<figure class="kg-card kg-image-card"><img src="https://cdn-images-1.medium.com/max/1600/1*2iPKmqCHIHTgd_yHWkV2jg.jpeg" class="kg-image" alt loading="lazy"></figure><p>dApps stand for Decentralized Applications. dApps have been around for a pretty long time now and it's still Greek and Latin for most of the people out there. The reason is 'no mainstream adoption'. dApps are decentralized and by decentralized, I mean that there's no central power governing these applications (or at least that's what it is supposed to be). Amid rising concerns over privacy &amp; security, Dapps are technically an amazing solution but we're still not there yet.</p><p>For all those what exactly is a dApp? Let me break it down for you.</p><p>A decentralized application as the name suggests runs on multiple user systems rather than on a central server which also avoids downtime and aids the reduction of processing power as each user contributes to run the network.</p><p>It is trustless which means that there is no third party involved and your data isn't controlled by a central private organization like Google. This peer-to-peer system is governed by the consensus or a majority of the people and the code base is open to public scrutiny. The power is in the hands of the public! (Maybe try reading the last sentence in a rebellious &amp; dramatic tone)</p><p>The consensus agrees and works by a Proof of Work / Proof of Stake system which is a pre-written algorithm to maintain protocol and security.</p><p>In fact, Bitcoin was the first dApp as it allowed users to run a node or a part of the blockchain on their individual computers which soon turned into a large interconnected decentralized architecture.</p><figure class="kg-card kg-image-card"><img src="https://cdn-images-1.medium.com/max/1600/1*WGW6pqPyBMUmzqAYxidQiA.jpeg" class="kg-image" alt loading="lazy"></figure><p>If you want to know more about dApps, check it out <a href="https://blockgeeks.com/guides/dapps/" rel="noopener">here</a></p><p>Getting back to our primary question, why aren't dApps mainstream yet?</p><p>dApps cannot be shut down, are more resistant to cyber-attacks, have no downtime and yet it hasn't reached the masses.</p><h3 id="awareness">AWARENESS</h3><figure class="kg-card kg-image-card"><img src="https://cdn-images-1.medium.com/max/1600/1*4Is4HTjKd4gmOoh1PMDCog.png" class="kg-image" alt loading="lazy"></figure><p>One of the main reasons is awareness. Let alone ease of use, people do not even know what a dApp is. For such people, it is not an easy task to adapt to these applications and consider them over centralized applications that are have been proven to be beneficial to users despite the security and technical concerns. Why is it so? It's majorly due to tradition and ease of use. There is a huge population that does not worry about how their data is used until they get the service they want. I cannot yet take the dApps' side as they are definitely not easy to use and involves a lot of setting up in order to use it. Why would people care to spend time on a dApp when they can just download a normal application directly off the app store on a single click. The general user must not go through gas, keys, and stuff like that. Yes, apps are slowly coming to mobile phones but they are still not straightforward and will have the do better than centralized applications to get into the limelight.