Learning the friendly way

Nous sommes ravis d'annoncer l'intégration du token Chain (XCN) sur Tap ! XCN est désormais disponible pour le trading sur l'application mobile Tap. Vous pouvez dès aujourd'hui acheter, vendre, échanger ou conserver XCN pour n'importe quel autre actif pris en charge sur la plateforme, sans limitation de paires. Tap est agnostique en termes de paires, ce qui signifie que vous pouvez échanger n'importe quel actif contre un autre sans vous soucier de la disponibilité d'une "paire de trading".

Nous sommes ravis d'accueillir XCN sur notre plateforme, enrichissant ainsi les options disponibles pour nos utilisateurs. Chez Tap, nous nous efforçons de diversifier constamment notre offre en intégrant de nouvelles cryptomonnaies, offrant à chacun l'opportunité d'explorer de nouvelles perspectives.

Fondée en 2014, Chain fournit aux organisations l'infrastructure nécessaire pour construire de meilleurs services financiers à partir de zéro. Le jeton Chain (XCN) est un jeton utilitaire et de gouvernance pour le protocole Chain, permettant à ses détenteurs de voter sur les améliorations du protocole et divers programmes pilotés par la communauté. XCN peut être utilisé pour un accès premium, des réductions, et le paiement de frais commerciaux sur Sequence et d'autres produits de l'écosystème Chain.

Apprenez-en plus sur XCN dans notre article dédié ici.

So you decided to go deeper into the fundamentals of investing and learn what an APY is. You've come to the right place, let's get you started with this perplexing "APY" term.

What Is APY?

In conventional finance, a savings account frequently offers both a low-interest rate and an annual percentage yield (APY). Let's look at what they are and what they mean.

• The Annual Percentage Yield (APY) is the annual return from the principal and accumulated interest on investments or savings, expressed as a percentage.
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• The simple interest rate is the amount earned on the original deposit. 

Assume an account at a bank offers a yearly interest rate of 5%. If someone deposits €2,000 into the account, it will be worth €2,100 after a year with the 5% yearly interest rate.                                           

The Difference Between Interest Rate, APY and APR

The APY takes into account the impact of compounding, whereas the interest rate does not. The APY is the projected rate of return earned annually on a deposit after taking compound interest into account.

Compounding interest is the interest that a person accrues from their initial deposit, as well as the interest they earn from their original investment (or in other words, the initial deposit amount plus the interest generated).

The terms APY and APR are frequently used interchangeably, although they represent two different things. These words are sometimes confused due to their close resemblance. However, APY and APR aren't the same things.

The APR (annual percentage rate) is a formula that determines how much interest you'll pay when borrowing money and is the rate of return earned if your funds are invested in an interest-bearing account. 

When a person takes out a loan, their lender sets an APR that varies based on the loan. APRs are either fixed or fluctuating depending on the type of loan the user requires. However, the APR is a rather basic interest rate and does not take compounding into account, unlike APY. 

How Is APY Calculated?

APY represents your rate of return, also known as the amount of earnings or profit you can make. Of course, your ultimate earnings will vary depending on how long you keep your assets invested while the holding period will influence how much you will earn. 

APY measures the rate of the annual return earned on any amount of money or investment after taking into account compounding interest.

The following is the formula for calculating APY:

APY = (1 + p/n)ⁿ − 1

Where:

p = periodic rate of return (or annual APR)

n = number of compounding periods each year
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Bear in mind that an APY can be calculated in a variety of ways depending on the provider.

The three core questions to ask yourself before investing are:

• What do you aim to achieve from each investment?
• How much money can you safely invest?
• How much risk are you prepared to take?

Establishing the answers early on will help you determine which investment avenues are best suited to your needs. For instance, investing for retirement will require a more steady and low-risk approach, while looking to make high profits will require a more high-risk approach. 

Below is a list of other factors to consider:

INFLATION

Inflation is the rate at which the value of a currency decreases. Always ensure your return on investment is higher than the inflation rate otherwise your investment will lose value over time. 

