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[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default” custom_padding=”||0px|||”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n
[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”3_5,1_5,1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”3_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n
[\/et_pb_text][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/Delaware-Certificate-SourceLess-Inc.jpg” title_text=”Delaware Certificate SourceLess Inc” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/Delaware-Certificate-SourceLess-Inc.jpg” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fold”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/Quality-Certificate-for-SourceLess-Inc.jpg” title_text=”Quality Certificate for SourceLess Inc” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/Quality-Certificate-for-SourceLess-Inc.jpg” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fold”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”3_5,1_5,1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”3_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n
[\/et_pb_text][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2022\/02\/sourceless-inc-SRL-350px.jpg” title_text=”sourceless-inc-SRL-350px” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2022\/02\/sourceless-inc-SRL.jpg” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fold”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”3_5,1_5,1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”3_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n
[\/et_pb_text][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/Stock-Certificate-Ccoin.jpg” title_text=”Stock Certificate Ccoin” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/Stock-Certificate-Ccoin.jpg” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”flip”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”3_5,1_5,1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”3_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n
Read the full <Blockchain Ecosystem Report> [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/EUBlockchain-observatory-Ccoin-Network-Blockchain-Companie.jpg” title_text=”EUBlockchain observatory – Ccoin Network Blockchain Companie” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/03\/EUBlockchain-observatory-Ccoin-Network-Blockchain-Companie.jpg” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”flip”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”3_5,1_5,1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”3_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/04\/SourceLess-Blockchain-cryptography.jpg” title_text=”SourceLess Blockchain – cryptography” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/04\/zk-SNARKs-definition-work.pdf” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”flip”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=”3_5,1_5,1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”3_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default” animation_style=”fade”]<\/p>\n [\/et_pb_text][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_image src=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/04\/SourceLess-Hybrid-Blockchain-DEFinition.jpg” title_text=”SourceLess Hybrid Blockchain DEFinition” url=”https:\/\/ccoin.uk\/wp-content\/uploads\/2021\/04\/SourceLess-Hybrid-Blockchain-DEFinition.pdf” _builder_version=”4.7.7″ _module_preset=”default” animation_style=”flip”][\/et_pb_image][\/et_pb_column][et_pb_column type=”1_5″ _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default” custom_padding=”||6px|||”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_divider _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_divider][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default” custom_padding=”||15px|||”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default”]<\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default”]<\/p>\n Blockchain Consensus Algorithm DEFinition<\/strong><\/p>\n \u00a0<\/strong><\/p>\n A consensus algorithm is a mechanism that allows users or machines to coordinate in a distributed setting. It needs to ensure that all agents in the system can agree on a single source of truth, even if some agents fail. In other words, the system must be fault-tolerant (see also: Byzantine Fault Tolerance Explained).<\/p>\n In a centralized setup, a single entity has power over the system. In most cases, they can make changes as they please \u2013 there isn\u2019t some complex governance system for reaching consensus amongst many administrators.<\/p>\n But in a decentralized setup, it\u2019s a whole other story. Say we\u2019re working with a distributed database \u2013 how do we reach an agreement on what entries get added?<\/p>\n Overcoming this challenge in an environment where strangers don\u2019t trust each other was perhaps the most crucial development paving the way for blockchains. In this article, we\u2019ll take a look at how consensus algorithms are vital to the functioning of cryptocurrencies and distributed ledgers.