POINTS² : web3’s attempt to lure LPs

https://blog.district0x.io/points%C2%B2-web3s-attempt-to-lure-lps-a4d295b2a734?source=rss----ecd1373b2ad6---4

Spotlighting the latest developments in web3

POINTS² : web3’s attempt to lure LPs by gamifying protocol airdrops with referrals and ‘play to earn’ logic

How DeFi becomes a playground for point hunters who seek to amplify their protocol airdrops by signing up their friends and family to earn ‘points squared’.

DeFi represents a transformative shift moving away from Banks as we know them toward a less centralized model: peer-to-peer finance — where everyone can participate at any time.

At the heart of this evolution are innovative incentive mechanisms to attract users and liquidity to new protocols — much-memed ‘point systems’, which have become a cornerstone in attracting and maintaining traction within web3. ‘Point systems’ are designed to reward users for their participation in the ecosystem: these rewards, in the form of future airdrops, not only incentivize users to provide liquidity but also to engage in various other activities like staking, borrowing and lending, and even large scale referral networking. So as it stands everyone refers everyone else, including their grandmothers!

At this stage, Point Systems are crucial for new protocols, as liquidity is the lifeblood that ensures smooth trading and efficient market functioning — while increasing gamification and participation from money-hungry degens is exactly what everyone needs to supercharge their marketing and GTM (most really need degens to even survive at all given the degen 100x leverage on perps for instance!).

But ser…gib Liquidity Providers… plz fren…

LPs supply the market with the necessary funds by locking their assets into protocols. In return, they receive tokens, which represent their share of the pools or positions, and sometimes even entitle them to a portion of the fees generated by the platform (and… that’s definitely not a security at all!).

Provide LiQuIDitY to get PAID… in points lol

Web3 teams rely heavily on these LPs to ensure sufficient liquidity is available for trading activities, lending supply, or simply liquidity on a new L2 (ie — Blast, Manta, Mode). This is where the point system comes in handy as an additional layer of incentive for these providers. By offering points or rewards, protocols and L2s alike encourage LPs to deposit a lot more assets than they would for regular usage because they have an opportunity to multiply their airdrop (by referring their friends to deposit assets too) thereby increasing the overall liquidity available on the platform or network. This not only benefits the providers through increased rewards but also enhances the user experience for other participants by ensuring smoother trading, lower slippage, and better pricing, and simultaneously increased TVL for the protocol.

DeFi has significantly evolved since DeFi Summer, particularly in how it incentivizes and retains users. Initially, DeFi protocols primarily relied on straightforward interest-bearing models for attracting liquidity. However, as the sector matured, there was a shift towards more gamified, complex, and appealing incentive structures, giving birth to today’s point systems emerging as ‘sophisticated’ methods that reward participation but also foster community engagement and loyalty at the same time.

Incentivizing Participation with Point Systems

Point systems are ingeniously designed to create a win-win scenario for both the platform/protocol and the liquidity providers. By participating in these systems, LPs can earn additional rewards, or multiply their rewards, often in the platform’s native token, which can either be traded or reinvested into the system for further gains, while the protocol gains deeper liquidity/TVL, a loyal community, and an all-around better product.

We like the Points

For instance, some apps even introduce tiered systems where points can lead to higher rewards or privileges within the ecosystem. This gamified approach encourages not just initial participation but sustained engagement over time. One innovative aspect of these point systems is how they integrate referral programs. Participants are encouraged to refer friends and other users to the platform, which ultimately expands the user base exponentially. Referrers are rewarded with additional points or tokens, creating a powerful network effect that drives growth for the issuer.

While point systems offer significant benefits, however, they are not without challenges. The primary concern is the sustainability of these incentives. Over-reliance on token rewards can lead to inflationary pressures, reducing the token’s value over time and acting in a counterproductive way for the issuer. Furthermore, as the market fluctuates, the actual value of these rewards can vary, affecting the predictability and attractiveness of the incentives. Another challenge lies in ensuring the fairness and security of the system. DeFi platforms must implement robust mechanisms to prevent manipulation and ensure that the rewards are distributed equitably among participants.

Some novel approaches link point systems with the platform’s governance, enabling users to have a say in the future direction of the protocol — thus creating a sustained interest in the protocol’s continuity, but also diluting governance decisions to include speculators (which can be a double-edged sword. This aspect of decentralized governance, while ideal in theory, has faced challenges in practice. The distribution of governance tokens, can sometimes also lead to centralization if a few users accumulate a large portion of these tokens, all things to be considered by issuers when establishing a point system.

not your friends

Integrating Referral Programs

Referral programs have become a staple in DeFi point systems, serving as a crucial mechanism for ecosystem growth. By incentivizing current users to invite new ones, DeFi platforms can expand their user base organically, yet exponentially. These programs are typically structured in a way that rewards both the referrer and the referee, where virtually no participant loses, creating a trifecta of benefits for all parties involved (the protocol, the user, and his referrals).

Referral programs often use tiered structures, where rewards increase with the number of users referred — similar to quadratic funding mechanisms. This approach not only encourages more referrals but also keeps users engaged with the platform, as they have a vested interest in its growth and everybody’s success. This method of expansion harnesses the power of network effects, ie social effects, where each new user potentially brings more users, leading to substantial growth. For this, the design of these referral programs is key; they must be attractive enough to motivate users to participate but also sustainable to prevent abuse and ensure long-term viability.

Referrals can multiply your points 10x

New referral systems have emerged to mimic multilevel marketing structures where each referral benefits all levels in the tree it joins. These models have proven far more viral than simple uni-level structures, ultimately contributing to the overall health of the community providing a more viable and robust framework for growth, without using new referrals as exit liquidity for older participants as everyone continues to benefit from the ever-growing network.

Points Squared

Points have amazing network effect. But what is even better than the network effect? Network Effect Squared. With the explosion of new L2s and new protocols on these ‘Superchains’, ‘Appchains’, and ‘Meshchains’ (Optimizm, Polygon, and Avax all have ‘subnets’ of sorts where easy to spin up rollups just seem to explode), we witness an increasing multiplication of point systems on top of point systems.

wtf is ‘Points Squared’?

One good example of this is Manta Pacific, a new rollup on Polkadot that used points to lure large amounts of liquidity (around $900M at the time of writing), and then proceeded to make use of that liquidity in new ‘sub-point systems’ in the various apps on the chain. This effectively makes the liquidity not only sticky but also allows for participants to keep earning while they explore the different apps on new chains.

The Points Squared logic is smart because instead of just earning points in one system there is a system inception that emerges where users suddenly earn points on top of points, for the underlying blockchain AND from the protocol used on that blockchain.

The Eigen Layer ecosystem is another prime example of how this plays out in practice:

https://medium.com/media/f025c39d9797de955caad1f6677aca7d/href

When applied with referral logic and multilevel reward logic these systems become super powerful community growth tools unlike anything we have ever seen. Ultimately we are witnessing the hyperfinancialization of attention, leading to what we have called ‘SocialFi networks’ in past articles.

But although in theory, these systems are a win-win-win for everybody, when crypto is involved scammers are not far. Users must remain vigilant as malicious systems can become a serious money trap if these are set up by scammers with ill intent.

All that Glitters is not Gold

While point systems and referral programs offer many benefits, however, they also come with risks. Regulatory compliance is a significant concern, as the legal framework surrounding DeFi and token-based incentives is still evolving. Platforms must navigate these regulations carefully to avoid potential legal issues, primarily related to security laws and regulations.

Another risk is market volatility. Since rewards are often in the form of tokens, their value can fluctuate significantly, affecting the real value of the incentives. This volatility can impact user participation and the overall stability of the platform.

Point slaves everywhere!!!

