A bug bounty of a million dollars, insider trading, and apparently an inflation-resistant stablecoin.
101 today:
A topic we explain —
Prerequisites to understanding ‘Lending’ & ‘Borrowing.’
Major happenings in the DeFi ecosystem —
Sky Mavis’s bug bounty of a million dollars, Coinbase’s insider trading, LUNA foundation gaurd’s steps to safety, and an inflation-resistant stable coin.
A Goldmine of a Twitter thread that sums it all up —
Get ready to understand Lending & Borrowing in crypto.
A peek behind the doors —
Twitter Spaces Announcement. Who is the guest?
One Topic:
You must have heard about the financial instruments the DeFi movement caught up for - ‘Lending’ & ‘Borrowing.’
But what goes on behind these two words? What are the prerequisites to understanding these words?
Today, let’s uncover:
How do banks earn & why DeFi?
What are Stablecoins and how do they work?
Understanding liquidity pools.
Did you know? 💡
The term ‘DeFi’ was coined back in August 2017 when a team of software developers and entrepreneurs were brainstorming on what to call the movement they had just started.
How do banks earn?
To start off, let’s have a look at the toplines of the Bank of America.
Grounds for why DeFi:
Net interest income is the difference between the income a bank earns from its lending activities and the interest it pays to depositors.
A whopping ~ 47 million dollars was earned in 2021 from interests and merely ~ 4 million dollars was paid out to depositors.
Non-interest income is bank and creditor income derived primarily from fees including deposit and transaction fees, insufficient funds (NSF) fees, annual fees, monthly account service charges, inactivity fees, check and deposit slip fees, and so on.
~ 39 million dollars was earned entirely from fees.
Other income sources include card income (credit & debit), mortgage-related lending & borrowing income, income from investment banking, etc.
Its DeFi equivalent:
No middleman: The ~ $47M earned by the Bank of America would reach back to the users in the case of DeFi.
No extra fees: DeFi has no human being charging extra money to move your funds. Gas fees are payments made to compensate for the computing energy required to process and validate transactions on blockchains. "Gas limit" refers to the maximum amount of gas (or energy) that you're willing to spend on a particular transaction.
However, as the ecosystem is growing, entrepreneurs are coming up with ways to remove the gas fees entirely and make DeFi more accessible to people.
For example, Brew Money itself is an app where you have to pay no gas or other hidden fees. You can participate in DeFi with a simple click. Add fiat money to your account on Brew and it will take care of everything else.
It will:
Convert your fiat into USDC;
Choose the best interest-providing protocol for you; (currently Aave)
Move the stablecoin into these protocols without any fees, and;
Show the 2-4% APY you’re earning in real-time on the app.
Experience DeFi in one simple click with Brew. Signup now.
No card fees: You are your own bank in DeFi. Take your crypto and pay directly to merchants pseudonymously.
What are Stablecoins?
The largest stablecoins by market capitalization today are Tether (USDT), USD Coin (USDC), Binance USD (BUSD), TerraUSD (UST), and Dai (DAI).
Stablecoins are cryptocurrencies backed by fiat or assets such as gold. For example, Pax Gold is a physical gold backed stablecoin, and the USD Coin launched by the Centre Consortium is backed by the US Dollar.
Because digital currencies like Bitcoin, and Ethereum are too volatile, crypto traders like to utilize stablecoins. Stablecoins maintain their price stability via collateralization (backing) or through algorithmic mechanisms of buying and selling the reference asset or its derivatives.
Understand the details here: How stablecoins stay stable.
Understanding liquidity pools:
It’s one of the foundational aspects of the whole DeFi ecosystem.
It’s how stablecoins maintain price stability, the safety cushion that supports lending & borrowing in DeFi, and what supports Automated Market Makers (AMM.)
A liquidity pool, in simple terms, is a big digital pile of crypto funds.
Liquidity pools are smart contracts containing locked crypto tokens that have been supplied by the platform's users. They’re self-executing and don’t need intermediaries to make them work. They are supported by other pieces of code, such as automated market makers (AMMs), which help maintain the balance in liquidity pools through mathematical formulas.
Read more here: The Funds that keep DeFi running!
Check out this animated video on How Liquidity Pools work.
Oof, that was a lot to unpack. We’ll explain more terms in our next issue….On Friday.
Subscribe?😶
Also, talking about Fridays, Brew Money hosts a chill meet-up every Friday to discuss the latest happenings in Defi. It’s only for the internal team for now, but mail to us at hello@brew.money.com and you can get exclusive access to one of these meet-ups.
(This is only for the ones reading our newsletter, do not share with friends, shh.)
News that made people go 🤯:
👀Sky Mavis announces a bug bounty of $1 million post the Ronin Hack. 🤯
After being drained of $622 million last month in the Ronin Hack, Sky Mavis has launched a bug bounty program. Sky Mavis is the developer of Axie Infinity, the game company whose Ethereum side chain is Ronin. The developer is offering a bounty of $1 million to whitehats who reveal severe security vulnerabilities. Read more about it here.
👀Coinbase was accused of insider trading, again. 🤡
Coinbase has made it to the rumor mills this week again after being called out for insider trading. Whistleblowers have found addresses that bought hundreds of thousands of tokens that were to be featured exclusively on Coinbase's new token listings. All the included tokens saw a price spike (10-30%) after Coinbase's announcement. Read more about it here.
👀Luna Foundation Guard bought $100 million AVAX tokens. 💸
Taking stock of the dynamic crypto markets, the Luna Foundation Guard is taking steps to safeguard its peg. It is stockpiling non-related digital assets like Bitcoin, and now a $100 million worth of Avalanche token (AVAX). Talk about safety! Read more about it here.
👀Volt protocol’s novel inflation-resistant stablecoin raised $2 million. 🧐
With waves of inflation hitting shores globally, who doesn't want to go inflation-resistant? That's what Volt, a protocol pegged to the inflation index rather than a fiat currency, aims to do. The protocol raised $2 million last week for its inflation-resistant stablecoin. Read more about it here.
One Tweet:
Get ready to understand Lending & Borrowing:
Now, an announcement:
Remember what we said in our last newsletter? 🕐
“Our team is hosting a special series of Twitter Spaces with the biggest educators in the DeFi space starting next week.”
Well, we are delivering on our promise. 🚀🎉
In our first episode of the series, we’re hosting the Twitter Spaces Event with a DevRel personality from Aviyel. Aviyel is a community-driven monetization platform for Open Source Projects.
We will be revealing the identity and time & day deets on our Twitter tomorrow. Tune in now!
That’s it for today, folks. See ya next Friday. 🤩
