Learning the friendly way

After its launch in 2020, Yearn.finance (YFI) quickly became one of the fastest-growing DeFi projects, attracting over $800 million in digital assets in its first month. In eight months, the total value locked (TVL) on the platform had grown to $1 billion. Yearn Finance offers a range of lending and trading services that provide impressive earning potential for crypto asset holders.

What is the Yearn Finance platform?

Yearn.finance (YFI) is a decentralized finance platform consisting of a group of protocols built on the Ethereum blockchain. These protocols allow users to maximize their digital asset-earning potential through staking, lending aggregation and yield generation services.

The aim of the Yearn Finance project is to make DeFi (decentralized finance) trading less complicated and more accessible to less technically-minded traders. The platform utilizes automation to allow traders to maximize profits from yield farming.

Yearn Finance consists of four core products:

• Earn – establishes the highest interest rates that users can earn from lending crypto assets. 
• Zap – groups together several trades in one click, reducing costs and labor.
• APY – comprehensive data table that analyzes interest rates across various lending protocols. 
• Vaults – investment strategies developed to yield the highest returns from other DeFi projects.

Through locking supported cryptocurrencies in Yearn Finance smart contracts integrated into the Curve DeFi and Balancer trading platforms, users earn YFI tokens and can engage in yield farming practices. The more crypto assets that users lock into these protocols, the more tokens they receive.

In order to operate efficiently in a decentralized manner, Yearn Finance built an impressive system of automated incentives rewarding participants who act in accordance with the outlined governance proposals with its YFI tokens. These proposals are voted in by YFI holders.

Who created Yearn Finance (YFI)?

Yearn Finance was launched in February 2020 by a prominent contender in the crypto space, Andre Cronje. Cronje led the launch of the platform having received no funding or reserving any tokens for himself, an exceptionally rare occurrence in the crypto assets and DeFi projects space. 

On top of that, he also holds important roles at smart contract ecosystem Fantom and CryptoBriefing - a premier go-to resource for anyone interested in Initial Coin Offerings (ICOs) or crypto media.

How does the Yearn Finance (YFI) platform work?

Yearn Finance offers users custom-built tools that act as an aggregator for other DeFi projects such as Aave, Compound, and Curve DeFi trading platforms. 

Built on the Ethereum blockchain, Yearn Finance deploys contracts on other compatible decentralized exchanges such as Balancer and Curve to maximize the earning potential for its users. 

These contracts can be categorized into the four core products mentioned above, with most of the platform's services centered around lending or trading digital assets, and generating a passive income.

Earn

The earn product acts as a lending aggregator and searches across a selection of reputable different lending protocols to find the best interest rates, allowing users to tap into the best rates when lending cryptocurrencies. Users can then deposit USDT, USDC, DAI, sUSD, or TUSD into liquidity pools directly through the Yearn Finance platform to tap into those interest rates. 

Zap

Saving time, costs and transaction fees, the zap product allows users to conduct several transactions in one click. For example, a user can trade DAI for yCRV in one smooth movement, as opposed to several transactions on other DeFi projects. 

APY (annual percentage yield)

Aggregates the earning potential on an annualized basis based on how much capital is invested by searching across the various lending protocols utilized by the Earn product. 

Vaults

The more complex of the services offered by Yearn Finance, the Vaults product allows users to tap into active investment strategies designed by the platform's own self-executing code. These essentially work as actively managed mutual funds with Yearn Finance being the financial intermediary.

Users looking to engage in this product, noting that it is still in experimental stages, would need to have some technical know-how to investigate how these strategies work as they are presented in Solidity (a smart contract-orientated programming language). Utilizing the product, however, is less complicated, simply requiring users to deposit USDC or DAI in each strategy which then invests the funds in various liquidity pools.

What is the YFI token?

Launched in July 2020, the YFI token is based on the ERC-20 token standard and operates as a utility and governance token across the ecosystem. While anyone can make a proposal, only YFI holders are able to vote on proposals put forward regarding the governance and future development of the platform. The higher one's YFI token holding, the more voting power the YFI holders have. A proposal requires more than 50% of the votes in order to be passed.

The maximum supply of YFI tokens was 30,000, however, YFI holders voted to increase this. Following the successful proposal, the total supply is now 36,666 YFI tokens.

