Are you familiar with cryptos and already have secure and lucrative assets? Do you want to take risks to go further and multiply your profits? Banco, You have come to the right place! Here, we will use altcoins and more specifically Ethereum tokens to play with the blockchain and create financial opportunities. So fasten your seatbelts, we'll see how to use the new project pool.
Objective of the section: know how to diversify your portfolio and understand the fluctuations on volatile tokens.
These are assets in a market with very strong fluctuations.
You can lose your investment very quickly.
What is an exchange?
Exchanges are huge platforms integrating hundreds of cryptocurrencies. There are a lot of them, you might have heard of Bittrex, Binance, Bitfinex, Poloniex, to name a few. These platforms are real cryptocurrency markets. The strongest have more than 500 cryptocurrencies, the problem is that each exchange reserves the right to accept or not the listing of a new currency after an audit of the accounts and codes of the project. It is therefore sometimes very long or very expensive to be listed on an exchange when a new blockchain is born. As a user, it will sometimes be necessary to register on a platform only for the much sought-after token. These are the exchanges that channel the bulk of cryptocurrency transactions. They offer a turnkey service. The exchanges mentioned above are those offering the cheapest fees on the market.
👈 The cheapest exhanges on the market.
What is a decentralized exchange?
Also called, Dex for "Decentralized Exchange", decentralized blockchain exchangers allow everyone to exchange values for their equivalents. Anyone can therefore arrive with their bag of tokens and "swap" them against another currency. The exchange is almost instantaneous and the fees relatively affordable.
These services are on the cusp of a financial revolution. Currently, the entire cryptocurrency market weighs around $ 2 trillion. Usually the banks manage the financial system, then in the case of the cryptocurrency market, the exchanges take care of user funds. Now, with the advent of decentralized finance, anyone can interact directly on the blockchain. That is to say, exchange funds on the blockchain, without government intermediary, without banking intermediary, without private intermediary .
It's a revolution for users. Use the funds that belong to it without an intermediary. Since all transactions take place via "Smart Contracts", these are interactions with a decentralized application. That is to say, it is at the same time, for everyone, and for nobody. It is its users that characterizes it.
Recently, because of the new services of decentralized finance, the ERC-20 network (blockchain on which Ethereum is based) has found itself completely saturated. The fees exploded and some users were forced to pay up to $ 200 in fees to complete a transaction.
The most used decentralized exchange on Ethereum 👉
Uniswap: 10 billion weekly assets
ERC-20 Ethereum Token
From the start, we have mostly talked about Ethereum and its ERC-20 token. It is widely used and widely trusted by the community. Moreover, Ethereum developer Vitalik Buterin works closely with the Uniswap team to offer an even more reliable, less expensive and more accessible service. A new version of Ethereum should therefore soon emerge, it will be Ethereum 2.0. It is a completely improved protocol that would allow countless transactions simultaneously, which would permanently decongest the network and democratize access to blockchains to connected services such as the IOT.
Ethereum is on track to succeed in this time trial. Indeed, every day new users join the Ethereum network and the very high acquisition costs for the purchase of ERC-20 token could slow down the arrival of new entrants. Because the fees paid for each transaction are redistributed to the miners of the network and constitute a real shortfall for small savers.
Binance Smart Chain BEP-20 Token
By definition, tokens are currencies based on a blockchain, thus allowing the development of the token on it. While many blockchains support token development, they all have a particular token standard by which a token is developed. For example, ERC-20 token development is an Ethereum blockchain standard, while BEP-20 is the Binance Smart Chain token standard. These standards define a common list of rules, such as the process for transferring a token, how transactions will be approved, how users can access token data, and the total amount of tokens available.
Binance is currently the largest cryptocurrency exchange, trading around 20 days a day. billions of dollars. This platform has also created its own cryptocurrency. This is the BNB, a very flexible token allowing speed in the exchanges. This token allowed Binance to make its own stablecoin indexed to the dollar, the BUSD and more recently, to open its blockchain to developers with the BEP-20 token on the Binance Smart Chain.
The most widely used decentralized exchange
Binance Smart Chain, PancakeSwap 👉
What are the risks in these emerging markets?
CeFi risks (centralized finance)
The two main risks of a centralized exchange are that the exchange in question cuts off your accessibility to your funds for some reason X or Y, or that it is hacked. You open the internet, the site has disappeared, you can't get your money back. This situation should never happen, however. Exchanges are so audited and controlled by governments that it is inconceivable that one of them carries out a "scam exit", that is to say to get out with the cash! In addition, most of them have an emergency fund to reimburse victims of hacks and are themselves insured against this kind of problem.
DeFi (decentralized finance) risks
Unlike traditional exchanges which are centralized, decentralized finance eliminates any governance risk. Thus, platform administrators do not have any control over the use of your assets. However, as they are decentralized, there is no entity that can vouch for in the event of a problem. Also, these platforms are completely open, that is to say that everyone can come and deposit their token and encourage others to buy them. But these tokens will not be audited and will not be subject to any regulation. Some tokens can be downright scams, with holes in the racket allowing developers to walk away with the loot.
Risk of "Pump and Dump".
Other tokens can be created only to explode in flight. This is a phenomenon called " Pump & Dump ". Groups of users of a currency are formed, buy en masse during the creation of the currency, then a time is set to do a public pump. The objective is to make the currency go up violently and then to sell its shares once the price has taken + 20%, + 100% or + 400%. These games are very dangerous. They can pay off big, but remember there's always someone picking up the tab. The worst would be to position yourself on a crypto at the time of a "Pump & Dump", the fall is already expected before you even enter the crypto.
Risk of "Impermanent Losses".
In the event that you wish to deposit funds in liquidity pools in decentralized finance with cryptos other than stablecoins, you should know that you expose yourself to the risk of non-permanent losses. That is, the market is changing. Calculations are performed automatically to maintain a certain asset ratio. Non-permanent losses occur whether the asset goes down or up. The only thing that matters for non-permanent losses is the difference between the current price and the price at the time of deposit.
There is only one solution. Find out about the projects in which you decide to invest and read the "Whitepaper". Know that all sustainable projects in cryptocurrency are based on a project or a vision defined on a white paper. If you are investing in a project for another reason, it is because you are playing. No harm ! Just don't go all-in.
What is the profitability?
Depending on the services offered, you can find exceptional returns. For example, 147% annual profitability on an investment in CAKE / BNB. These investments are very attractive, but potentially dangerous. Again, you will be using very volatile cryptocurrencies. Depending on the liquidity pools you find, your rate of return can easily go up to 400%. Some Altcoins are on the rise, defending real projects that will certainly be pillars of the economy of tomorrow. But this environment is also very frequented by whales, who do exactly the same thing as you, with 50 million dollars in assets more than you.
Remember the non-permanent losses, the risks of pump & dump and don't enter a system that you do not master enough. If you accept this risk, go ahead and take advantage of decentralized finance!