BC CRYPTO
Saved by @Shubham51ngh

We're in the phase of the market where there's a lot of retail inbounds but not enough education about the Ethereum ecosystem and DeFi.

So, let's break down the basics of some of the top protocols.

First on deck: Aave (@AaveAave), an Ethereum-based money market protocol.

A 🧵

 TL;DR: Aave is a protocol through which any user anywhere in the world can take decentralized loans by collateralizing their assets.

Aave also allows those will idle assets to earn a relatively safe return on capital from lenders, whose rates are determined by a curve.
1/ For years, most crypto assets had no indirect or direct utility.

Users would hold BTC, ETH, and other assets (including many ERC-20 tokens) with no expectation of a native yield or dividends.

ETH, for instance, was long just an asset for transaction fees, as was Bitcoin.
2/ If users wanted to borrow against their assets, they were relegated to centralized platforms—which were few and far between years ago.
3/ Aave, formerly ETHLend, is a protocol allowing users the ability to lend and borrow on-chain, without KYC and untransparent fees.

Users can deposit a variety of assets as collateral, then use that collateral as ammo to borrow other assets to be used in DeFi or beyond.
4/ Today, Aave supports a handful of Ethereum-based assets, including but not limited to stablecoins (USDC, DAI, USDT), Ethereum itself, DeFi blue chips (UNI, YFI, SNX), Wrapped Bitcoin, and a number of other assets.

Loans are *overcollateralized*.
5/ There are two core buckets of users of Aave:

1. Those looking for steady, relatively safe yield on idle assets.

2. Those that want to leverage their assets by borrowing against their holdings, then trading and spending the loan to achieve utility beyond the rate they pay.
6/ For those in the first bucket, the user flow is:

- Find idle assets that can be lent out on Aave
- Deposit said assets
- Earn a per-block, pro-rata interest paid for by those that borrow your assets (assets are pooled, then used) from the protocol
7/ For those in the second bucket, the user flow is:

- Find inactive, useless asset
- Deposit it into Aave
- Enable it as collateral
- Borrow desired assets from protocol
- Use borrowed assets for trading, yield farming, spending, etc.
8/ There are a few use cases with borrowing on-chain. Let's explain a few.

Shorting:

A user can borrow an asset from Aave, sell it, buy it back when the price is lower, then pocket the delta.

This works because the loan is denominated in the asset(s) borrowed.
9/ Earning a yield on any asset:

ETH natively does not produce yield.

It can be used as collateral to borrow assets that *can* earn yield.

Assuming you can earn 15% on USDC and borrow @ 5%, borrowing USDC at a 200% collat. ratio will allow for an effective yield of 5% on ETH.
10/ Spending:

Say a user is holding Wrapped Bitcoin and wants something on-chain or IRL, though doesn't want to get rid of their WBTC exposure.

A user can collateralize their WBTC, buy what they want, then pay back the loan with income or other assets to reclaim their WBTC.
11/ Now that we have some use cases out of the way, let's take a look at flash loans.

Aave pioneered flash loans, a concept where anyone can borrow any amount of capital within a single block for a number of use cases.

Did a thread here in the past.

https://t.co/FRn5Pj2TFk
12/ Due to inefficiencies in the market, users can borrow large chunks of capital from Aave within a block, to balance the price of assets between different exchanges, along with other use cases.
In the above transaction:

- A user borrowed 2,048,000 USDC from dYdX

- Traded that USDC for 2,028,367 DAI in Curve's Y pool

- Traded that DAI for 2,064,182 USDC in Curve's sUSD pool

- Paid dYdX back + 2 wei

All in one block...

Profit: 16,182 USDC
Cost: $60 in gas
13/ Now, a look at a few of the mechanics of the protocol to help contextualize how Aave works.

I'll cover:

- Interest rates
- Terms
- Liquidations
- aTokens
14/ Interest rates: Aave's rates on the lender and borrower sides are determined by a curve.

The more an asset is utilized, the higher the rate lenders earn and borrowers pay.

The borrow rate is always above the deposit rate.

Here's the borrow rate model for USDC / USDT.
15/ Aave has the added component of a "stable" borrowing rate.

To mitigate unexpected spikes in utilization affecting the rate one pays on their loan, users can lock in a fixed rate, so they can manage risk properly.

This rate can readjust based on market conditions.
16/ Terms:

Aave has a number of loan terms that dictate how much one can borrow, at what point they are liquidated, and how much they pay when they are liquidated.

These terms are determined by a risk team, who assess market conditions to minimize risk to protocol collateral.
17/ Liquidations:

Unlike traditional loans, Aave loans are liquidated autonomously when a user's loan-to-value ratio falls below certain values.

A large enough drop in the value of one's collateral will allow users to bid the collateral, sell it, then pocket a bonus.
18/ aTokens: Users that deposit assets into Aave are granted an aToken representing their deposit (USDC -> aUSDC).

aTokens are yield-bearing assets that accrue interest in real time, allowing one to watch their deposited assets grow by block.
19/ These basics aside, Aave, at the end of the day, is a core money lego.

It can be used by other developers to build interesting applications and use cases.