Holders are able to earn YFI tokens through revenue received through fees charged on the platform. These are generated through the 0.5% fees charged for using the Earn feature and 5% for the Vault service. Users can also earn YFI tokens by providing liquidity on the platform.

How can I buy the Yearn Finance token?

Whether looking to actively engage in the yearn.finance (YFI) platform, other DeFi protocols, or simply acquire and hold the YFI token, Tap provides a simple and secure solution. Fully regulated and licensed, the Tap mobile app requires users to create an account and complete the account verification process in order to gain access to a wide range of vetted cryptocurrencies. 

Once approved, users can buy, sell, store and trade the YFI token or any of the other supported cryptocurrencies from the convenience of their mobile phone. 

TradFi (traditional finance) is one of the newer terms to emerge from the cryptocurrency space. A combination of the words traditional and finance, TradeFi encompasses centralized institutions like retail, commercial, and investment banks. The term originated to help differentiate these from the decentralized world of cryptocurrencies. 

What is TradFi (traditional finance)?

TradFi refers to the traditional finance institutions and fintech companies operating within the current mainstream financial system. These service providers are heavily centralized and regulated by governments and are primarily brick-and-mortar businesses that have provided banking and financial services for decades. They typically also carry high barriers to entry, and stringent KYC and AML processes.

TradFi includes everything from banks to hedge funds to brokerages. Examples of TradFi platforms include JPMorgan Chase and Goldman Sachs (banks) as well as fintech companies like PayPal, Square, and SoFi. All these platforms execute financial transactions in a centralized and controlled manner.

Benefits of TradFi and the mainstream financial system

Only businesses with the appropriate licenses and accreditations can offer TradFi services. If these TradFi institutions' services falter in any way, customers can file complaints and receive compensation with the backing of regulatory bodies. Additionally, the amount of paperwork makes it difficult for scammers and fraudulent people to get involved, particularly with money laundering.

TradFi also assists the government by monitoring illegal spending and investments in the finance industry. In DeFi, because crypto transactions are anonymous, this is more challenging to do. By working together, TradFi institutions and governments can better achieve their goals.

TradFi has several limitations. The excessive rules and government intervention stifle development and innovation in the sector. It also keeps a significant portion of the population from accessing financial services. 

In the coming years, TradFi institutions, blockchain technology, and cryptocurrencies will hopefully find a way to collaborate to create an advanced financial infrastructure that is accessible to everyone.

TradFi vs DeFi

DeFi, or decentralized finance, is a financial infrastructure that doesn't require central authorities like banks or governments. It uses blockchain technology and smart contracts to verify and authorize transactions in a decentralized, peer-to-peer manner. 

One of the most prominent key differences between the two is that with TradFi services, the money is issued by the bank while decentralized finance platforms use a blockchain protocol to issue the funds to crypto users. Smart contracts then authorize the transaction between the two parties, while TradFi transactions are facilitated by banks. 

Touched on above, DeFi is much more financially inclusive, providing services to anyone who can fulfil the requirements (which typically involve providing collateral). TradFi platforms on the other hand will put the applicants through rigorous checking of financial statements and credit scores. 

You can get started with the crypto assets services offered by DeFi platforms in a few easy steps. TradFi investing has now been opened up to a much wider audience as a result of digitization, however, it still requires intensive KYC (Know Your Customer) and AML (anti-money laundering) documentation.

TradFi vs CeFi

The centralized nature of CeFi (centralized finance) fuses together the best aspects of DeFi and TradFi. This system provides opportunities to investors who wish to use cryptocurrency-based accounts with less of the risk and might include crypto exchange services. These accounts have many benefits, with a strong similarity to traditional savings accounts.

However, the APYs (annual percentage yield) differ significantly from CeFi to TradFi platforms. You can borrow money against your crypto assets on CeFi platforms just like you would with a collateral-backed loan from a bank. This requires little to no documentation, unlike TradFi.

While some government-backed insurances cover TradFi deposits, this is not the case for CeFi deposits, making it a more risky endeavor.

How do TradFi financial institutions fit into the crypto world?

In order to stay afloat and keep up with the times, industries rely on implementing cutting-edge technologies. Today, blockchain technology and digital assets are at the forefront of a financial revolution.

