looking back at the events that have transpired, 2022 is poised to be a pivotal year for the NFT ecosystem, as the NFT industry has seen progress in numerous areas recently. On the other hand, the broader crypto industry continues to be impacted by the crypto winter in 2022.

The infrastructure and culture of NFTs are likely to become even stronger, both in the real world and the Web3 environment, which presents new hope for the utilization of NFTs as a technology of the future. NFTs have the potential to enable a variety of practical applications and revolutionize the way people gain benefits in a reciprocal manner. Web3 startups have already established a foundation for many use cases such as:

NFT User and Marketplace

The NFT market saw a surge in transactions in 2022, totaling $522 million and resulting in a total NFT revenue of $616 billion with an average sale revenue of $1,124. This represents a 39.4% YoY growth from the previous year's value of $17 billion.

Marketplace platforms for NFTs faced intense competition in their bid to capture market share and develop the NFT ecosystem.

OpenSea dominated the market, with a total trading volume of $40.7 billion and 40.9 million transactions. Rarible followed closely, with a total trading volume of $27.1 billion and 356.8 million transactions. Other notable players in the market include Uniswap, Blur, and SudoSwap.

Despite the competition, 2022 was a turbulent year for NFTs. After a peak in NFT trading activity early in the year, transaction volume declined and interest waned in the following months.

The NFT market also saw instances of wash trading, where users traded NFTs with their own wallets to artificially inflate their collections or accumulate token incentives.

In 2022, $30 billion of NFT transactions on Ethereum were identified as wash trading, accounting for over 44% of the year's total traded volume. The platform with the highest occurrence of wash trading was LooksRare, with 98% of its total trading volume and 25% of its traders involved. x2y2 also saw a significant amount of wash trading, with 87% of its total trading volume and 22% of its traders involved.

NFT (Global) Project Performance in 2022

As the NFT market navigates through choppy waters and uncertainty, some NFT projects are working to create new value for holders and grow a fragile ecosystem. In this section, we will highlight some of the top NFT projects in 2022.

CryptoPunks

CryptoPunks was launched as a fixed NFT asset containing 10,000 items in mid-2017 and became one of the inspirations for the ERC-721 standard. CryptoPunks have been featured in renowned places such as Art Basel Miami and Christie's of London. To date, 9,998 CryptoPunks NFTs have been minted and owned by 3,661 unique holders, generating revenue of USD 574 million with a market capitalization of USD 753 million. CryptoPunks have seen a relatively significant decrease in revenue this year along with the NFT Bored Ape Yacht Club (BAYC) project. The performance price competition between the two projects has become intriguing to observe.

Bored Ape Yacht Club (BAYC)

Bored Ape Yacht Club or BAYC is a collection of 10,000 live NFTs on the Ethereum blockchain. BAYC has a variety of utilities, such as Yacht Club membership cards, and provides access to special member benefits. The Token ecosystem in the BAYC project, Ape, has 9,998 NFTs minted, 6,196 NFTs owned, and a total revenue of USD 1.5 billion this year with a market capitalization of USD 751 million. BAYC had strong buyer interest in the first quarter of March 2022, generating USD 260 million, however, its total revenue has declined along with market conditions and controversies.

Otherdeed for Otherside

The otherdeed project comes originally from the same creator as BAYC, Yuga LABS. Otherdeed is the key to claim land on Otherside. Each has a unique combination of characteristics between the environment and sediment—some with strong resources and artifacts. To date, there have been 99,999 NFTs minted, 33,740 have been owned, and revenue has reached over USD 1 billion this year with a market capitalization of USD 153 million. Otherdeed generated phenomenal revenue in the second quarter of May, reaching USD 931 million, this revenue also generated a lot of controversy regarding the large amount of gas fees required to be paid, which was 64,000 ETH or USD 1.8 billion.

Azuki

Azuki began its NFT journey with a collection of 10,000 avatars that give users access to membership in “The Garden” to create a decentralized future. Azuki is a brand built by the community for Web3. Azuki owners receive access to exclusive rewards, festival celebrations, and more. To date, there have been 10,000 NFTs minted and owned by 5,012 unique holders, generating revenue of USD 847 million this year with a market capitalization of USD 128 million.

Amid the controversy surrounding the recognition of Azuki's founder leaving the project, Azuki's revenue performance in the month reached USD 147 million. However, the following month, Azuki experienced a drastic decline in revenue to USD 12 million.

RTFKT

RTFKT, also known as CloneX, is a collection of digital sneakers that are NFT-based. This project provides a unique twist to the NFT market as it offers a variety of virtual sneakers with limited edition designs and exclusive drops. Each RTFKT sneaker is unique, with its own unique design and rarity. Currently, there are 9,999 RTFKT sneakers minted, owned by 3,661 unique holders, and generating revenue of USD 974 Million with a market capitalization of USD 128 Million.

In the first quarter of 2022, RTFKT saw a surge in interest with a revenue of USD 260 Million, however, this revenue declined as the market conditions changed. Despite the market fluctuations, RTFKT continues to attract attention due to its innovative approach to NFTs and its partnerships with popular sneaker brands.

In conclusion, these five NFT projects - are leading the way in the NFT market in 2022. Each project offers a unique approach and value proposition, which continues to attract and retain a strong following. As the NFT market continues to evolve and mature, it will be exciting to see how these projects and others will continue to shape the future of the NFT landscape.

NFT (Indonesia) Project Performance in 2022

The Non-Fungible Token (NFT) market has been growing rapidly in Indonesia, with several projects making their mark in the industry, there are five NFT projects that are worth mentioning.

Karafuru

Karafuru is home to 5,555 generative art NFT collections where the combination of colors and unique character traits serve as the main characteristics of Karafuru. NFT owners can access various events, festivals and purchase merchandise. Out of the 5,555 NFTs that have been minted, 3,615 unique holders currently own them, with total revenue reaching USD24 million this year and a market capitalization of USD1 million. During the festival held in March, Karafuru was able to generate USD7 million in revenue, which was accompanied by a subsequent increase in income in the following months due to festival euphoria of USD10 million.

Mindblown Universe

Mindblowon is an NFT featuring a unique character imagination with 6,969 people in the metaverse, created by Lickpalik. Mindblowon Universe was able to successfully mint 6,969 NFTs, which are currently owned by 3,759 unique holders, with total revenue reaching USD21 million this year and a market capitalization of USD288,000. Despite the challenging market conditions, Mindblowon sales saw an increase in September 2022, amounting to USD560,000, due to the celebration of the We The Fest music festival in Jakarta.

Ghozali Everyday

Ghozali Everyday is an NFT collection consisting of 933 selfies of a man named Ghozali. The Ghozali project was able to mint NFTs, which are currently owned by 281 unique holders, with trading volume reaching USD486 million. The highest increase this year occurred in the first quarter of January, amounting to USD57,000 or around IDR 903 million, with a total of 157 NFTs sold.

Si Juki: Lost in Jukiverse

Si Juki: Lost in Jukiverse is a collection of 3456 Jukis based on the Indonesian comic character, Si Juki, created and written by Faza Meonk since 2010 and has rapidly grown to this day. Jukiverse serves as a bridge for the development of IP Brand from Web2 to Web3. To date, there are a total of 3454 NFTs that have been minted, owned by 1370 unique holders, with a market capitalization of USD40,000.

Baliverse

Baliverse is a collection of 8,000 NFT avatars inspired by Balinese culture, created by Raka Jana. To date, there are a total of 8,000 NFTs that have been minted, owned by 1480 holders, 19% of which or 281 are unique holders, with trading volume reaching USD149 million or equivalent to IDR 2.3 billion.

Conclusion

NFTs have become the epicenter of culture and movements in Web3. Its development is worthy of observation as a technological advancement, proving that JPEG images are only a proof of concept. The best of NFTs is yet to come. To wrap up this spotlight on NFTs, we have summarized the crypto highlights of 2022 to provide context on what has happened over the past year:

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This article was conducted based on regulations, the number of users, the market situation supported by various other studies and has been translated from its original form:

https://www.coindesk.id/berita/perkembangan-adopsi-kripto-di-seluruh-dunia-sepanjang-2022

Interest on Cryptocurrency has rapidly grown in recent years, opening up opportunities while also attracting regulatory attention. As the sector evolves in this panoptic era, differing regulatory and tax policies have emerged. Despite this, the adoption of cryptocurrencies remains a noteworthy trend, with some individuals still uncertain about its use.

This article provides an overview of cryptocurrency adoption trends in 2022.

Financial Sovereignty: Crypto vs State

In recent years, the growth of cryptocurrency usage has rapidly increased due to the rise in crypto asset prices, which is partly attributed to the influx of institutional investment into the sector. Stablecoins have emerged as one of a few crypto assets that have grown and are increasingly being accepted by both institutions and retail investors in 2022.

According to The Block Research, even though there was a significant decrease in market capitalization across the industry, the supply of stablecoins only declined by 2.4% from USD 143 billion to USD 140 billion. In fact, the usage of stablecoins reached a new record this year. The adjusted annual transaction volume of stablecoins (i.e. the flow of payments from one address to another on the public blockchain) surpassed USD 7.2 trillion in 2022, with an annual growth rate of 19%.

The cryptocurrency market has experienced remarkable growth, however, attention towards policy, legal regulations, and the implementation practices of cryptocurrencies remains a highly debated topic. This is evident in incidents such as the SEC and CFTC's proxy war, OFAC sanctions, lawsuits against Ooki DAO, and many others.