Point systems in DeFi have become a game-changer, enabling platforms to attract and retain liquidity in innovative ways by combining financial incentives with gamified elements and community governance. At this stage however seemingly every protocol and new chain has some sort of point system, ultimately making it hard to keep track and know which ones are legit and which ones are set up by scammers to once again rob you of your coins. The integration of referral programs has further propelled this growth, leveraging social networks and community ties, enhancing user engagement and platform growth — every single system however needs to be researched and audited in depth to make sure it is legit and not a scam rug.

As DeFi continues to grow and mature, we can expect to see further innovation in how platforms incentivize and engage their users. These developments will likely shape the future of web3, offering more inclusive, efficient, and user-centered financial services. As the points system landscape continues to evolve, so too will the mechanisms for incentivizing and rewarding participation, shaping the future of liquidity provision. The sustainability and regulatory compliance of these systems, however, remain areas of ongoing focus and development. One thing we all know is that DeFi is not without its risks. YES, for real. So participants must understand the decentralization illusion and be aware of the potential risks associated with new traps put out by scammers.

The future of DeFi and its point systems is bright but requires careful navigation, and as regulatory frameworks evolve, DeFi platforms will need to adapt to ensure compliance while continuing to innovate. So stay cautious out there, don’t get scammed, and DYOR!

Joining the district0x DAO

For more information about the district0x network:


POINTS² : web3’s attempt to lure LPs was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.

Token Bonds & Protocol Owned Liquidity — a sustainable growth model for productive Treasuries.

https://blog.district0x.io/token-bonds-protocol-owned-liquidity-a-sustainable-growth-model-for-productive-treasuries-b6f8a0a673ad?source=rss----ecd1373b2ad6---4

Spotlighting the Latest Developments in Web3

Token Bonds & Protocol Owned Liquidity — a sustainable growth model for productive Treasuries.

How token bonding mechanisms and Protocol Owned Liquidity (POL) can help any project bootstrap a diversified and healthy Treasury and grow it in a sustainable and predictable manner.

Bonds, the cornerstone of traditional finance, have been pivotal in shaping tradfi investment landscapes. The bond market dances to the tune of interest rates and inflation, offering insights into economic sentiment and being a general temperature check for belief in ‘the strength of the system’. Government bonds, a pillar of stability, wield influence globally, while Corporate bonds known for higher yields come with a critical caveat: credit risk. But behold, there is a new bond in town: the recent developments in crypto bring an entirely new model to the table: permission-less, collateralized, programmable token bonding curves (executed through yield-bearing NFTs).

Sure, corporate bonds entice investors with enhanced returns, but the prospect of credit risk looms large. Crypto bonds seek to counter this risk in innovative ways: token locks and emission schedules guarantee the bond buyer that the tokens will in fact be sent his way and end up in his wallet — often only a few weeks or months long by the way. However, the volatility of crypto tokens opens up new risks akin to those experienced by corporate tradfi. So how does one guarantee that the underlying value of the bonded tokens doesn’t evaporate in a -90% down only dump because ‘Devs on holiday.gif — I think the project rugged.jpg’ in the Telegram’?!

This is where Protocol Owned Liquidity (‘POL’ for short) comes in. Specifically: Protocol Owned Reserve Liquidity. Factors like performance and project alignment shape the trajectory of this burgeoning segment. Let’s face it, the intricacies of traditional bond markets extend beyond interest rates. And they do so also in token economies. For example, ‘green bonds’, a novel addition to traditional bond markets, channel funds into eco-friendly and social endeavors, and the returns might be more than just financial, hence having much wider participation and acceptance. As we delve into crypto bonds, parallels with their traditional counterparts become apparent. Interest rate dynamics, for instance, a force shaping all bonds, echo in the crypto realm as well. The nascent stage of crypto bonds indeed mirrors the early days of green bonds, with a potential for broad socio-economic projects financed by their proceeds, and thus massive participation.

BONDS. MUCH BONDS.

Token Bonds: A Catalyst for Sustainable Protocol-Owned Liquidity in Token-Based Projects

Token Bonds have emerged as a revolutionary mechanism, propelling the evolution of decentralized finance (DeFi) into what is now referred to as DeFi 007. Joking. But close enough. So how do they work, and how can they mitigate the risks of tradfi bonds? Let’s explore the benefits of token bonds to protocol-owned liquidity, elucidating how they contribute to the sustainability of token-based projects by attracting reserves of stablecoins and deep liquidity in a safe manner.

Token bonds involve protocols selling their tokens at a ‘discount vested over time’ to buyers who, in turn, provide other tokens such as DAI, USDC, USDT, ETH, or even LP tokens to the protocol, to ensure that the protocol has a.) enough reserves to continue operations, b.) enough deep liquidity for the token to trade well, and c.) maybe even allocate a portion of reserves to yield farming and thus further growing the treasury over time. This unique approach to liquidity bootstrapping and reserves generation has become a cornerstone of the DeFi 2.0 landscape of today. And if you are not participating, you are simply missing out (both as a project and a buyer).

Liquidity Managers finally woke up to the fact that Protocol-Owned Liquidity and Bonding are a synergistic duo, in many regards. For one, bonding, as a concept, creates a symbiotic relationship between the protocol and liquidity providers. The user really ‘joins’ your project, he doesn’t just ‘buy your tokens’. There is something much more fundamental to being bonded. Meanwhile, the protocol acquires its liquidity and reserve assets through bonds, establishing a diversified treasury which in turn is used by the protocol to increase the value of their product/tokens over time. It’s a win—win.

Protocol-owned liquidity, powered by token bonds, introduces a paradigm shift in sustainability. Unlike traditional liquidity mining with high reward costs, the burden of mercenary and non-loyal LPs is shifted towards more sustainable models of selling tokens at a discount — a safer and less mercenary model better for both the protocol as well as the traders — and is more conducive to guaranteeing loyalty over time. This ensures the longevity of the project by aligning incentives with long-term success for all parties involved. Mercenaries go away. For real. …Please?

Furthermore, the allure of stablecoins in the cryptocurrency space is undeniable. Deep stablecoin reserves are the best-case scenario for any protocol. Token bonds attract reserves of stablecoins, providing a reliable and low-volatility foundation for the project. This stability is crucial for user confidence and broader adoption. Native tokens bonds may also be a good idea for protocols to secure the base transaction currency they need to deploy new smart contracts and settle on-chain expenses.

wen $TIDE bonds? wen $DANK bonds?

Supercharging your POL: Stable Growth Through Delta Neutral DeFi Yield Strategies

Protocol-owned liquidity is a revolutionary concept reshaping the dynamics of decentralized finance (DeFi) as we speak. At its core, it involves protocols actively managing their liquidity and reserves. We are now seeing this liquidity more often acquired through innovative strategies such as token bonds, ie liquidity bonds and reserve bonds, but the true potential of deep liquidity becomes exponentially more productive with delta-neutral DeFi yield strategies, particularly focusing on yield-bearing stablecoins and liquid staking derivatives. Stable Real Yield, with 0 volatility or risk (other than counterparty risk).

Protocol-owned liquidity refers to a decentralized protocol’s ability to actively control and manage its liquidity reserves — initially bootstrapped stablecoins, diversified at best, with some small allocation to native tokens to pay for on-chain expenses, bridging, trading, or market making. This approach empowers protocols to navigate the challenges of liquidity provision and better adapt to market dynamics, ultimately making them a lot more resilient and sustainable.

Coupled with delta-neutral strategies, protocols can manage risks extremely efficiently, while still contributing liquidity to the network and doing their part in securing transactions (in the case of liquid staking derivatives) or supporting the growing RWA vertical by providing liquidity to real yield protocols. Delta Neutral strategies traditionally aim to eliminate market risk by balancing asset exposure. In the context of DeFi, these strategies involve maintaining a neutral delta/principle, thereby hedging against potential price fluctuations. This ensures a more stable and predictable environment for yield generation and leveraged yields.