<\/p>\n Consensus algorithms and cryptocurrency<\/strong><\/p>\n In cryptocurrencies, users\u2019 balances are recorded in a database \u2013 the blockchain. It\u2019s essential that everyone (or more accurately, every node) maintains an identical copy of the database. Otherwise, you\u2019d soon end up with conflicting information, undermining the entire purpose of the cryptocurrency network.<\/p>\n Public-key cryptography ensures that users cannot spend each other\u2019s coins. But there still needs to be a single source of truth that network participants rely on, to be able to determine whether funds have already been spent.<\/p>\n Satoshi Nakamoto, the creator of Bitcoin, proposed a Proof of Work system to coordinate participants. We\u2019ll get into how PoW works shortly \u2013 for now, we\u2019ll identify some of the common traits of the many consensus algorithms in existence.<\/p>\n Firstly, we require that users that want to add blocks (we\u2019ll call them validators) provide a stake. The stake is some kind of value that a validator must put forward, which discourages them from acting dishonestly. If they cheat, they\u2019ll lose their stake. Examples include computing power, cryptocurrency, or even reputation.<\/p>\n Why would they bother risking their own resources? Well, there\u2019s also a reward available. This usually consists of the protocol\u2019s native cryptocurrency and is made up of fees paid by other users, freshly-generated cryptocurrency units, or both.<\/p>\n The last thing we need is transparency. We need to be able to detect when someone is cheating. Ideally, it should be costly for them to produce blocks, but cheap for anyone to validate them. This ensures that validators are kept in check by regular users.<\/p>\n <\/p>\n Types of consensus algorithms<\/strong><\/p>\n Proof of Work (PoW)<\/strong><\/p>\n Proof of Work (PoW) is the godfather of blockchain consensus algorithms. It was first implemented in Bitcoin, but the actual concept has been around for some time. In Proof of Work, validators (referred to as miners) hash the data they want to add until they produce a specific solution.<\/p>\n A hash is a seemingly random string of letters and numbers that\u2019s created when you run data through a hash function. But, if you run the same data through it again, you\u2019ll always end up with the same output. Change even one detail, though, and your hash will be completely different.<\/p>\n Looking at the output, you can\u2019t possibly tell what information was fed into the function. They\u2019re therefore useful for proving that you knew a piece of data before a certain time. You can give someone its hash, and when you later reveal the data, that person can run it through the function to make sure the output is the same.<\/p>\n In Proof of Work, the protocol sets out conditions for what makes a block valid. It might say, for instance, only a block whose hash begins with 00 will be valid. The only way for the miner to create one that matches that combination is to brute-force inputs. They can tweak a parameter in their data to produce a different outcome for every guess until they get the right hash.<\/p>\n With major blockchains, the bar is set incredibly high. To compete with other miners, you would need a warehouse full of special hashing hardware (ASICs) to be in with a chance of producing a valid block.<\/p>\n Your stake, when mining, is the cost of these machines and the electricity required to run them. ASICs are built for one purpose, so they have no use in applications outside of cryptocurrency mining. Your only way to recoup your initial investment is to mine, which yields a significant reward if you successfully add a new block to the blockchain.<\/p>\n It\u2019s trivial for the network to verify that you have indeed created the right block. Even if you\u2019ve tried trillions of combinations to get the right hash, they just need to run your data through a function once. If your data produces a valid hash, it will be accepted, and you\u2019ll get a reward. Otherwise, the network will reject it, and you\u2019ll have wasted time and electricity for nothing.<\/p>\n \u00a0<\/strong><\/p>\n Proof of Stake (PoS)<\/strong><\/p>\n Proof of Stake (PoS) was proposed in the early days of Bitcoin as an alternative to Proof of Work. In a PoS system, there\u2019s no concept of miners, specialized hardware, or massive energy consumption. All you need is a regular PC.<\/p>\n Well, not all. You still need to put some skin in the game. In PoS, you don\u2019t put forward an external resource (like electricity or hardware), but an internal one \u2013 cryptocurrency. Rules differ with every protocol, but there\u2019s generally a minimum amount of funds you must hold to be eligible for staking.<\/p>\n <\/p>\n From there, you lock up your funds in a wallet (they can\u2019t be moved while you\u2019re staking). You\u2019ll typically agree with other validators on what transactions will go into the next block. In a sense, you\u2019re betting on the block that will be selected, and the protocol will choose one.