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BTC, ETH, ICOs, and now - DeFi: How Far Have We Come?

Bitcoin caught the attention of technologists and anarchists alike following the 2008 Global recession. Ethereum took Bitcoin’s ‘Digital Gold’ status and gave us smart contracts. ICOs took smart contracts and gave us supply chain management solutions for problems that we never knew existed.

A crypto-winter later, just when we thought that:

Altcoin season was over
Decentralized Exchanges were dead in the water
Crypto won’t grow without regulators’ tacit approval,

Along came Uniswap and ended all doubts that crypto was a fad that had lived out its 15 seconds of fame.

The innocuous-sounding DeFi or Decentralized Finance had humble beginnings in the days of the ICOs where ‘Banking the Unbanked’ was the de facto sales pitch of ICO Founders on LinkedIn and Twitter.

Today, DeFi has metamorphosed metamorphosed into the befitting reply to centralized exchanges like Binance and Coinbase. Exchanges like Uniswap and the similarly named Mooniswap have dealt a death-blow to the Order Book, upon which, centralized exchanges, their listed tokens liquidity, and the alleged shady listing-fees market was built.

How Does UniSwap Work?

Imagine a bank that does not want to waste paper, hands out eco-friendly plastic tokens instead of a passbook to denote your deposits. You deposit your funds and get your bioplastic tokens.

Now. banks hold not just dollars, but also, euros, pesos, rupees, dinars, and other such currencies, to facilitate international remittances.

While banks use models to determine how much of a currency it should hold, Uniswap lets the community decide.

You deposit your funds in a ‘liquidity pool’ to facilitate transactions and in return, you get a small fee. While banks give you interest (after subtracting their arbitrary spread), on UniSwap, this is called liquidity mining.

How’s It Different From Banks then?

First off, banks are centralized which makes a lot of their rules arbitrary. Second, banks have salaried employees while the UniSwap protocol has none.

Also, banks are regulated by Governments to protect the general public, DeFi is, to put it mildly, risky.

Finally, on UniSwap, if you own UNI tokens, you have a say in the governance structure and implementation - it’s completely transparent.

Impact of UniSwap on The Crypto-verse

Centralized exchanges are, for the first time, facing an existential crisis - and they face regulators
Token issuers have started offering attractive liquidity mining fees for pooling funds in their token
It is easier to pump and dump in the crypto-verse than ever before
UniSwap overtook USDT (Tether) as the biggest spender of Ethereum’s GAS fees
Ethereum’s GAS fees skyrocketed as projects started mushrooming
Ethereum 2.0 shall be tested by DeFi just as 1.0 was tested by ICOs

A Word of the Wise

D.Y.O.R - Do Your Own Research. Do not chase tokens that came up yesterday. They might be gone tomorrow
Pooling in top hundred trade volume coins coins are safer (as safe as Crypto-investments can be) than those outside of the top thousand
Trading signals on Telegram and Twitter are, more often than you think, as clueless as you

Conclusion

As with all Investments, they’re always subject to market risks and Black Swan events. If you’re looking to dip your toes to see why the crypto-people are going gaga over UniSwap, do consider the pooling solution of this newsletter’s sponsor: Digitex Futures. Learn more here