Yield-bearing stablecoins play a crucial role in delta-neutral strategies. As mentioned in our last article, YBS, and LSDs are two rapidly growing verticals in DeFi, both mainly because of their real yield potential and their potential to bring outside liquidity into the web3 space in a big way. By employing delta-neutral strategies on these stable assets, protocols can optimize yield generation while maintaining complete stability, virtually fully removing the risk of liquidations. This dual benefit attracts liquidity providers, as well as protocols, fostering the essential building blocks to enable the growth of said protocol-owned liquidity.

Similarly, liquid staking derivatives (LSDs) introduce an additional layer to protocol-owned liquidity, one in which protocols can stake their assets to help the blockchain ecosystem they operate on flourish, while never being locked up or losing liquidity in an inefficient lock-up. By staking ETH assets and creating derivatives, protocols can unlock all their idle liquidity without sacrificing the potential staking rewards. Delta-neutral strategies applied to these derivatives further enhance the efficiency of liquidity management and allow for leveraged positions, again virtually risk-free.

Growth Potential and Sustainability

Bonding proves to be a superior method for generating liquidity compared to traditional yield farming, ICO liquidity traps, or slow-burn token sales. Their inherent role in finance coupled with their safe and guaranteed discounts, make bonds the perfect instruments to help protocols acquire LP liquidity as well as reserves in stables and other tokens. Apebonds (formerly Apeswap) has recognized this early on and has fully pivoted to becoming a bond infrastructure protocol.

ApeBonds Liquidity Bonds 30 days

An enhanced and matured bond infrastructure further fortifies the market and helps projects gear up against market fluctuations. Ultimately, this stability allows for the protocols to explore new revenue-generating strategies for their treasuries. Here at district0x, we are currently assessing in which ways we can leverage bonds to further expand the token utility and create new products on top of liquidity management.

Today, token bonds clearly serve as a financial instrument for protocols to become more resilient, allowing them to actively attract liquidity and reserves while ensuring programmatic guarantees for the buyers. This financial flexibility empowers protocols to reach new levels of safety in a very volatile industry. Token bonds also mitigate risks associated with liquidity provision. By establishing a predictable and sustainable model, token-based projects can for the first time think about growing their liquidity rather than having to focus on simply keeping it. The synergy between protocol-owned liquidity, delta-neutral strategies, yield-bearing stablecoins, and liquid staking derivatives creates a robust ecosystem for growth.

This not only creates a flywheel of yields, but also attracts new users, in turn creating more stability, and so forth and so forth…, forming a dynamic framework that optimizes liquidity management, attracts stakeholders, and propels the protocol towards sustainable growth. Besides, the implementation of token bonds also fosters community involvement. As stakeholders participate in bonding, they become integral to the governance and decision-making processes of the project, promoting a decentralized ecosystem and active participation in the token’s success.

However, while token bonds offer significant advantages, challenges such as initial token pricing and potential manipulation exist. Future developments in smart contract technology and governance structures aim to address these challenges and further optimize the efficiency of token bonds, including bond insurance and other security features.

In conclusion, we can note that the future of crypto bonds undoubtedly emerges as an intriguing frontier. The volatility inherent in cryptocurrencies poses challenges akin to credit risk, while the crypto market’s responsiveness to external factors parallels the traditional bond market’s sensitivity to interest rates. Just as green bonds pioneered a new era in financing, crypto bonds hold promise for revolutionizing capital flows in the digital realm. For now, our gaze extends beyond the turbulence of the first steps into what could become the sustainable growth flywheel for all of DeFi liquidity, envisioning a future where crypto bonds carve a niche for themselves in the global financial landscape.

Joining the district0x DAO

For more information about the district0x network:


Token Bonds & Protocol Owned Liquidity — a sustainable growth model for productive Treasuries. was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.

How Yield-Bearing Stablecoins are Reviving DeFi: do RWAs and Real Yield have the potential to fuel…

https://blog.district0x.io/how-yield-bearing-stablecoins-are-reviving-defi-do-rwas-and-real-yield-have-the-potential-to-fuel-fc70caada17f?source=rss----ecd1373b2ad6---4

Spotlighting the latest developments in web3

How Yield-Bearing Stablecoins are Reviving DeFi: do RWAs and Real Yield have the potential to fuel the next cycle?

YBS and their impact on liquidity

Yield-bearing stablecoins pay interest to holders. In essence, this is what the fuzz is all about. They are typically backed by either a basket of assets, including other stablecoins, fiat currencies, and government bonds or simply emit off-chain yield to on-chain token holders. In many cases, the backing helps to maintain the stablecoin’s peg to the US dollar, if it isn’t maintained algorithmically.

Some yield-bearing stablecoins also work by lending out the underlying assets to borrowers. Borrowers may use these assets for a variety of purposes, such as margin trading or yield farming. In return for lending out their assets, stablecoin holders earn interest. In that case, the ‘revenue’ generated by the liquidity is usually sent back to the supplier in the form of rebates. Some more recently developed yield-bearing stablecoins also source their yield from Liquid Staking Derivatives, which we touched upon in the last article, such as $DUSD.

Notable names in the #YBS space include $sDAI, $USDM, $CASH, $eUSD, and many others. Each ecosystem/chain usually has at least one yield-bearing stable, earning native yield on that chain for its token holders, although the biggest concentration of YBS is on Ethereum Mainnet (where most DeFi activity and liquidity is found).

In this post, we will review the concepts behind #YBSs and see how they may fuel the growth of DeFi and potentially even be the root of the next bull run’s ignition. But how do YBS work and what are their benefits? Let’s dive in.

so are yield-BEARing stables UP ONLY?!

What are Yield BEAR-ing Stablecoins?

There are a few different ways that yield-bearing stablecoins can work. One common approach is to use a decentralized or even centralized lending protocol. In this case, stablecoin holders deposit their coins into a smart contract or custodial account, which then lends out the coins to borrowers. Borrowers pay interest on the loans, which is then distributed to the stablecoin holders.

A second approach will collateralize other yield-bearing assets, ie. Liquid Staking Derivatives, to issue a stablecoin that distributes the underlying yield to the holders either through rebates or airdrops. This approach enables the holder to leverage the asset further on DeFi protocols to loop or ‘compound’ the yield of the principal in a Delta Neutral Strategy.

The third approach is to bring off-chain yield onto a blockchain and simply distribute that yield to holders. This approach has recently gained a lot of traction and interest from the TradFi community. It is one of the main arguments around the RWA narrative, and some even go as far as calling it the engine that will ‘take DeFi to a Trillion Dollar Marketcap’.

Are they a better 2.0 version of ‘Stablecoins’?

Yield-bearing stablecoins offer a number of benefits over traditional stablecoins. First, they allow holders to earn interest on their holdings. This can be a valuable source of passive income, especially in a low-interest environment.

Second, yield-bearing stablecoins can be used to hedge against inflation. When inflation is rising, the value of fiat currencies is eroded. However, yield-bearing stablecoins can help to protect against this erosion by providing holders with a return on their investment. This is very important in places like Argentina where the fiat-dollar hyperinflates regularly.

Third, yield-bearing stablecoins can be used to invest in other DeFi protocols, to compound yield, and to run ‘strategies’ — used to maximize capital efficiency. For example, stablecoin holders can use their coins as collateral on decentralized lending protocols, and loop their yield many times over.

HODL? how safe are stablecoins?

Risks of yield-bearing stablecoins

Yield-bearing stablecoins also come with some risks. One risk is that the underlying backing of the stablecoin may not be sufficient. If the backing assets lose value, the stablecoin may lose its peg to the US dollar. This recently happened to Terra’s $TUSD, one of the biggest implosions in recent crypto/DeFi history; as well as $USDR — Tangible’s YBS, backed by a combination of things (including Real Estate).