</p><h3 id="few-real-dapps">FEW REAL DAPPS</h3><figure class="kg-card kg-image-card"><img src="https://cdn-images-1.medium.com/max/1600/1*rE4aMC_0WcNVSVfuhNXxFQ.jpeg" class="kg-image" alt loading="lazy"></figure><p>Most of the dApps launching these days aren't really dApps. Even if the project works over a decentralized system, the control is not entirely given to the users. This means that the showrunners still have a considerable amount of influence within the platform which completely destroys the concept of dApps. Due to this very reason, there have been very few legitimate dApps launched.</p><h3 id="interoperability">INTEROPERABILITY</h3><figure class="kg-card kg-image-card"><img src="https://cdn-images-1.medium.com/max/1600/1*zxj3tI1lNa0D3FdtqrM2lQ.jpeg" class="kg-image" alt loading="lazy"></figure><p>Interoperability is also an age-old reason for the stagnance of dApps. To put in simple words, consider a Bank that does not allow international transfers or restricts exchanges to a single currency. This will make the user unhappy while also ruining the business of the bank. As of now, it is impossible to send a transaction from the Bitcoin blockchain to the Ethereum blockchain. Such cross-chain compatibility is needed for dApps to widen their user base. This can be achieved by building the dApps on a secondary layer which is interoperable with different blockchains. This is easier said than done as interoperability has been a big obstacle since the inception of Blockchain. As Deloitte said, interoperability is something that has been holding down the widespread adoption of dApps all this while.</p><h3 id="speed-scalability">SPEED &amp; SCALABILITY</h3><figure class="kg-card kg-image-card"><img src="https://cdn-images-1.medium.com/max/1600/1*ux8QaeMBhXdQT_kUg9eozw.jpeg" class="kg-image" alt loading="lazy"></figure><p>The speed and scalability problem still persists but is constantly improving and evolving. More than 50 percentage of dApps that exist run on Ethereum and there is a reason why these dApps are going with Ethereum even though it's not perfect. The transaction speed is currently 15 transactions per second which is shameful when put next to Visa Card's 1700  transactions per second(The mythical 24k tps count is just based on theory) Ethereum is said to increase its transactions speeds in a big way in Ethereum 2.0 which is due for release. Vitalik Buterin, the founder of Ethereum has said that Ethereum 2.0 will eventually do 100,000 transactions per second. Apart from this, players like the Matic Network exist for the sole purpose of scaling dApps and it is doing a good job at it.</p><p><strong>DeFi</strong> is growing rapidly and bolstering the mass adoption of dApps. Since it's inception in 2019, it has been by far the most impactful trend within the blockchain ecosystem. As far as the finance sector is concerned, Blockchain has already grown significantly and it's only a matter of time that dApps blow up and be used by almost everyone.</p><p>As per the 2020 Q2 Dapp Market Report,</p><blockquote>Over $4.9 billion USD (ATH) was transferred through finance dapps, 67% increased since Q1. <strong>Total DeFi Volume reached $11.5 Billion.</strong></blockquote><p>Patience is the key. dApps need to get a lot of things right but the foundation is strong. A new wave of builders are coming in, paving the way for mainstream adoption of dApps. They are going to be essential in day-to-day activities removing the middlemen and reducing costs in our personal and business transactions. Once the code is cracked, it's going to be largely disruptive with applications having unimaginable use cases entering and taking the market by storm. There's still a long way to go but we'll eventually get there. Blockchain and decentralization are the next big things that are going to transform the world and I stand by this no matter what.</p>

