Connect with us

Altcoins

Investing in stablecoins? Loaning cryptocurrencies? Making (MKR) it possible.

Published

on

stablecoins
READ LATER - DOWNLOAD THIS POST AS PDF

Stablecoins were, probably, the most hyped cryptocurrency class of the year. Potentially, they can increase cryptos market usability, serve as a cryptographic and more secure alternative to fiat money and are already basically unanimous in every exchange as middlecurrencies.

Currencies tend to lose their value over time. Investing in a stablecoin pegged to the USD would be pretty similar, thus, to invest in the dollar, which is generally a bad investment, except if you manage to trade them with a small premium instead of a small discount over their par, the latter being much more usual (and you’ll rarely be able to buy a significant amount of them when they are below their par value). There’s also the general mistrust about whether their claimed collateral reserves are true or not. If they cannot prove they possess enough collateral to back their circulation, then they’re not far from a Ponzi scheme which can eventually cause some trouble for their users. Well, in the case of Tether (USDT), there has already been a copious amount of trouble. They still didn’t provide us with a third-party audit for their reserves and, on top of that, there is enough evidence to affirm it was used to manipulate Bitcoin’s price causing its value to skyrocket and then fall at the same pace. Paxos (PAX) and TrueUSD (TUSDT) are two dollar-backed exceptions, providing regular and legitimate audits consistently.

Besides being useful currencies for their given purposes, there are some concerns surrounding the fact that they only work because they rely on regulation. Some worry that these regulations are subjected to the authorities’ scrutiny, which can change at any time, others simply don’t like the idea of mixing cryptocurrencies with the government.

The Maker Platform is an algorithmic stablecoin, not a fiat-backed one, making it an answer to all these issues.

First of all, Maker is one of those “dual token” platforms. The tokens have very different functions but brilliantly complement each other. There is DAI, the stablecoin, kept at $1. Differently from other cryptos that do the same, DAI is not backed by a regulated asset and still, it won’t ever significantly fluctuate even under extreme circumstances, which they have a special mechanism for. It’s back by Ether (ETH). DAIs can be borrowed using Ether as a collateral. Maker issues Collateralized Debt Positions (CDPs), allowing users to lock a certain amount of Ether to loan DAIs. The loan can be paid at any time, unlocking the user’s Ethers and burning the DAIs.

The amount of DAI borrowed is equivalent to the current ETH market price, as 1 DAI is expected to be equal to 1 USD. If the price of Ether happens to appreciate, the user doesn’t need to pay any more than what they borrowed to unlock their ETH. That’s the magic of CDPs: if the price of ETH happens to appreciate, you can settle your loan paying less than the current ETH’s price.
In case the Ether price goes down making the collateral of the CDP to go below a certain threshold, the CDPs are automatically liquidated before there’s insufficient Ether to back for the DAIs. Maker then sells the collateralized Ether to buy enough DAI to pay for the loan. At this point, the borrower wouldn’t have lost anything more than what he would if he just held the Ether (except, well, a liquidation fee and the CDP fee).

Considering the Ether price can crash too fast reaching a value which isn’t enough to back for the CDPs’ DAI, MKR comes into play. In this case, more MKR is issued and sold in the open market to raise the necessary funds to back for DAI. MKR holders are responsible for the governance of the Maker ecosystem, setting parameters such as collateralization rate and liquidation threshold.

They receive the CDP fees in return. As more MKR is created and sold, it’s natural that the token’s price will drop, incentivizing the voters to intelligently regulate the system.

Maker presents a last resource process that basically resets the system, called the “global settlement”. A select number of governors can trigger the global settlement, allowing DAI holders to claim ETH at par value. Although it sounds a harsh movement, it’s Maker’s solution to extreme theoretical situations in which its vulnerability can be exploited.

DAI and MKR’s current market status

Dai
As we can see by this graph, Dai tends to fluctuate by no more than 0.05%, with some rare slips of up to 5%, which doesn’t make it less of a stablecoin, albeit revealing a volatility higher than other common stablecoins’, like Tether and TrueUSD.


source: coinmarketcap.com

MKR


source: coinmarketcap.com

Maker is a solid cryptocurrency, ranked as 24th in market capitalization. Its price tends to be comparatively unpredictable, as it’s not only determined by demand, but by bad governance from the holders. But trading is not the only way to profit from MKR. Taking part in Maker’s regulation is also a way of earning income from it, and it only requires you to hold a few tokens to vote and receive a share of CDPs’ fees.

Conclusion

Although there are already many stablecoins in the market, Maker achieves stability in a different and smart way.