<\/p>\n If your block is selected, you\u2019ll receive a proportion of the transaction fees, depending on your stake. The more funds you have locked up, the more you stand to gain. But if you attempt to cheat by proposing invalid transactions, you\u2019ll lose a portion (or all) of your stake. Therefore, we have a similar mechanism to PoW \u2013 acting honestly is more profitable than acting dishonestly.<\/p>\n Generally, there aren\u2019t freshly-created coins as part of the reward for validators. The blockchain\u2019s native currency must thus be issued in some other way. This can be done either via an initial distribution (i.e., an ICO or IEO) or by having the protocol launch with PoW before later transitioning to PoS.<\/p>\n To date, pure Proof of Stake has only really been deployed in smaller cryptocurrencies. Therefore, it\u2019s unclear if it can serve as a viable alternative to PoW. While it appears theoretically sound, it will be very different in practice.<\/p>\n Once PoS is rolled out on a network with a large amount of value, the system becomes a playing field of game theory and financial incentives. Anyone with the know-how to \u201chack\u201d a PoS system would likely only do so if they could gain from it \u2013 therefore, the only way to find out if it\u2019s feasible is on a live network.<\/p>\n We\u2019ll soon see PoS tested on a large scale \u2013 Casper will be implemented as part of a series of upgrades to the Ethereum network (collectively known as Ethereum 2.0).<\/p>\n \u00a0<\/strong><\/p>\n Other consensus algorithms<\/strong><\/p>\n Proof of Work and Proof of Stake are the most-discussed consensus algorithms. But there\u2019s a wide variety of other ones, all with their own advantages and disadvantages.<\/p>\n <\/p>\n https:\/\/academy.binance.com<\/a><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_divider _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_divider][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default”]<\/p>\n Hybrid Yield Farming in Decentralized Finance (DeFi) DEFinition<\/strong><\/p>\n \u00a0<\/strong><\/p>\n The Decentralized Finance (DeFi) movement has been at the forefront of innovation in the blockchain space. What makes DeFi applications unique? They are permissionless, meaning that anyone (or anything, like a smart contract) with an Internet connection and a supported wallet can interact with them. In addition, they typically don\u2019t require trust in any custodians or middlemen. In other words, they are trustless. So, what new use cases do these properties enable?<\/p>\n One of the new concepts that has emerged is yield farming. It\u2019s a new way to earn rewards with cryptocurrency holdings using permissionless liquidity protocols. It allows anyone to earn passive income using the decentralized ecosystem of \u201cmoney legos\u201d built on Ethereum. As a result, yield farming may change how investors HODL in the future. Why keep your assets idle when you can put them to work?<\/p>\n So, how does a yield farmer tend to their crops? What kind of yields can they expect? And where should you start if you\u2019re thinking of becoming a yield farmer? We\u2019ll explain them all in this article.<\/p>\n <\/p>\n What is yield farming?<\/strong><\/p>\n Yield farming, also referred to as liquidity mining, is a way to generate rewards with cryptocurrency holdings. In simple terms, it means locking up cryptocurrencies and getting rewards.<\/p>\n In some sense, yield farming can be paralleled with staking. However, there\u2019s a lot of complexity going on in the background. In many cases, it works with users called liquidity providers (LP) that add funds to liquidity pools.<\/p>\n What is a liquidity pool? It\u2019s basically a smart contract that contains funds. In return for providing liquidity to the pool, LPs get a reward. That reward may come from fees generated by the underlying DeFi platform, or some other source.<\/p>\n Some liquidity pools pay their rewards in multiple tokens. Those reward tokens then may be deposited to other liquidity pools to earn rewards there, and so on. You can already see how incredibly complex strategies can emerge quite quickly. But the basic idea is that a liquidity provider deposits funds into a liquidity pool and earns rewards in return.<\/p>\n Yield farming is typically done using ERC-20 tokens on Ethereum, and the rewards are usually also a type of ERC-20 token. This, however, may change in the future. Why? For now, much of this activity is happening in the Ethereum ecosystem.<\/p>\n However, cross-chain bridges and other similar advancements may allow DeFi applications to become blockchain-agnostic in the future. This means that they could run on other blockchains that also support smart contract capabilities.<\/p>\n Yield farmers will typically move their funds around quite a lot between different protocols in search of high yields. As a result, DeFi platforms may also provide other economic incentives to attract more capital to their platform. Just like on centralized exchanges, liquidity tends to attract more liquidity.