Ashwin Kumar R

Premium reporting on technology, startups, VC funding, and software from Techfastly tagged with technology. Read articles on technology here.

Technology

Why dApps haven't taken off yet???Mainstream adoption imminent

<p>Imagine a future where cryptocurrency and decentralized finance become the norm, and banks become an option. Although this isn't happening anytime soon, DeFi is catching like wildfire. The total value locked in DeFi increased five-fold in just six months and stands at over 4 billion dollars. I agree that this is a drop in the ocean compared to the trillion-dollar traditional banking industry. Still, given the pace at which DeFi is moving, it'll engulf the banking industry.</p><h3 id="but-what-exactly-is-defi">But what exactly is DeFi?</h3><p>DeFi stands for Decentralized Finance and is often referred to as the Open Finance Movement. Decentralized finance is built over smart contracts, protocols, digital assets and are accessed using a dApp (Decentralized application). Consider it a futuristic system of every traditional financial service you use today - loans, trading, insurance, and more. It runs on a trustless, permissionless, and open blockchain where the control is not under any individual entity. The majority of DeFi applications now are based on lending and borrowing with impressive interest rates that sometimes touch double-digit figures (Sounds way better than the negligible interest rates banks provide, doesn't it?)</p><p>These applications run on smart contracts that are programs that execute when certain conditions are met. The code is written and released, and from then on, there is no central power handling your assets. Everything is automated with almost no human intervention (although developers deploy upgrades or bug fixes). Most of the DeFi applications are run over the Ethereum network. Even though there is still a scalability problem, it is expected to improve vastly with the release of Ethereum 2.0 as it is moving to the Proof-of-Stake system from the current Proof-of-work mechanism.</p><h3 id="traditional-finance-vs-decentralized-finance">Traditional Finance vs. Decentralized Finance</h3><p>The most 'in-your-face' difference is that an organization runs banks, and they are responsible for the money you deposit in the bank. They lend it out as loans, or they charge you for their services. DeFi is fighting against this to bring about a decentralized system where people would no longer need to rely on a third party, like banks, for their financial needs. With DeFi, people can transfer money across countries (depends upon the regulations). This is what DeFi is aiming at, a globalized peer-to-peer financial system. People that aren't in the crypto space often assume cryptocurrency is volatile and highly unstable, and it is not safe enough to use them as a global currency. This is where stablecoins step in. Stablecoins are a cryptocurrency too, but they are pegged to the value of the US dollar. Such coins are protected against the instability of the cryptocurrency market. Tether (USDT) and MakerDAO (DAI) coins are some of the critical stablecoins.</p><p>Customer data must be protected at all costs, and that is something legacy finance cannot entirely guarantee since it is prone to hacks due to its centralized nature. In a blockchain, all the data is encrypted and is publicly available to validation. This does not mean that your data is out in the wild. Unlike banks, DeFi does not require you to identify yourself. The entire system supports anonymity and yet provides security as no one will be able to alter data. In 2019, Capital One fell prey to a hacking attack that exposed over 100 million customers' personal information. Since DeFi is entirely transparent and anonymous, customers will feel much safer here. The anonymity might also open doors for money-laundering, so it will be challenging to come up with regulations.</p><p>The Venezuela Hyperinflation is something so devastating that it almost rendered the currency worthless. A steep drop in oil prices and poor government policies led to the mass printing of new currency, which destroyed the economy and shot up inflation to over 1,000,000%. This was entirely caused by humans. Blockchain came to the rescue when people from Venezuela started sending funds as cryptocurrency to their friends and relatives in other countries. Such a problem can never occur in DeFi since new coins are minted based on the protocol and not by choice.</p><p>MakerDAO is currently the darling of the DeFi world and has 1.09 billion dollars locked in its system. MakerDAO is a decentralized organization that allows the lending and borrowing of cryptocurrency and is built over the Ethereum network. It locks ETH as collateral in Collateralized Debt Position(CDP) and lends the DAI stablecoin with an attractive interest rate with complete security since a smart contract manages all this instead of a central authority. It is smart and also dangerous in a way that, in order to maintain the stable value of the DAI token, the collateral must always be at least equal to the amount of DAI borrowed. If the collateral value falls below 150%, a liquidation process is automatically initiated by the smart contract, and anyone in the network acquires the power to repay the debt. These people aren't so kind as to repay someone else's debt. They get 13% of the total debt taken from the initial borrower's locked funds. All this can be avoided by the borrower controlling the loan amount and the regularity of repayments. The liquidation is solely done to maintain the stable value of the DAI token. This way, it can remain a global currency that anyone can send and receive around the world. A lot of other players are catching up in this space, including Compound and Synthetix.</p><h3 id="what-s-next-for-defi">What's next for DeFi?</h3><p>DeFi will not replace traditional finance overnight, it's just taking its baby steps, and we have to wait until it can run. It might either overthrow traditional finance or coexist with it. The future where these two switch roles and traditional finance is looked upon as a mere option is inevitable.</p><p>One of the significant challenges DeFi will face is regulation, and it's interesting to see how it will tackle this problem. COVID has turned the world upside down, and DeFi has taken advantage of it. The past few months have seen a surge in the adoption of Decentralized Finance. Mainstream companies are paying attention to DeFi and are working hard to tackle it, but DeFi seems to be growing strong.</p><p>Cryptocurrencies are already being accepted as forms of payment in various stores and organizations around the world. DeFi should earn the trust of users to enter mainstream adoption. The tech has developed significantly, and developers are working on providing a better user interface to allow even grandmas to use it. The crypto community has dubbed 2020 the year of the "DeFi Renaissance." The topic of decentralization is, itself, pretty restricted to the tech community, and it has to cross that border for mass adoption. DeFi isn't going to take over the world in the next 4 or 5 years, but it's taking one step at a time, and each step is a giant one.</p>

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Banking

DeFi is booming - Banking to be a thing of the past?

