đź‘® Will DeFi be regulated?

Crypto fundraising for midterm elections, A guide to Yield Farming.

October 23, 2022

Contents (4 min read):

  • đź‘® Will DeFi be regulated?

  • 🗳️ Raising CryptoFunds for the Midterms

  • đź’° Coins of the week

  • 🌾 Yield Farming: A Guide.

  • đź“° Top Reads

  • 🙏🏻 Grateful for…

đź‘® Will DeFi be regulated?

This year has been a slow year and somewhat uneventful year for DeFi. But the technology experienced exponential growth the previous 2 years. In mid-February 2020, the total value locked within decentralized finance (DeFi) applications first exceeded $1 billion. Fueled by the DeFi summer of 2020, it wouldn’t even take a year before it multiplied 20-fold to reach $20 billion and only another ten months to reach $200 billion. Given the pace of growth so far, it doesn’t seem outlandish to imagine the DeFi markets hitting a trillion dollars within another year or two.

This has created a dilemma for regulators, given the decentralized nature of the space. Most crypto platforms have strong KYC requirements for clients to onboard. In the DeFi space, there is no need for such requirements, allowing anyone, including anonymous players, with a wallet to participate.

For many investors, this is the main purpose of decentralized finance, for regulators, this is a red flag. This week Sam Bankman-Fried, known by his initials SBF, wrote a draft with a set of standards that the industry could enact to create clarity and protect customers while waiting for full federal regulatory regimes. 

The American entrepreneur, billionaire, and investor who co-founded FTX, a cryptocurrency exchange, mentioned that this it to be treated as an industry norms manual, trying to establish consensus, and that they are confident that this structure is not exactly correct–it’s just a draft.

‍Why is this important? Investors and entrepreneurs like Sam are starting to be very vocal about regulation in the space, with many investors taking sides in this very important matter. We can expect more feedback on the matter and definitely more regulation that will differ by geographic area.

Regulators think that lots of illicit gotten assets are traded freely in DeFi protocols and something has to be done to stop this and reveal who is behind these transactions. For the rest of us, this means more taxes for our gains, less freedom to use any protocol of our choice.

🗳️ Raising CryptoFunds for the Midterms

The United States midterm elections are on November 8th. Normally, candidates depend on cash donations. State candidates, party committees, and ballot measure committees for 2021 and 2022 elections are projected to raise more than $7 billion, a new OpenSecrets analysis of state-level campaign finance disclosures projects. 

This year things are different as crypto-fundraising Startup Sets Sights on Midterm Election Donations. Engage Raise, Engage Lab’s donation platform that launched in July 2022, currently works with 16 congressional candidates to facilitate cryptocurrency contributions.

The team declined to comment on how many donations candidates have received through the platform, but said the average has been about $1,000 per donor. The most popular token for donations has been the stablecoin USDC, followed by Ethereum’s native ether (ETH). 

Why is this important? - In a capitalist political economy money reigns. The deeper your pockets, the more marketing muscle a candidate has to get his message across and the more popular he/she can be among voters. Crypto donations mean that donors may be able to throw money from anywhere in the world and more anonymously, but still have an agenda for candidates that take their donations.

Today’s newsletter is brought to you by YouTopian Journey

You have greatness within! YouTopian Journey is here to help you awaken it with life-changing knowledge and unique artwork from our custom-drawn comic book! YouTopian Journey provides weekly motivation and wisdom to help you become mentally stronger and realize your potential.

đź’° Coins of the week

Huobi Token (HT) has gained close to 28% this past week. One of the reasons is that Tron founder Justin Sun revealed that he owns “tens of millions” of the Huobi Token, days after joining the platform as an advisor. The coin almost doubled in price on the news.

HT is the native token of the cryptocurrency exchange Huobi Global. It is a decentralized digital asset based on the Ethereum blockchain and is ERC-20 compliant. HT’s value is in part reliant upon the reputation of the Huobi crypto exchange, yet other factors also have an impact.

🌾 Yield Farming: A Guide.

Yield farming is a method of investing cryptocurrencies for additional returns. Yield farms are decentralized finance investment tools that rely on smart contracts. For investors prioritizing aggressive returns, yield farms may provide high interest rates, including more than 100%.

Quick facts:

  • Yield farming is the process of token holders maximizing rewards across various DeFi platforms.

  • Yield farmers provide liquidity to various token pairs and earn rewards in cryptocurrencies.

  • Top yield farming protocols include Aave, Curve Finance, Uniswap and many others.

  • Yield farming can be a risky practice due to price volatility, rug pulls, smart contract hacks and more.

Types of yield farming:

  • Liquidity provider: Users deposit two coins to a DEX to provide trading liquidity. Exchanges charge a small fee to swap the two tokens which is paid to liquidity providers. This fee can sometimes be paid in new liquidity pool (LP) tokens.

  • Lending: Coin or token holders can lend crypto to borrowers through a smart contract and earn yield from interest paid on the loan.

  • Borrowing: Farmers can use one token as collateral and receive a loan of another. Users can then farm yield with the borrowed coins. This way, the farmer keeps their initial holding, which may increase in value over time, while also earning yield on their borrowed coins.

  • Staking: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield.

Risks

Risk farming carries a number of risks that investors should understand before starting. Scams, hacks, rugs, and losses due to volatility are not uncommon in the DeFi yield farming space. The first step for anyone wishing to use DeFi is to research the most trusted and tested platforms.

đź“° Top Reads

Reply

or to participate.