DAI loans are allowing people to buy things they need at the moment without selling an asset they see the potential to grow in the future, and with CDPs, there’s nothing really to lose except a small tax.

There’s certainly a place for a stablecoin like DAI alongside fiat-backed ones that provide sufficient evidence of their reserves to match Maker’s algorithm that dispenses it from audits.

For real-time trade alerts and a daily breakdown of the crypto markets, sign up for Elite membership!

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency and read our full disclaimer.

Image Courtesy of Pexels

Altcoins

Aluna.Social is a Compelling Social Platform for Crypto Traders and Investors

Published

on

Aluna.Social
READ LATER - DOWNLOAD THIS POST AS PDF

When one thinks about the social media landscape, the companies that first come to mind are most likely Facebook, Instagram, LinkedIn, and Snapchat.  These platforms are a great way to stay connected with friends, families, and colleagues, especially when geographic distance is a factor.  But, in addition to just chatting about life in general and sharing pictures, social media can be used to bridge the information gap that exists within the investment community.

Over the last decade, many trading offices have been established in large cities all over the world which allow solo traders and investors to pay a monthly fee in exchange for a workspace.  The real benefit to trading in these offices is to participate in the free flow of trading ideas and information.  Proprietary trading is one of the most challenging careers to be successful at and the exchange of ideas is almost required in order to succeed.  Traders at hedge funds and investment banks work in teams so why shouldn’t remote traders?

While these trading offices are a great way to help bridge the information gap, Aluna.Social may provide an even better way, especially as it relates to cryptocurrency trading.

Mission Statement

Aluna.Social, founded by Alvin Lee and Henrique Matias, is a multi-exchange social trading terminal for crypto traders and investors.  The goal of the platform is to help newcomers shorten their learning curve,…

Continue Reading

Altcoins

CoinFlip Scores Big with BRD Wallet Partnership

Published

on

CoinFlip
READ LATER - DOWNLOAD THIS POST AS PDF

As the crypto markets move closer to mass adoption, one of the keys for future success will revolve around attracting as many market participants as possible.  While many crypto users are extremely tech oriented, a lot of those on the sidelines are not.  The cause of waiting on the sidelines could be due to a variety of reasons such as fear of the unknown, lack of knowledge, age, or a combination of all of the above.  In order to entice new users to join the crypto revolution, crypto ATMs are rising up across the country.  Of those, the largest and most influential crypto ATM company by a significant margin is CoinFlip.

In early October, CoinFlip announced on its Twitter that it had officially partnered with BRD Wallet to re-introduce their crypto ATM map.  Now, BRD wallet users will be able to locate their nearest CoinFlip ATM and receive a 10% discount for both buys and sells.  BRD brand awareness is growing quickly within the crypto community thanks to its innovative and entrepreneurial spirit.  The team strongly believes in the value of financial freedom and independence, and want to empower people across the world by leveraging the possibilities that Bitcoin and other cryptocurrencies provide.

Cryptocurrencies are already making a huge difference around the world.  Citizens of Venezuela, a country devastated by rampant inflation, have been using several cryptocurrencies…

Continue Reading

Altcoins

Can Libra help the crypto industry to reach new heights?

Published

on

Libra is motivated and determined to change the face of payment procedures across the globe and make the blockchain-based project the leaders of payments.
READ LATER - DOWNLOAD THIS POST AS PDF

The market for cryptocurrencies started with the launch of Bitcoin in 2009, and since then, so many cryptocurrencies have been launched that it gets hard to keep track of them. The crypto market has seen massive growth in the past 3-4 years as it started gaining attention from mass media, which helped in this boom.

From the past 2-3 years, several new cryptocurrency projects were launching in the market. Amid all this, the social media giant – Facebook announced the launch of their cryptocurrency platform, and this news got viral like wildfire. The announcement came forward in June, and the upcoming cryptocurrency is known as Libra, and it’ll come with its dedicated wallet called Calibra.

What is Libra?

Libra is a permissioned blockchain-based digital currency which is being developed under the supervision of Facebook’s vice president, David A. Marcus. The cryptocurrency is under development in partnership with an independent, non-profit member Libra Association. Facebook is the second member of the project, and these companies aim to use Facebook’s user base for the promotion of the digital currency when it is launched. The transactions and the cryptocurrency will be managed and cryptographically entrusted by the Libra Association.

Note: Libra Association was established by Facebook to look after the cryptocurrency and the transactions, and it was founded in Geneva, Switzerland.

The development of…

Continue Reading

eToro