<div>Basic Attention Token (BAT) has lately been enjoying a lot of traction but also some bashing recently. BAT has always been considered a revolutionary project, and it has been proven right. It is solving one of the looming problems of the internet, digital advertising.<br><br></div><div>Digital Advertising, as it stands, is broken. YouTube, which is sought after by many content creators, isn't as kind as you think to these creators. It uses its hard work for its rise and also takes in a lot of the Ad revenue. It is pretty stingy when it comes to paying its creators. Luis Fonsi's Despacito being the highest-viewed Youtube Video, only earned $3.2 million as of 2017. This is downright stupid, considering the number of views the video has. Brave is trying to save these creators from such greedy platforms by adopting a decentralized Ad exchange platform where the creators have a much better ROI.<br><br></div><div>Let me ask you a question. Do you enjoy ads? We don't think you do, but some might if the content is relevant, but it does get annoying when you hit YouTube to watch a video, and it throws an Ad at your face even before the video starts. It gets even more annoying when it keeps interrupting your watching experience. Most of us are likely to skip an ad when given a chance rather than sit through it.<br><br></div><div>Why do you even sit through Ads, though? We have no option since we get to view the content for free, and we agree it is a revenue stream for both the creators and the platforms. It would be better if you could access content for free and get paid for viewing uninterrupted privacy-respecting Ads, right?</div><div>That's what BAT does with the Brave browser. BAT connects the user, content creators, and advertisers. It pays users in BAT to view Ads, and users can donate to the content creators with BAT, and the Ads are displayed so that no information is collected and stored on a server. It just records the time spent on websites. This revenue model is a win-win for all three parties involved. It already has many content creators on its platform since they want to be treated fairly and for their content to be more valuable. It has already amassed more than 400,000 creators on YouTube.<br><br></div><div>The Brave browser completely removes Ads wherever they may occur. It only shows you the ads that pay you if you are opt-in for them. BAT is going places, and it can now be redeemed at Amazon, Uber, etc., for rewards. The announcement of the partnership with the TAP network has made BAT even more versatile since it can now convert BAT into gift cards for hundreds of top brands.<br><br></div><div>The BAT token is more of a utility token than a sound investment since users are not entitled to the company's profits, but this is not why BAT was created. Its major plot is to replace the existing broken digital advertisement model, which is beneficial to users, publishers, and advertisers alike. Even though it is slowly getting there, it will take time to replace the current system entirely as it is already well-established. People have to be more aware of the advertising problem going on to support BAT. This has been changing lately, and we will soon live in an era of complete honesty and transparency in the digital advertising world (we forgot to mention that the annoying pop ads will no longer exist).<br><br></div><div>The number of people using ad-blockers has increased, and it keeps rising every day. This is entirely because of how insensibly these Ads are placed. People are ready to support their favourite content creators, but little do they know that they aren't getting good returns from their hard work. The brave browser aims to remove all the ads while allowing users to directly support their favorite content creators. Some websites and creators heavily rely on advertisements for revenue, and ad-blockers are the worst enemy for them. Some have resorted to begging users to turn off their ad-blockers to get the ad revenue they need. While this may be beneficial to the creator, it definitely is not comfortable for the user.<br><br></div><div>This system avoids the collection of user data and invasion of privacy. We all know what Facebook did with our data. It sold it to Cambridge Analytica and what the company did was influence the people on political decisions like the US elections, etc. We must not forget this, and BAT is trying to tackle all these problems with its privacy-focused Brave browser, which stands true to its claims.<br><br></div><div>It recently came under the radar when a Brave user discovered that Brave has been adding referral links in the autocomplete suggestions for certain crypto websites like Binance, Trezor, Ledger, etc. Before you come to any conclusions, No, user data wasn't sold, and there was no harm to privacy. It only tried to get some revenue from those affiliate links. While this does not harm users, it must have been publicly announced rather than keeping it a secret. Obviously, the creator of BAT, Brendan Eich (Yep! The same guy who created Javascript and co-founded Mozilla Firefox), gave a reply and said that the company was sorry for such behavior and has since fixed this "issue." He also mentioned that the open-source code on GitHub has had these autocomplete suggestions for a long time, and it wasn't hidden.<br><br></div><div>Despite such hiccups, BAT hasn't slowed down and is at the top of the mountain when it comes to privacy-based browsers. BAT's advertising model is truly revolutionary, and it will eventually overthrow the existing models. We would not give any advice on over-investing in BAT but keep in mind that it is a utility token, and its major use-case lies in the advertisement model. Brave browser has already been gaining more users every day, and people are loving the advertisement model. BAT has already proved its worth, and its triumph is not too far away.</div>