If traditional financial institutions, TradFi platforms, want to maintain their relevance, they will have to eventually adopt cryptocurrencies into their systems, thus bringing them into mainstream use.

Due to traditional finance needing to comply with government regulations, the implementation of digital currencies into their platforms will likely have positive forward momentum for crypto regulation. 

While currently they remain separate, there is plenty of opportunity for traditional finance and crypto platforms across key sectors like lending and insurance to join forces and merge each one's progress thus far in terms of innovation, speed, and accountability. 

Stocks are essentially shares in a company that the company sells to shareholders in order to raise money. Shareholders are then entitled to dividends if the company succeeds, and might also receive voting rights when the company makes big decisions (depending on the company).

What are stocks?

Stocks play an important role in the global economy, assisting both companies (in raising capital) and individuals (in potentially earning returns). Traders can buy and sell stocks through stock trades facilitated by various stock exchanges. The stock price is determined by supply and demand, largely influenced by the company's success and media representation.

These "units of ownership" are sold through exchanges, like Nasdaq or the London Stock Exchange, under the guidance of regulatory bodies, such as the Securities and Exchange Commission (SEC) in the United States. These regulatory bodies set specific regulations on how companies can distribute and manage their stocks.

What are the different types of stocks?

There are two types of stocks, common stocks and preferred stocks, as outlined below.

Common Stock

Shareholders of common stock typically have voting rights, where each shareholder has one vote per share. This might grant them access to attending annual general meetings and being able to vote on corporate issues like electing people to the board, stock splits, or general company strategy.

Preferred Stock

For investors more interested in stability and receiving regular payments rather than voting on corporate issues, preferred stocks are often the security of choice. Preferred stock are shares that provide dividends but without the voting rights. Like bonds, there are a number of features that make them attractive investments. For example, many companies include clauses allowing them to repurchase shares at an agreed-upon price.

Stock vs bond

Although both stocks and bonds signify an investment, they vary in how they operate. With bonds, you're essentially lending money to the government or a company and collecting interest as a return while with stocks you're buying part-ownership of a company. Another key difference is that bondholders usually have more protection than stockholders do.

In contrast to stocks, bonds are not normally traded on an exchange, but rather over the counter (the investor has to deal straight with the issuing company, government, or other entity).

Stocks vs futures and options

Futures and Options contrast stocks in that they are derivatives; their value is reliant on other assets like commodities, shares, currencies, and so on. They are contracts established off the volatility of underlying assets instead of ownership of the asset itself.

Stocks vs cryptocurrencies

While stocks provide a unit of ownership in a company, cryptocurrencies are digital assets that operate on their own network. Cryptocurrencies are decentralised, meaning that no one entity is in charge, while stocks are shares in companies that are heavily centralised and held accountable for their price movements. Both the stock price and the price of cryptocurrencies are determined by supply and demand.

Another key difference is that stocks are regulated while, at present, cryptocurrencies are not.

Where did stock trading originate?

The first recorded instance of stock-like instruments being used was by the Romans as a way to involve their citizens in public works. Businesses contracted by the state would sell an instrument similar to a share to raise money for different ventures. This method was called 'lease holding.'

The 1600s gave rise to the East India Company (EIC), which is considered by many the first joint-stock company in history. The EIC increased its notoriety by trading various commodities in the Indian Ocean region. Today, we see the limited liability company (LLC) as a watered-down version of the joint-stock company.

How does the stock market work?

The 'stock market’ is an umbrella term that refers to the various exchanges where stocks in public companies are bought, sold, and traded.

The stock market is composed of similar yet different investment opportunities that allow investors to buy and sell stocks, these are called "stock exchanges." The best-known exchanges in the United States are the New York Stock Exchange (NYSE), Nasdaq, Better Alternative Trading System (BATS), and the Chicago Board Options Exchange (CBOE).

Together, these organisations form what we call the U.S. stock market. Other financial instruments like commodities, bonds, derivatives, and currencies are also traded on the stock market.

An example: the New York Stock Exchange

The New York Stock Exchange (NYSE) is the largest equity exchange in the world, and it has a long and rich history. Established in 1792, it was originally known as the "Buttonwood Agreement" between 24 stockbrokers who gathered at 68 Wall Street to sign an agreement that called for the trading of securities in an organised manner.