Another risk is that the lending platform or decentralized lending protocol may be hacked or exploited. This could lead to the loss of stablecoin holders’ funds. Ultimately the smart contract risk and counterparty risk play a large role here — with regular exploits plaguing the vertical regularly.

Finally, yield-bearing stablecoins are typically more complex than traditional stablecoins. This can make them more difficult to understand and use — so they are usually not a good fit for noobs or for users who want to hold large sums of money in a stable asset. Some protocols even require KYC and are non-permissionless so users may end up with funds locked or frozen.

The YBS Players to date

The biggest yield-bearing stablecoin player to date is undoubtedly MakerDAO with $DAI — $sDAI (sprakprotocol.io). MakerDAO is a decentralized lending protocol that allows users to mint DAI, a USD-pegged stablecoin. DAI is backed by a basket of assets, including other stablecoins, fiat currencies, and government bonds. MakerDAO users can earn interest on their DAI by depositing them into the Dai Savings Rate (DSR). The DSR is a smart contract that lends out DAI to borrowers. Borrowers pay interest on the loans, which is then distributed to the DAI depositors. Sparkprotocol.io also lets you borrow DAI against your LSDs.

In addition to $sDAI, there are a number of other yield-bearing stablecoins available. Some popular options include:

  • sUSDT (USDT Savings) and eUSDC (USDC Earn) — the two staples by Tether and Circle.
  • mkUSD, DUSD, eUSD, and R and CASH — mostly backed by LSDs or, in fact staked ETH.
  • USDM, USDY, and USDR — backed by Real World Assets such as Treasury Bills and Real Estate.

So what’s next? Where are the next big innovations in this space going to come from? If you listen to the X DeFi degens: ‘RWAs!’ seems to be the answer everyone agrees with.

Breaking News: RWAs are here.

BREAKING NEWS: ‘RWAs are Reviving DeFi and Fueling the Crypto Bull Run!’

In the ever-evolving world of stablecoins, innovation continues to drive the industry forward. DeFi has been a transformative force and its evolution has led to the emergence of real-world assets (RWA) packaged as yield-bearing stablecoins. According to many, these new developments have the potential to not only revive DeFi but also fuel the next crypto bull run.

DeFi represents a shift from traditional financial systems to decentralized, blockchain-based alternatives. The beauty of DeFi applications is to enable users to access a wide range of financial services, without the need for traditional intermediaries like banks, often referred to as “money legos.” In 2022 and 2023 the DeFi space matured, and the need to bridge the gap between TradFi and the crypto became evident: this is where Real-World Assets (RWA) come into play.

RWAs are fueling DeFi

Real-World Assets (RWA)

RWA refers to off-chain assets that are tokenized and brought onto the blockchain for use in DeFi applications. Tokenization involves converting real-world assets, such as treasury bills, real estate, commodities, or even debt, into digital tokens. These tokens represent ownership and value, allowing them to be traded and used in blockchain-based financial applications. Tokenization simplifies the transfer of ownership, provides transparency, and enables fractional ownership, making it possible for a broader range of investors to participate — it democratizes access while making transactions more capital-efficient.

RWA tokens come in various forms, including equity-based, real asset-based, and fixed income-based. These tokens have the potential to significantly expand the range of assets available for DeFi use. Notable examples include Goldfinch, Centrifuge, and Maple Finance, each offering unique approaches to RWA in DeFi. The best resource for RWAs at the moment is rwa.xyz.

The Promise of YBS

While RWA represents a bridge between traditional assets and DeFi, yield-bearing stablecoins add an exciting layer to the DeFi ecosystem. Yield-bearing stablecoins play a crucial role in DeFi for several reasons:

They can be generating Passive Income, while contributing to the liquidity of DeFi platforms by incentivizing users to supply their assets to lending pools, thus facilitating borrowing and lending within the ecosystem.

Yield-bearing stablecoins also provide a way to manage risk in DeFi. They offer a stable value, which can be used to hedge against the volatility of other cryptocurrencies and help diversify a user’s portfolios by holding a stable asset with exposure to traditional assets (while staying within the DeFi ecosystem).

The stability of YBSs and the inclusion of real-world assets in DeFi expands its utility. This stability is essential for attracting institutional investors who seek a broader range of investment options. As DeFi and stables mature, they can provide solutions for traditional financial needs, including asset-backed loans and investments in tangible assets like real estate.

% yields at stargate.finance/farm

Yield Attractiveness for Liquidity

Yield-bearing stablecoins introduce a new dimension of attractiveness to DeFi. As interest rates in the traditional financial sector fluctuate, the appeal of yield-bearing stablecoins can increase. For instance, during periods of rising interest rates, these stablecoins can offer competitive yields, making them an enticing option for investors looking for passive income.

The addition of yield-bearing stablecoins also enhances liquidity within the DeFi ecosystem. Liquidity is the lifeblood of financial markets, and stablecoins encourage users to provide their assets for lending or staking, which, in turn, supports borrowing and trading activities. This increased liquidity and capital inflow can be a driving force behind the growth of DeFi in the future.

As real-world assets are integrated into DeFi, we witness the potential for crypto to drive positive change in traditional finance. These developments showcase the industry’s ability to adapt and create innovative solutions that transcend the limitations of traditional systems.

Finally, the convergence of RWA and yield-bearing stablecoins in the DeFi ecosystem signifies a significant leap forward in the crypto industry. A leap that makes the benefits of DeFi clear and obvious to all — even TradFi! The inclusion of Yield Bearing Stablecoins expands the possibilities for investment while offering attractive yields, new primitives, and even new composability with DeFi 1.0.

Undoubtedly, yield-bearing stablecoins offer a number of benefits over traditional stablecoins and volatile tokens and usher in a new age of blockchain finance. They allow holders to earn interest on their holdings, hedge against inflation, and bring new RWA yields on-chain in a stable and easily accessible, permissionless way. However, yield-bearing stablecoins also come with some risks, such as the risk of hacking and the risk of the stablecoin losing its peg to the US dollar.

So far however, the benefits far outweigh the risks, and once mainstream TradFi catches up with that point of view we could see an unseen amount of liquidity being poured back into the DeFi and crypto ecosystem-potentially reigniting interest in blockchain and thus the next cycle’s bull run.

Joining the district0x DAO

For more information about the district0x network:


How Yield-Bearing Stablecoins are Reviving DeFi: do RWAs and Real Yield have the potential to fuel… was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.

The shiny new thing which may ignite the next bull run: what are Zero- Knowledge-Proof Solutions?!

https://blog.district0x.io/the-shiny-new-thing-which-may-ignite-the-next-bull-run-what-are-zero-knowledge-proof-solutions-dca2b866b4c9?source=rss----ecd1373b2ad6---4

Spotlighting the latest developments in web3

The zk rollup revolution is here and zksync seems to lead others on the path toward a more scalable, less public DeFi ecosystem

Blockchains are a powerful technology, but they have some limitations. One of the biggest limitations is scalability. The Ethereum blockchain, for example, can currently only process about 15 transactions per second. This is not enough to support the growing demand for blockchain applications.

There are a number of scaling solutions being developed for blockchains. One promising solution is zero-knowledge proofs (ZKPs). ZKPs are a cryptographic technique that allows parties to prove the correctness of a statement without revealing the statement itself. This means that ZKPs can be used to verify the correctness of transactions without having to publish the entire transaction on the blockchain.

Last month we attended EthCC in Paris, one of the biggest EU-based Ethereum conferences. Zk Rollup solutions dominated the conference: ZkSync, Starkware, Mantle, Linea, and many more competitors are working on and with the Ethereum ecosystem to develop a secure growth hack for blockchain applications seeking to build on Ethereum.

ETH CC 6 Paris

But what exactly are ZKs and how do they work? Let’s dive into how Zero Knowledge Proofs (ZKPs) and ZK Rollups can revolutionize Ethereum by enabling quick, cheap, and scalable L2 networks.