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Digital Marketing

BAT Token Is The Next Big Internet Thing

<p>Facebook's Libra started off as an ambitious cryptocurrency project that wanted to change the way people use money. The goal was to introduce a globally accessible cryptocurrency backed by a blockchain system. Unlike the other cryptocurrencies out there, Facebook was planning to create a cryptocurrency that will be backed by a 'basket of currencies' rather than a single currency to avoid volatility in value.</p><p>The idea was truly revolutionary and if executed properly, it would have benefitted everyone tremendously. Unlike traditional cryptocurrency, Libra is centralized and permissioned which means that transactions can only added by a trusted group of parties. Libra would have been integrated into Facebook, Instagram, and WhatsApp which would have made payments a breeze since these platforms are used by people on a daily basis. Just Imagine, with Facebook's more than 2.6 million users, if they get just a quarter of them to use Libra, it's already more than double the US population. The UI of Calibra, the platform built on top of the Libra coin was touted to be surprisingly user-friendly for a crypto platform. As good as all this sounds, Facebook is the same company that sold user data to Cambridge Analytica. </p><p>Lawmakers were skeptical about Libra right from the time it was announced. A Facebook vs Congress showdown happened and the Congressmen were not impressed by Facebook's answers.</p><p>Facebook claimed that it will only be one among the hundred members of the Libra association (doesn't sound true to me) and will not control the Libra system. Mark Zuckerberg went on to say that Libra will not be released until it is approved by the US. The US government's hesitation is understandable since a few other cryptocurrencies have had its fair share of illegal activities given the pseudoanonymity of the blockchain network. </p><p>Initially, the Libra association consisted of giants like PayPal, Visa and MasterCard who invested at least $10 million into the project. Libra's intent was to compete with the traditional currencies rather than the cryptocurrencies which the government was not comfortable with. As a result, the members started backing off starting from PayPal leaving first. From then on, the Libra project has gone downhill. It started losing its backers, several governments banned Libra and it slowly started to lose traction. With countries announcing the plans of launching their own digital currencies, Facebook was in deep trouble.</p><p>After all the trouble they went through, Facebook finally stepped down and revamped the system (Libra 2.0) to please the lawmakers and the regulatory bodies. Rather than fighting against the other currencies in the world, they decided to back each LBR (Libra coin) with certain traditional currencies such as the US Dollar(USD), Euro(EUR) and British Pounds(GBP). These are the currencies confirmed as of now and might rope in other countries to join in as well (if they wish to). It is still going to be using a smart contract based system. The Libra Association is coming up with strong compliance frameworks that will battle black marketing in the system. The Libra white paper also suggests that if central banks develop their own digital currencies, it could replace Libra's single-currency stablecoin (Poor Facebook). Another suggestion is that the Libra Coin(LBR) will be defined in fixed nominal weights, such as the Special Drawing Rights (SDR) maintained by the International Monetary Fund (IMF). </p><p>Libra states that, for countries that do not have a single-currency stablecoin on Libra, it can utilize the Libra coin(LBR) which will act as a non-volatile asset. These countries can use LBR for cross-border transactions which the recipient can then convert into their local currency to make purchases in their country. (Sounds pretty good doesn't it?). The unbanked population will be provided access to unhosted wallets which might not have access to VASPs (Virtual Asset service providers). This unbanked population currently stands at a whopping 1.7 billion (That's a huge number!)</p><p>Not to forget that Chinese Digital Currency Electronic Payment(DCEP) is also under development and will pose as a strong competitor to the Libra coin. I would still take this competition with a pinch of salt since the USA and a few other countries are not really happy with China and it is interesting to see how China overcomes these problems to launch their digital currency and achieve their goal of worldwide Yuan adoption. </p><h3 id="will-libra-2-0-succeed">Will Libra 2.0 succeed?</h3><p>The success of Libra 2.0 is too early to comment on considering the drastic changes Libra went through. Calibra is a wallet that was built to utilize the Libra token. It was supposed to launch this summer but was pushed back to October. Interestingly, Calibra has been renamed as 'Novi' which makes more sense since it now does not operate over an individual currency but rather a token pegged to countries' currency value. What's more interesting is that the wallet will not just contain these tokens but also your personal information like your traveller status, proof of age and also your loyalty cards. This will enable people around the world to access global financial services and open the gates to greater economic value by putting Libra in the hands of millions of people around the world. Such a thing would offer benefits that no banking system has ever been able to.</p><p>Even though the Libra project went through a major overhaul from plans to create an individual cryptocurrency to a mere PayPal like blockchain-based electronic payments system, it still has a lot of potential since it will be accessible to a large population (let's hope Facebook doesn't steal our data). It might even use this to leverage its ad business that fetched 98% of Facebook's entire revenue stream in Q1 2020. Nevertheless, this is going to be loved and used by the majority of the people inspite of the privacy concerns as such a global payments system integrated into the apps that we use almost everyday will be much more comfortable than the existing standalone solutions.</p><p>All these features rolled into one single wallet that can be used anywhere sounds convenient but its quite unsure how Facebook will pull off such a thing keeping safety and privacy concerns in mind. Let's all wait until it finally lands and hope it benefits the world rather than use us as bait.</p><p>To know more about Libra, here's the link to the <a href="https://libra.org/en-US/white-paper/">Libra White paper</a>.</p>

What's happening to Facebook's Libra?