<\/p>\n What started the yield farming boom?<\/strong><\/p>\n A sudden strong interest in yield farming may be attributed to the launch of the COMP token \u2013 the governance token of the Compound Finance ecosystem. Governance tokens grant governance rights to token holders. But how do you distribute these tokens if you want to make the network as decentralized as possible?<\/p>\n A common way to kickstart a decentralized blockchain is distributing these governance tokens algorithmically, with liquidity incentives. This attracts liquidity providers to \u201cfarm\u201d the new token by providing liquidity to the protocol.<\/p>\n While it didn\u2019t invent yield farming, the COMP launch gave this type of token distribution model a boost in popularity.\u00a0 Since then, other DeFi projects have come up with innovative schemes to attract liquidity to their ecosystems.<\/p>\n <\/p>\n What is Total Value Locked (TVL)?<\/strong><\/p>\n So, what\u2019s a good way to measure the overall health of the DeFi yield farming scene? Total Value Locked (TVL). It measures how much crypto is locked in DeFi lending and other types of money marketplaces.<\/p>\n In some sense, TVL is the aggregate liquidity in liquidity pools. It\u2019s a useful index to measure the health of the DeFi and yield farming market as a whole. It\u2019s also an effective metric to compare the \u201cmarket share\u201d of different DeFi protocols.<\/p>\n A good place to track TVL is Defi Pulse. You can check which platforms have the highest amount of ETH or other cryptoassets locked in DeFi. This can give you a general idea about the current state of yield farming.<\/p>\n Naturally, the more value is locked, the more yield farming may be going on. It\u2019s worth noting that you can measure TVL in ETH, USD, or even BTC. Each will give you a different outlook for the state of the DeFi money markets.<\/p>\n <\/p>\n How does yield farming work?<\/strong><\/p>\n Yield farming is closely related to a model called automated market maker (AMM). It typically involves liquidity providers (LPs) and liquidity pools. Let\u2019s see how it works.<\/p>\n Liquidity providers deposit funds into a liquidity pool. This pool powers a marketplace where users can lend, borrow, or exchange tokens. The usage of these platforms incurs fees, which are then paid out to liquidity providers according to their share of the liquidity pool. This is the foundation of how an AMM works.<\/p>\n However, the implementations can be vastly different \u2013 not to mention that this is a new technology. It\u2019s beyond doubt that we\u2019re going to see new approaches that improve upon the current implementations.<\/p>\n On top of fees, another incentive to add funds to a liquidity pool could be the distribution of a new token. For example, there may not be a way to buy a token on the open market, only in small amounts. On the other hand, it may be accumulated by providing liquidity to a specific pool.<\/p>\n The rules of distribution will all depend on the unique implementation of the protocol. The bottom line is that liquidity providers get a return based on the amount of liquidity they are providing to the pool.<\/p>\n The funds deposited are commonly stablecoins pegged to the USD \u2013 though this isn\u2019t a general requirement. Some of the most common stablecoins used in DeFi are DAI, USDT, USDC, BUSD, and others. Some protocols will mint tokens that represent your deposited coins in the system. For example, if you deposit DAI into Compound, you\u2019ll get cDAI, or Compound DAI. If you deposit ETH to Compound, you\u2019ll get cETH.<\/p>\n As you can imagine, there can be many layers of complexity to this. You could deposit your cDAI to another protocol that mints a third token to represent your cDAI that represents your DAI. And so on, and so on. These chains can become really complex and hard to follow.<\/p>\n <\/p>\n How are yield farming returns calculated?<\/strong><\/p>\n Typically, the estimated yield farming returns are calculated annualized. This estimates the returns that you could expect over the course of a year.<\/p>\n Some commonly used metrics are Annual Percentage Rate (APR) and Annual Percentage Yield (APY). The difference between them is that APR doesn\u2019t take into account the effect of compounding, while APY does. Compounding, in this case, means directly reinvesting profits to generate more returns. However, be aware that APR and APY may be used interchangeably.<\/p>\n It\u2019s also worth keeping in mind that these are only estimations and projections. Even short-terms rewards are quite difficult to estimate accurately. Why? Yield farming is a highly competitive and fast-paced market, and the rewards can fluctuate rapidly. If a yield farming strategy works for a while, many farmers will jump on the opportunity, and it may stop yielding high returns.<\/p>\n As APR and APY come from the legacy markets, DeFi may need to find its own metrics for calculating returns. Due to the fast pace of DeFi, weekly or even daily estimated returns may make more sense.