In a global context, some countries are becoming increasingly open to cryptocurrencies, albeit to varying degrees. The accessibility of a country to cryptocurrencies is generally considered legal if it is bound by Anti-Money Laundering (AML) regulations, which allows the government to monitor cryptocurrency trading to prevent illegal financial activities, as well as the existence of applicable tax regulations.

Crypto Taxes: Navigating the Different Rules in Each Country

The taxation of crypto assets varies among different countries. Here are some of the current tax regulations in place:

Japan

In the land of cherry blossoms, crypto assets are considered as miscellaneous income and taxed at a rate of up to 55%. Non-resident taxpayers with crypto assets must pay a 20% tax when they leave the country.

China

The Chinese government does not recognize crypto as a valid form of payment and has prohibited its usage. Therefore, there is no tax imposed on cryptocurrencies in China and any attempt to pay tax on crypto assets would be considered illegal.

United States of America

The Internal Revenue Service (IRS) in the United States has issued a tax on cryptocurrencies, referred to as capital gain tax. The IRS classifies cryptocurrencies as investment assets, such as stocks, bonds, and properties, rather than income. This differs from the tax treatment of cryptocurrencies in some countries in the European Union, which categorize them as income without the imposition of value-added tax (VAT). VAT is a tax on goods and services, and therefore, represents a different approach to taxation compared to the United States.

Portugal

Portugal is seen as a haven for cryptocurrency players and miners. This is due to its policy of exempting cryptocurrencies from taxes, as the country views them as recognized means of payment rather than assets. However, with the increasing capital gains and business income from cryptocurrency assets, Portugal plans to impose taxes, making it no longer a tax haven for cryptocurrency.

Indonesia

In Indonesia, cryptocurrencies are categorized as commodities. In May 2022, the government announced that cryptocurrencies will be subject to VAT and Income Tax. The tax rate for cryptocurrencies, or VAT and Income Tax on cryptocurrencies, is set based on PMK 68 of 2022, with rates varying depending on the transaction and its categorization.

According to the CEO of Binance cryptocurrency exchange, Changpeng Zhao (CZ), the recently implemented cryptocurrency tax regulations in Indonesia are not yet optimal. The regulations may impact the level of activity in the region, but it is unlikely to hinder innovation.

The 2022 Crypto Adoption Index Unveiled

Blockchain analysis firm, Chainalysis, released a report titled "Geography of Cryptocurrency" in 2022 which examines the adoption of cryptocurrencies in countries and regions worldwide, with a focus on dynamic trends in emerging markets.

Chainalysis has ranked 154 countries using various indices as a method to analyze crypto adoption based on the utilization of various types of services. The metrics considered include purchasing power parity (PPP) per capita, which measures an individual's ability to purchase a set "basket" of goods in a specific country.

As a result, Chainalysis data shows that overall crypto adoption in 2022 is slowing down globally in a bear market scenario, but still above the pre-bull market level. Global adoption has reached a balanced point in the past year after continuous growth since mid-2019.

Historically, the graph demonstrates investor interest in digital assets as evidenced by the rise in prices between 2020 and 2021. As we entered the final quarter of 2021, the graph aligns with the largest crypto asset holders who have continued to "hold" their investments even during a bear market.

As we delve further into this report, some other key points to highlight are that users in middle- and lower-income countries typically use crypto for:

• Relying on crypto assets to send remittances

• Keeping their savings during fiat currency volatility, and

• Meeting other unique financial needs within their economy

These countries are categorized by the World Bank based on income level and overall economic development.

Middle- and lower-income countries tend to be more reliant on crypto assets such as Bitcoin and stablecoins than other countries. Over the next few years, this may be considered intriguing given that solutions to increase adoption in high- and low-income countries in the crypto asset industry are still in the grey area.

Highlight the Most Crypto-Friendly Nations

Vietnam

According to the report, Vietnam is ranked first in consecutive crypto asset usage for two years. This ranking is accompanied by high levels of usage and purchasing power in centralized exchanges, DeFi, and P2P.

Other sources also note that there are approximately 21% of consumers from the total crypto ownership or usage in 2020, second only to Nigeria with a rate of 32%. Crypto games are also driving this adoption, including the highly popular P2E and M2E models in Vietnam, with the best-selling P2E game Axie Infinity based in Ho Chi Minh City.

United States of America

America is ranked in the top three of every sub-index, with the exception of population and P2P exchange usage adjusted for purchasing power, which shows that P2P exchange usage tends to be highest in countries with low purchasing power.

China

In China, the use of centralized services is highly favored and ranking second overall for adjusted transaction volume in both overall and retail settings. This is particularly noteworthy given the government's restrictions on crypto asset activities, including a ban on all crypto asset trading announced in September 2021, indicating that the ban may not be effective or widely followed.

Indonesia

Surprisingly, Indonesia ranks in the Top 20 for Crypto Adoption. The country boasts a 13th ranking in the DeFi value adoption index out of 154 nations. The NFT sector also contributes to a significant portion of user traffic in Indonesia, but it has the second-highest market share for blockchain-based gaming and entertainment.

It should be noted that it is unclear why crypto activity appears more impressive in countries with fewer individual wealth, given that crypto can be used for various purposes including speculative trading, remittance processing, payment and savings.

To conclude this section, here is a list of the 20 countries with the highest global crypto adoption index:

Crypto for the Masses

The use of cryptocurrency assets for daily purchases is becoming increasingly widespread. This trend is driven by various factors, including:

• Coinmap, a platform that helps users identify locations nearby that accept cryptocurrency as payment

• Crypto debit cards, which allow users to make purchases anywhere using their cryptocurrency by converting it into fiat currency (such as dollars) at the point of sale. This can be done through intermediaries like Visa or Mastercard. Examples of websites that offer this option include Binance and CoinGate, which both offer the ability to buy gift cards with cryptocurrency.

With the growing number of cryptocurrency ATMs globally (according to Coin ATM Radar, there are over 38,000 in operation), it is becoming easier for individuals to use cryptocurrency as a form of cash.

Conclusion

The development of cryptocurrency is characterized by a simultaneous progression of innovation and regulation. Although there may be conflicts between those things, the growth of the crypto ecosystem is unstoppable and will continue to expand in all market conditions.

• SoulBound tokens (SBTs) are a new concept introduced in a whitepaper by Vitalik Buterin, Glen Weyl, and Puja Ohlhaver

• SBTs are a key component in the growing trend of "Decentralized Society (DeSoc)" within the Web3 space

• SBTs are a type of non-transferable, public-verifiable digital token known as NFTs but a of a different variety

• These tokens have a wide range of potential uses, including in education, professional spaces, and as a form of proof of knowledge in various programs

• SBTs have the ability to be used for immutable records such as employment history, work experience, and academic credentials

NFTs, or non-fungible tokens, are a revolutionary way to buy, sell, and trade digital assets. They are essentially tokens that represent ownership of a digital asset, such as a piece of art or collectible. One of the key benefits of NFTs is that they provide a clear record of ownership and other important information, such as metadata, on the blockchain. However, there is still room for improvement in the way that NFTs are used. Currently, they are mostly used for ownership purposes, but there is potential for so much more.

NFTs are Transferable

NFTs have become popular in various industries, including art, real estate, gaming, and collectibles, as a way to establish ownership of valuable items. However, they can be bought and sold by anyone, so their main purpose is to prove ownership rather than any earned attributes such as ability or knowledge.

For example, the proof-of-attendance-protocol (POAP) gives digital badges or mementos to attendees of an event. If one of these badges is sold as an NFT, the new owner becomes the owner of the badge even if they did not attend the event. This raises concerns about authenticity, as there is no way to verify the credibility of these badges when they are transferred to others.

In the other hand, Web3 is trending toward hyper-financialization and commoditization, leading lights in the space have proposed an alternative model built upon emergent networks by bottom-up communities with rich social identity. In the bid to solve this problem is where Soulbound Tokens (SBTs) come in.

What are SoulBound Tokens?

In a groundbreaking white paper by experts Vitalik Buterin, Glen Weyl, and Puja Ohlhaver, the concept of DeSoc and SBTs was introduced. Drawing inspiration from the popular game World of Warcraft, these SBTs would serve as the foundation for this revolutionary new way of constructing a decentralized society. Imagine a future where communities can operate without the limitations of traditional systems - it's an exciting prospect, and SBTs are the key to making it a reality of DeSoc.

At the intersection of politics and markets, DeSoc embodies the core principles of Web3, including composability, community-driven collaboration, and user-owned and governed networks. It aims to enhance the hyper-financialization of the Web3 space, promoting inclusivity, democracy, and decentralization. By building on the strengths of Web3, DeSoc is working towards a more equitable and decentralized future starting with SoulBound tokens.

Soulbound tokens are non-transferable, meaning that ensures that it will always remain connected to your personal wallet and identity, thanks to its link to Souls (a type of address that establishes ownership). This means that these tokens are the perfect way to digitally represent valuable assets that cannot be transferred or sold to someone else, such as certificates of expertise, reputation, and medical records. With the added security and permanence of Soulbound tokens, you can confidently use them to represent your valuable assets online.

Non-transferability ensures that these tokens are permanently linked to their owner. The individual holding the token has the ability to determine who has access to the data within and can also revoke that access at their discretion. This offers a solution for individuals who wish to have complete control over their personal data by managing it in a tokenized form rather than on a central database.