RISK

Managing risk is an important element of investing. Higher returns typically involve higher risk, ensuring that your strategies align with what you are comfortable with is a must. 

LIQUIDITY

Liquidity indicates how quickly an asset can be sold. For investments made using capital that you might require in the short term, you will want to ensure that you invest in a market that has high liquidity. For example, the Bitcoin market is highly liquid while a smaller altcoin will likely be harder to sell. 

DIVERSIFICATION

Diversifying your investments helps to manage risk and spread rewards. Similar to “don’t put all your eggs in one basket”, diversification ensures that should one coin underperform the impact is greatly reduced. Try to include a range of coins in your portfolio. 

TAX

Last but not least, ensure that you are aware of the tax implications of your investment, as tax laws vary from country to country. The responsibility lies with each individual to establish what these are and adhere to them accordingly. 

The DeFi scene has exploded in recent years, with a number of successful protocols contributing to the rising volume and liquidity (Uniswap, PancakeSwap, and SushiSwap to name a few). While these protocols have entirely democratized trading in the crypto space, there are still some risks associated with getting involved. 

If you have experience in DeFi trading you’ve likely come across this term. Impermanent loss refers to losses made as a result of the price changes of the digital assets from when the liquidity provider deposited them into the liquidity pool to now. Below we break down how impermanent loss happens and how to manage the risk. 

How does impermanent loss happen?

Impermanent loss is when the price of the digital asset changes from the time you deposited it, providing liquidity to a liquidity pool, to the time you withdrew it. The bigger this change, the bigger the loss (essentially less dollar value at the time of withdrawal). There are of course ways to mitigate impermanent loss.

Liquidity providers' exposure to impermanent loss is decreased when trading in pools with assets that have smaller price ranges, like stablecoins (a stable asset) and wrapped versions of coins for example. In these cases, liquidity providers can provide liquidity with a lower risk of impermanent loss.

In some cases, impermanent loss can also be counteracted by trading fees. Liquidity pools exposed to a high risk of impermanent loss can still be profitable thanks to lucrative trading fees. 

For example, Uniswap offers liquidity providers 0.3% on every trade, so if the pool has a high trading volume, liquidity providers can still make money even if exposed to impermanent loss. This will depend on the protocol, deposited assets, specific pool, and wider market conditions. 

What does impermanent loss looks like for liquidity providers in liquidity pools?

Here is an example of what impermanent loss might look like for a liquidity provider trading on automated market makers (AMM).

Say John finds an automated market maker that requires a pair of digital assets equating to the same value. For the sake of this example, say 1 ETH is equivalent to 1,000 USDT, which he deposits in a liquidity pool. The total value of his deposit, therefore, sits at $2,000. 

Other liquidity providers have contributed a combined offering of 10 ETH and 10,000 USDT into the liquidity pool, meaning that John holds a 10% share of the overall liquidity pool. 

Let's say that the price of ETH rises to 4,000 USDT. During this time, arbitrage traders will contribute USDT to the liquidity pool and remove ETH until the ratio reflects the price increase. Note that AMMs don't have order books. Instead, the price of assets is determined by the ratio between them in the liquidity pool, meaning that while the liquidity remains constant, the ratio of assets in it changes. 

In this case, if the price of ETH is now worth 4,000 USDT then the arbitrage traders will work to ensure that the liquidity pool now holds 5 ETH and 20,000 USDT. The liquidity pool's total liquidity is now worth $40,000.

If John decides to withdraw his funds, he's entitled to 10% of the liquidity pool's share based on his initial deposit and the size of the liquidity pool. He, therefore, is entitled to withdraw 0.5 ETH and 2,000 USDT, equating to $4,000 in value. However, if he'd kept the initial 1 ETH and 1,000 USDT this would be worth $5,000 now. 

In this case, John would have made bigger returns had he hodled instead of using the liquidity pool and this is what impermanent loss is all about. 

This example does not incorporate trading fees that John might have earned for providing liquidity to the liquidity pool. In many cases, these fees would cancel out the losses and make the process profitable. Either way, understanding what impermanent loss is, is imperative before providing liquidity in the DeFi space.