Since then, the NYSE has become a global leader in financial markets, with more than 2,400 companies listed and nearly $26.2 trillion in market capitalization. The exchange has an average daily trade volume of $123 billion.

Investing in common stock or preferred stock on the NYSE can be done through a broker or online stock trading platform. When trading on the NYSE, investors have access to a wide range of products and services, including stocks, bonds, mutual funds and ETFs (exchange-traded funds).

Investors can also take advantage of the numerous benefits that come with trading on the NYSE, such as access to real-time information and the ability to buy and sell quickly. The trading platform is regulated by the U.S. Securities and Exchange Commission (SEC).

How to navigate stock market volatility

Stock market volatility, characterised by rapid and unpredictable changes in stock prices, is influenced by economic indicators, geopolitical events, and investor sentiment. To manage this volatility, investors can diversify their portfolios, set clear investment goals, and maintain a long-term perspective.

Regular portfolio reviews and seeking guidance from financial advisors can also help when it comes to making informed decisions during volatile periods. Investors who stay informed about market trends and use strategic approaches can navigate market fluctuations more effectively, which better positions them for long-term success in stock investing.

The importance of diversification when investing

Diversification is key when investing, and the stock market is no exception. The "don't put all your eggs in one basket" approach offers benefits like risk reduction and the potential for higher returns. Strategies for diversification include investing across different sectors, industries, and asset classes.

By spreading investments, investors can manage risk effectively, ensuring their portfolio isn't overly exposed to any single asset or market sector. This helps cushion against market downturns and enhances the overall stability of the investment portfolio.

Terminology associated with the stock market

• Broker: A broker is someone who buys and sells assets on behalf of another person, charging a commission for their services.
• Stockholders equity: The value of a company's stock can be better understood by this metric, which is the company's assets remaining after all bills are covered (liabilities).
• Stock splits: Conducting a stock split is one way that companies make their stocks more accessible to investors. Although it won't change the market capitalisation or value of shares, it will increase the number available.
• Short selling: If an investor wants to bet on a stock's price going down, they can take a "short" position. To do this, they must borrow the stock from either a broker or a financial institution.
• Blue-chip stocks: Companies that are large and have a lot of capital typically fall into the blue-chip category. They usually trade on famous stock exchanges, like the NYSE or Nasdaq.
• Pink sheet stocks: 'Penny' or 'pink-sheet' stocks are those that trade below the $5 threshold and are typically OTC (over the counter). These can be high risk.
• Buying on margin: Buying on margin is using borrowed money to buy stocks, bonds, or other investments in the hopes of making big returns and paying off the loan.
• Market order: When placing an order for a trade, the investor needs to pick from several types of orders. A market order is executed at whatever the next price is, which can be risky if there's a big gap between what buyers and sellers are offering.
• Limit order: A limit order is an order to buy or sell a security at a specified price, with a maximum amount decided on before executing the trade.
• Stop order: A stop order, also referred to as a stop-loss order, is an order placed with a broker to buy or sell once the stock reaches a predetermined price.

In conclusion

Shares, or stock, are units of fractional ownership in a company that investors buy to gain capital appreciation and tap into a company's earnings if the company's stock pays dividends. Companies, through listing their stock on an exchange, can raise capital to further develop the business.

Stock is traded on an exchange, and the stock prices are determined by supply and demand. 

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‍‍Slippage plays an important role in trading cryptocurrencies for retail investors as it determines the difference between the amount that you expected to pay in a transaction and the amount the trade was executed at. Below we're uncovering what slippage in crypto is, explaining how it can contribute to risk, and providing some practical examples on how to avoid it. 

What Is Slippage In Trading?

Slippage is when an investor opens a trade but between creating the trade and the trade executing, the price changes due to price movements in the greater market. This can often be a costly problem in the financial sector and particularly when trading digital currencies on crypto exchanges.

How Does Slippage Occur?

The two main causes of slippage are volatility and liquidity, outlined in more information below.

Volatility is when the price changes rapidly, as is common in cryptocurrency markets, and as a result the price changes between the time of creating the buy or sell order and the time of execution. 