ZK Rollups

ZK rollups are a type of scaling solution that uses ZKPs. ZK rollups work by batching transactions together and then executing them off-chain. The results of the transactions are then proven to the blockchain using ZKPs. This allows ZK rollups to achieve much higher throughput than the underlying blockchain. Sequencers neatly compress the data and sequence the transactions on the mainchain.

For example, zkSync, a ZK rollup for Ethereum, can process up to 2,000 transactions per second. This is a significant improvement over the 15 transactions per second that Ethereum can currently process!

ZK Rollups and Privacy: In addition to scalability, ZK rollups also offer some privacy benefits. Because the transactions are executed off-chain, the details of the transactions are not visible to the public. This can be important for applications that require privacy, such as DeFi applications. For DeFi it is especially important that transactions can also be private, and although this is in contrast with what the ethos of public finance is all about — many tradfi asset managers do not want their transactions to be publicly auditable. In fact, many tradfi institutions require private transactions to function properly.

ZKPs: Data is verified and proven to be authentic without being revealed publicly

ZK Rollups are largely praised for their innovative concepts and are heavily backed by the best funds in the industry. zkSync for instance uses a technique called PLONK to generate ZKPs. PLONK is a new proof system that is designed to be more efficient than previous proof systems. This makes zkSync even more scalable and more privacy-preserving than its competitors.

zkSync is still under development currently, and while expected to go live soon, its launch has often been postponed. However, it has the potential to be a major scaling solution for Ethereum. If zkSync is successful, it could attract and retain considerable amounts of liquidity and TVL (Total Value Locked)— becoming the defacto chain for private DeFi!

While several VCs seem to think (and bet on) this scenario to become reality, many developers are unsatisfied with the current state of affairs, since many Solidity apps are non-compatible with the zk infrastructure as it stands — resulting in many teams having to rewrite the code entirely or refactor large parts of it to be able to deploy safely on the new L2.

zkSync.io

zkSync — what’s under the hood?

zkSync is a ZK rollup for Ethereum. Its superior technique called ‘PLONK’ to generate ZKPs is said to be “a revolution in cryptography”. PLONK is a new proof system that is designed to be more efficient than all previous zero knowledge systems.

This makes zkSync more scalable and more privacy-preserving, and potentially a major scaling solution for Ethereum. If zkSync is successful, it could enable the Ethereum blockchain to go mainstream by making it more user-friendly for developers and more powerful for onboarding millions of users to fast blockchain dapps.

a new era begins

The major benefits of zkSync are:

  • Scalability: zkSync can process up to 2,000 transactions per second. This is a significant improvement over the 15 transactions per second that Ethereum can currently process.
  • Privacy: The transactions are executed off-chain, so the details of the transactions are not visible to the public – important for applications that require privacy, such as DeFi applications and identity solutions.
  • Security: zkSync is based on the Ethereum blockchain, so it inherits the security of Ethereum.

However, there are complexities from the following challenges that zkSync faces:

  • Complexity: zkSync is a complex technology, and it is still under development, with some fundamental differences to Ethereum — making solidity applications not always compatible.
  • Adoption: zkSync is a new technology, and it will need to gain adoption in order to be successful. Like any new technology, this will require time and business development effort.

Next, let’s look at how zkSync differentiates from other L2 rollup solutions, specifically Optimistic rollups, its biggest competitor.

Optimistic Rollups

Optimistic Rollups

zkSync and Optimistic rollups are two of the most promising scaling solutions for Ethereum. Both technologies use off-chain execution to achieve higher throughput than the underlying blockchain. However, there are some key differences between the two technologies.

Optimistic rollups use a technique called fraud-proofs to verify the correctness of transactions. Fraud-proofs are less efficient than ZKPs, but they are simpler to implement. This makes optimistic rollups more accessible to developers but ultimately compromises efficiency, security, and security.

Nonetheless, Optimistic rollups have a number of other advantages over zkSync. For example, optimistic rollups are more widely adopted, and they have a larger ecosystem of already running DeFi applications, such as Optimism — the optimistic rollup of choice.

zkSync and optimistic rollups are both promising scaling solutions for Ethereum. However, they have different strengths and weaknesses. Ultimately, the best scaling solution for Ethereum will depend on the specific needs of the application and the developer teams. For applications that require high scalability, privacy, and security, zkSync is a good choice. For applications that are more focused on adoption and ecosystem, optimistic rollups are a better choice.

many new projects have shined at ETH CC 6

Other ZK Projects

In addition to zkSync and optimistic rollups, there are a number of other ZK rollup projects in development. These projects include StarkNet, zkPorter, Hermez, Mantle, zkEVM, and Linea.

StarkNet is a ZK rollup that uses a technique called STARKs to generate ZKPs. STARKs are a more efficient proof system than PLONK, which makes StarkNet even more scalable than zkSync.

zkPorter is a ZK rollup that is designed for low-cost transactions. zkPorter uses a technique called zk-SNARKs to generate ZKPs. zk-SNARKs are less efficient than PLONK and STARKs, but they are also much smaller. This makes zkPorter ideal for low-cost transactions.

Hermez is a ZK rollup that is designed for interoperability. Hermez allows ZK rollups to interact with each other and with the Ethereum mainnet. This makes Hermez ideal for applications that require cross-chain communication.

Additionally, Polygon’s zkEVM, Consensys’s Linea, and Mantle are all zk solutions seeking to harness the power of zero-knowledge rollups to help Ethereum scale.

Finally, it is obvious that ZKPs are a promising technology that can be used to scale blockchains. ZK rollups are a type of scaling solution that uses ZKPs. ZK rollups offer a number of benefits, including scalability, privacy, and security. zkSync, the leading ZK rollup for Ethereum that is currently still in development, which if successful, could help to make Ethereum more scalable, more privacy-preserving, and more user-friendly, to help meet the needs of the growing DeFi ecosystem. There are a number of different ZK rollup projects in development, each with its own strengths and weaknesses. The best ZK rollup for a particular application will depend on the specific needs of the application.

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The shiny new thing which may ignite the next bull run: what are Zero- Knowledge-Proof Solutions?! was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.

A fundamental paradigm shift is coming: All of DeFi on LSDs.

https://blog.district0x.io/a-fundamental-paradigm-shift-is-coming-all-of-defi-on-lsds-a80cb2b6ae0b?source=rss----ecd1373b2ad6---4

Spotlighting the most important developments in web3!

LSDfi is the hottest thing in crypto since NFTs. Is it ushering in a sustainable growth model for DeFi?

After Ethereum recently upgraded to Proof of Stake with ‘The Merge’, staking ETH to validate the network has become a competitive game for whales vs. funds. Massive amounts of TVL are locked up in Ethereum’s PoS contracts and protocols to squeeze out the purest elixir of life crypto has to offer: ‘Real Yield’.

Locking up that much ETH however is not exactly capital efficient, so developers were fast to present a solution: Liquid staking derivatives (LSDs). LSD’s (or LST’s as some prefer to call them) are a type of financial instrument that allows users to earn staking rewards on their staked cryptocurrency holdings without having to lock them up. The idle liquidity is simply derived into a new token: stETH (‘stakedETH’). This makes it possible for users to participate in staking while still maintaining access to their funds, and being able to trade in and out of their position on the liquid markets of these derivatives.

In this post, let’s explore the current state of liquid staking derivatives. First, lets look into the origins of LSDs and how they grew in the early days, pioneering a new yield bearing primitive: network validation. Then, lets discuss where LSDs stand today and protocols are the most significant players in the space. Finally, let’s look at what LSDs may bring to DeFi as a whole, where we can observe growth, and how it will affect the crypto markets and finance of the future. Now, without further ado, lets dig in!

