Defi Archives - 2100NEWS

BrankoNovember 3, 2020
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6min122

Market veterans are hesitant to enter the market unless liquidity is sufficient. They know something the rest don’t.

DeFi is booming for many reasons. One of the more important factors behind this boom has been the development of the concept and the emergence of decentralized liquidity pools.

The decentralized liquidity acts as a backbone in refining DeFi space more convenient and efficient. When provided from a wide range of parties whose behavior is deeply uncorrelated, liquidity is fundamentally more robust: it is less likely to evaporate in a crisis and more indicative of a healthy market. Therefore the health of DeFi is largely identical to the health of decentralized liquidity venues.

Decentralized liquidity provisioning is emerging through a mechanism that does not exist in traditional financial markets — automated smart contracts. This is a totally new vector of provisioning liquidity.

What are 2100NEWS DeFi liquidity pools?

Liquidity pools, in essence, are pools of tokens that are locked in a smart contract. Contracts are simply pools of 50% ETH and 50% CETF Tokens. They are used to facilitate trading by providing liquidity, so the users can always trade and they don’t have to wait for another counterparty to show up. There are two players in pool trading. The exchangers, who use the pools to exchange tokens, and the liquidity providers, who offer their liquidity to the exchangers. They earn exchange fees whenever exchangers make use of their liquidity.

Traders buy either asset directly from the contract, causing the prices to move algorithmically. When differences emerge between the algorithmically-determined price offered by the contract and the market price, arbitrageurs close the gap.

Uniswap liquidity pools use a constant product market maker algorithm that makes sure that the product of the quantities of the 2 supplied tokens always remains the same. A pool can always provide liquidity, no matter how large trade is. The main reason for this is that the algorithm asymptotically increases the price of the token as the desired quantity increases. The mechanism through which the price adjustments are made for each token swap on the liquidity pool is termed as Automated Market Maker (AMM).

Whenever someone trades on the exchange, the trader pays a 0.3% fee which is added to the liquidity pool. Since no new liquidity tokens are minted, this has the effect of splitting the transaction fee proportionally between all existing liquidity providers.

Liquidity providers

Anyone can replenish liquidity in the contracts by contributing liquidity to the pools, he would have to add both CETF Tokens and ETF at their current ratio to the Uniswap exchange contract, to maintain the same price for the trading pair. In return they are given tokens from the exchange contract which can be used to withdraw their proportion of the liquidity pool at any time. . This concept of supplying tokens in a correct ratio remains the same for all liquidity providers that are willing to add more funds to the pool. Doing so entitles them to a pro-rata share of the trading fees (0.3% per trade) that accumulate in the contract. The crypto users who stake or store their assets in these liquidity pools to yield more assets or income through the concept of DeFi Yield Farming are known as a liquidity provider.

About interest

The interest in Uniswap could be very high for some trading pairs. The yearly interest of 30+% is not necessarily a rarity. But how can it come to such high-interest values?

  • the field is fairly new, and many still don’t know what liquidity pools are or how high the interest is.
  • Furthermore, providing liquidity comes with risks, since it’s still new and prone to mistakes. A larger mistake in the code could mean total loss for users.
  • Pool trading has advantages when compared to CEXs, all the tokens can be listed fairly easily, there is no KYC requirement and the costs are low when not considering transaction fees. Therefore, many trades on pool trading platforms which generates high interest in the form of fees.

This interest should in theory adjust over time and drop significantly since more investors will want to use them to generate fees. With more liquidity in the pools, the interest rate falls, since the collected fees will be divided on more staked capital.

Key Advantages of Liquidity Pools in DeFi

  • Provides and bootstrap liquidity Providing Network
  • Reduces Liquidity Risks in decentralized finance.
  • Liquidity Providers earn passive income

LilyJuly 24, 2020
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8min356


LEND (Aave) as Large-cap Token is 48th in the 2100NEWS ranking. The quality of the order book of LEND is Excellent. The average quality of the order book for large caps members of the NWSL100 index is 15.0. What is the true value criterion in the crypto world?

*Among all, the price is always at the forefront. By comparing with the index, we can gauge the price-performance with similar digital assets that are members of the index. Considering an investor’s point of view, peer comparison should be efficient and effective. We present you tokens that are worth keeping in mind.