<\/p>\n <\/p>\n What is collateralization in DeFi?<\/strong><\/p>\n Typically, if you\u2019re borrowing assets, you need to put up collateral to cover your loan. This essentially acts as insurance for your loan. How is this relevant? This depends on what protocol you\u2019re supplying your funds to, but you may need to keep a close eye on your collateralization ratio.<\/p>\n If your collateral\u2019s value falls below the threshold required by the protocol, your collateral may be liquidated on the open market. What can you do to avoid liquidation? You can add more collateral.<\/p>\n <\/p>\n To reiterate, each platform will have its own set of rules for this, i.e., their own required collateralization ratio. In addition, they commonly work with a concept called overcollateralization. This means that borrowers have to deposit more value than they want to borrow. Why? To reduce the risk of violent market crashes liquidating a large amount of collateral in the system.<\/p>\n So, let\u2019s say that the lending protocol you\u2019re using requires a collateralization ratio of 200%. This means that for every 100 USD of value you put in, you can borrow 50 USD. However, it\u2019s usually safer to add more collateral than required to reduce liquidation risk even more. With that said, many systems will use very high collateralization ratios (such as 750%) to keep the entire platform relatively safe from liquidation risk.<\/p>\n <\/p>\n The risks of yield farming<\/strong><\/p>\n Yield farming isn\u2019t simple. The most profitable yield farming strategies are highly complex and only recommended for advanced users. In addition, yield farming is generally more suited to those that have a lot of capital to deploy (i.e., whales).<\/p>\n Yield farming isn\u2019t as easy as it seems, and if you don\u2019t understand what you\u2019re doing, you\u2019ll likely lose money. We\u2019ve just discussed how your collateral can be liquidated. But what other risks do you need to be aware of?<\/p>\n One obvious risk of yield farming is smart contracts. Due to the nature of DeFi, many protocols are built and developed by small teams with limited budgets. This can increase the risk of smart contract bugs.<\/p>\n Even in the case of bigger protocols that are audited by reputable auditing firms, vulnerabilities and bugs are discovered all the time. Due to the immutable nature of blockchain, this can lead to loss of user funds. You need to take this into account when locking your funds in a smart contract.<\/p>\n In addition, one of the biggest advantages of DeFi is also one of its greatest risks. It\u2019s the idea of composability. Let\u2019s see how it impacts yield farming.<\/p>\n As we\u2019ve discussed before, DeFi protocols are permissionless and can seamlessly integrate with each other. This means that the entire DeFi ecosystem is heavily reliant on each of its building blocks. This is what we refer to when we say that these applications are composable \u2013 they can easily work together.<\/p>\n Why is this a risk? Well, if just one of the building blocks doesn\u2019t work as intended, the whole ecosystem may suffer. This is what poses one of the greatest risks to yield farmers and liquidity pools. You not only have to trust the protocol you deposit your funds to but all the others it may be reliant upon.<\/p>\n <\/p>\n Yield farming platforms and protocols<\/strong><\/p>\n How can you earn these yield farming rewards? Well, there isn\u2019t a set way to do yield farming. In fact, yield farming strategies may change by the hour. Each platform and strategy will have its own rules and risks. If you want to get started with yield farming, you must get familiar with how decentralized liquidity protocols work.<\/p>\n <\/p>\n We already know the basic idea. You deposit funds into a smart contract and earn rewards in return. But the implementations can vary greatly. As such, it\u2019s generally not a great idea to blindly deposit your hard-earned funds and hope for high returns. As a basic rule of risk management, you need to be able to remain in control of your investment.<\/p>\n So, what are the most popular platforms that yield farmers use? This isn\u2019t an extensive list, just a collection of protocols that are core to yield farming strategies.<\/p>\n <\/p>\n Compound Finance<\/strong><\/p>\n Compound is an algorithmic money market that allows users to lend and borrow assets. Anyone with an Ethereum wallet can supply assets to Compound\u2019s liquidity pool and earn rewards that immediately begin compounding. The rates are adjusted algorithmically based on supply and demand.<\/p>\n Compound is one of the core protocols of the yield farming ecosystem.<\/p>\n <\/p>\n MakerDAO<\/strong><\/p>\n Maker is a decentralized credit platform that supports the creation of DAI, a stablecoin algorithmically pegged to the value of USD. Anyone can open a Maker Vault where they lock collateral assets, such as ETH, BAT, USDC, or WBTC. They can generate DAI as debt against this collateral that they locked. This debt incurs interest over time called the stability fee \u2013 the rate of which is set by MKR token holders.