The trippy origins of LSDs

The idea of liquid staking derivatives was first proposed in 2016 by Vitalik Buterin, the co-founder of Ethereum. Buterin argued that liquid staking would make it possible for users to participate in staking without having to lock up their funds. This would make staking more accessible to a wider range of users and could help to increase the security of the Ethereum network. Indeed, that idea was a rather smart.

Some time after, the first liquid staking protocol, Rocket Pool, was launched. Rocket Pool allows users to stake ETH by depositing it into a pool managed by a network of validators. In return, users receive rETH tokens, which represent their staked ETH. rETH tokens can be traded on decentralized exchanges and can be used to access DeFi services. Today, rETH and its counterparts are widely integrated in all of DeFi. LSDs are used for a number of different ‘yield optimizing’ and ‘yield compounding’ strategies, not only on Ethereum but across all PoS chains.

The early days of liquid staking were marked by rapid growth. In 2019, the total value locked in liquid staking protocols was just over $10 million. By 2020, this figure had grown to over $100 million. This growth was driven by a number of factors, including the increasing popularity of staking, the launch of new liquid staking protocols, and the growing demand for DeFi services. In recent months, LSDs have become increasingly popular, as they offer a number of advantages over traditional staking: trading, composability, leverage, deeper liquidity.

Current State of Ethereum LSDs

Today, the liquid staking market is worth billions of dollars. The most popular ETH liquid staking protocol is Lido, which has over $12 billion in total value locked. Lido allows users to stake ETH by depositing it into a liquid staking pool. In return, users receive stETH tokens, which represent their staked ETH, derivative tokens which can be traded on decentralized exchanges, collateralized, and can even be used to access newer DeFi services such as bonds, or stablecoin yields.

https://defillama.com/lsd

In addition to Lido, there are a number of other liquid staking protocols in the market. These include Frax, StakeWise, and Swell. Each of these protocols has its own unique features and benefits. The most significant players in the LSD space are the liquid staking protocols themselves. These protocols are responsible for managing the staking pools and issuing the liquid staking tokens. The most popular liquid staking protocols are usually the safest ones, with proven TVL and strong community support.

In addition to the liquid staking protocols, there are a number of other players in the LSD space, such as Lending and Borrowing protocols, decentralized exchanges, DeFi yield aggregators, and staking service providers. While DeFi protocols allow users to use liquid staking tokens to access financial services in a fully non custodial manner, Staking service providers offer staking services to users who do not want to manage their own staking pools.

Why are LSDs so important?

Liquid staking derivatives bring a number of benefits to DeFi, and lead to it’s growth. Growth in TVL, growth in users, volume, and applications. LSDs are a catalyst for all of crypto. When looking more closely, we can observe growth in the LSD space in a number of areas, where the benefits are most impactful:

  • Increased liquidity: Liquid staking derivatives can increase liquidity in the DeFi markets. This is because liquid staking tokens can be traded on decentralized exchanges, which makes it easier for users to buy and sell them.
  • Better access to staking: LSDs can increase access to staking, because they allow users to participate in staking without having to lock up their funds. This can make staking more accessible to a wider range of users.
  • Stronger security: Liquid staking increases the security of the DeFi markets. Users to stake their funds without having to worry about losing access to them, ultimately making DeFi markets more attractive to users who are concerned about security.
  • Real Yield: The ‘Real Yield’ generated through the stake is stable, consistent yield originating from validating the network. There is a true interest on the LSDs, making them a perfect use case for DeFi composability.
  • They enable new protocols: The number of liquid staking protocols is growing rapidly. This is due to the increasing demand for liquid staking services.
  • The TVL: The total value locked in liquid staking protocols is also growing rapidly. This is due to the increasing popularity of staking and the growing demand for DeFi services.
  • The adoption of liquid staking by other DeFi protocols: DeFi protocols are increasingly adopting liquid staking for advanced capital efficiency and DeFi protocol composability.
https://dune.com/defimochi/lsdfi-summer

This growth, quickly resulted in LSD protocols being among the biggest protocols in crypto, with having the most users, the most assets under management, and the most liquidity in DeFi. They are also the most likely to continue to grow strong into the future as new cross-chain composability strategies emerge and new use-cases are developed.

Liquid Staking = Advanced Yield?

LSTs ‘Liquid Staking Tokens’ as they are also called, are still in their early stages, but they have the potential to revolutionize the DeFi industry. They offer a number of advantages over traditional staking, including yield optimization:

  • Liquidity Yields: Users can create LP pools with higher yields, since tokens may now be paired with yield bearing assets — such as for instance LSD backed, yield bearing stablecoins.
  • Leveraged True Yield: Liquid staking derivatives can offer higher yields than traditional staking when used as collateral, and borrowed against to deepen the position. This makes yield farming a more stable on a long horizon play.
  • Flexibility of yields: Liquid staking derivatives can be used to earn interest on staking while also compounding yield with other real yield products such as RWA backed stablecoins, tokenized bonds or treasury bills.

As the crypto industry matures, liquid staking derivatives are likely to become increasingly popular due to these characteristics. According to several analysts they are already on an exponential growth curve due to their advanced yield bearing potential.

https://dune.com/cryptokoryo/ethstaking

One thesis even goes as far as proclaiming that eventually all LP pairs will be paired with LSDs rather than the underlying principal, since it is just a much more efficient structure for the capital to flow through the protocols. Once we see true omnichain interoperability, the multichain LSDfi narrative should become an interesting one to follow.

If you want to be at the forefront of digital asset innovation, and earn the freshest yields in all of DeFi, then onboard now friends – buy the ticket, take the trip!

‘Buy the ticket, take the trip’

To conclude, we should mention that liquid staking derivatives are a new and innovative decentralized finance primitive that has the potential to turn the bear market around simply from making the whole system more capital efficient. They offer a number of advantages over idle assets, including liquidity, advanced yield, and flexible composability, and as the crypto industry matures LSDs are likely to become increasingly important as a key facilitator of optimized capital efficiency.

Finally, if you haven’t already go stake your ETH! Now!

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A fundamental paradigm shift is coming: All of DeFi on LSDs. was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.

Meme Coin Mania: what drives the wild 100x pumps of the next generation of meme coins?!

https://blog.district0x.io/meme-coin-mania-what-drives-the-wild-100x-pumps-of-the-next-generation-of-meme-coins-14d5233b823a?source=rss----ecd1373b2ad6---4

From DogeCoin to Shiba Inu and now to PepeCoinEth, the memetic power is alive and kicking in the crypto space.

Memes have massive influence. Fact. They have become an integral part of internet culture and for younger generations simply an integral part of their own culture and digital identities. These viral images, videos, or phrases spread rapidly across the web, often with humorous or satirical intentions capturing hearts at scale: memes know no borders, no age differences, gender, or origin. Everybody loves them, all over the world. Their widespread appeal and easily shareable nature have led to a new viral phenomenon on platforms like 4Chan.

Until now they were mostly confined to digital formats, copy-pasteable .jpegs or .movs without much second thought. But since the invention of blockchain, NFTs, and DeFi, they have become a lot more powerful: they have become a new kind of currency in the world of cryptocurrency, simply called ‘meme coins’. In this post, we will explore the phenomenon of some of the most wildly successful meme coins, starting with a brief history of memes to get a better understanding of the underlying force, then evaluating some of the most successful meme coins we have seen to date, and concluding with a discussion of the biggest memes of all time ‘Pepe the Frog’ and the narrative around why a new coin called PepeCoinEth has seen such a strong rise to fame and a powerful rise to half a billion market cap within a few days. Chad moves.

‘I like Memes’

To meme or not to meme, that is the History of Memes

The term ‘meme’ was first introduced by Richard Dawkins in his 1976 book, The Selfish Gene. Dawkins used the word to describe an idea or concept that could be ‘transmitted from person to person, just like genes are passed down from generation to generation’. However, the modern use of the term is associated with the internet culture, where memes have become a form of social currency.