A look at impermanent loss vs price increases (excl trading fees)

So, impermanent loss happens when the price of the cryptocurrency assets in the liquidity pool changes. But how much is it exactly? Note that it doesn’t account for fees earned for providing liquidity.

Here is an overview of the impermanent losses incurred due to asset price increases (note that trading fees are not factored in here).  Impermanent loss examples:

1.25x price change = 0.6% loss

1.50x price change = 2.0% loss

1.75x price change = 3.8% loss

2x price change = 5.7% loss

3x price change = 13.4% loss

4x price change = 20.0% loss

5x price change = 25.5% loss

Note that impermanent loss happens whether the price both increases or decreases as it is calculated by the price ratio relative to the time of the initial deposit into the liquidity pool. Unfortunately in these cases, price volatility leads liquidity providers to lose money.

The risks associated with becoming a liquidity provider

Realistically, impermanent loss isn't the best name. The losses are known as "impermanent" because they only become evident when you withdraw your coins from the liquidity pool. However, the "temporary loss" then becomes pretty permanent. Although the fees might be able to compensate for those losses, it does seem like a somewhat deceptive title.

When you put cryptocurrency assets into an AMM, be cautious. Some liquidity pools are far more vulnerable to fleeting losses than others, as we've discussed above. As a general rule, the more volatile the assets in the liquidity pool are, the greater your chance of being exposed to impermanent loss. It's also preferable to start by depositing a little bit of money in a liquidity pool to see the returns before exposing a lump sum. 

Another thing to keep in mind is to look for more established, tried-and-true AMMs. It's fairly simple to fork an existing AMM and make a few modifications thanks to DeFi. However, this might introduce bugs that lock your funds in the liquidity pool indefinitely. If a liquidity pool promises exceptionally high returns, there's more than likely a tradeoff taking place and there's likely to be much higher risk associated. Be sure to understand the ins and outs of any liquidity pool before making any deposits.

Decentralized Finance, or DeFi, opens up a whole world of financial services for you, ranging from straightforward banking services to complex financial instruments similar to those used by hedge funds and investment bankers. But here’s the twist: it all operates with cryptocurrencies instead of traditional cash.

In DeFi, you can stake your cryptocurrency in what are called smart contracts, which essentially means locking up your funds to earn interest, known as Annual Percentage Yield (APY). As a token of appreciation for staking your funds and providing liquidity, DeFi projects grant you special project-specific tokens. These tokens aren’t just a thank-you note—they give you a say in the project’s future decisions and carry some speculative value too.

Before we get started, let us first address several terms you are likely to come across in this piece:

• Financial institutions are your traditional banks
• Centralized exchanges are crypto exchanges that are operated by a managing company
• Decentralized exchanges are crypto exchanges that are not managed by one company and typically work in a peer-to-peer manner.
• DeFi is decentralized finance and refers to the industry in which regular users can engage various financial services requiring only an internet connection.

How smart contracts work in the DeFi space

A smart contract is a digital agreement that automatically executes once the predetermined criteria have been met. These computer codes are facilitated by blockchain technology and rely on the blockchain that they are built on. 

At the moment, your bank account from financial institutions might give you the right to a certain amount of monthly interest at a fixed rate. The deal is reached through a formal application procedure - which can take many days - that is handled by a mix of people and software and is acknowledged in writing. Once successful, the bank account is opened and you have access to the services.

A smart contract, on the other hand, uses a programming language (e.g. Solidity on Ethereum) to map out the mathematical aspects of an agreement - how much interest is due when and where it should be paid - while the underlying Ethereum blockchain executes the contract for a fee, making it transparent and unchangeable.

The ups and downs of the DeFi ecosystem

owever, it’s not all smooth sailing. DeFi can offer higher returns than traditional banks, which is quite appealing, but it also comes with higher risks. For instance, if something goes wrong with a smart contract, or you lose access to your private keys, there’s no safety net to catch you.