Liquidity concerns on the other hand are when the coin you are trading is not traded very often and the range between the lowest ask and the highest bid is wide. This can cause sudden and dramatic price changes, resulting in slippage. Fewer people trading an asset results in fewer asking prices, resulting in less favourable prices. 

This is common among altcoins with low volume and liquidity. While slippage can occur in forex and stock markets too, it is much more prevalent in crypto markets, particularly on decentralised exchanges (DEXs). 

There are two types of slippages:

Positive Slippage

Positive slippage is when a trader creates a buy order and the executed price is lower than the price initially expected. This will result in the trader getting a better rate. The same is true for a sell order that experiences a higher price point at trade execution, resulting in more favourable value for the trader. Positive slippage banks profits.

Negative Slippage

Negative slippage is when the trader loses out on the trade, with the price of the buy order higher than expected at the time of execution. The opposite is true for sell orders, meaning that the execution price is lower at the time of execution, similarly resulting in losses for the trader. 

Can Slippage Be Avoided? How To Avoid Slippage

While one can't eradicate slippage entirely, there are several measures one can take to better manage slippage, as regularly falling victim to negative slippages can result in losing a lot of money. 

• Create limit orders

Instead of creating market orders, traders can instead create limit orders as these types of trades don't settle for unfavourable prices. Market orders are designed to execute a trade service as quickly as possible at the current available price.

• Set a slippage percentage

Traders can create a slippage percentage that eliminates trades happening outside of the predetermined range. This can range from 0.1% to 5%, however, if the slippage percentage is too low this could lead to the trade not being executed and the trader missing out on large drops/jumps.

• Understand the coin's volatility

When in doubt, get educated. Learn about the coin's volatility as well as the volatility on the trading platform you are using. Understanding more about previous patterns can assist in making more informed decisions on when to open and close a position, and avoiding negative slippages.

How To Calculate Slippage

Slippage can be calculated in two ways, either in dollar amount or percentage. Although to work out the percentage, you will first need the dollar amount. This is calculated by subtracting the price you expected to pay from the price you actually paid. This amount will indicate if you incurred a positive or negative slippage. 

Most exchanges express this amount in percentages. This is calculated by dividing the dollar amount of slippage by the difference between the price you expected to get and the limit price. Then multiply that by 100. 

For example, say you are looking to buy Bitcoin for $50,000, but are not willing to pay more than $50,500. When the price is at $50,000 you will create a limit order of $50,500, however, the order executes when the price reaches $50,250. This will result in a $250 slippage. 

To calculate the percentage, divide $250 by $500 (the difference between the price you expected to pay and the limit order). 0.5 multiplied by 100 equals 50%. 

In this case, your slippage was $250 or 50%. 

Want to know more about cryptocurrencies and trading? Check out all our other educational articles here. 

Whether you’re a trader, investor, or just trying to get to grips with your finances, understanding your net worth is a crucial step toward gaining control over your financial health. Knowing what net worth entails and how to calculate it provides valuable insights that empower you to make informed choices and build a stronger financial future, and ideally, increase your monetary value.

In this article, we will explore the concept of net worth, discuss the factors that influence it, guide you through the calculation process, and provide practical examples to enhance your understanding.

Understanding net worth

Net worth is a comprehensive financial metric that reflects your financial standing. It represents the difference between your assets and liabilities, giving you a holistic view of your wealth. 

Unlike income, which represents your earnings over a specific period, net worth offers a long-term perspective by considering both what you own and what you owe. Understanding what net worth means allows you to evaluate your financial progress, set realistic goals, and make informed decisions about your financial well-being.

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Factors affecting your net worth

There are several factors that need to be considered when calculating your net worth:

Income

Your income plays a significant role in determining your net worth. It includes earnings from various sources such as salaries, investments, and side businesses. The higher your income, the more potential you have to accumulate wealth. 

However, it's important to remember that sustainable wealth is not solely dependent on income but also on effective management of expenses.

Assets

Assets are valuable resources that contribute to your net worth. They can include investments, savings, real estate properties, and personal possessions. By acquiring appreciating assets and diversifying your portfolio, you can increase your net worth over time. Understanding the value and potential growth of your assets is crucial for making informed financial decisions.