<p><em>Disclaimer - This is neither financial advice nor am I promoting any financial service. Investment in DeFi is your responsibility and I will not be held responsible.</em></p><p>Passive Income is a catchy term that has sprung up lately. Even though there are a lot of scams, the legitimate ones are a god-send. Who wouldn't want to make money by investing their existing cryptocurrency and get high returns.</p><h3 id="what-is-yield-farming">What is yield farming?</h3><p>How does farming work? A farmer sows the seeds, waits for it to grow and harvests it (I know there's a lot more steps involved but I don't want to bore you all). Yield farming works in a similar way. It the process of investing idle crypto assets and leveraging it to earn profits.</p><figure class="kg-card kg-image-card"><img src="https://iaxds62ruoojbg1k4180.cleaver.rocks/images/posts/3eb02dcc7460c91c3ef5c7a108ed88cf.png" class="kg-image" alt loading="lazy"></figure><p>The returns are mostly in the form of interest or rewards. <strong>Lending and borrowing </strong>is the most widespread method for yield farming. Consider Compound, a DeFi platform. The borrower puts in a crypto asset as collateral and borrows equivalent COMP token. This can be lent to other borrowers who might in turn lend it out to someone else. These people who borrow and lend on Compound earn rewards in the form of COMP tokens. 2880 COMP tokens are released to users per day. At the time of writing, the value of COMP is 184$ which translates to almost 530,000$ per day in rewards! (Phew!)</p><figure class="kg-card kg-image-card"><img src="https://iaxds62ruoojbg1k4180.cleaver.rocks/images/posts/bb2955e86bbca66c129ec084a141d817.jpg" class="kg-image" alt loading="lazy"></figure><p>The second most used method for yield farming is<strong> liquidity pools</strong>. It's basically a giant pool of money (I just made that up but it sounds fancy doesn't it?). A great example for liquidity pool is Uniswap. Due to scalability issues of Ethereum, it is not possible to follow the order book method. To tackle this problem, Uniswap came up with a beautiful solution. Uniswap consists of multiple pools, one of the best ones being DAI-ETH pool. Liquidity providers deposit an equal amount of two tokens to create a market and in return they earn fees whenever a trade is facilitated in the pool.</p><p>Would you believe it if I told you that yield farming gives 100% APY (Annual Percentage Yield)? Well, it's true. Banks have never offered such high interest rates and will probably never will. I agree that there are risks involved but it's not as bad as you think it is. There's a large community to help you out in the process, so, don't jump into this and throw all your life savings in it without knowing the risks.</p><p>The 100% APY isn't very realistic but it is possible. The farmers switch between multiple strategies and protocols to gain high yields. They borrow and lend coins between multiple protocols like Compound, Balancer, Synthetix and more. These coins are in rotation and they earn the users incentives which explains the super-high returns.</p><h3 id="the-huge-returns-also-come-with-huge-risks"><em>The huge returns also come with huge risks</em></h3><p></p><p>I'm also going to disappoint you here but here it is, yield farming is profitable only when you can shell out a considerably large amount of crypto (at least over 1000$). This is because of the competition out there and high gas prices (determines the transaction fees). If you're just getting started, invest a few dollars and see how it works and learn but this approach will definitely result in loss.</p><h3 id="how-risky-is-this"><strong>How risky is this?</strong></h3><p>Like I already mentioned, this is riskier when compared to the traditional financial system. If your money is gone, it's gone. There's no deposit insurance, chargebacks or anything of that sort. The two major risks are smart contract bugs and liquidation.</p><h3 id="smart-contract-bugs">Smart Contract Bugs</h3><p>The yield farming system is built upon smart contracts which are pre-written lines of code which facilitate the lending and borrowing or other functionalities of the system. If a hacker or any tech guy notices a bug/flaw and exploits it, it is possible to steal hundreds of thousands of dollars from that pool.(Oh I mentioned pool? We'll get there in a minute) This does not make the traditional financial system superior, the benefits overweigh the risk but it will be wise to learn about what you're stepping into rather than to cry over spilt milk.</p><h3 id="liquidation-issue">Liquidation Issue</h3><p>The second issue is liquidation. Most of these DeFi platforms operate with stablecoins which are cryptocurrencies whose values are pegged to the US Dollar. If the platform decides the reduce the coin value to half of what it actually was, the returns are heavily impacted and the loans related to other crypto assets will crash. </p><p>All these risks are to be considered when stepping into yield farming. The risk are definitely higher than the traditional financial system but it is up to you to decide if the risk is worth it. Some have risked their money to earn enormous amounts of profit while some have lost all of their invested money entirely. This is the game, this is why such great rewards are being offered and it is up to the user to risk it.</p><p>These huge gains are not going to last forever. Such high yields are only until its infancy. Once more money flows in, the insanely high yield dies and along with it so does the risks. We live in a revolutionary era where blockchain is attempting to become the next big thing like how the internet did back then. </p><p>Almost all of the DeFi platforms are run on top of the Ethereum network. Ironically, the market cap of all ETH based tokens surpassed the market cap of ETH. This shows how rapidly and large the DeFi market is growing. </p><h3 id="the-future-of-yield-farming">The future of Yield Farming</h3><p>Yield farming is driving mainstream DeFi adoption rapidly and the passive income has made a lot of heads turn. People are more aware of the crypto world now. Even though yield farming is a profitable idea, it is not going to be sustainable in the long run as DeFi becomes more widespread. If you're planning to dip your feet into the pool, now is the time but let me remind you that this is not financial advice nor am I promoting all of this. It sure does have a lot of risk but if you think the risk is worth then go ahead and do what you think is right. More yield farming projects are likely to flood the crypto world in the next few years. A quite interesting time we live in.</p>

Yield Farming - the new DeFi King

Proof-of-Work and Proof-of-Stake are two different ways of validating transactions on the blockchain. Our article offers an overview to help you understand the difference.

One of the most talked about events in the crypto-world is the release of Ethereum 2.0. It is making the move from a Proof-of-work mechanism to a Proof-of-Stake mechanism.