<\/p>\n Yield farmers may use Maker to mint DAI to use in yield farming strategies.<\/p>\n <\/p>\n Synthetix<\/strong><\/p>\n Synthetix is a synthetic asset protocol. It allows anyone to lock up (stake) Synthetix Network Token (SNX) or ETH as collateral and mint synthetic assets against it. What can be a synthetic asset? Practically anything that has a reliable price feed. This allows virtually any financial asset to be added to the Synthetix platform.<\/p>\n Synthetix may allow all sorts of assets to be used for yield farming in the future. Want to use your long-term gold bags in yield farming strategies? Synthetic assets may be the way to go.<\/p>\n <\/p>\n Aave<\/strong><\/p>\n Aave is a decentralized protocol for lending and borrowing. Interest rates are adjusted algorithmically, based on current market conditions. Lenders get \u201caTokens\u201d in return for their funds. These tokens immediately start earning and compounding interest upon depositing. Aave also allows other more advanced functionality, such as flash loans.<\/p>\n As a decentralized lending and borrowing protocol, Aave is heavily used by yield farmers.<\/p>\n Uniswap<\/strong><\/p>\n Uniswap is a decentralized exchange (DEX) protocol that allows for trustless token swaps. Liquidity providers deposit an equivalent value of two tokens to create a market. Traders can then trade against that liquidity pool. In return for supplying liquidity, liquidity providers earn fees from trades that happen in their pool.<\/p>\n Uniswap has been one of the most popular platforms for trustless token swaps due to its frictionless nature. This can come in handy for yield farming strategies.<\/p>\n <\/p>\n Curve Finance<\/strong><\/p>\n Curve Finance is a decentralized exchange protocol specifically designed for efficient stablecoin swaps. Unlike other similar protocols like Uniswap, Curve allows users to make high-value stablecoin swaps with relatively low slippage.<\/p>\n As you\u2019d imagine, due to the abundance of stablecoins in the yield farming scene, Curve pools are a key part of the infrastructure.<\/p>\n <\/p>\n Balancer<\/strong><\/p>\n Balancer is a liquidity protocol similar to Uniswap and Curve. However, the key difference is that it allows for custom token allocations in a liquidity pool. This allows liquidity providers to create custom Balancer pools instead of the 50\/50 allocation required by Uniswap. Just like with Uniswap, LPs earn fees for the trades that happen in their liquidity pool.<\/p>\n Due to the flexibility it brings to liquidity pool creation, Balancer is an important innovation for yield farming strategies.<\/p>\n <\/p>\n Yearn.finance<\/strong><\/p>\n Yearn.finance is a decentralized ecosystem of aggregators for lending services such as Aave, Compound, and others. It aims to optimize token lending by algorithmically finding the most profitable lending services. Funds are converted to yTokens upon depositing that periodically rebalance to maximize profit.<\/p>\n Yearn.finance is useful for farmers who want a protocol that automatically chooses the best strategies for them.<\/p>\n <\/p>\n https:\/\/academy.binance.com<\/a><\/p>\n [\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_divider _builder_version=”4.7.7″ _module_preset=”default”][\/et_pb_divider][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.7.7″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.7.7″ _module_preset=”default”][et_pb_text _builder_version=”4.7.7″ _module_preset=”default”]<\/p>\n ProofOfStake DEFinition<\/strong><\/p>\n \u00a0<\/strong><\/p>\n What is Proof of Stake (PoS)?<\/strong><\/p>\n If you know how Bitcoin works, you\u2019re probably familiar with Proof of Work (PoW). It\u2019s the mechanism that allows transactions to be gathered into blocks. Then, these blocks are linked together to create the blockchain. More specifically, miners compete to solve a complex mathematical puzzle, and whoever solves it first gets the right to add the next block to the blockchain.<\/p>\n Proof of Work has proven to be a very robust mechanism to facilitate consensus in a decentralized manner. The problem is, it involves a lot of arbitrary computation. The puzzle the miners are competing to solve serves no purpose other than keeping the network secure. One could argue, this in itself makes this excess of computation justifiable. At this point, you might be wondering: are there other ways to maintain decentralized consensus without the high computational cost?<\/p>\n Enter Proof of Stake. The main idea is that participants can lock coins (their \u201cstake\u201d), and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block. Typically, the probability of being chosen is proportional to the amount of coins \u2013 the more coins locked up, the higher the chances.<\/p>\n This way, what determines which participants create a block isn\u2019t based on their ability to solve hash challenges as it is with Proof of Work. Instead, it\u2019s determined by how many staking coins they are holding.