SBTs Adoption

To truly thrive, SBTs require a significant level of adoption by the organizations that are responsible for issuing them. This could include schools, recruiting firms, and event planners, among others. It is important for these entities to have the necessary infrastructure in place to effectively utilize tokenized assets in order for SBTs to reach their full potential.

SoulBound Token Use Cases

SBTs have a wide range of use cases. Some of them include:

• Education History and Work Resume

  Major institutions, such as educational institutions, can utilize the Soul wallet as proof-of for graduating students. The SBT will store the student's credential, providing authenticity to their achievements. In addition, SBTs contain personal information, accomplishments, and work credentials, making them useful as digital resumes for job searches and employees seeking new opportunities.

• Credit History

  Offers an innovative solution for creditors looking to assess the creditworthiness of loan applicants with proof of diligence. This technology provides a secure and transparent way for creditors to make informed lending decisions, ultimately supporting responsible borrowing practices.

• Medical Records

  By utilizing a SoulBond Token as a medical record, the process of changing physicians or obtaining insurance can be made effortless. This innovative solution eliminates the hurdles of verifying personal information and medical history during the transition to a new healthcare provider to more efficient experience.

• Undercollateralized On-Chain Lending

  Cryptocurrencies have struggled to establish a strong credit system due to technical difficulties in verifying a borrower's ability to repay a loan. SoulBound Token, however, has the potential to address this issue through its reputation verification system. This innovative solution could greatly improve the credibility and stability of the crypto market.

• DAO Sybil Attack Protection

  Decentralized autonomous organizations (DAOs) are vulnerable to sybil attacks, where a person or group of people acquire a large number of governance tokens and manipulate voting in their favor. By utilizing the SoulBound token, DAOs can implement measures to reduce these risks, including evaluating the correlation between SoulBound token possession and support for a specific vote and adjusting accordingly.

  More potential use cases for Soulbound Tokens can be found in the “Decentralized Society: Finding Web3’s Soul” paper.

Limitations of SoulBound Tokens

There have been concerns regarding the loss of keys and the security of using SoulBound Tokens. Buterin and his team have addressed these concerns by implementing a recovery mechanism for lost keys and allowing for the option of public or private use of the tokens. Additionally, some have questioned the potential negative consequences of these tokens, such as the creation of a "social credit system" similar to the one being developed in China. This system would involve attaching a person's online handle to their real ID and storing data related to that individual online, potentially raising ethical concerns about privacy.

The Future of SoulBound Tokens

Let’s go back to the beginning. The purpose of blockchain technology is to not only store value but also to give everyday people control over their personal data and how it is utilized. The emergence of Soulbound Tokens (SBTs) allows individuals to have control over their data, including the management and access granted to it. This may seem like a small change, but it represents a significant shift away from the centralized model of data storage that we are accustomed to.

Furthermore, SBTs have the potential to be a crucial part of the Decentralized Society movement, which involves the creation of communities centered around shared networks and resources that are owned and managed by the individuals who use them. Essentially, SBTs are a logical progression in blockchain's journey towards complete decentralization. It is interesting to consider where these advancements may take us in the future. Where do you think they’ll take us?

• Ethereum has experienced incredible growth in network usage and applications, but this has also led to high traffic and congestion on the network.

• One solution to this scalability issue is the use of blockchain rollups. These rollups process transactions off-chain, helping to alleviate strain on the Ethereum network.

• There are two main types of blockchain rollups: ZK-rollups and Optimistic-rollups.

In this article, we'll delve into how each of these approaches works to improve scalability on Ethereum.

Are you struggling to understand the concept of blockchain rollups? Don't worry, we've got you covered! In this article, we'll provide a comprehensive explanation of what rollups are and how they function.

As you may know, Ethereum has experienced tremendous growth in recent years, with a surge in users, value, and the amount of data managed by the network. This can be attributed to the widespread adoption of smart contracts and the rising popularity of cryptocurrency in 2021.

According to State of the Dapps, approximately 3,000 decentralized applications (dapps) are built on Ethereum, making up a significant portion of the total 4,000 dapps currently in existence. Additionally, Ethereum leads the way in the DeFi (decentralized finance) market, with 191 DeFi projects powered by the network out of a total of 216 in the ecosystem. It's also the most popular network for NFT (non-fungible token) projects and transactions.

However, the high usage of Ethereum has strained its capabilities and resulted in network congestion. This has caused delays in transaction processing, which has given rise to various Ethereum competitors.

To address the scalability issues faced by Ethereum and other blockchains, layer2 scaling solutions have been introduced. Rollups are one such solution that helps to improve transaction processing on the layer1 mainnet. In this article, we'll delve deeper into the concept of rollups and how they work.

Blockchain Rollups

As Ethereum becomes more popular and more applications are built on its network, the volume of traffic increases. This can lead to delays in processing transactions because each Ethereum block has a limited amount of space. To prioritize certain transactions, the mainnet selects a few with the highest bids to process first, while all other transactions must wait.

There are two types of information that can be posted on the Ethereum mainnet: transactions and data. While the storage and processing of transaction information can be demanding for the mainnet, data resulting from a transaction is less burdensome and remains constant regardless of the number of transactions.

To alleviate the strain on the mainnet, we can instead store data that includes multiple transactions rather than processing each transaction individually. This is where blockchain rollups come in. They compile a group of transactions, process them off-chain, and turn them into a single piece of data to be submitted back to the Ethereum mainnet. This is why rollups are also referred to as "off-chain scaling solutions." By submitting more transactions in a single piece of data, rollups improve the scalability of Ethereum. There are two types of rollups, each with a different security model. Let’s explore these further.

ZK Rollups

If you're familiar with Ethereum, you may have heard of something called a Zero Knowledge (ZK) rollup. These innovative tools help scale the Ethereum mainnet by taking some of the computational and storage burden off the main blockchain and onto a separate layer 2 protocol.

In a nutshell, ZK rollups allow for the batch processing of thousands of transactions at once. They then produce a "validity proof" to confirm the accuracy of these transactions, and finally, only the essential summary data is submitted to the main Ethereum blockchain. There are two different types of ZK rollups, and we'll delve into those in more detail later on.

ZK-SNARK

ZK-SNARK stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.

In the world of ZK-SNARKS, verifiers and provers work together to ensure the validity of transactions on the Ethereum network. Verifiers constantly challenge provers to confirm the legitimacy of the transactions, and when they are found to be legitimate, the verifiers submit a "validity proof" to Ethereum's layer 1. By utilizing ZK-SNARKs, Ethereum is able to process more transactions due to the small size of the proof and the constant-time verification process.

But what does the acronym "ZK-SNARK" actually stand for?

• "ZK" stands for zero-knowledge, meaning no additional information is needed beyond the validity of the transactions.

• "S" stands for succinct, meaning the proof size is small and allows for quick and easy processing.

• "N" stands for non-interactive, meaning no interaction is required with those verifying the work or transactions.

• "ARK" stands for argument of knowledge, meaning the validity proof provided by the checker holds true and demonstrates the computational strength of ZK-SNARKS.

While ZK-SNARKS provide security and privacy for transactions, they can be vulnerable to certain types of hacking techniques, including those utilizing quantum computing.

ZK-STARK

ZK-STARK stands for Zero-Knowledge Scalable Transparent Argument of Knowledge, the cutting-edge technology created by StarkWare Industries to revolutionize the way transactions are verified and processed.

But what exactly are ZK-STARKs and how do they work? Essentially, they operate in a similar way to ZK-SNARKS by bundling and verifying transactions off-chain and then submitting validity proofs to the Ethereum mainnet. However, what sets ZK-STARKs apart is their improved scalability and transparency compared to their predecessor, ZK-SNARKs. This makes them a powerful tool for anyone looking to take their blockchain operations to the next level.

Let us understand each term of the ZK-STARK acronym.

“S” stands for Scalable, ZK-STARKS are known for their scalability, thanks to their advanced technology that allows them to generate proofs more quickly than ZK-SNARKS. This means that ZK-STARKS can handle more transactions in a shorter amount of time.

“T” stands for Transparent, this is where ZK-STARKS really shine. Unlike ZK-SNARKS, which rely on trusted parties to verify transactions, ZK-STARKS are completely transparent. This makes them more secure and trustworthy for users.

“ARK” stands for Argument of Knowledge, this term is similar to what you'll find in ZK-SNARKS, but ZK-STARKS use a different approach to computation that eliminates the need for trusted setups.

While ZK-STARKS may be faster at generating proofs, they do come with a downside - their proof sizes are larger, which can take longer to verify. However, overall, ZK-STARKS are considered more scalable, secure, and transparent compared to ZK-SNARKS.

On the other hand, ZK-SNARKS have the advantage of being more cost-effective for end users, as they are estimated to only consume 24% of gas fees. Keep in mind that ZK-STARKS are still in their early stages, so it may take some time to determine their true efficiency.

Optimistic Rollups

Optimistic rollups are a type of layer2 scaling solution that aims to improve the scalability of Ethereum by processing transactions off-chain and submitting a compressed version of the transaction data, called "call data," to the main chain.

These rollups operate under the assumption that all transactions are valid by default and are approved to the mainnet, saving time and effort that would otherwise be required for executing and submitting transactions.

However, a challenge period is provided during which anyone can challenge these transactions if they are found to be illegitimate. In this case, the rollup protocol will re-execute the transactions and update the rollup, with the block validator receiving a penalty. Smart contracts on Ethereum control the operation of optimistic rollups, which rely on the Ethereum mainnet for security but may be vulnerable to fraud if there are not enough honest validators or nodes.

