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When do we get our chance to get into DeFi? When we make it.

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When do we get our chance to get into DeFi? When we make it.

Give someone a fish, you feed them today, but teach someone to fish and you feed them for many tomorrow’s.

My personal passion is to teach financial fishing. I don’t always teach as well as I would like, but I keep practicing and I hope I get better.

DeFi : decentralized Finance

There is a lot of interest in DeFi right now and I am writing this post to answer a few questions about why we want to wrap our Token.

Goal or Purpose for cryptocurrency tokens

I think we need to start from this basic assumption; any cryptocurrency token, is purchased by an investor for either *speculation; usually defined as the desire for its value to increase, so we can sell it for a profit. Or income

What is a wrapped token?

A wrapped token in common parlance is an altcoins, as in any cryptocurrency token which isn’t Bitcoin, which is changed transformed by a tokenization process to an ERC token, so it can be traded on the Ethereum blockchain.

Let’s pause to explain.
There’s a complicated technical explanation for a wrapped token, which is filled with other new terms. For this publication I will define it as a facsimile or representation of the ownership interest in the original token, which is allowed to be traded on a specific blockchain, such as an ERC token is allowed to be traded on the Ethereum blockchain.

What’s the value of a wrapped token?

The value of a wrapped token is that it allows people who own any altcoin token to to trade a facsimile of their original token in the Ethereum blockchain through the creation of a trading pair.

The value of the trading pair is that it allows other investors the ability to invest in your coin on a popular coin trading exchange on the Ethereum blockchain.

Why do we want to wrap our Token and create a trading pair on an exchange on Ethereum

Two reasons value and income.

Value We want to attract investors to buy our wrapped token because it creates interest in our regular token. If the interest transforms into purchases, this increases the buying pressure on our token and raises its price.Large trading volumes on a popular exchange attract attention, attention attracts investors, investors buy the token, create buying pressure, and buying pressure increases the price of our token.

Income Investors who are attracted to our token on a DeFi trading exchange like Uniswap or Justswap have the desire to make money. The two most common methods of profiting appear to be buy low and sell high, this is called speculation. Investors buy into new trading pairs on these exchanges hoping to profit from price increases like doubling, tripling or even 10 to 100 fold increases in value tokens occasionally experience when there is a lot of news. The second way investors profit is called yield farming. Investors who practice yield farming basically find new trading pairs like wrapped Bitcoin and Ethereum on Uniswap and deposit both wrapped Bitcoin and Ethereum into the liquidity pool of this trading pair. If their deposits represent ten percent of all the deposited wrapped Bitcoin and Ethereum in the pool, they are paid ten percent of all transaction fees for people who come to the exchange just to trade wrapped Bitcoin for Ethereum. The depositing of both sides of a trading pair is called providing liquidity. Doing this in order to earn a percentage of transaction fees is called yield farming. It is quite profitable and is attracting large amounts of USD to these trading exchanges who feature decentralized trading and liquidity pools.

How Big is this decentralized exchange economy?

The most successful one to date is Uniswap based on the Ethereum blockchain. It is monitored by an outside or third party who recently reported that Uniswap had more the equivalent of 9.3 billion USD deposited in its Liquidity pools. Uniswap recently surpassed Coinbase, one of the largest exchanges in the world in deposited value of cryptocurrency.

Why use Ethereum which doesn’t have fast and cheap transactions like other blockchains?

In my opinion it’s about many things, but here are two which I think are important: first cost and speed are relative. Second is marketing.

Cost is relative I believe the growth in DeFi is being driven by money coming outside cryptocurrency. Here on DPOS we are accustomed to fast free transactions. We look down at Ethereum because of the transaction fees of 12-50 dollars or more. But in the world outside cryptocurrency investors are use to spending 50-100 dollars or more to move money and they are use to it taking a few days. So we here in cryptocurrency are predicting the death of Ethereum based on its performance against newer blockchains. But to the world outside Ethereum the fees and transaction fees on Ethereum are an improvement. It’s all based on where your coming from or perspective.

Marketing I have created a DeFi product, called Steem-Staking which is profitable, but it is a month old and still growing. It needs more marketing and so I am thinking up ways to create interest in the project. Ethereum is well know nothing inside and outside cryptocurrency. The established financial companies of the world want to invest in widely known assets like Bitcoin and cryptocurrency investment tools on widely known blockchains like Ethereum. Justin Sun recently created Just and Justswap from open source code used to create two widely known DeFi investment tools; the MakerDao and Uniswap. This created publicity, which is a great form of marketing and both projects are doing well.

Where does our project fit into this scenario?

I have been asking myself when does our project get a chance to profit from this?

I just realized that we can help ourselves, if we learn how to create our own entry point into DeFi.
So I am learning how we can create our own entry point into DeFi. It will cost money, but if successful it may bring value to our token and that will help us all. That is my next project.

Knowledge is the key to financial success and independence.

@shortsegments

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