<\/p>\n Some might argue that the production of blocks through staking enables a higher degree of scalability for blockchains. This is one of the reasons the Ethereum network is planned to migrate from PoW to PoS in a set of technical upgrades collectively referred to as ETH 2.0.<\/p>\n <\/p>\n Who created Proof of Stake?<\/strong><\/p>\n One of the early appearances of Proof of Stake may be attributed to Sunny King and Scott Nadal in their 2012 paper for Peercoin. They describe it as a \u201cpeer-to-peer cryptocurrency design derived from Satoshi Nakamoto\u2019s Bitcoin.\u201d<\/p>\n The Peercoin network was launched with a hybrid PoW\/PoS mechanism, where PoW was mainly used to mint the initial supply. However, it wasn\u2019t required for the long-term sustainability of the network, and its significance was gradually reduced. In fact, most of the network\u2019s security relied on PoS.<\/p>\n <\/p>\n What is Delegated Proof of Stake (DPoS)?<\/strong><\/p>\n An alternative version of this mechanism was developed in 2014 by Daniel Larimer called Delegated Proof of Stake (DPoS). It was first used as a part of the BitShares blockchain, but soon after, other networks adopted the model. These include Steem and EOS, which were also created by Larimer.<\/p>\n DPoS allows users to commit their coin balances as votes, where voting power is proportional to the number of coins held. These votes are then used to elect a number of delegates who manage the blockchain on behalf of their voters, ensuring security and consensus. Typically, the staking rewards are distributed to these elected delegates, who then distribute part of the rewards to their electors proportionally to their individual contributions.<\/p>\n The DPoS model allows for consensus to be achieved with a lower number of validating nodes. As such, it tends to enhance network performance. On the other hand, it may also result in a lower degree of decentralization as the network relies on a small, select group of validating nodes. These validating nodes handle the operations and overall governance of the blockchain. They participate in the processes of reaching consensus and defining key governance parameters.<\/p>\n Simply put, DPoS allows users to signal their influence through other participants of the network.<\/p>\n <\/p>\n How does staking work?<\/strong><\/p>\n As we\u2019ve discussed before, Proof of Work blockchains rely on mining to add new blocks to the blockchain. In contrast, Proof of Stake chains produce and validate new blocks through the process of staking. Staking involves validators who lock up their coins so they can be randomly selected by the protocol at specific intervals to create a block. Usually, participants that stake larger amounts have a higher chance of being chosen as the next block validator.<\/p>\n This allows for blocks to be produced without relying on specialized mining hardware, such as ASICs. While ASIC mining requires a significant investment in hardware, staking requires a direct investment in the cryptocurrency itself. So, instead of competing for the next block with computational work, PoS validators are selected based on the number of coins they are staking. The \u201cstake\u201d (the coin holding) is what incentivizes validators to maintain network security. If they fail to do that, their entire stake might be at risk<\/p>\n While each Proof of Stake blockchain has its particular staking currency, some networks adopt a two-token system where the rewards are paid in a second token.<\/p>\n On a very practical level, staking just means keeping funds in a suitable wallet. This enables essentially anyone to perform various network functions in return for staking rewards. It may also include adding funds to a staking pool, which we\u2019ll cover shortly.<\/p>\n <\/p>\n How are staking rewards calculated?<\/strong><\/p>\n There\u2019s no short answer here. Each blockchain network may use a different way of calculating staking rewards.<\/p>\n \u00a0Some are adjusted on a block-by-block basis, taking into account many different factors. These can include:<\/span><\/p>\n For some other networks, staking rewards are determined as a fixed percentage. These rewards are distributed to validators as a sort of compensation for inflation. Inflation encourages users to spend their coins instead of holding them, which may increase their usage as\u00a0 cryptocurrency. But with this model, validators can calculate exactly what staking reward they can expect.<\/p>\n A predictable reward schedule rather than a probabilistic chance of receiving a block reward may look favorable to some. And since this is public information, it might incentivize more participants to get involved in staking.<\/p>\n <\/p>\n
<\/strong><\/a><\/span>Ccoin Network, Notable Blockchain (pg.148)<\/span><\/span><\/a><\/p>\nSourceLess Blockchain – cryptography
zk-SNARKs<\/span><\/h3>\nSourceLess Hybrid Blockchain DEFinition<\/h3>\n
Ccoin Network & SourceLess Blockchain Wiki<\/span><\/h2>\n
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