Proof of Stake vs. Proof of Work

Proof of Stake vs. Proof of Work | Techfastly

<p>Anyone familiar with the crypto world must have often heard these two terms: Proof-of-work (PoW)&nbsp; and Proof-of-Stake (PoS). These two key components of blockchain are essential to validate cryptocurrency transactions. Most cryptocurrencies are not issued or controlled by central banks; this decentralized nature of cryptocurrency is often believed to be its main benefit. However, without a central authority to verify transactions, there can also be issues with counterfeit cryptocurrency.</p><p>Let’s talk about what a consensus mechanism is, its various types, and pros and cons of PoW and PoS.<br><br>&nbsp;</p><h2>What is a Consensus Mechanism?</h2><p>For any centrally administrated system, like a database of driving licenses in a country, one central administrator is responsible for the maintenance and updates of the database. This responsibility includes making any updates - like adding or deleting certain people who are qualified to receive certain licenses. In this way, the duty of maintaining legitimate records remains with the central authority, which remains solely in charge.</p><p>Public blockchains that operate as decentralized systems on a global scale don't have any single authoritative figure. Contributions from hundreds of thousands of participants help to verify transactions and authenticate contributions on the blockchain, which includes block mining activities.</p><p>In such an ever-changing system, we need to ensure that all happening on the network is authentic and that all parties agree with the consensus regarding the status of the ledger. The consensus mechanism handles this key task: it's a set rule that decides on the legitimacy of participation from various contributors (i.e., nodes or transactors) from around the network.</p><p>&nbsp;</p><h3>Types of Consensus Mechanisms</h3><p>There are several consensus mechanisms developed and used, each with their own advantages and disadvantages. The mechanisms differ in how the verification of transactions is rewarded. Mentioned below are the various types of consensus mechanisms:</p><p><img src="https://iaxds62ruoojbg1k4180.cleaver.rocks/images/posts/fcaaa01f-539e-4f14-95eb-a5582b1562ae.png"></p><p>Let’s understand the two common consensus mechanisms in detail:<br>&nbsp;</p><p>&nbsp;</p><h3>Proof of Work Mechanism (PoW)</h3><p>Proof of work is a mechanism that was conceptualized way before the creation of crypto assets. Proof of work, also known as PoW, has been around since 1993 when it was first introduced by Cynthia Dwork and Moni Naor. It was Markus Jakobsson who coined the term in the year 1999.</p><p>Proof of work is the first consensus mechanism proposed, but even after many years of operation, it is nowhere near perfect. This did not stop it from being the most dominant consensus mechanism that most of the cryptocurrencies in circulation use to date. It was first introduced in Bitcoin by Satoshi Nakamoto in the 2008&nbsp;<a href="https://bitcoin.org/bitcoin.pdf">Bitcoin Whitepaper</a> (The algorithm was previously used in Adam Back's HashCash).</p><p>It is an energy-intensive consensus protocol which requires miners to compete against one another to solve complex cryptographic puzzles using high-powered computers. The first to come up with a 64-digit hexadecimal number (hash) earns the right to form the new block and confirm transactions. The successful miner is rewarded with ‘block reward’, a predetermined amount of crypto.</p><p>The mechanism is secure, but it is still vulnerable to a 51% attack. In layman's terms, 51% of the nodes in the network decide to be on the evil team to steal money by taking the blockchain network hostage. They control more than 51% of the computer power that is used for mining in the network. This is unlikely to happen in large-scale cryptocurrencies but smaller altcoins like Bitcoin Gold have been subject to this attack in the past.</p><p>The major downside for PoW is that it requires a lot of computational resources and energy. It also has limitations on scalability because it's difficult for new miners to compete with existing ones that have large infrastructure costs.<br>&nbsp;</p><h4>Pros and Cons of PoW Mechanism:</h4><p>&nbsp;</p><p><strong>Pros of Proof of Work model:</strong></p><ul><li>Miners are rewarded with a block reward and a share of the transaction fee.</li><li>It leads to more decentralized networks.</li><li>The network gets difficult and costly to attack.</li></ul><p>&nbsp;</p><p><strong>Cons of Proof of Work model:</strong></p><ul><li>It is not insulated to 51% attack.</li><li>A lot of computational power is wasted once the equations are solved.</li><li>An excessive amount of electricity is consumed, which could impact the environment in the near future.<br><br>&nbsp;</li></ul><h3>Proof of Stake Mechanism (PoS)</h3><p>Proof of Stake was created to address the mining process's energy consumption problem in a Proof of Work system. Sunny King and Scott Nadal introduced it in 2012.