How to buy DeFi tokens in 2022

On By mehranmuslimiblogIn Blockchain, DeFiLeave a comment

How to buy DeFi tokens in 2022

DeFi offers multiple investment opportunities, but as with all crypto there are risks. Jordan Finneseth offers us three ways to analyse the DeFi tokens on offer, together with their protocols.

As he says, “There’s more to investing than just technical analysis and gut feelings.” Since decentralised finance projects burst onto the scene, we have seen some blockchain analysis platforms appear with the aim of providing better insights into the “fundamentals supporting a cryptocurrency project” and these offer us three ways to evaluate them.

  1. Check the community and developer activity

Looking at this is one of the most basic ways to begin your evaluation. Many of the top protocols in the space offer analytics that track the growth in active users over time. For example, you should look for the average number of active wallets on a daily, weekly and monthly basis. Investors should also look at the number of transactions and volumes transacted on the protocol, as well as sentiment about the project on social media channels, such as Twitter. Information about developer activity is available on GitHub.

  • Look for increases in total value locked (TVL)

The overall strength of a project may be revealed in the sum of all assets deposited on the protocol, otherwise known as the total value locked (TVL). Growth in the TVL shows that momentum and interest in the project are increasing. Tools you can use to look at this are DeFi Llama and DappRadar, which allow users to dive deeper into the data and look at the statistics for different blockchain networks, such as Ethereum, and on individual projects.

  • Identify the majority token holders

Another factor to consider are the benefits given to a project’s token holders for their activity. Finneseth says, “Investors should also look into the manner in which the token was launched and who the dominant token holders currently are.” He also warns, “caution is warranted when excessive yields are offered for low liquidity, anonymously-run protocols with little community activity because this can be the perfect setup for catastrophic losses.” This is what is referred to as a ‘rug pull’ in DeFi speak. Also, look at the number of tokens allocated to the developers and founders vs. the tokens held by the community as this could be an indicator of a platform that could fall victim to a rug pull.

And that is a basic guide to buying DeFi tokens. Season’s Greetings to my readers, and wishing you all a healthy, happy and prosperous 2022.

DeFi will fuel a new Roaring Twenties

On By mehranmuslimiblogIn Blockchain, DeFi, UncategorizedLeave a comment

The DeFi boom started in 2015 when the Ethereum network went live, and since then it has grown by 33x to 1.2 million per day on the Ethereum blockchain alone, and it would be even bigger if other chains were added to this figure.

The current DeFi sector “represents only 0.1% of its maximum potential,” writes Artem Tolkachev. As he says, “DeFi is a natural product made possible by blockchain technology and has the right and ready infrastructure to propel the technology to a bigger playing field.”

What has contributed to DeFi growth?

The answer is the use of DeFi services such as Uniswap, which facilitates over $1 billion swaps each day, as well as lending and borrowing protocols such as Aave, Compound and BondAppetit. Combined they form a market worth tens of billions.

The TradFi (traditional finance) market is of course much bigger at trillions of dollars, and currently DeFi can’t offer the same extensive list of services as TradFi. At the moment, DeFi is mostly confined to lending, borrowing, decentralized trading and yield-aggregating, but it also has the advantage of playing an important role in the future of NFTs and in Web 3.0, otherwise known as the Metaverse.

The key to DeFi growth

The TradFi market is ripe for disruption, writes Tolkachev, and that is where DeFi can excel. For example, consumer payments are worth $500 billion per year in revenue for banks worldwide, but this could be tapped into with a frictionless UI, a global stablecoin and broad acceptance points.

And in capital markets, security tokens are an inevitable trend that regulators will eventually need to approve and construct the regulatory framework so that centralized and decentralized exchanges – at least the ones that adhere to the know-your-customer (KYC) requirement — can tap into the trillion-dollar TradFi equity market.

There is also the 1 billion plus daily global credit card transactions to be captured, and even moving 1% of them onto the Ethereum blockchain, or another of the DeFi-friendly smart contract blockchains, would multiply the number of its transactions by eight.

And there is the revenue from DeFi protocols. At the moment this is estimated to have a value of $5 billion annually, which is a fraction of the $2.3 trillion global retail banking revenue; $2 trillion global cross-border payment revenue and $35 billion global stock exchange revenue. Tolkachev says, “The TradFi industry is so lucrative that seizing a 1% market share means 10x-ing the DeFi revenue.”

Furthermore, it is estimated that DeFi has not really yet penetrated the general crypto user market, with only 5% of the 221 million global crypto users accessing DeFi services, revealing a massive untapped market for DeFi that can be captured as the UI/UX is improved.

DeFi is only three years old, so it needs to be given time to grow. The DeFi builder community has grown stronger in 2021 with more programmers from the traditional startups and big tech joining the blockchain and DeFi scene. Tolkachev says, “with the resources and talent flowing into the space now, growing 100x in the next 5 years is not a dream, it is inevitable.”

A Real Estate Boom in the Metaverse is Coming

On By mehranmuslimiblogIn DeFi, Ethereum, Metaverse, NFTsLeave a comment

If Irina Karagyaur is correct, 2022 will see the beginning of a gold rush in virtual land, especially as a “more efficient and scalable future for the intersection of blockchain and real estate is being built as we speak – and it’s not solely confined to the Ethereum blockchain.”