About token

LEND has been launched in 20 exchanges.

Aave as Large-cap Ethereum based Token is 48th in 2100NEWS ranking (after Index Review of 17th July 2020). It is an Index member: NWST1100, NWSL100, NWSTo100, NWSET100, NWSDM100.

2100NEWS DA Orderbook Quality Evaluation Grade: Excellent, Score: 18.6, (Average for Large caps: 15.0)


Over the past week, the average market cap was $388.8 million, average daily volume was $30.9 million.


 

In this section, we will examine how the market, with price changes, evaluates project progress. It seems important to us if the project is outside of the usual tide of crypto project prices. In order to make an appropriate peer comparison, we gauged the LEND (Aave) with 2100NEWS Digital Assets 100 Large Cap Index (NWSL100). Looking at the chart below, we can see the LEND vs. NWSL100 at the top, the original LEND price in the middle of the chart, and NWSL100 and correlation between LEND and NWSL100 at the bottom. On average (violet area chart), the relationship between LEND to NWSL100 has shown that it was stronger during June and July. Over the last four months, it has outperformed NWSL100 by 780%. However, if we compare the LEND green area graph with the orange index area graph while observing the correlation graph, the correlation graph gives us an explanation that the correlation is strong (Pearsons correlation coefficient = 0.80). For 70% of the time, it was moving in the same direction as the NWSL100. So, it has been an ordinary representative of the NWSL100 index in terms of price changes.

According to Etherscan, ownership is quite dispersed, There are 162,649 token holders (at the time of this article’s writing).

 

2100NEWS observation:

At Aave, the money lending system is well designed. On their blog you can find out all about interest rates and why this is good for us. They strive for a secure protocol, so they are constantly taking action in this direction. They have even found some big investors this year. Caring for the community is also very important to them. They have 51.3K followers at Twitter.

 

About Aave – what they do

Aave is a decentralized non-custodial money market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an over collateralized (perpetually) or under collateralized (one-block liquidity) fashion.

Aave has been implemented with security as priority. The system has been designed to be safe and secure, and we have spent all the necessary resources in order to ensure that the protocol matches the highest security standards.

Currently, the protocol code has been audited by Trail of Bits and a second audit by OpenZeppelin prior the release of the protocol during September and November of 2019 respectively. During May 2020 prior the release of the Uniswap Market Consensys Diligence audited Aave’s Constant Product Market Price Provider (CPMPP) Component.

Flash Loans are special uncollateralised loans that allow the borrowing of an asset, as long as the borrowed amount (and a fee) is returned before the end of the transaction. There is no real world analogy to Flash Loans, so it requires some basic understanding of how state is managed within blocks in blockchains.

 

General information

Aave is headquartered in London. Aave is made out of a team of innovators with the focus on creating a transparent and open financial infrastructure. The founder is Stani Kulechov.

 

Exchanges: Alterdice, Bibox, Bilaxy, Binance, CoinDCX, CoinEx, Dex-Trade, Fatbtc, Folgory, Gate.io, HitBTC, Hoo, IDEX, Indodax, Kyber Network, Loopring Exchange, MXC, Poloniex, Uniswap, Uniswap (V2).

 

Website: https://aave.com/

You can follow them:     Github    Medium    Twitter

 

Do you know more about this topic or would you like to report an error in the text? Leave a comment or email us at info@2100news.com.

 

The Crypto Highlights are considered the opinion of 2100NEWS and the material is for informational purposes only and 2100NEWS is not soliciting any action based upon such material. The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. At the time of this article’s writing, the author did not hold any tokens LEND.



About us

We are the new economy news hub. 2100NEWS is the professional index, data, and tools provider in the digital asset space, offering Crypto Market Intelligence, providing the perspective you can trust and equipping you with information edge you need to stay ahead. (Real-time data of token issuers and news, analysis and commentary from community.) We are very excited to contribute to the evolution of the industry and build an ecosystem around our offering (the institutional-grade data infrastructure required to enable institutional investments in digital assets). We want our contributions (Contents and Tools on 2100NEWS.com) to be useful for helping investors.


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