</p><p>This mechanism does not involve miners, and there is no need for high computational power, making it a greener alternative to Proof of Work. The creators replaced the mining process with something called "staking." Instead of mining a block, the responsibility of creating a block is given to a user in a deterministic way, depending upon their stake (the amount of coins the individual owns). The individual with a higher stake has better chances of being chosen as the validator and will receive more staking rewards. This does seem pretty unfair as it allows for a centralization-like situation.</p><p>This brings us to another problem, similar to the 51% attack. Rather than contributing to 51% of the network's computational resources, you now have to own at least 51% of the coins in a network. This seems dangerous, but it is highly unlikely for anyone to trust a coin so much.</p><p>Unlike in Proof of Work, no new coins are minted. The validators are only paid through transaction fees where the rewards are from coins that were already created.</p><p>There are a few other issues with Proof of Stake like initial distribution of coins, monopolization, and the nothing at stake problem. All these issues were addressed in 2013 by the creation of Peercoin. Proof of Work turned heads majorly when Ethereum 2.0 announced that they are moving to a Proof of Stake system.</p><h4>Pros and Cons of PoS Mechanism:</h4><p>&nbsp;</p><p>&nbsp;</p><p><strong>Pros of Proof of Stake model:</strong></p><ul><li>Theoretically, insulated to the 51% attack.</li><li>Better rewards to the validators.</li><li>It does not require a lot of computational power, thus is more energy-efficient.<br><br>&nbsp;</li></ul><p><strong>Cons of Proof of Stake model:</strong></p><ul><li>It is less secure as compared to PoW.</li><li>It is more susceptible to low-cost attacks</li><li>It leads to a less decentralized network.</li></ul><p>&nbsp;</p><h3>Proof of Work Vs Proof of Stake</h3><p><strong>Energy Consumption</strong></p><p>As already mentioned, Proof of Stake tackled the power consumption problem and adopted a greener mechanism. Due to mining farms setup around the world to mine cryptocurrencies, this practice's energy consumption shot up like crazy.</p><p>Study reveals&nbsp;<a href="https://doi.org/10.1016/j.erss.2020.101721">Bitcoin’s electricity consumption is underestimated</a>&nbsp;and finds the network ‘represents close to half of the current global data centre electricity use’. This is alarming. It is good to see that the future of cryptocurrency is moving towards PoS which requires only a small fraction of the energy.</p><p><strong>Decentralization</strong></p><p>Even though PoS is the future, it does have its flaws. In comparison, PoW is more decentralized since the validator being chosen does not depend upon the number of coins owned. Not everyone will want the overhead of becoming a miner.</p><p>In the case of PoS, the validators neither have to spend on mining equipment nor have to pay electricity bills. All they need to have is some cryptocurrency, which they keep staking. This leads to centralization as the coins are with the same person instead of a miner who will have to cash in some cryptocurrency to pay the electricity bills.</p><p>The PoW mechanism results in better distribution of coins and maintains the decentralized state of the network more fairly.</p><p><strong>Security</strong></p><p>Proof of Work is a tried and tested mechanism. It has shown its strength with Bitcoin, and the world is witness. Since Proof of Stake is relatively new, it just can't be used without a lot of testing.</p><p>The problem with PoS is when a blockchain is forked due to some reason. Validators can validate transactions of both the chains without any consequences. This can be exploited to created multiple forks of the same blockchain. It introduces the problem of double spending where the coin spent in the original chain might not be added to the forked chain. Even though solutions have been proposed to solve this problem, it is not yet convincing from a user's perspective.</p><p>PoW is comparatively safer since miners will have to decide to split their mining power to the original and forked chain but are unlikely to do so as the low mining power resulting from the split will not be enough for mining.</p><h3>Difference Between Proof of Work (PoW) and Proof of Stake (PoS) in Blockchain</h3><p><img src="https://iaxds62ruoojbg1k4180.cleaver.rocks/images/posts/37147acb-8429-468a-8f6e-ab8b25fc04cb.png"></p><p>&nbsp;</p><h2>Conclusion</h2><p>The blockchain ecosystem must remain secure. Both the consensus mechanisms are viable to secure the network. It depends on the developer as to which mechanism should be implemented for the security of the ecosystem.</p><p>&nbsp;</p><p>If a miner misbehaves, it will result in being cut off economically or financially from the network. Punishing the misbehaved users is a crucial act to prevent cheating in the blockchain ecosystem. In theory, it is much cheaper to attack a Proof-of-Stake blockchain. Although, there have been several upgrades in the Proof-of-Stake mechanism to make it more secure.</p><p>The favoritism is towards the Proof-of-Work mechanism; however, it is difficult to mention which one is better. Both the algorithms are accessible to all the users and focus on preventing cheating. The choice could be challenging and may depend on the costs and centralization.<br>&nbsp;</p>

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