Optimistic rollups are relatively easy and cost-effective to implement, in comparison to ZK rollups which require special hardware for producing "validity proofs." In terms of transparency, ZK STARKs and optimistic rollups tend to be more transparent than ZK SNARKs.

A Scalable Future

Blockchain rollups are a game-changing solution that can help increase the scalability of the Ethereum network. There are multiple versions of rollups, each tackling the issue in their own unique way while striving to strike a balance between security and efficiency.

Despite being a relatively new technology, the potential for rollups to transform the blockchain ecosystem is immense. The fact that these solutions exist and are being developed by a wide range of stakeholders shows that the blockchain industry is constantly evolving and expanding its capabilities. As we move into the future, it's exciting to imagine all the ways that blockchain technology could be used to revolutionize various industries. So, let's embrace the future and see what the blockchain has in store for us!

• Data privacy has become an increasingly pressing issue in the digital world. Unfortunately, current systems often exacerbate the problem. Zero-Knowledge Proof (ZKP) offers a solution to this central issue through the use of cryptography.

• ZKP technologies allows businesses and government agencies to verify and authenticate users without collecting sensitive personal information. As a result, individuals can access services without having to share their personal details.

• ZKP and blockchain technology have the potential to revolutionize the way we access data and use the internet, while also empowering individuals to take control of their privacy.

Introduction

In today's digital age, privacy concerns are prevalent in every aspect of our lives. This can range from supplying the bank with your name, salary, and credit score to obtain a loan, to the visa process requiring everything from address proof to bank statements.

But why do we need to reveal so much personal information in order to prove just one fact? It's not just government and banking services that collect your data. With our reliance on digital services, which can easily track our online activity

We live in a society where very little is truly private. Companies use data to sell us more ads or keep us using their platform, which allows them to gather even more data on us and start the cycle again.

While it may be possible to opt out of certain services that collect this data, it's difficult to find a company that does not engage in this practice. However, there are alternatives, such as privacy-focused technologies like Zero-Knowledge Proof (ZKP), that offer a way to maintain privacy in the digital age.

Eliminate the discrepancy with zero-knowledge proof - read on for full explanation.

What is a Zero-Knowledge Proof?

In a nutshell, Zero-Knowledge Proof (ZKP) is a form of cryptography that allows you to verify your identity or specific qualifications to another party without disclosing any personal information. It's a simple yet effective way to protect your privacy while still verifying your credentials. So, how does it work in real life?

Imagine Alice has a special ring that can only be worn by the true owner of the ring. Alice wants to prove to Bob that she is the true owner of the ring, without actually showing the ring to Bob.

Here's how a ZKP could work in this situation:

1. Alice and Bob agree on a series of challenges that only the true owner of the ring would be able to complete.

2. Alice completes the challenges without revealing the ring to Bob.

3. Bob verifies that Alice's solutions are correct, which proves to him that Alice is the true owner of the ring, without Bob actually seeing the ring.

In this example, the ring is the "secret" that Alice wants to prove to Bob that she knows, without actually revealing the secret to him. The challenges that Alice and Bob agree on can be thought of as the equivalent of the math problems in the ZKP case.

ZKPs Application

It's essential to understand that ZKP cannot be completely accurate. Rather, each time the statement is tested, the probability that it is false is reduced.

There are two types of zero-knowledge proof:

1. Interactive proof: requires communication between the prover and verifier to establish their statements

2. Non-interactive proof: utilizes complex cryptography and hashing, allowing the prover and verifier to complete the transaction without direct communication.

While non-interactive proof may be more popular due to its scalability, both types of proof have various applications. Let’s look at some of the ways that zero-knowledge proof can be used:

Blockchain Technology

Blockchain technologies have been revolutionizing the way we handle data and transactions. One type of technology that has gained popularity in the blockchain world is called zero-knowledge proof (ZKP). ZKPs have been used in some of the most well-known private blockchains, such as Zcash, which utilizes a variation called ZK-Snark. This non-interactive technology verifies information across the blockchain without requiring interaction between all of the nodes, making it a practical solution for larger networks.

In addition to being used in privacy blockchains, ZKPs have also been implemented in layer two scaling solutions for Ethereum, such as Immutable-X and Arbitrum. These blockchains bundle transactions to be processed on the main chain, using zero-knowledge to reduce the amount of data in each transaction, improving scalability and reducing congestion.

Identity Verification

Zero-knowledge proof allows individuals to retain ownership of their identity. Rather than requiring a physical identification, such as a driver's license, apps can verify an individual's identity through zero-knowledge proof techniques. By providing only necessary information, individuals can prove their eligibility for certain services or compliance with regulations while protecting sensitive identity data. This can help to decrease the likelihood of fraud and simplify processes like visa applications, loans, rental agreements, and voting.

Conclusion

Web3 aims to empower users on a network rather than allowing centralized entities to hold control. This is where the combination of ZKP and blockchain technology becomes exceptionally relevant - it helps to reclaim our digital autonomy as we increasingly rely on the internet in our daily lives. ZKPs hold great potential for creating privacy-focused digital platforms and, if utilized correctly, have the ability to revolutionize how we utilize the internet.

Demystifying Storage with IPFS

This section will explain a bit technical about IPFS, we will discuss how Filecoin solves each and every drawback of IPFS to become a pioneer in providing storage to Web3 ecosystem afterward

Internet is increasingly centralized, fragile and inefficient. Most cloud storage services are provided by companies that have absolute control (centralized data monopolies) over the data stored on their servers and suffers from vulnerable choke-points (poor data safety).

This model requires users to trust the service provider. They must trust the company to not modify the stored data nor censor them by denying access to the service. Furthermore, the users have no way of verifying that the data has not been manipulated since it was uploaded unless they have a copy of the original data. B…but thanks to the InterPlanetary File System (IPFS), a protocol and peer-to-peer network for storing and sharing data in a distributed file system. Lets break it down a little bit:

A protocol is a standard set of rules which are used for formatting and processing data—description on how data should be packaged. Protocols allow computers to interact with one another. Take a look at HTTP as clearest illustration of a protocol, webpages commonly use this to launch any website on the internet. Through the HTTP protocol, our computers communicate with the server and fetch the webpage.

Now, IPFS is a peer-to-peer network. Peers are non other than individuals and peer-to-peer interaction refers to individuals communicating directly with one another. A peer-to-peer network is a collection of computers that are linked together. This allows computers to share data among themselves. The main objective IPFS is to replace HTTP protocol. Sounds difficult to achieve right?, but lets find out!

How IPFS Works

As said earlier, IPFS accomplishes two things: it stores data and makes it available to the user who requested it. IPFS stores data using content addressing rather than location addressing. Webpages are stored on servers, and each server has an IP address (location). Users get data from the server by making a HTTP request that includes the server's IP address.

IPFS leverages a concept known as content addressing. A CID is a cryptographic hash that is used to label data at the most basic level. When users run data through a hashing algorithm, such as SHA256, they receive a unique string with 256 characters. This string (or hash) is bound to that (data) information. Meaning only the data users passed can produce that string; if by any case users modify a letter or a bit in that data, it can generate a whole new string that cannot be compared to the original text. There are several hashing algorithms, with SHA256 serving as the default.

A CID is composed of a Codec and a Multihash. Codecs are used to encode and decode data. A Multihash consists of three elements:

• Type

• Length

• Value.

The original hash of data is represented by value. IPFS utilizes the SHA2-256 hashing algorithm by default, however additional algorithms are available. This is preceded by the length of the hash. It is then preceded by the kind of hash utilized (SHA2-256 in this case).

Core Mechanismmmm of IPFS

We already know that each blob of data has a unique label (referred as a digital fingerprint). A label simply refers to the data. Now, where is the data kept? Data is stored on computers connected to the network. Let me explain it clearly!

Assume Person A has connected his PC to the network (simply install and launch the IPFS program to connect your computer to the IPFS network), this computer is now referred to as a peer in the network. The person now has a file on his PC named weatherdata and importing the file into the IPFS program. When A does this, a CID is generated for the weatherdata file.

The image shows that after importing a file, person A receive a CID. The text underneath (QmUZJxu6xpoc…) is the file's CID. By using the file CID, Person B can obtain the weatherdata.txt file from Person A. When Person B downloads the file, it is also stored in cache. As a result, if Person C wants to download the file, he may do so from both A and B.

Behind the scenes, IPFS protocol uses DHT(Distributed Hash Table). DHT is a simple key-value table. The peer id is used as the key here (every computer has a unique id called peer id). The value here is the file CID. As a result, every peer possesses this DHT table. So, Person B inputs the CID into the application, and IPFS searches for peers that contain this CID with the DHT table.

The IPFS protocol represents a file as a Merkle Tree, more precisely a Merkle DAG. In summary, if there is a large file, it is chunked into pieces and each piece is assigned a hash. All of these hashes are then added together to generate the root hash, the CID.

IPFS Use Cases and Feasibility

The remaining question after understanding how IPFS works is why we should adopt it and whether IPFS is feasible right now. Interestingly, it functions similarly to how a torrent works. We can fetch a file in parts from two or more peers.

Advantages

• A website can only exist for 100 days, according to statistics. Whereas with IPFs, a file can theoretically live forever since even if you remove it from your machine, it can live on other computers on the network.

• It is simple to share files. For example, if a film is watched by ten individuals in the same room using the HTTP protocol, all ten people will access the same server. This raises the server's load, which is undesirable. Suppose if the people use IPFS, they can download it at a faster rate as so many peers have it.