To dip your toes into DeFi waters, you’ll need a digital wallet like MetaMask and some funds from a cryptocurrency exchange. Once you’re set up, you can participate in various DeFi activities like lending or staking, each with its own set of fees depending on the network you’re using.

Additionally to the higher returns, DeFi tokens have also seen a rise in value, with some entering the top 20 and top 10 biggest cryptocurrencies based on market cap.

Furthermore, the value of DeFi tokens has surged, with some climbing into the top ranks of cryptocurrencies by market cap. This growth indicates a strong interest and a robust market presence, which can be exciting for anyone involved in the space.

However, it's not all smooth sailing. DeFi comes with its own risks that you should be aware of. For instance, executing smart contracts can get pricey, especially during times of network congestion. If you're looking to cut down on fees, you might want to explore alternatives to popular platforms like Ethereum, which can be more cost-effective.

Also, not all smart contracts are built the same. Some may have vulnerabilities that could put your funds at risk if not properly managed or if an error in the contract execution occurs. This highlights the importance of being careful with where and how you invest your digital assets.

Moreover, the decentralized nature of these platforms means that you’re in full control—which sounds great until you realize there is no safety net. If you lose access to your private key or make a transaction mistake, there's no customer service line to call for a do-over.

Ensure you vet various DeFi protocols before engaging

In general, more established Defi protocols with a higher total value of assets secured within them (also referred to as Total Value Locked, TVL) are safer. This is due to the fact that their code has been more thoroughly audited and "battle-tested".

Newer platforms will typically offer higher APYs in order to entice investors and build up liquidity. While this may sound lucrative, always ensure that you've done your research in order to understand exactly how the protocol operates and who is behind the project. 

Here are a few things to look out for:

• Has the protocol's code been professionally audited? 
• How long has the project been live?
• What is the platform's TLV? (The higher the better)

Finding your top Defi protocol

There are a number of "well-established" DeFi platforms that have proven reliable and trustworthy in recent years. While the risks are still prevalent, these are the most established options when looking to enter the DeFi space with the leading DeFi protocols.

Aave

Compound

Maker

Yearn Finance

How to use DeFi protocols (Get started in DeFi)

Jumping into the world of DeFi protocols can be quite an adventure. Here’s a simple guide on how to get started :

First, you'll need a digital wallet, and MetaMask is a popular choice. It's user-friendly and a common gateway for engaging with DeFi platforms.

Once you have your digital wallet, you'll need to move your cryptocurrencies into it. This is usually done through a transfer from a centralized exchange. For example, if you have a Tap wallet, you can transfer Ethereum (ETH) or other supported assets directly into your MetaMask wallet. Remember, DeFi protocols operate with cryptocurrencies, not traditional bank funds.

With your wallet set up and your funds in place, you can connect to any DeFi application that interests you. You can then engage with various features of the platform, such as depositing funds into a lending protocol. Keep in mind that actions like depositing, staking, unstaking, or withdrawing will typically involve network fees, which vary by blockchain.

That’s all there is to it! With these steps, you can start exploring the different functionalities and opportunities within DeFi at your own pace.

Understanding the risks associated with DeFi

While we've stressed that using tried and tested DeFi platforms provide a higher level of security, there are still risks associated with the DeFi space.

Below are some more steps you can do in order to secure your cryptocurrency assets and decrease the chance of losing your funds.

• Consider insurance, look into options for insuring your assets to help mitigate potential losses.
• Research the team behind the project, do your due diligence.
• Familiarize yourself with the platform's operations and features. For instance, if a platform advertises a certain return rate, such as 10% APY, delve into how they achieve those figures.
• Don’t commit more than you can afford to lose

Decentralized finance is one of the most innovative and promising areas in cryptocurrency. It is also a harsh environment, however, that demands some expertise before stepping in.

Before you place any funds into Defi protocols and become one of the many liquidity providers, ensure that you've fully vetted the project and considered the pros and cons of what it has to offer. Also ensure that you understand how the platform operates.