‘The Selfish Gene’ by Richard Dawkins

The first internet meme is generally considered to be the “Dancing Baby” from the 1996 animated GIF. This meme gained widespread popularity on early internet forums and was widely shared via email. Since then, memes have evolved and diversified into various forms, such as image macros, reaction images, and videos.

Some of the most popular memes today include the “Success Kid,” “Grumpy Cat,” “Harlem Shake,” “Wojak”, “Doge,” “Pepe the Frog” and a number of other internet characters which describe pretty much any emotion and any state of mind one could eve experience (and most of us have gone through at one point or another in our lives).

Today, even mainstream media cannot get away without using memes every now and then to make you feel like one of them.

The Guardian’s use of ‘The White Guy Blinking’ meme has been quite the PR stunt.

In recent years, with the invention of Blockchains and Cryptocurrency tokens, both erc20s and erc721s, memes have taken over the financial media as well, including most of Twitter communicating exclusively with memes – so far that even the world’s richest man, Elon Musk, often uses memes to share his thoughts or point out the obvious on his Twitter profile (a platform which he now owns).

Elon Musk on Twitter: “Also the plot of Deus Ex pic.twitter.com/MhL5zLJQfn / Twitter”

Also the plot of Deus Ex pic.twitter.com/MhL5zLJQfn

But memes go even deeper in crypto since some degens have discovered that they can 1000x the force of memes when coupled with viral marketing campaigns and with liquidity games such as liquidity mining, vesting schedules, DEX strategies, and airdrops. Shibaswap was the first memecoin-defi platform, created by the Shiba community and fully operated by Shiba Inu Tokens and its derivatives such as $BONES and $WOOF. Needless to say, liquidity quickly dried up and everything went to sh*t in the bear market.

But so what are these Meme Coins all about, and why are some so successful?

Let’s dive in!

Who let the Doge out, who who who…

Dogecoin

The Japanese Dog-e-coin, created in 2013 by Billy Markus and Jackson Palmer, is one of the earliest and most well-known meme coins. Its inspiration came from the Shiba Inu dog meme, which was popular at the time. Dogecoin’s success can be attributed to its appeal to the online community and its celebrity endorsements, notably from, again, Elon Musk who even recently made it the official Twitter logo.

At its peak in May 2021, Dogecoin reached a market capitalization of over $90 billion. However, its value has since declined significantly, and it currently has a market cap of around $35 billion. Despite this, Dogecoin remains a popular and well-known meme coin, with a loyal following. generally, it is portrayed as the Godfather Meme Coin, the Genesis Meme Coin so to speak. Then came, the “Shiba Army”…

Shibu Ina to the Moon!

Shiba Inu

Shiba Inu is another meme-inspired cryptocurrency that gained popularity in 2021. It is often referred to as the “Dogecoin killer” due to its similar origin story and community-driven nature. Shiba Inu’s success can be attributed to its low initial price and the support of social media influencers, such as Vitalik Buterin, the co-founder of Ethereum.

At its peak in May 2021, Shiba Inu reached a market capitalization of over $13 billion. Its current market cap is around $4 billion, indicating a significant decline in value. Nevertheless, Shiba Inu remains a popular and active cryptocurrency, with a large community and active trading volume.

But behold! The Dog days are over! Frogs are back in fashion.

Make Memes Great Again

$PEPE Coin: The Narrative of a Pepe Coin bull run.

Pepe the Frog is one of the most well-known and controversial memes of all time. It is potentially THE most well-known meme of all time. Originally created by artist Matt Furie in 2005, Pepe became a popular internet meme in the early 2010s. However, its association with far-right and white nationalist groups led to its classification as a hate symbol by the Anti-Defamation League in 2016.

Despite this controversy, Pepe remains a popular and recognizable meme, with a large online community. The narrative around a Pepe coin is that it would be incredibly powerful due to its broad appeal and ability to bridge various online communities. However, it is important to note that any association with hate groups would likely be detrimental to the success of a new meme coin.

But this is no longer a dream. On April 14th, 2023, a group of anon degens launched PepeCoinEth — ticker $PEPE on Ethereum. The coin was heavily marketed by a number of NFT influencers and quickly grew to a $1.5B market cap, in a meteoric rise to fame, leaving many coping with the immense gains while making early speculators filthy rich in a matter of days.

At the time of writing $PEPE just made a new ATH, up almost 1250% on the week, as per Coingecko:

https://www.coingecko.com/en/coins/pepe

Ladies and gentlemen, Memes are the new Currency. CT even contemplates if $PEPE will lead the bull run in this cycle, and from what we currently see it could very well be the case. Don’t even get me started on $Wojak, $Bonk, $GChad or $Mong. Everything is pumping double and even triple digits — and it’s beautiful to see after almost 18 months of down-trending markets.

Last but not least, speculators and meme degens should however thread carefully around these highly volatile assets. The liquidity across DEXs remains low and from what the latest on-chain data shows one whale of the top 10 holders of $PEPE is enough technically to remove 99% of liquidity and ‘rug’ the coin to 0 within one or two transactions. It wouldn’t really be in anyone’s best interest to do that, even the big holder will probably still see a 1000x if they remain patient, but everything could happen at this point quite frankly.

The current total holder count of $PEPE however is only 60k — comparatively Shiba Inu sits at 1.3M holder. And although the market cap sharply rose to $1.5B within a three weeks, it is still very far away from the $35B or doge or even the $4B of Shiba, so we could still see massive upside in multiple metrics.

All in all, we can conclude that we are still pretty early in the overall meme coin markets, with only a handful of memes making serious headlines. The seriousness and longevity of the $PEPE coin have yet to be proven, so remaining cautiously optimistic is probably the best stance to take here for the time being. Secure your moon bags, let the market do the rest.

Yes, meme coins have become a new form of cryptocurrency, focusing on community and online culture. But while some, such as Dogecoin and Shiba Inu, have achieved significant success, others have failed. The biggest and most popular meme of all however, Pepe the Frog, has only just found its way on the new frontier of financial infrastructure called Ethereum Mainnet, and with all the hype around memes lately both in DeFi and NFT land, we will probably still see some upside in both adoption and market cap.

wen mooooooooooon?

Bare in mind: NFA! KEK

Joining the district0x DAO

For more information about the district0x network:


Meme Coin Mania: what drives the wild 100x pumps of the next generation of meme coins?! was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.

Bitcoin Ordinals: an overhyped technicality or a new asset class about to reset the NFT space?

https://blog.district0x.io/bitcoin-ordinals-an-overhyped-technicality-or-a-new-asset-class-about-to-reset-the-nft-space-3a993d64813b?source=rss----ecd1373b2ad6---4

Spotlighting the most important developments in web3

How Satoshi inscriptions take on the multichain NFT ecosystem by promising god-tier non-fungible assets on the gold standard.

What Are Bitcoin Ordinals? Are they NFTs as we know them from other chains? Or are Ordinals the latest massive discovery in the Bitcoin space ready to ignite the next bull run? Or are they an attack on Bitcoin’s fungibility seeking to devalue the most liquid asset of all?

Bitcoin has revolutionized the financial industry by introducing a decentralized digital currency that is based on cryptography, providing an alternative to traditional banking systems and allowing users to transfer funds directly to each other without the need for intermediaries. One of the key features of bitcoin is that it has a finite supply, with a maximum of 21 million bitcoins that can ever be created.

However, this finite supply also raises questions about the value of bitcoin as an asset, and how it can be compared to other assets such as gold or stocks. This is where the concept of bitcoin ordinals comes in. Bitcoin ordinals are a way of comparing the value of bitcoin to other assets, based on its scarcity and the number of units available, and here is why they are something worth paying attention to:

domo on Twitter: "In the shadow of the Blur vs. Opensea conflict, Ordinals are quietly having their own marketplace wars. 1/x pic.twitter.com/pWkZgjR0le / Twitter"

In the shadow of the Blur vs. Opensea conflict, Ordinals are quietly having their own marketplace wars. 1/x pic.twitter.com/pWkZgjR0le

In this post, we will explore the concept of bitcoin ordinals in more detail, looking into what they are and how they are calculated, what they can tell us about the value of bitcoin, and they are used in practice.