• Suppose person A want to download a e-book, there are several links available on the internet, but there is no way to verify that all of those URLs include the e-book. There is a decent possibility that the e-book link will may point to another file. With the use of CID, this may be prevented in IPFS. Because an e-book (file) has a single unique CID and all peers with that CID only give the e-book person A desire. As a result, when A utilize CID, the person A will always download the required file.

• IPFS enables the power of decentralization because there is no such thing as a central server.

Drawbacks of IPFS

• To obtain data from a network node, the node must be operational. That is, if a computer in the network is turned off, we cannot access its data. Remember that nodes in the network are often managed by people. A HTTP website, on the other hand, is hosted on a server in a datacenter such as GCP, AWS, or Azure. These servers will continue to operate until we pay.

• To make IPFS as successful as HTTP, we need a large number of peers all around the world, which is currently is not the case. IPFS is only known to few people.

• There is a DNS system and an IPFS-search site, however it is nowhere near Google or other search engines. People may find the data that they’re looking for with ipfs-search. Furthermore, very few individuals use dns as their CID. Knowing a CID is completely useless without DNS because we can't say what data a CID contains.

*clap sound* That’s all for IPFS!. We get an idea that IPFS is no way near to replace HTTPS. But, most important thing is we need to understand that IPFS is a protocol. This protocol acts as a backbone to the decentralized storage system within the numerous project come to the surface, let’s take a look to one of prominent project that uses IPFS to provide storage to the applications: Filecoin.

Introduction: Filecoin

Thanks to its decentralized nature, the power of the network lies in its community. Filecoin itself isn't the gatekeeper for storage, the community is. In short, Filecoin allows anyone to rent-out free space on their computer to other users who are looking to store data. It can be thought as similar to the Airbnb model, which allows anyone to rent out a room in their house or even the entire house.

Filecoin is a decentralized peer-to-peer network that allows its users to store and retrieve data on the internet, robust foundation to store the world most valuable data sets and alternative to conventional cloud storage services. An alternative to costly cloud storage with open platform and a market economy that allowing users to take advantage (store, request, and transfer data) of its unmatched network capabilities via a verifiable marketplace.

The four key features that Filecoin bundles together:

1. Connects clients with storage providers

   Clients and storage providers make deals (i.e., storage agreements) to store or retrieve data using FIL as the medium of exchange; connects people who have excess storage space with people who want to store data, efficiently priced (minimizing financial barriers) and geographically decentralized storage.

2. The network is completely open-source

   Enabling people from all over the world to participate, meaning that anyone can store data on the network or become a storage provider. The price of storage depends on supply and demand.

3. Built on InterPlanetary File System (IPFS)

   Using Filecoin directly requires technical skills, protocols can be built on top of Filecoin and IPFS (adds economic incentives to store files on IPFS). These protocols make interacting with the blockchain easier.

4. The Filecoin protocol runs on an advanced and novel proof system

   A blockchain that incentivizes its miners (i.e. node operators) to store other users data in return for block rewards paid in Filecoin (FIL) tokens using a combination of Proof of Replication (PoRep) and Proof of Spacetime (PoSt), to provide unmatched efficiency and reliability. The miners store data and have to provide frequent cryptographic proofs for it. Users can verify that their data is stored correctly by looking at the cryptographic proofs on the blockchain.

   Proof of Replication (PoRep)

   Proof of Replication combines two proofs: Proof of Storage and Proof of Retrievability. Proof of Storage requires a miner to demonstrate the he is utilizing the requisite amount of storage space to store the data.

   In Proof of Retrievability, a verifier retrieves the file from the prover to ensure that he has it.

   Replica and duplicate are not the same thing. A duplicate is an exact copy of the original, but a replica is a one-of-a-kind copy of the original. That is, we cannot distinguish between duplicates but can identify between replicas. Each replica may be identified. This can be achieved by mathematical operations (such as CID encoding).

   Proof of Spacetime (PoSt)

   PoRep is only performed once, at the moment of data storage. Afterward, PoSt ensures that the storage miner is keeping the data in his storage. PoSt chooses a subset of data and checks to see if it is present in the miner's storage. This procedure is repeated at regular intervals till the conclusion of the term.

Over the previous decade, advances in blockchain technology have enabled applications that were not possible before. Storing valuable data including sensitive information on another machine may appear suspicious at first glance. It is feasible to establish a large-scale data storage network utilizing modern blockchain technology, where it is practically difficult to modify the stored data without breaking the chain.

With Filecoin, they breaks down the data before storing it to ensure that attackers cannot access the data saved by anyone anywhere in the network. As a result, if a malicious actor attempts to access a file stored in the system, they will only see nonsensical data fragments.

There is an enormous amount of data information available, and it is critical to be able to authenticate its veracity. For example, government documents, laws and other legal documents, scientific data and reports, cultural heritage, etc. Moreover, many people’s trust in institutions, governments, and companies has diminished, creating a demand for trustless ways of storing data.

The global cloud storage market is dominated by large tech companies such as Amazon, Microsoft, and Google. These companies’ cloud infrastructure services’ combined yearly revenue exceeds 100 billion USD, although this number includes both storage and computing.

Filecoin competes with large tech companies, conventional tech startups, and other blockchain protocols. Its on-chain competitors include Akash Network, Arweave, Siacoin, and Storj. Filecoin is the largest cloud storage service built on blockchain as measured by storage capacity or valuation, but how much do we have to play with?

Fundamental Filecoin

Filecoin generates revenue by charging fees for computation, storage, and transactions on the blockchain. The fees are paid in FIL. A fraction of the fees are burnt to reduce the supply of FIL, while the remaining is paid to miners. Potential future revenue streams for storage providers may include other fees, such as fees from smart contract apps or decentralized compute services.

The maximum supply of FIL is 2 billion, of which 220 million are in circulation. As indicated in the diagram above, the tokens are allocated to miners, Protocol Labs, investors, and the Filecoin Foundation. Protocol Labs, investors, and the Filecoin Foundation are on a 6-year linear vesting schedule. The miners will receive the tokens allocated to them as block rewards over several decades depending on network usage. The price of FIL, shown in the figure below, peaked in April 2021 and has since fallen near its ICO price.

The figure below shows Filecoin’s circulating market cap (i.e. the amount of FIL in circulation multiplied by its price) and total revenue (i.e. fees paid). Filecoin’s revenue also peaked in April 2022 with 264% growth as active storage deals grew 128% and network storage capacity grew 7%. However it’s still whopping 74% lower on year-over-year basis.

Filecoin’s relatively low current revenue is partially explained by a protocol upgrade that increased the blockchain throughput by an order of magnitude (a mechanism to scale throughput to 10–25x of its original capacity) and by the Chinese authorities’ crackdown on cryptocurrency mining.

A key implication protocol upgrade was that storage proofs were aggregated, which significantly reduced congestion and freed up blockspace. While the protocol upgrade benefited most network participants, it hurt the protocol revenue because it led to a reduction in transaction fees.

The network’s storage capacity has also kept growing, increasing the supply of storage and reducing its cost. The figure below shows how the fees are split between the protocol (i.e. FIL tokenholders) and supply-side participants (i.e. miners). Burning a portion of the fees is comparable to a share buyback and thus counted as protocol revenue, although, supply-side revenue decreased 4% in FIL terms year-over-year, corresponding to a 48% decline in USD terms. Near-zero storage fees impacted supply side revenue since it limited storage providers revenue to just block rewards and tips.

Regardless of overall market conditions, Filecoin’s committed storage capacity has grown steadily during the past year reached over 17.8EiB. This network capacity is equivalent to more than centralized entity. Filecoin’s storage capacity is supplied by over 4,000 decentralized storage providers distributed around the globe (supply dynamics tell only one side of the story about the network activity. The other side is told through Filecoin demand in the context of actively stored data).

Catasthrope

Filecoin continue to onboard demand, it stands a chance to be a prominent provider of decentralized storage and cloud services for Web3 and traditional apps. While decentralized storage is still in its early days, the Filecoin ecosystem continues to thrive, as over +1460 projects are currently being built on Filecoin. Filecoin is being leveraged by several use cases, including:

• NFTs

• Web3

• Gaming

• Metaverse

• Audio/Video.

In the future, the adoption of decentralized storage solutions and the integration of smart contracts built on top may open the door to novel applications. Open data initiatives and decentralized compute may enable the next generation of apps beyond storage. Filecoin’s main goal is to prove its reliability as a storage provider and potentially become an enabler of a wide range of data-intensive services. The protocol is off to an impressive start and its long-term feasibility will depend on several factors including how the endowment performs and the price of FIL. Given Filecoin ambitious mission, the time horizon for judging its success is decades or even centuries.

Takeaways

1. IPFS is a protocol that acts as a backbone to the decentralized storage system.

2. Filecoin competes with large tech companies, conventional tech startups, and other blockchain protocols. Filecoin is the largest cloud storage service built on blockchain as measured by storage capacity or valuation.

3. Filecoin’s main goal is to prove its reliability as a storage provider and potentially become an enabler of a wide range of data-intensive services.

4. Filecoin continue to onboard demand, it stands a chance to be a prominent provider of decentralized storage and cloud services for Web3 and traditional apps.