The DeFi space can be both lucrative and devastating, it is complex and requires a good amount of know-how. If you wish to get involved, take the time to really understand both the opportunities and the challenges it presents first. This way, you can engage with DeFi more cautiously and equipped with the necessary knowledge. And remember with Defi everything is at your own risk.
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As the Internet of Things becomes an increasingly popular topic of conversation, we are here to lay the foundations of what the concept of IoT really is. As people become familiar with blockchain and cryptocurrencies, it is only a matter of time before the IoT becomes deeply ingrained in our day to day living.  

What is the internet of things?

The Internet of Things refers to millions of physical devices that connect to the internet and collect and share data. These systems of interrelated computing devices can be as small as a pill or as large as an aeroplane and are able to communicate real-time data. This marks a prominent milestone in the evolution of the Computer Age.

This shift is possible due to a number of factors that have come into play in the last few decades, such as the decreased cost of connecting to the internet and broadband internet becoming more accessible. There is also the added advantage of more devices being built with sensors and WiFi capabilities and how these devices have reduced in cost becoming more accessible to everybody. These factors contributed to making the perfect storm for IoT to ignite. 

While the term was coined in 1999 by Kevin Ashton, the IoT era is believed to have only truly begun in 2008 when the world officially had more devices connected to the internet than people. 

An example of IoT devices

An IoT device is any natural or man-made object that can be assigned an Internet Protocol (IP) address and transfer data over a network. It can range from smart speakers like Amazon's Alexa and Google Next to a lightbulb, security camera or thermostat that are controlled by apps, from heart rate monitors to sprinklers, and everything in between. 

How does IoT work?

IoT technology is made up of physical devices that consist of networks of sensors, processors and communication hardware. These internetworking components are able to collect, send and act on the data they receive. 

The data is then analysed in the cloud through an IoT gateway or other edge device, or communicated to other related devices from where action can be executed. These processes are all automated, however, human invention can occur when setting them up, accessing data or giving the devices instructions. This technology essentially enables the remote monitoring, programming and control of specific data with minimal human intervention. 

Artificial intelligence (AI) and machine learning can also be implemented to assist in making data collecting processes easier and more dynamic.

In a practical example, an IoT device such as a thermometer will collect the data (temperature), this will then be collated and transferred through an IoT gateway or IoT hub from where the back-end system or user interface (e.g. app on a smartphone) will analyse the data and take action. 

IoT in domestic settings

Already seeing a huge advancement in home and office devices, the IoT movement on a domestic level is big and getting bigger. Home automation is fast becoming a very lucrative endeavour, with the market valued at $44.68 billion in 2020 alone. This ranges from lights to air conditioners to security systems, anything in the home that can be controlled by an app, including smart hubs connecting these devices, like TVs and refrigerators. 

IoT devices have also proven their worth among elders and people with disabilities, as they are able to provide assistive technology for sight, hearing or mobility limitations. 

IoT in industrial settings

While the smart home industry is booming, the industrial use cases are not far behind. IoT in business allows companies to automate processes and can help to monitor the performance of systems and machines in real-time, from supply chain management to logistic operations.

The market has already seen devices used to track environmental conditions (humidity, air pressure, temperature), prevalent in the designs of smart cities. They also prove their worth in the agricultural sector where farmers can use these devices to monitor the water levels of livestock or automatically order new products when the supply is about to run out. 

The future of IoT

Already over a decade into the movement, IoT is only going to get bigger. With a range of use cases that span almost every sector, it's no surprise that the projected value for the industry in 2028 is over $97 billion. Forecasts also predict that industrial and automotive equipment will present the largest opportunity for growth in the future, while smart home and wearable devices will dominate in the coming years. 

However, if the implementation of these devices is not done well this could present a new challenge to the industry. For example, if you have several smart home devices running in your home and need to log into several different apps to use them, this will hinder the growth of that sector. 

In conclusion: The IoT is the future of things

Any device falls into the category of IoT as long as it collects and shares data enabling smarter working with more control. If implemented correctly, IoT devices may well be a permanent fixture in our lives in the next decade, with analysts predicting that adoption and spending will grow exponentially in the next few years. 

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