Crypto Banking and Decentralized Finance, Explained

]

DeFi platforms are structured to become independent from their developers and backers over time and to ultimately be governed by a community of users whose power comes from holding the protocol’s tokens.

By comparison, centralized finance, or CeFi, businesses more closely resemble traditional finance, or TradFi, where consumers enter into an agreement with a company like BlockFi that collects information about them, requires them to turn over their crypto and also serves as a central point for regulators.

What is Ethereum?

Ethereum is the primary network that developers use to build decentralized platforms for crypto borrowing, lending, trading and more. Ether is the cryptocurrency, or token, used to pay to operate on the network. Because the Ethereum blockchain is so popular and made it possible to create new offerings, Ether is widely used and crypto fans are enthusiastic about its worth. It is the second-most valuable cryptocurrency by market capitalization after Bitcoin, at more than $460 billion as of early September.

What are some risks associated with DeFi?

DeFi cuts out the third parties that U.S. financial regulators rely on to ensure market integrity. Licensed operators like banks and brokers play a quasi-governmental role in traditional finance, collecting and reporting data to the authorities, including information on capital gains on investments made by their clients, to ensure taxes are paid. Their participation in the market depends on following lots of rules.

By contrast, DeFi programs are unregulated apps created by coders interested in capital markets. Users’ assets can and have been hacked, and not all of the operations are built in good faith. “Rug pulls,” when developers abandon programs after investors contribute significant assets, are notorious in DeFi.

What’s good about crypto finance?

Innovators argue that crypto fosters financial inclusion. Consumers can earn unusually high return on their holdings, unlike at banks. One in 10 American adults say they do not have a checking account and about a quarter are “underbanked” and unable to qualify for loans. Crypto businesses say they serve their needs and, outside the United States, provide financial stability for customers in countries with volatile government-issued currencies.

Crypto finance gives people long excluded by traditional institutions the opportunity to engage in transactions quickly, cheaply and without judgment, industry advocates say. Because crypto backs their loans, the services generally require no credit checks, although some take customer identity information for tax reporting and antifraud purposes. On a DeFi protocol, users’ personal identities are generally not shared, since they are judged solely by the value of their crypto.

As Bitcoin’s Dominance Steadily Declines, What Crypto Assets Are Institutions Looking At?

]

Crypto is making a steady recovery as Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) have traded higher by more than 20% over the last month.

The most interesting part of the recent crypto rally is that Bitcoin dominance has been steadily declining, Cumberland’s Chris Zuehlke said Thursday on CNBC’s “Squawk On The Street.”

Bitcoin dominance is near an all-time low, Zuehlke said.

Bitcoin dominance is the measure of Bitcoin’s market cap relative to the market cap of the rest of the crypto industry.

See Also: Scaramucci Still Sees Bitcoin Going To 0,000 By Year-End

Zuehlke’s Take On Cryptocurrency Market: Zuehlke told CNBC there is an increased interest in other aspects of the crypto industry that represent pushing innovation in the smart contract space.

Investors have become more and more interested in layer one protocols that enable the disintermediation of smart contracts, he said.

Ethereum, Solana (CRYPTO: SOL), Polkadot (CRYPTO: DOT) and other similar assets have all seen increased interest lately, he said.

“It’s a pretty clear indication that institutions are starting to look beyond Bitcoin to ways the industry might evolve finance going forward.”

Zuehlke expects these layer one protocol assets to be a leader in growth and innovation over the next six to 12 months, he said.

BTC, ETH Price Action: Bitcoin is up 71.58% year-to-date, while Ethereum is up 407.61% year-to-date.

Photo by Christopher Muschitz from Pixabay.

See more from Benzinga

Buy this Under-the-Radar Crypto Before it Pops

]

Had you invested just $1,000 into PancakeSwap (CRYPTO:CAKE) tokens last October, you would be sitting on more than $20,000 in profits today. It hasn’t even been a year since its launch, but the namesake decentralized exchange behind the token is now seeing $1 billion per day in cryptocurrency trading volume. It has more than $12 billion in total assets on its platform.

So how did PancakeSwap go from zero to hero in such a short amount of time? As it turns out, it solves a pretty major problem in the cryptocurrency community – access to altcoins for Americans.

A unique solution for a unique country

American and Chinese investors have a lot in common when it comes to cryptocurrencies. For years, Chinese entrepreneurs and millionaires have been using Bitcoin to transfer their hard-earned wealth abroad while bypassing the central government’s stringent capital control regulations. Similarly, Uncle Sam has a unique set of financial regulations that cause cryptocurrency exchanges like Binance, the largest of its kind in the world, to have a separate platform for Americans and one for everyone else. There are only about 50 coins available for trading on Binance.us, but Binance.com offers more than 500 coins. According to Investopedia, Binance recently halted trading on its U.S. platform, citing regulatory concerns.

As a result, the only way American investors can legally access the vast depth of the altcoin market is through decentralized exchanges like PancakeSwap, hence its sudden rise in popularity. There are 1,639 coins listed on PancakeSwap and 9,654 pairs available for trading, far more than what Binance.com offers.

The platform does not offer any fiat-to-crypto services whatsoever to comply with regulations. Instead, investors need to first purchase major cryptocurrencies like Bitcoin and Ethereum somewhere and then connect their wallet to the PancakeSwap network to swap for altcoins. But here’s the genius part: All one has to do is to swap their altcoins for a stablecoin like Tether that’s pegged to the U.S. dollar to lock in profits after a bull run.

An innovative exchange

But PancakeSwap isn’t just about buying and selling crypto. For starters, users can stake their PancakeSwap tokens in pools to validate transactions on other blockchain networks, earning a sizable amount of interest while doing so. In addition, users can also farm yields by providing trading liquidity with their PancakeSwap tokens, of which PancakeSwap has $6 billion worth of per day. On top of that, the platform recently integrated non-fungible tokens (NFTs).

So why invest in PancakeSwap?

Pledging PancakeSwap tokens for either yield farming or validating transactions removes tokens from its available float, causing artificial scarcity that elevates its price levels. What’s more, a small amount of PancakeSwap units are burned through every transaction, and its developers also buy back tokens in the open market for cancellation (similar to stock buybacks). The exchange burned 5.3 million PancakeSwap units in one week in July alone, and its total supply now amounts to 217.3 million. The more the supply goes down, the more scarce the commodity, leading to a subsequent surge in price.

Overall, expect further capital inflows into this promising token due to record-level interest in the decentralized finance (DeFi) space. With the exchange providing universal access to altcoins, the token being useful for pledging, and a “cryptocurrency buyback protocol,” the future is bright for PancakeSwap.

follow us