Referrence

https://docs.ipfs.tech/

https://hackernoon.com/a-beginners-guide-to-ipfs-20673fedd3f

https://filecoin.io/blog/

https://www.theblock.co/post/180450/filecoin-releases-new-content-delivery-network-called-saturn

https://greenpill.substack.com/p/46-filecoin-with-alan-ransil

https://tokenterminal.com/terminal/projects/filecoin

This is where stablecoins come in. Stablecoins are price-stable cryptocurrencies, which means that their market price of a stablecoin is pegged to another stable asset (US dollar), functioning as branch out into mainstream banking to ease the cost and burdens of making payments. For normies (non-crypto), it might not be obvious why stablecoin exist today, in term of search the shed of light—let’s dive into it!

The Holy Grail of Crypto

Fiat currencies are prone to fluctuation of exchange rates, diminishing purchasing power, and inflation. These fluctuations are exacerbated in the realm of cryptocurrencies, which are subject to massive volatility, making them appealing to speculators yet also impractical for mainstream use. In their most simplistic form, stablecoins are simply cryptocurrencies with stable prices measured in fiat currency.

The volatility of a cryptocurrency may fuel speculation—prevents mainstream adoption of applications built on top of protocols, but it subsequently (in the near future) hinders real-world adoption; precludes derivatives, blockchain-based loans, prediction markets, and other longer-term smart contracts that require price stability.

Price volatility may also prevented a currency from retaining its medium of exchange and store of value properties—defining prices for goods and services becomes more difficult as prices fluctuate, deeming the currency unsuitable as a unit of account. Therefore the adoption of stablecoins will be a catalyst to the new decentralized internet becoming mainstream.

But what type of "stable" mechanism is required to counteract volatility?, a perfectly engineered stablecoin is the key to achieve the essential properties of a currency. Graphic bellow summarize it.

As cryptocurrencies, stablecoins use blockchain technology to run their smart contracts. Stablecoins are often backed by an external asset class, while others rely on complicated algorithms to maintain their value. By being on chain, these assets gain the underlying protocol's security, speed, and ease of use while retaining a fixed value in the historically volatile cryptocurrency market; provide stable pairings for foundation of liquidity pools, and are regarded as a core DeFi infrastructure.

Stablecoins are the fundamental Decentralized Finance (DeFi) money component (specific category of cryptoassets), the essential denomination—basic primitive that use various mechanisms to maintain their value at one unit of account

Stablecoins typically have low volatility; serve as the basic building block for simple and much more complex financial products, provide a familiar mechanism to transfer capital and store value that easily bridgeable to traditional finance, and enable investors to exit positions on chain by acting as a safe haven during market volatility, but what is the price for it?.

The Price of Stability

A stablecoin proclaims to be an asset that prices itself rather than an asset that is valued by supply and demand; stablecoins are just currency pegs, and currency pegs are far from impossible—numerous currency pegs are still being maintained. However, practically all major central banks have abandoned currency pegs. This is due in part to the realization that currency pegs are rigid (inflexible) and difficult to maintain, efficiently, no currency peg can be maintained against sufficiently adverse conditions.

The reality is, any peg can be maintained, but only within a particular band range of market behavior. The band may be broader for certain pegs than others. But it’s straightforwardly true that under certain market conditions, it's possible to maintain a peg.

To summarize, an ideal stablecoin should be able to withstand significant market volatility, be relatively inexpensive to maintain, should have easy to analyze stability parameters, and should be transparent to traders and arbitrageurs. These features maximize its real-world stability.

Generally speaking, newer and larger stablecoins do not fail as aresult of the use of an algorithm, but rahter due to “collateral design”. The relative risk with respect to the latter usually boils down to:

1. How much collateral is required by the protocol to mint the stablecoins

2. The quality of the assets making up the collateral

When “stability” comes into play, there is a dimension in which different stablecoin schemes emerge to fill the gaps. There are taxonomy of stablecoins includes three families: fiat-collateralized coins, crypto-collateralized coins, and non-collateralized coins.

Fiat-collateralized

Stablecoins are the most straightforward way to create a stable currency. A certain amount of fiat currency is deposited as a collateral and coins are issued 1:1 against this fiat money, such as USDT, USDC, BUSD. Although this method is simple and robust, it requires a central party (custodian) which guarantees the issuance and redeemability of the stablecoin. Regular audits are needed to ensure that the stablecoin is indeed fully collateralized. Naturally, other pegs backed by interchangeable assets such as gold, silver or oil are also possible; linked to a specific amount of the commodity and stored in a known location—frequently subject to outside audits (collateralized, i.e. PAX Gold, DGX)

Pros:

• 999999999999% price-stable

• Simplest (a big virtue!!!)

• Less vulnerable to hacks, since no collateral is held on the blockchain

• Comodity stablecoins give investors the opportunity to trade tangible assets, along with the ability to accumulate value over time

Cons:

• It can affected by the health of the asset they’re pegged to. For instance, If the value of the USD is debased, it affects the value of USDT and other off-chain collateralized stablecoins.

• Centralized — need a trusted custodian to store the fiat (otherwise vulnerable to brick and mortar theft)

• Regulation always poses a risk with these centralized—need regular audits to ensure transparency

• Counterparty risk—the value of the stablecoin will spiral downwards if the company's cash reserves don't exist

• Expensive and slow liquidation into fiat

Crypto-collateralized

Stablecoins work quite similar to their fiat-counterparts, with the exception that the collateral is not an asset in the “real-world” but rather another cryptocurrency. To account for the price-volatility of the underlying crypto-collateral, these stablecoins are often over-collateralized. The most popular crypto-collateralized stablecoin currently is DAI; minted by users who deposit assets like ETH and USDC as collateral into the Maker protocol. In doing so, users effectively take out a loan in DAI by collateralizing their crypto assets.

However, in case of a black swan event, where the underlying asset becomes completely worthless, the stablecoin would collapse too. In this case the loss-exposure would even be amplified for the stablecoin owners because of the over-collateralization. This is also why some experts are strongly discouraging this approach.

Pros:

• More decentralized (trustless)—there is no counterparty risk, resistant to censorship and government regulation

• Can liquidate quickly and cheaply into underlying crypto collateral (just a blockchain transaction)

• Very transparent — easy for everyone to inspect the collateralization ratio of the stablecoin

• Can be used to create leverage

Cons:

• Can be auto-liquidated during a price crash into underlying collateral

• Less price stable than fiat, over-collateralized to manage volatility

• Tied to the health of a particular cryptocurrency (or basket of cryptocurrencies)

• Inefficient use of capital

• Most complexity

Non-collateralized

Stablecoins are not actually “backed” by anything other than the expectation that they will retain a certain (the assets backing up the outstanding stablecoins), often says as “algorithmic stablecoins”. One often-mentioned solution to non-collateralized stablecoins is the seigniorage shares approach. This concept builds on smart contracts that algorithmically (it uses both for liquidations and to maintain the stablecoin peg) expand and contract the supply of the price-stable currency much like a central bank does with fiat currencies, but in a decentralized manner, for reference: USTC, USDN, AMPL, FEI, FRAX.

Pros:

• No (need to lock up) collateral required—capital efficient

• Most decentralized and independent (not tied to any other cryptocurrency or to fiat)

• Just like crypto-collateralized stablecoins—do not have counterparty risk

• The seigniorage mechanism is defined by audited, open-source, smart contract code that can be viewed by everyone

Cons:

• Requires continual growth

• Most vulnerable (high-risk) to crypto decline or crash, and cannot be liquidated in a crash

• Difficult to analyze safety bounds or health

• Some complexity

Utopian Stablecoin

Despite the volatility that the crypto market is known for, the growth of the stablecoin market is unphased by this unpredictability. Market capitalization growth is at an exponential pace despite the extremely low adoption outside of the crypto industry.

Stablecoin are here to stay; represent a large growth sector in digital assets, provides a crucial on-ramp to the crypto ecosystem. But as In times of high volatility, the chances of breaking the peg increases—especially for those stablecoins that are not sufficiently backed by assets in their treasury. This is particularly concerning when we realize that high volatility in crypto markets is very common. As a result, there is a sense of doubt that has been cast over the industry.

Some may argue stablecoin critics suspect that stablecoins, particularly crypto-collateralized stablecoins, are inevitably doomed to fail, because even over-collateralized stablecoins would collapse in the face of a black swan event. Others doubt that pegging a cryptocurrency to a fiat currency such as the US Dollar is the right fundamental problem to solve in the first place.

With this argument, an actual stablecoin should not be stable in relation to a fiat currency, but rather remain stable in its purchasing power. Only time will tell whether a mainstream stablecoin emerges.

Smart contracts might help maintain the (constant) value of a stablecoin and make it a viable unit of account.

The outstanding problem, however, is that smart contracts brings a unique set of risks to the table ranging from treasury management to censorship and no team has been able to develop a universally accepted stablecoin that does not compromise features of either privacy, security or decentralization.

Another concern that smart contracts represent is that the currency control can be compromised in such a way that causing the treasury could be mismanaged. This manipulation might involve currency hyperinflation or the removal of treasury funds. In the governance case related to the treasury, compromise of the stablecoin can be caused through a failure in governance to act in the best interests of the stablecoin. If the coin contains treasury reserves that are maintained in secrecy and do not have transparent audits, holders may be concerned since this is seen as less transparent than central banking.

Crypto collateralized stablecoins offer transparency into the governance and treasury but if they are using on-chain governance it is feasible to game the governance architecture and essentially take control of the protocol managing the stablecoin treasury.

On-chain governance has been exploited with devastating effects, drawing attention to the necessity for careful vigilance with all on-chain components of the stablecoin.