Liabilities and Debts

When liabilities exceed assets, on the other hand, this decreases your net worth. Liabilities and debt encompass mortgages, loans, credit card balances, and any outstanding payments. Minimising liabilities and managing debts effectively is vital for improving your net worth. 

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By reducing high-interest debts and maintaining a healthy debt-to-income ratio, you can positively impact your overall financial health. A healthy debt-to-income ratio is considered to be at or below 43%, meaning that you are spending at or less than 43% of your income on debt payments.

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How to calculate net worth

Whether your goal is to improve your net worth or aspire to be one of the high-net-worth individuals in your country, calculating your net worth is an integral step to achieving these. To calculate your net worth, you will need to:

• Write a list of all your assets and their estimated values.
• Summarise your liabilities, including outstanding debts and obligations.
• Subtract your total liabilities from your total assets to determine your net worth.

By regularly updating and monitoring your net worth statement, you can track your progress and identify areas for improvement.

Example of a positive net worth calculation

To illustrate what it looks like to calculate a positive average net worth, see this example below:

Step 1: Write a list of all your assets and their estimated values

​​Assets

Home: The current market value of Sarah's primary residence is $400,000.

Savings: Sarah has $50,000 in her savings account.

Investment portfolio: Sarah's investments, including stocks and bonds, are valued at $150,000.

Retirement account: Sarah has a 401(k) retirement account with a balance of $200,000.

Vehicle: Sarah owns a car, which is valued at $20,000.

Step 2: Summarise your liabilities, including outstanding debts and obligations

Liabilities

Mortgage: Sarah still owes $200,000 on her mortgage.

Student loan: Sarah has a remaining balance of $30,000 on her student loan.

Step 3: Subtract your total liabilities from your total assets to determine your net worth

Total Assets

$400,000 (Home) + $50,000 (Savings) + $150,000 (Investment Portfolio) + $20,000 (Vehicle) = $620,000

Total Liabilities

$200,000 (Mortgage) + $30,000 (Student Loan) = $230,000

Net Worth

Total Assets - Total Liabilities = $620,000 - $230,000 = $390,000

Based on these calculations, Sarah's net worth is $390,000. This positive average net worth indicates that her total assets exceed her total liabilities, representing her wealth and financial standing. It showcases her financial progress and the value of her accumulated assets.

Example of a negative net worth calculation

To illustrate what it looks like to calculate a negative net worth, see this example below:

Step 1: Write a list of all your assets and their estimated values

Assets

Car: Mark owns a car valued at $10,000.

Personal possessions: Mark has various personal possessions valued at approximately $5,000.

Step 2: Summarise your liabilities, including outstanding debts and obligations

Liabilities

Student loan: Mark has a student loan debt with an outstanding balance of $50,000.

Credit card debt: Mark has accumulated a card debt totaling $8,000.

Medical expenses: Mark has unpaid medical bills amounting to $3,000.

Step 3: Subtract your total liabilities from your total assets to determine your net worth

Total Assets

$10,000 (Car) + $5,000 (Personal Possessions) = $15,000

Total Liabilities

$50,000 (Student Loan) + $8,000 (Credit Card Debt) + $3,000 (Medical Expenses) = $61,000

Net Worth

Total Assets - Total Liabilities = $15,000 - $61,000 = -$46,000

This reveals that Mark's net worth is -$46,000, illustrating a negative value. This negative net worth indicates that Mark's total liabilities exceed the value of his assets, serving as a clear indicator that Mark's financial obligations outweigh his accumulated wealth. This sheds light on his ongoing financial challenges and the extent of his financial struggles. 
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6 reasons why it’s beneficial to grow your net worth

​​Financial security

Increasing your net worth provides a foundation of financial security. As your net worth grows, you have a greater buffer against unexpected expenses, job loss, or economic downturns. It offers a safety net to navigate through challenging times and helps you maintain stability in your financial life.

Achieving financial goals

A higher net worth enables you to achieve your financial goals and aspirations. Whether it's buying a home, starting a business, funding education, or retiring comfortably, a growing net worth provides the necessary resources and financial freedom to pursue your dreams.

Building wealth

Net worth is a measure of your wealth accumulation over time. By actively growing your net worth, you increase your overall wealth and improve your financial position. It allows you to build a stronger foundation for yourself and potentially leave a legacy for future generations.