So wtf are these ‘Ordinals’ anyway?

Bitcoin Ordinals arise from an old argument in the Bitcoin community: ‘Is BTC a simple currency for transacting or should we also use it as a secure and decentralized network to store data?’.

In a nutshell, Bitcoin Ordinals are “ sats ” or satoshis (the lowest unit of Bitcoin with a value of 0.00000001 BTC), that have been ordered and inscribed with a piece of information, such as a hash or an image. This piece of information makes the sat unique and turns it into a de-facto NFT. Ordinal numbers are a way of ranking objects based on their value or size. For example, if we have three objects A, B, and C, we can rank them in order of size or value using ordinal numbers, such as for example: A=1, B=2, and C=3. We might say that A is the smallest, B is the second-smallest, and C is the largest.

Here are the official docs for a deeper dive into the theory behind Ordinals.

An easy-to-understand analogy would be two one-dollar bills. Both are fully fungible but have a non-fungible element to them, which allows us to identify each bill as unique: their serial number – which theoretically makes every bill a unique “NFT”. You could still spend it as regular money, but the serials make the bill’s significance unique. Ordinals work in the same manner: they take advantage of the fact that each individual satoshi can be uniquely identified by its “ordinal number”.

Both the numbering scheme and the transfer scheme rely on order, the numbering scheme on the order in which satoshis are mined, and the transfer scheme on the order of transaction inputs and outputs. Thus the name, ordinals.

Check out this Dune Dashboard for an accurate real tie data analysis of Ordinals:

trending up only

If Bitcoin is to become the world reserve currency, that would most presumably leave no room for experimental use cases like inscribing data onto its block space. But since the two significant hard fork updates, Taproot and Segwit raised the block size limit from 80 bytes to 4 MB however, this outcome has become more of a possibility. In simple terms, these updates introduced, among other effects, a different way of measuring block size, which allows data to be arranged in a more effective way — and therefore store more data directly on-chain.

But how do Ordinals Inscriptions actually work?

According to Ordinals inventor Casey Rodarmor, the position of a satoshi in the Bitcoin blockchain can be linked according to its index in a block, its index in the block difficulty adjustment period, its index in the block halving epoch, and, finally, its cycle number index— making it possible to ‘rank’ ordinals accordingly and therefore catalog them.

Using this indexing model, the first ever sat in a block would be rarer since it’s the first sat, and the last one would be the least rare one of all. All sats in between would carry some sort of rarity based on their distance from either end, somewhat analogous to how some tokens used to be valued among collectors for being part of a ‘rare’ mint.

A text-based NFT (“inscription”) containing the words “Hello, world!” (Ordinal Theory Handbook).

Check out this deep technical dive by Porteaux, for even more insight and detail into the legendary OP_RETURN function allowing ‘inscriptions’.

Ordinal inscriptions function as ‘digital artifacts’ that do not require a separate token or a sidechain which is the case with most other NFTs on other chains. They are stored in taproot script-path spend scripts, which are a unique type of Bitcoin transaction. First, a taproot output is created with the inscription content. Then, the output is ‘spent’, revealing the inscription content on the blockchain. The inscription content is wrapped in an “envelope,” which is a type of no-op that does not alter the script. For example, to store the string “Up Only” on the blockchain, it would be wrapped in an envelope and stored in a taproot output. The inscription can then be tracked using the rules of ordinal theory, enabling it to be transferred, bought, sold, or even recovered if lost.

Think of Ordinals as ”envelopes” for data inscribed onto Satoshis. Since the block size limit on Bitcoin is 4 MB however, this is the ceiling for data that can be inscribed — not very practical. So technically, Satoshis are still fungible, but each inscribed sat would be unique because it carries a non-fungible piece of information or data, calculated according to its ‘index on-chain’.

Currently Ordinals market is the #1 marketplace for trading ordinals, although the volume remains limited.

But how does all this compare to NFTs on other chains, let’s say Ethereum or Polygon?

Are Ordinals the same as other NFTs?

Although ordinals are similar to NFTs, they function fundamentally differently. Ordinals are technically still satoshis — thus not their own token standard as we know it from erc-721s or 1155s. The raw file data is inscribed directly onto the Bitcoin blockchain, rather than minted as a new token like other NFTs. And while the actual raw file data is written into the Bitcoin blockchain, NFTs on other chains can contain reference points to files that are not even hosted on the blockchain, but live on hosting services such as Pinata and IPFS for example.

Before you keep reading check out this explorer to look up initial inscriptions.

This is tricky, however, since as mentioned above Bitcoin’s block size is limited to 4MB, and there is a hard cap of 21 million coins. If all block space on the blockchain were to be used for ordinals, it would limit the number of ‘NFTs’ that could be minted. Ordinals would have to become incredibly popular to consume all block space on Bitcoin, but technically it is still possible.

Regardless of that limitation, creators have already started launching collections on Ordinals, with one of the most popular collections being The Bitcoin Punks:

Bitcoin Punk #5412 (Inscription #18067)

Also, another significant difference between Bitcoin and Ethereum NFTs is that Bitcoin does not have smart contracts, making the handling of ordinals unique. Decentralized exchanges, accessible wallets, and user interfaces are not readily available, and trading must occur ‘over-the-counter’. Despite these limitations, however, there has been a recent surge of interest in ordinals (mostly fueled by the hordes of opportunists on Crypto Twitter). Nonetheless, there is more: another interesting feature of ordinals is that sats could carry multiple inscriptions, potentially creating multi-vector NFTs on Bitcoin! While this has not yet happened, it is a possibility.

Finally, while NFTs on EVM chains can be lost if access to the wallet is lost, inscribed sats can be accidentally spent. This means that the miner processing the transaction would become the owner of the ordinal. Consequently, the Bitcoin blockchain could become cluttered with “sats with artifacts,” akin to damaged or tainted currency bills in circulation — ultimately jamming up the entire god-chain. This may indicate that ordinals are not really suited to function in a similar manner to NFTs, we yet have to understand and experiment more to fully grasp the benefit of ordinal numbers on the BTC chain.

In Conclusion, we can see that crypto Twitter is all up in arms about Ordinals, on one side the stale bitcoin maxis trying to discredit it, and on the other the futurist welcoming this as the next big thing in crypto hyping the s*it out of it to get plebs to buy their bags.
Yet, some members of the Bitcoin community view Ordinals and their consequences as proof that the Bitcoin security model may need fixing.
It’s difficult to see how Bitcoin could serve as an “arbiter of truth” with Ordinals igniting this wave of disagreements in a deeply rooted community. Although the idea that data may be stored on the Bitcoin blockchain in a verifiable, decentralized way has been brought up time and time again, at this moment, it does not appear very likely — simply due to the technicalities and technical boundaries Ordinals imply.

NFTs on Bitcoin, however, are nothing new:

Rare Pepes project: OG NFTs on bitcoin using Counterparty (fun fact: also based on OP_RETURN).

Counterparty (XCP — popularized by the legendary Rare Pepe Project) has made NFTs readily available on Bitcoin since 2014, so NFTs on Bitcoin definitely isn’t anything new.
The Bitcoin community has been surely been spooked by Bitcoin Ordinals, however, and so has the NFT community at large. But only time will tell whether Ordinals will have an important influence on Bitcoin outside of the typical community debates.

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Bitcoin Ordinals: an overhyped technicality or a new asset class about to reset the NFT space? was originally published in district0x Updates on Medium, where people are continuing the conversation by highlighting and responding to this story.