For instance...
20/ @BasketDAOOrg: BasketDAO deposits assets under management into Aave, which creates a yield-bearing index

@APWineFinance: APWine allows users to trade unrealized yield

etc.

aTokens, flash loans, etc. can all be used in tandem with other contracts to create use cases.
Fini/ As always, none of this is investment advice. Please take caution when interacting with protocols on-chain and understand all risks before doing so.

As I said at the start of the thread, this is the first of many.

More to come.

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Oliver Jumpertz
Oliver Jumpertz
@oliverjumpertz
"Blockchain technology is energy-intensive..." => No, it doesn't have to be.

Let's look at Proof-Of-Stake, an alternative to the energy-intensive Proof-Of-Work algorithm.

🧵🔽

1️⃣ A Quick Recap On Proof-Of-Work

A Proof-Of-Work algorithm requires miners to do a certain amount of work that is compute-intensive to gain access to a service or the right to do something. This algorithm, by design, also requires that the work done shall not ...

... be reusable for anything else than what it was performed for. This lies at the core of the security concept of a blockchain. To gain the right to append a new block to a chain and to get some currency as a reward, there is work to be done, and this work must be verifyable.

That work is a race between different miners. Many miners try to compete and to be the first to find the answer to a problem presented to them. This implies that a lot of energy is wasted as only the first correct solution is accepted.

You can find a more detailed thread on Proof-Of-Work
CRYPTO
0xB1AdceddB2941033a090dD166a462fe1c2029484
0xB1AdceddB2941033a090...
@0x_b1
0/ Predictions for 2021:
(This is not investment advice, or any other type of advice. DYOR)

1/ #ETH hits new ATH(s).

2/ #Bitcoin breaks $55K; but BTC YE2021 close is < $30K.
wins!

3/ > 3 billion-dollar crypto IPOs successfully occur (eg CoinBase, BlockFi, et al).

4/ @SBF_Alameda’s ‘off-chain BTC folding’ strategy goes unnoticed; whole crypto ecosystem wins!
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David Fauchier
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@dfauchier
Some thoughts on this super inaccurate piece.

tl;dr: this is not a defence of Tether/ iFinex, who I would like nothing more than to see disappear into irrelevance. However, most of the conclusions here show zero understanding of crypto market

1. First up: it’s completely inexcusable that Tether refuse to have a 3rd party audit. I can’t find a single good faith reason for this.

Bitfinex GC recently did a superb job of sidestepping that question on WBD:

2. For better or worse, USDT (tether) started as a way for people to move fiat between exchanges (a major problem) in the absence of the ability to onboard banking partners, none of whom wanted to touch crypto. USDT is now the dominant stablecoin by mkt cap & liquidity.

3. As a result of the difficulty of having a fiat on/off rail, many exchanges, like Binance, chose to be ‘crypto only’, using stablecoins in lieu of fiat. This is why the majority of inflows into BTC (article says 70%) is via USDT

4. Unbanked exchanges are in aggregate larger than banked ones. This is true, but it’s not because of a giant conspiracy to steal your BTC. Being unbanked = real regulatory arbitrages (lower cost + ability to innovate fast), and lower barriers to entry means there’s more of them.
CRYPTO
\U0001f42e Mikko Ohtamaa
🐮 Mikko Ohtamaa...
@moo9000
1/ ERC-20 token standard approve() has caused an unnecessary cost of $53.8M for #Ethereum and #DeFi users

This is bad. Continue reading why and how to avoid this in the future.

👇👇👇


2/ Before you go all rage on the flaws of my analysis, please read the whole Twitter thread for disclaimers and caveats.


3/ approve() is an unnecessary step of ERC-20 tokens when they interact with smart contracts.

You know this because when you do a Uniswap trade you need press two transaction buttons instead of one.


4/ Why there is approve() - you can read the history in this Twitter


5/ I queried all approve() transactions on Google BigQuery public dataset and calculated their ETH cost and then converted this to the USD with the current ETH price.
CRYPTO
Thetamind
Thetamind
@thetamind37
The new age of privacy, and the crypto ecosystem that will enable it.

A Thread.
$XHV $SCRT $RUNE
1/

Throughout my research, @HavenXHV The Haven protocol renewed my faith, that privacy wasn't just a temporary trend, but something with actual, sustainability. The creation of a private bank, exchange, and access to real world assets in completely privacy of my own vault. $XHV
2/

Haven's offering to the world, with it's private assets $xUSD $xEUR $xGOLD and xSilver, made me research what else can be done privately, now that I have private stable coin options. My first question was, if I wanted to sell my private assets, how would I do it? $XHV
3/

It didn't take me long before I discovered $RUNE and @thorchain_org and their cross chain liquidity pools and decentralized exchange capabilities. How anyone can offer liquidity and earn rewards and trading fees for doing so. But also,how all trading pairs,are interchangable.
4/

This made me realize that as Thorchain grows in popularity,they will provide the ability for everyone, across the cryptosphere,to trade any coin for any coin. Kind of like uniswap, but cross chain,and outside, yet including, the erc-20 ecosystem. It's uniswap on steroids. $XHV
5/
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