Better financial opportunities

A higher net worth opens doors to better financial opportunities. It improves your borrowing capacity, allowing you to secure favourable loan terms and interest rates when needed. Additionally, a strong net worth can attract investment opportunities and partnerships that can further boost your wealth.

Flexibility and choices

Increasing your net worth provides you with more flexibility and choices in life. It affords you the freedom to make decisions based on what aligns with your long-term goals and values, rather than being constrained by financial limitations. A growing net worth expands your options and empowers you to take calculated risks or make life-changing decisions with confidence.

Peace of mind

Knowing that your net worth is growing can bring peace of mind. It reduces financial stress and anxiety, allowing you to focus on other aspects of your life. A positive net worth provides a sense of control over your financial well-being and offers peace of mind that you are on the right track towards a secure financial future.

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Tips for increasing your net worth

Building and growing your net worth requires proactive steps and strategic planning. Consider the following tips as a guideline for building your net worth in a sustainable way. 

Manage income and expenses

• Increase your earning potential through career development or additional income streams.
• Practise sensible spending habits and reduce unnecessary expenses.
• Allocate a portion of your income towards savings and investments.

Grow assets and investments

• Diversify your investment portfolio to mitigate risks and maximise returns.
• Seek professional advice to identify opportunities for growth in real estate, stocks, or other assets.
• Regularly review and adjust your investment strategy based on market conditions.

Reduce debts and liabilities

• Prioritise paying off high-interest debts to minimise interest charges.
• Consolidate debts and explore refinancing options to potentially lower interest rates.
• Develop a realistic debt repayment plan and stick to it.

Long-term financial planning considerations

• Establish an emergency fund to handle unexpected expenses.
• Plan for retirement by contributing to retirement accounts and exploring other retirement investment options.
• Consider contacting a financial advisor or planner for personalised guidance and expertise.

In conclusion

Understanding net worth is a fundamental step toward taking charge of your financial future. By comprehending the factors that influence net worth, calculating it accurately, and implementing practical strategies, you can enhance your financial health and build a more secure tomorrow. 

Empower yourself with knowledge, embrace proactive financial habits, and make informed choices that align with your long-term goals. Your net worth is not just a number but a tool that can transform your financial well-being.

Lido's liquid staking service allows users to tap into the benefits of staking rewards without compromising their tokens' liquidity. Lido aims to empower users to put their staked assets to use, supporting a number of PoS cryptocurrencies. The platform offers a liquid staking solution that provides users with a system that allows them to earn rewards on staked coins while also receiving a tokenized version of the staked coins which can generate returns in other DeFi protocols. 

What is Lido (LDO)?

Lido DAO is an innovative decentralized autonomous organization that offers a liquid staking solution on the Ethereum 2.0 blockchain as well as other Proof of Stake (PoS) platforms like Solana (SOL), Polygon (MATIC), Polkadot (DOT), and Kusama (KSM). 

By initially locking up assets, Lido DAO allows users to liquefy their holdings and use them for other protocols - what we call 'liquid staking'. Through this yield-generating process, users are able to receive a tokenized version of their staked tokens on a 1:1 basis when depositing their crypto tokens into the network, which can then be used to participate in other DeFi on-chain activities to gain additional yields.

Since its establishment in December 2020, shortly after ETH 2.0's release, the platform has been overseen by the Lido DAO, with several key members including P2P Capital, KR1 and Semantic Ventures. 

Since then, Lido DAO has gained an impressive reputation for its liquid staking capabilities, and now boasts over $13 billion in staked assets. Its core focus is on Ethereum, yet its horizons are expanding to other blockchain networks including Terra and Solana, both of which launched staking capabilities in 2021, as well as several other layer 1 PoS blockchains.

Lido DAO stands apart from other liquid staking protocols due to its decentralized nature and attractive annual percentage rates (APR). The platform offers 4.8%, 8.1% and 6.6% APR for staking Ethereum, Terra and Solana respectively.

Who created the Lido DAO platform?

Lido was co-founded by Kasper Rasmussen and Jordan Fish, also known as CryptoCobain. Behind the Lido DAO are a number of individuals and organizations that are well-regarded within the DeFi space. 

