Hash Notes

Update: Previously researched Coin ranking

Chainlink Ranked #25 on 4/29/22. Was #23 on 3/4/22.

Secret Ranked #95 on 4/29/22. Was #41 on 3/3/22.

Nano Ranked #174 on 4/29/22, was #179 on 3/3/22.

USDT Ranked #3 on 4/29/22. Was #3 on 3/3/22.

Pancake Swap Ranked #46 on 4/29/22. Was #57 on 3/3/22.

Terra USD Ranked #10 on 4/29/22. Was #13 on 3/3/22.

Research Different Sectors in DeFi

· Lending

o Defi is taking traditional centralized finance systems, like banking, and developing decentralized alternatives with blockchain technology.

o Defi lending platforms aim to offer crypto loans in a trustless manner, i.e., without intermediaries and allow users to enlist their crypto coins on the platform for lending purposes. A borrower can directly take a loan through the decentralized platform known as P2P lending. Besides, the lending protocol allows the lender to earn interests. Among all of the decentralized applications (DApps), Defi has the highest lending growth rate and is the most prevalent contributor for locking crypto assets.

o The underlying technology for defi lending is Blockchain; Defi utilizes all its unique features and performs exceptionally well compared to traditional lending. Defi lending offers complete transparency with easier access to assets for every money transfer process without involving any third-party. It provides the most straightforward borrowing process; the borrower needs to create an account on the Defi platform, have a crypto wallet and open Smart contracts. Defi offers a censorship-free environment, meaning there is no preferential treatment while ensuring immutability.

o A cryptocurrency-backed loan uses digital currency as collateral, similar to a securities-based loan. The basic principle works like a mortgage loan or auto loan — you pledge your crypto assets to obtain the loan and pay it off over time. You can get this type of loan through a crypto exchange or crypto lending platform.

o While you retain ownership of the crypto you’ve used as collateral, you lose some rights, such as the ability to trade it or use it to make transactions. Also, if the value of your digital assets drops significantly, you may end up owing back much more than you borrowed should you default on the loan.

o Low interest rates: While they’re generally not as cheap as mortgage or car loans, crypto loans are an inexpensive alternative to personal loans and credit cards. You can often get a crypto loan with an interest rate below 10 percent.

o Loan amount is based on asset value: In many cases, you can borrow up to 50 percent of your portfolio value, but some exchanges go as high as 90 percent.

o Choice of loan currency: Depending on the platform and what you need, you can generally get the loan funds in the form of U.S. dollars or select cryptocurrencies.

o No credit check: Crypto lending platforms and exchanges typically won’t run a credit check when you apply, making it an incredibly attractive financing option for people with poor credit or no credit history.

o Fast funding: Once you’re approved, you can get your loan funds in as little as a few hours.

o Ability to lend crypto: Many crypto exchanges offer “interest” accounts that allow you to lend your own digital assets and receive a high APY — sometimes upward of 10 percent — in return.

o Margin calls: A margin call occurs when the value of your collateral drops below a certain threshold and the lender requires you to increase your holdings to maintain the loan. In some cases, the lender may even sell some of your assets to cut your loan-to-value ratio. Because cryptocurrencies are extremely volatile in the short term, the chances of this happening can be high.

o No access to your assets: As long as your loan has an outstanding balance, you can’t access your holdings to trade or transact. This can be a significant problem if the price of the currency drops significantly or you need cash in a hurry.

o Repayment terms can vary: These loans usually function like traditional installment loans, and depending on the crypto lending program, you may have less than a year to pay back what you borrowed. In other cases, you can create your own repayment schedule. With shorter repayment terms, it’s crucial that you know beforehand whether you can afford the payments.

o Not all digital assets are eligible: Depending on the crypto lending platform you use, you may need to exchange your currency for an eligible asset. This may not be preferable if you want to hold onto your specific asset and it doesn’t qualify as collateral on any platform.

o Interest account funds aren’t insured: If you’re lending your own digital assets, the funds in a crypto interest account aren’t insured like the money in your bank account. So if the exchange fails, you could lose everything.

o Interest account withdrawals can be slow: You can generally request a withdrawal from your crypto interest account whenever you want. But depending on the platform, it could take several days for those funds to be released so you can use them. This can be very damaging if the value of your assets drops quickly and you can’t trade them.

· DEXes

o Decentralized crypto exchanges (DEXs) are blockchain-based apps that coordinate large-scale trading of crypto assets between many users. They do that entirely through automated algorithms, instead of the conventional approach of acting as financial intermediary between buyers and sellers.

· Staking

o The purest form of DeFi staking refers to users locking a specific amount of native tokens or coins to become a validator in a PoS (proof-of-stake) blockchain network. Moreover, PoW consensus algorithms require computing power to validate transactions, which consumes energy and has a larger carbon footprint. On the other hand, the PoS mechanisms rely on validators with a vested interest in the given chain. Validators who stake their assets are inclined to perform their duties properly to avoid the risk of losing a portion of or even their entire stake. Of course, there are also staking rewards that further encourage validators to create and validate blocks.

o There are many PoS blockchains (e.g., Polkadot, Algorand, Solana, Cardano, etc.).

o Staking can serve to provide liquidity for specific trading crypto pairs. It can also be used to ensure that the value of a certain project or cryptocurrency doesn’t drop. Furthermore, when platforms are in question, staked assets can be used for other purposes. Hence, the “why is DeFi staking used” range can greatly vary from one DeFi platform to another.

· Liquid Staking

o Liquid staking allows you to use your tokens in DeFi and also stake them.

o Users to remain in control of their funds.

o PoS Network benefit from liquid staking with increased liquidity and enhanced network security

o Top Liquid Staking platforms are Lido & Marinade

o Liquid staking is the act of delegating your tokens to a service that stakes for you without losing access to your funds.

o Liquid staking allows you to access your funds even when you’re staking them. The funds remain in escrow, but aren’t “locked” and inaccessible, as they would be with PoS staking.

o When you stake coins you have to lock them up for a specified amount of time. During which you cannot sell or transfer your coins. If there is a market crash during your lock period, you won’t be able to act in a timely manner. With liquid staking, you can add and remove funds as you pleased (usually with a trade-off of lower APR)

o Liquid staking offers the best of both worlds: a passive income and access to your staked funds.

Web2 Finance to Web 3 Translation:

How does current banking process translate to Web3 Defi (ex. Web2 of Foreign Exchange [Forex] is Web3 of DEXes)? See below chart.