In the centralization risk, certain stablecoins have the capacity to censor users the use of them may not be desirable as this is the same effect as having their assets frozen. It reflect with the assumption that people can have custody over the stablecoin isn’t a given with every design. For example, financial institution may utilize a stablecoin to perform transactions on your behalf, but the institution retains custody of the stablecoins.

Institutions may decide that they do not want custody of public forms of crypto but instead want to capitalize on the strengths of crypto by using private blockchains and tokenized assets defined by an institution or group of institutions such as banks, whereas the government may choose to ban certain digital assets in favor of government-issued tokens there is a risk that governments may choose technology managed by the state (central bank denominated currencies depending on people jurisdication).

The crypto industry seeks consistent and clear regulation across a wide range of jurisdictions that span not just countries but smaller authorities such as states and provinces, which further complicates compliance.

Modernization of regulatory frameworks must embrace the distinct properties of digital assets while also acknowledging that many of the existing products are designed to be genuinely decentralized and trustworthy on an international scale.

Until laws are reworked, or new laws are introduced, the crypto industry still faces a degree of uncertainty until more clarity is in place. The crypto industry is more advanced these days, and lobby groups are more common to advocate for the use of digital assets and finance.

As for assessing the quality of the assets, it’s useful to separate “undercollateralized pegged coins” (including those using endogenous collateral) from the categories of “algorithmic” and “stablecoins” to add more nuance to policy discussions prioritizing consumer protection and supporting innovation.

A successful implementation of a stablecoin could potentially be a major catalyst for fundamental long-term innovation in the crypto ecosystem. Lack of price stability prevents cryptocurrencies from displacing most forms of fiat money and enabling decentralized applications, stablecoins can provide the solution. A broadly established fiat-free currency that’s price stable will likely challenge the legitimacy of weak government issued currencies around the world—until then, let’s debunking myth around this industry.

Reference

https://decrypt.co/resources/stablecoins

https://ethereum.org/en/stablecoins/

https://medium.com/dragonfly-research/a-visual-explanation-of-algorithmic-stablecoins-9a0c1f0f51a0

https://medium.com/dragonfly-research/fighting-to-be-stable-the-evolution-of-stablecoins-aca81fb432f9?source=post_page-----9a0c1f0f51a0----3----------------------------

https://newsletter.banklesshq.com/p/the-stablecoin-wars-5c4

https://newsletter.banklesshq.com/p/rise-of-the-cryptodollar

https://www.theblock.co/data/decentralized-finance/stablecoins

Farming as a Service (FaaS) for dummies

DeFi is an incredible technology that can be extremely lucrative—indices that they are building people can passively invest in, while FaaS is the next wave about to take off. FaaS allowing the averse investor to participate in some of the deep end DeFi stuff, the closest analogy to FaaS are hedge funds. People give hedge funds money, and they should be able to outperform the market (in theory). They have more resources and the time to keep up with the markets. People sit back and reap the rewards.

Technically, by owning a FaaS token, people can own part of the treasury that the team uses to gain yield in various DeFi protocols and get paid dividends based on farming profits as well as transaction volume in the native token itself (generally).

FaaS protocols are offering this service for DeFi. A team of DeFi experts will take people money (put into cross chain staking, yield farming, trading with leverage, or asset management), and invest it on behalf of its investors.

Remember that not all “farmers” are equal. They all have different strategies to generate yield.

They have the time and access to keep up with the latest narratives and "alpha" in the DeFi space. Sound good? Let's see how Reimagined Finance (ReFi) formula works!

Simplyfing to the extreme: ReFi Protocol

ReFi is a crypto investment management protocol listed on the Ethereum (ERC20) and BNB (BEP20) chain, which makes it easy for anyone to start earning farm yield distributions without the complexities of deploying capital on multiple chains and protocols.

Investors simply purchase and own $ReFi tokens, and they can start receiving periodic farm distributions. These distributions are derived from the farming profits achieved by their investment team. ReFi also offers treasury management services for various crypto / DeFi protocols.

ReFi makes it easy for the common retail investor to gain exposure to DeFi passive income strategies.

This is a sector within DeFi that aims to offer accessible and sustainable distributions to investors via yield farming and asset management. Their native token, $ReFi, acts as a proof of ownership of a percentage of future distributions.

Investors share of distributions is directly proportional to ownership of the total $ReFi token supply of 1 billion (1,000,000,000). For instance, if investors own 10 million $ReFi tokens (1% of total supply), they will receive 1% of future distributions.

How ReFi protocol works

The ReFi team subsequently deploys investor capital onto various chains and protocols to generate yield—investors participate in the dividend distribution of a managed fund, which deploys DeFi's capital, actively managing risk, positions, distributions—they earn from the price appreciation of the token; distributions paid out by the project. Distributions are made up of Reflections and Farm Profit Distributions.

When investors buy / sell $ReFi protocol tokens (watch out for gas fees and slippage), they are taxed 12% on their transactions immediately. The graphic below summarizes it.

The 12% tax is further channeled into 3 buckets:

1. Reflections

   Distributions to current ReFi holders in proportion to their ReFi token holdings.

2. Treasury

   ReFi grows the treasury via yield farming—utilized by their farming team to gain yield across multiple chains / protocols.

   The protocol pays investors a share of the treasury profits through distributions. Utilizing the Treasury, there's now a war chest that'll be put to work through.

3. Liquidity Pool.

   Funds ReFi liquidity pool on exchanges it is listed on. As a recap, distributions are made up of Reflections and Farm Profit Distributions.

   Reflections: derived from first bucket of the 12% tax from all transaction. This is dependent on volume.

   Farm Profit Distributions: derived from yields gained by the farming team.

Thereafter, once there's a profit, the protocol may choose to issue investors a dividend (kinda like how some stocks do). Investors can choose between 2 options to receive their distributions; receive $ETH using the claim button or receive the same value in ReFi native tokens using the compounding button.

This freedom of choice is badass, most are paying out in their native tokens rather than $ETH. This means they're not printing inflationary tokens, and there's no downward (naturally reduced) selling pressure on the native token. Most protocols have a fixed supply, and some are even making it deflationary.

Hypothetically; consistent sell pressure on the native token mean the mark-to-market losses on investment are larger than dividends investors could receive.

As holders have the option to claim in $ETH and use it for other purposes (i.e. buy NFTs, convert to fiat etc.), it incentivizes them to hold ReFi tokens to continue receiving distributions from all buy / sell transactions and farm profit distributions.

F*ndamental things

These are just a few of the numerous factors which have convinced some investors to be bullish on choose ReFi as their preferred long-term FaaS investment. TLDR:

• Excellent team with doxxed dev

• Fully committed core team and moderators

• Transparent farmers

• Consistent and Transparent project updates

• Active and cohesive community

• Strong connections with DeFi stakeholders real value created for investors

The core team is also exploring other audit providers to further strengthen investors confidence and trust in the project. The team continues to explore ways to enhance its security and level of transparency with the community—ReFi has been fully audited by Certik.

ReFi has also officially onboarded Fireblocks for the custody and security of its treasury assets. It joins some of the largest institutional investors in crypto as it starts its next planned stage of growth; ReFi moving from multi-signature wallet security to Fireblocks shows its intent to maintain institutional-grade security and protection of its treasury.

ReFi attracted investment from numerous institutional investors. Since inception, DAOs such as TrexDAO, MidasDAO, TempoDAO and VCs such as Collective Ventures have invested into ReFi and continue

Puts on the *HATER* hat

Highlight a few “critics” of ReFi protocol:

There are no “moats” that separate ReFi from each other, the community is tribalistic because of the reflections, identical paying to join the Club—basically, this is the most controversial part about FaaS. Every time investors buy or sell the token, a % of it gets paid to the existing holders. It rewards loyalty.

This is useful for the initial ramp-up phase, but it does give off p*nzishhh energy.

The main differentiator is the lead Farmers. When investors catch a bags on ReFi or FaaS projects in general, they are betting to ensure that the "lead farmers" can outperform any market conditions, even in bearish times (guided to protect investors)—showcasing immense foresight and consistency, avoiding bid drawdowns and putting bags safely with lower risk, or trading both directions (while the bull run and greed was rampant), b..but after all, what happens if the lead farmers leave?

The farmers affect the performance, It's looks like a higher-risk investment in a risk-off environment.

Investors are taxed on the buying & selling, there is 12% tax on all transactions—watch out for liquidity / slippage. This tax is then channeled directly into the ReFi Treasury, which will be deployed by the ReFi investment team onto various chains and protocols to generate profits and yield for investors meaning that the protocol has to outperform the taxes + gas fees.

Investors need to purchase a minimum of 10,000 $REFI on Ethereum (ETH) chain (11,353 $REFI after accounting for 12% taxes) and 1 $REFI on Binance (BNB) chain to qualify for distributions.

The great part about FaaS project is their transparency. Every FaaS project shares its trades and what's in its treasury. Look through ReFi dashboards, medium articles, and Twitter accounts to see how they generate yield, in other words, their investments are public.

Retail investors even can copy some of the trades.

Let's zoom into Marketcap and then extrapolate into the future—Marketcap to Treasury Ratio; how large is their treasury compared to the market cap? It's kinda like TVL / Market Cap to measure, this is one way to measure value and if investors getting a "good deal". Using historical data to get a sense for how volume might grow with market valuation.

But these numbers are hard to compare; some protocols have already paid off distributions and dividends. The treasury might not reflect their true value, and some of the data is hard to find.