Lido DAO members include Semantic VC, Chorus, ParaFi Capital, P2P Capital, Libertus Capital, Terra, StakeFish, Bitscale Capital, StakingFacilities, and KR1. Several of the highly esteemed angel investors include Stani Kulechov of Aave, Banteg of Yearn, Will Harborne of Deversifi, Julien Bouteloup from Stake Capital and Kain Warwick from Synthetix.

How does the Lido Protocol work?

Liquid staking services through the Lido protocol allow users to earn block rewards from staking PoS assets while addressing issues like illiquidity, complexity, and centralization. Lido DAO offers an innovative solution that allows users to gain access to the typically locked-up tokens and lowers the barrier to entry and costs associated with staking requirements.

When staking tokens on the Lido DAO platform, users tap into a staking pool smart contract that stakes the tokens on the relevant PoS blockchain. Users will also receive a digitized version of their deposited funds (stAsset tokens), that can be used to bring in rewards from not just the original protocol but also other DeFi protocols and decentralized applications (dapps), like lending and yield farming. This allows users to maximize their earnings potential.

The staking pool smart contract manages the users' deposits and withdrawals, determines the staking reward fees, delegates funds to node operators, and mints and burns tokens as needed.

How tokens can be used

Let's look at ETH for example. With Lido staking, users are rewarded with 1:1 stETH tokens that represent their deposited ETH. Users can use their stETH balance just like regular ETH to earn staking rewards in real-time, updated on a daily basis. There are no lock-ups or minimum deposits when using Lido.

Lido DAO's liquid staking protocol involves three distinctive processes: staking, minting and DeFi.

Staking

Users can choose any amount of ETH to stake, which is then deposited onto the platform. 

Minting

In return for the staked ETH, Lido issues on a 1:1 ratio minted or Lido-native liquid representatives of ERC-20 coin (stETH). 

DeFi

Users can make use of these stETH tokens across the DeFi ecosystem to earn greater yields bypassing the need to "lock up" staked coins. 

With the Lido DAO platform, users can stake any amount of ETH to the Beacon Chain without having to comply with typical lock-up requirements. For providing this staked ETH service, a 10% fee is collected by Lido for each process.

How validator rewards are earned from staked assets

Validator rewards can be earned through staked PoS tokens on the platform. In order to stake ETH, become a validator and earn rewards for validating payments on the Ethereum platform, users are required to stake a minimum of 32 ETH tokens. To bypass this minimum requirement and still earn rewards, Lido allows users to stake a fraction of this amount and earn a proportionate amount of block rewards.

Users will then deposit ETH into the Lido smart contract and receive the same number of stETH (an ERC-20 token representing the deposited ETH). These tokens are minted once the funds have been received and are burned when the users withdraw their original ETH. The staked funds will then be distributed to the multiple validators (node operators) on the Lido network and deposited into the Ethereum Beacon Chain from where they will be secured in a smart contract (and inaccessible).

The Lido DAO will then assign, onboard, support and enter the validators' addresses to the smart contract registry before being given a set of keys for the validation. All ETH that users have deposited on the Lido platform will be split into groups of 32 ETH among the active Lido node operators who will use this public validation key to validate transactions. The block rewards will then be shared proportionately.

This distribution process of sharing staked assets eliminates single-point-of-failure risks common among single-validator staking. 

What is LDO?

The Lido DAO token (LDO) is an ERC-20 token, the native utility token to the Lido protocol used to reward users. The token has a total supply of 1 billion tokens and serves three primary functions. 

The LDO token grants holders with governance rights in the operations of the Lido DAO, as well as the removal or addition of Lido node operators and helping with the management of fee parameters and distribution. 

The more LDO coins a user holds, the more powerful their vote. 

How can I buy the Lido DAO token and earn staking rewards?

If you're looking to expand your digital currencies portfolio, Lido tokens can be a great addition. The Tap app provides an easy and secure way for anyone with an account to add these tokens to their portfolios in no time, making it one of the most effortless trading experiences around.

Utilize the Tap app to access the Lido ecosystem by purchasing LDO tokens with either crypto or fiat currencies. Users can then choose to store their LDO tokens securely in the integrated crypto wallet or transfer them to the Lido platform and engage in the platform's earning potential. All you need to do to get started is download the app and create an account.