As I’ve mentioned in previous articles, the future of NFTs is a multi-chain one. This solves the limitations of the Ethereum blockchain and enhances its usage, and we will see “unimaginable opportunities” in every corner of commerce. Alternative chains, such as Solana, Tezos, Polkadot, Kusama, Cardano and many others make more diverse use cases possible and they answer issues such as scalability, network congestion and the ability to truly fractionalize ownership, so that NFTs become usable and transferable in the Metaverse. It may also mean that NFTs are able to “break out of the confines of traditional digital collectibles,” and be part of the ‘real world’. But while NFTs have been until now primarily focused on collectible memes, art, sports and luxury goods, Karagyaur argues that the potential for real estate to be modernized and made more efficient on the blockchain is powerful, inevitable even.

Buying and selling real estate is a time-consuming business, as well as an expensive one. But with virtual real estate in open metaverses, it will be possible to use peer-to-peer transactions alongside smart contracts that automate and speed up every part of the process. For example, property asset transactions, can be executed in minutes instead of weeks or months.

Furthermore, Karagyaur points out, “virtual real estate can unlock liquidity via decentralized global markets that enable tradable assets and allow for metaverse assets to be used as extractable collateral to fuel innovative methods of lending in decentralized finance (DeFi). Potentially, owners of digital homes may be able to use them as collateral for loans, and it may be possible for owners of a valuable piece of virtual land to exchange it for a property or land in the real world.

Most importantly, Karagyaur claims that Ethereum’s network, whicle it is the dominant smart contract blockchain, will not be enough to host all this activity. This is why the talk about multi-chain development is so important. As she says, “Although Ethereum layer 2 solutions (add-ons that help the network process more transactions) work well, new blockchains have seen exponential growth and promise fertile new ground,” and there is plenty of room for the creative builders that are looking beyond Ethereum.

Some well-known names, such as Snoop Dogg, are already investing millions of dollars in virtual real estate, and Fortune magazine calls it “a multi-trillion dollar opportunity”. For the younger generation it is possible that their first property purchase will be in the Metaverse, an idea that the Boomer generation may struggle to comprehend. Of course, there is a lot of work to be done before we get to that point, and there are some who believe it is a ‘pie in the sky’ notion, some criticising it as ‘novelty’ driven by hype and speculation, whilst others argue that buying and selling real estate requires legal due diligence, and they can’t see how that might be possible in a virtual world. And of course there is the real estate sector itself, which may not be too keen on seeing their old-fashioned but profitable business model turned on its head. Still, as Karagyaur says, “real estate NFTs promise the ability to democratize property ownership, a space that has historically excluded a majority of the world.” It’s just a potential market at the moment, and building it will take time, but it’s not too difficult to imagine the day when it’s a reality.

Luxury NFTs in the Metaverse

On By mehranmuslimiblogIn Metaverse, NFTsLeave a comment

The NFT market is a hot one that is predicted to get even hotter, especially if Morgan Stanley is correct. In a note published last Tuesday, it said luxury-branded non-fungible tokens could become a $56 billion market by 2030 and could see “dramatically” increased demand thanks to the Metaverse. Added to this, the general NFT market could grow to a roughly $240 billion market by 2030, with digital collectibles from luxury brands making up 8% of the space by that time.

The analysts at Morgan Stanley said that in 2021, luxury brand NFTs only accounted for around one percent of the market’s transaction value. They said, “We think this is about to change. The metaverse will likely take many years to develop; however, NFTs and social gaming present two nearer-term opportunities for luxury brands.”

Balenciaga and Gucci make an early entrance

Early ventures into this area for the luxury brands include Balenciaga launching Fortnite outfits in September 2021 priced at 1,000 v-bucks, which equates to approximately $8. Earlier, in May 2021, Roblox, a global gaming platform, hosted a virtual Gucci exhibition where players could purchase digital models of real Gucci products for a small amount of in-game currency. Once the exhibition ran out of products, the gamers began to put up the branded NFT items for auction, inflating their cost tenfold. As a result, a digital version of Gucci’s Dionysus bag sold for 350,000 Robux, or roughly $4,100, which is $700 higher than the retail price of the real-life version.

Currently, the best-exposed companies in the run up to the coming of the Metaverse are soft luxury brands, including ready-to-wear, leather goods and shoes, rather than items such as jewellery and watches.

Widening the luxury market

NFTs will also open up brands to the possibility of earning in “perpetuity” thanks to smart contracts, which capture a percentage of each sale for the owner, as opposed to the physical world wherein the profit only comes from the first and initial sale. The analysts said, “The metaverse will more than likely allow brands to appeal to an even broader audience,” adding that the average age of Roblox players is 13, while women generate 70% of sales in the luxury brand market, but that as the Metaverse develops the luxury brands will gain exposure to ever-younger customers, and more importantly, male customers.

The importance of the immersive experience

One reason that luxury brands stand to do so well in the Metaverse is the ‘immersive experience’. As Constantin Kogan writes at Cointelegraph, “The personal avatars that users utilize will wear clothing and use items as manifestations of individualization and personal expression, much like they would in the physical world — this opens up a really exciting opportunity for premium brands.” For example, in the aforementioned Roblox’s gaming and creation system, “one in five players will change their avatar every day, much in the same way a person gets up and gets dressed every morning.” Together with Fortnite, these platforms provide some insight into the emergence of Metaverse malls.

As our physical world still maintains a capital on luxury fashion brands due to their dependence on the physicality of clothing to connect with their customers, the success of Gucci and Balenciaga are only examples of what could be. It seems luxury will always have a home in the Metaverse, but as it is early days, this is not to say that the brands we now know to be in that category won’t be out-performed by the creation of desirable goods and the arts in general. As Kogan says, “As the rules and economic landscape are yet to be full-formed in this exciting new digital frontier, and everyone has a unique opportunity to find success.”