Rising Tide Digital has taking historical data; relating volume, market cap, and treasury—so we can take a look little bit the Market Cap : Treasury Ratio, and “know” a volume coefficient for a given treasury and market cap value. Graph bellow summarized it well.

Since Rising Tide Digital don't have data to fit for future volume and market valuations they assume ReFi become linear and similar growth rate after that point as time moves forward.

An important thing to note is how the catalyzing growth wave of volume will or can be on the overall growth of the treasury and acceleration of the exponential growth. Along with how the market valuation magnitude may also accelerate this growth.

Takeaways

1. ReFi or basically FaaS project operates like a hedge fund for DeFi.

2. Understand ReFi tokenomics (yeah due dilligence tokenomics is when people do economics while really high) before investing especially how their tax structure works.

3. Learn how the ReFi protocols differentiate from each other (i.e. Multi-Chain Capital, Scary Chain Capital).

4. Investors are basically betting on the ReFi farmers and team experience.

reference

https://www.reimagined.fi/

https://reimaginedfi.medium.com/

https://twitter.com/ReimaginedFi

The investment landscape can be extremely dynamic and ever-evolving. In the case of collective capital acquisition with diverse investment products, it might obfuscate long term lucidity and decision-making, resulting in lackluster results. But those who take the time to understand the basic principles and the different asset classes stand to gain significantly over the long haul.

Investment club requires a shared understanding in term of commitment (mission, values, and strategy) as crucial aspect to invest collectively. But when it comes to investing itself, one of the challenges that individuals or groups will face with the investment club is that it will be confusing or frustrating because of all the new deals created based on speculative and the misuse of existing, well-known capital allocation.

That confusion may deter a lot of people who can help push the club forward with a diverse range of skill sets and outlooks.

To begin, investment club need to distinguish different types of investments and what rung each occupies on the risk ladder. At present, we have different asset classes that we can invest upon (we truly believe in) to potentially grow our money in long-term. Some of the popular ones that have been emerging aside from equity investments are cryptos and NFTs (Non-Fungible Tokens). Let’s look at what it means to invest in these 3 asset classes and what difference we can find out.

Traditional Equity

Equity represents the value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debts were paid off.

This is the traditional method of investing in a traditional stock market where I can invest on companies that I believe in. “I believe” is a term which I would define it as where the company’s fundamentals are good. By that I mean:

• If the company’s business model is sustainable long-term or not,

• Can it be replicated,

• Who are the key players/peers that it would compete with,

• How far can I envision company’s goals and,

• To what extent I can trust the management?

The most important aspect is the financial health of the company, can it survive if any uncertainties like the pandemic, occurs. Also, these are shares of ownership in a company. If investment club buy equities, they may receive direct payments from these shares—known as dividends. Investment club also benefit for selling equities, thus realizing some gains. Equities represent companies globally and many investors are able to build well-diversified portfolios with these securities.

Stocks could help investing club to beat inflation in the long term provided option to select the right stocks. Long term compounding works in favour to generate inflation—beating returns and the same is evident in the case of well managed portfolios.

Equity investing is much stable investing asset class as it is regulated by bunch of boards/SECs to mitigate volatility.

Tokens

A token is a unit value with virtual representation of a particular asset (tradable and fungible).

Token It’s the encapsulation of unit of value universally recognized and enforced by the system that issues it—give people more than just monetary value, they give people social and cultural value as well. In many ways, it’s the greater catalyst to activating capital.

In other words, a token doesn’t necessarily have any intrinsic value but relative value. Sometimes, tokens function like equity in a company, and investing in a token is akin to holding a stake in the project’s potential upside.

Tokens are barely a new concept. When the respective systems fail to enforce and recognize the value of these tokens, the jurisdiction can step in to protect the token holders.

There are different kinds of tokens, including:

• Platform tokens, support dapps built on the blockchain. Example: DAI

• Security tokens, represent legal ownership of a physical or digital asset. Example: Blockchain Capital, Sia Funds, Science Blockchain

• Transactional tokens, serve as units of account and are exchanged for goods and services. Example: Bitcoin, Ethereum

• Utility tokens, integrated into an existing protocol and used to access the services of that protocol. Example: Filecoin, Chainlink, Auorora

• Governance tokens, fuel blockchain-based voting systems. Example: MakerDAO, Uniswap Governance, Compound

All designed types serve specific purposes, and the use for some different things can even overlap. Tokens are code, and as such, can be programmed to do nearly anything its creator dreams up. To trade and investing on token with confidence, investment club need a complete understanding of what’s working in their portfolio**—security is a top priority, but so is managing and clarity.**

Allocating capital to Invest in token are something that feels obvious in hindsight, but extremely nuanced at inception. Owning a token of a promising project can really bring investment club an extremely attractive gain that is multiplied many times over. Therefore, whether it is worth investing in tokens is quite unequivocal meaning if investment club gather information to start strict due diligence and skepticism in this space is vital; understand (asses) the risks and are familiar with at least the basic principles of tokenization investing is a must; although it’s extremely less cumbersome to invest in crypto tokens, there is a huge volatility that investment club need to be ready for during uncertain times.

This is a high-risk asset class, apart from other stable-coins. So, this could possess a greater risk to investment club portfolio at least in the short-term which not every investor would like to face.

NFTs

NFT is stand for Non-fungible token, they can act as a certificate of authenticity for manifestations of ideas (jpegs and other digital files, artwork, writing, etc.).

NFTs give physical properties to digital items, making them unique, ownable, and tradeable, in addition to digital properties like programmability and composability. Over time, NFTs will represent things that are more useful than the things they represent today, but even today, the collectibles use case is a real one.

NFTs are much more than digital art—the identity and purpose being rebirthed in this moment is most appropriately expressed in the art communities. Right now, digital ownership of art as permanent visuals is happening because of the blockchain. The technological tools being developed right now are much akin to the more rudimentary yet no-less revolutionary tech tools developed in the Industrial Revolution.

NFTs are still a very young technology, but they’ve already driven a tremendous amount of volume and inspired a ton of creativity, not just in terms of art, but in terms of the technology itself. NFTs are a broad category, and within it, there are fascinating models emerging.

As NFTs have taken off, it’s become increasingly clear that they represent not just a fleeting trend but an entirely new form of consumer product.

In market terms, this certification strengthens consumer confidence that one is actually. Investing on NFTs are booming, but it won’t last forever to willing to lose. This ecosystem is volatile and changes quickly despite having gained significant capital, experience, and risk tolerance

Investment club should determine that investing NFTs, especially notable “blue chips” NFTs (BAYC, Crypto Punks, Clone X) they might prove to be more “stable” investments, but larger opportunity lies in being early to the next big thing. Signal to look for when it comes to investment club:

• Project is affiliated with proven, doxxed leaders

• Volume at launch

• Notable wallets that buy into the project

• Meaningfully engaged community

• Differentiated roadmap

Unifying all NFTs holding on investment club is critical, because NFTs can be so volatile, it’s also necessary to have visibility into their floor prices and unrealized value. The mind is naturally geared towards selling when there are profits to be made. It’s important to consider holding but investment club can lose more by selling too early than individual would lose by holding a project that goes to zero. However, investment club must be careful about leaving before any major project milestone that could pump the price.

Investment club should do the necessary sanity checks like who the artist is, his past Proof of Work (PoW), how the community is aligned and engaged with the NFT project – the investment would remain a riskier one.

Collective Mind with Investing

Investment club as DAOs will radically transform the future of investing—decentralized, democratized, and community driven. Web3 will become the catalyst for this shift. One of which is strongly emerging with Investment Clubs is Syndicate, they has launched their remarkable product; investment club—enable friends, angels, and web3 communities to launch native investment clubs as DAOs on protocol to benefiting from pool their capital and investing in the things they care about together—built with the full power and composability of web3 to creating and relying on strong consensus mechanisms.

Syndicate is an interesting protocol for investment clubs that can be created, managed, and recorded on-chain enabling transparency, enhancing security and empowering composability features in the future. It is not just a power tool for investment clubs investing in tokens or NFTs but also for off-chain investment that clubs make in VC funding or angel investing into startups or pre-public companies.

Syndicate's product is really cool, but the more remarkable syndicate has shift in investment mentality. Our ability to create values has always been tied to the ways in which we make deals about, and with our shared records, because blockchain allow us to define succinctly our shared truths and because the record itself is shared across all participants, there is a whole "truth space" we can explore.

These systems are so enmeshed in our lives that we do not even recognize them. Not because they are hidden, but because they are ubiquitous—these systems shape us. And yet, our history is littered with systems we've outgrown. Often it's a new technology that enables transition. Something better is developed and old systems fail. Changing systems to accumulate capital and invest collectively is what we humans do.

Always remember that one of the primary functions of an investing club is diversification within your larger asset portfolio and beneath consensus—collective thinking. If an investing club does not believe an asset growth will outpace the industry, it may not be advisable to buy. A risk-adjusted portfolio balances stable assets with higher-growth bets.

Investment clubs should have clarity about what is truly valuable to them—sharing ideas, learning together, increasing buying power, sharing risk, and lowering transaction costs—as well as why they require a high level of social trust, how to sustain it, and how to increase access is a simple first step in the right direction.

Reference

https://corporatefinanceinstitute.com/resources/valuation/equity/

https://www.coinbase.com/learn/crypto-basics/what-is-a-token

https://www.forbes.com/advisor/investing/cryptocurrency/nft-non-fungible-token/

https://guide.syndicate.io/en/