DeFi projects are frantically attempting to acquire more Curve tokens (CRV) by first obtaining vote-locked Curve tokens (veCRV).
Projects can vote for more CRV tokens to be issued to their preferred liquidity pool using these vote-locked tokens. There will only ever be so many CRVs because the supply is limited (3.3 billion in total, to be precise).
As a result, with a limited supply, it’s effectively an accumulation race with additional steps: Acquire CRV, lock it up for veCRV, then vote to allocate CRV tokens to a chosen pool and earn more CRV. Rinse and repeat until you’ve exhausted all of your options.
A new market is growing amid all of this: bribery.
Several secondary sites now allow for bribes in some way or another. Let’s start by looking at how the mechanism works in general.
Let’s imagine you’re a big Curve Finance liquidity provider who wants to boost the amount of CRV awards that pool earns while you stay there and, well, offer liquidity. However, you can only have so much CRV (and thus only so much veCRV-based sway in this community).So you decide to set up some form of bribe. You essentially say, “Hey, if you vote for my pool to receive greater rewards with your veCRV holdings, I’ll give you another token in exchange,” It’s a good bargain if people believe the other token is more valuable.
You can take this all the way down to the protocol level.
Assume a project wants to make its native token more liquid. Naturally, offering the most appealing rewards to potential LPs, a la yield farming, is the simplest method to accomplish so. If you can offer them a high APY in exchange for adding liquidity to your freshly launched cryptocurrency, you’ll be able to attract a large amount of new capital and quickly make your new coin incredibly liquid. Andre Cronje, the developer of Yearn Finance and a slew of other DeFi companies, devised a framework that could be used to carry out this type of bribe. The website, dubbed “bribe.crv.finance,” is effectively a one-stop-shop for everything CRV bribe-related. Bribers can make offers, and bribees can take advantage of them.
However, because this concept is well-known (the Curve Wars officially began in 2020), there are currently a number of DeFi bribe systems available. Convex has proven to be one of the most successful of these systems.
It now owns over 53% of all CRV tokens in circulation, and it was created with the goal of acquiring as much CRV as possible by rewarding users with the maximum amounts of CRV.
It works like this: Users that deposit their CRV tokens (or even Curve’s LP tokens) on Convex receive another token called cvxCRV as a type of receipt. Users who hold this token are entitled to (1) Curve trading costs (remember, every trade on Curve earns 0.04 percent in fees), (2) Convex’s native token, CVX, and (3) the maximum reward achievable for a single Curve pool.
The variable APY in CRV shows that not everyone can take advantage of the full range without using Curve’s “Boosting” feature. However, you’ll need a lot of veCRV to do this, so it’s not really feasible for tiny holders.
Convex has the capacity to essentially max increase all benefits for every Convex user because they have pooled all of this CRV (and veCRV) through appealing bonuses and put it back to work.
And this is causing a flywheel effect, resulting in even higher CRV accrual. There’s also a rush to buy CVX so that holders can control Curve through proxies.
When you hear the term “governance extractable value” on Twitter, this is pretty much what it means: buying up large amounts of a project’s native governance token in order to take it over.
We wanted democratized finance, instead we got 3 layers of bribe protocols ultimately controlling plutocratic protocol governance systems.
The market will have to determine whether the alarming increase of DeFi bribery is indeed the “end state of DeFi” or merely the next chapter. Or the authorities in charge?
Bitcoin and other cryptocurrencies have had a difficult time in recent weeks. Over the previous 30 days, bitcoin has lost more than 18% of its value. The overall crypto market cap, as calculated by CoinGecko, peaked on November 10, 2021 and has since been steadily declining. Some NFTs have begun to exhibit signs of weakening in their floor prices.
This may be something of a fresh experience for a staggering number of crypto newbies. Coinbase’s verified users increased from 37 million in the second quarter of 2020 to 68 million in the second quarter of 2021, and then to 73 million in the third quarter.
That amounts to tens of millions of crypto investors who have never seen a true crypto bear market, let alone a long “crypto winter.” It’s not definite that we’ll experience any of them, but both are possibilities – and newcomers should prepare psychologically.
Let’s start with some context. For anyone who has been following Bitcoin for a long time, a decline to $40,000 does not seem like the end of the world. BTC reached that level for the first time only a year ago, in January 2021. Even as recently as July, it fell considerably below that threshold, briefly falling below $30,000. On a longer time scale, BTC’s current 38 percent drop from a November high isn’t even close to the token’s worst crashes: in only a few weeks in 2018, BTC dropped 84 percent.
In summary, individuals who bought at the height of the frenzy are likely to be hurting right now, while many other investors – those who sought out solid entry opportunities to build their portfolios – are still doing well. Because these assets are so accessible and liquid, they are prone to large, rapid fluctuations in sentiment, resulting in fragile blowoff peaks. Warren Buffett’s timeless advice applies even more than inequities: Be afraid when others are greedy, and greedy when others are afraid.
The most recent dramatic drop occurred in July when the market dropped by more than 50%. Following important developments like El Salvador’s adoption and Twitter’s popularity, the price quickly recovered. Though larger conditions point in the wrong direction, something similar could reverse the current trend. Above all, the Federal Reserve’s intention to tighten the money supply this year will be a drag on Bitcoin’s “inflation hedge” thesis, as well as tightening startup funding and other speculative investments in general.
However, the cyclical nature of bitcoin acceptance, interest, and markets appears to be unaffected. For the past decade, this pattern has been consistent. Every fresh crypto boom brings a flood of new speculators and venture capitalists, many of whom have just a rudimentary knowledge of the technology and why it’s significant. FOMOing into a top burns a lot of these new recruits. They also outsmart themselves by purchasing a token marketed by the founders as “the next Bitcoin,” which turns out to be a cheap hoax or simply a terrible idea. The “decoupling” of crypto assets has escalated in this cycle, and the margin between good and bad investments has been enormous.
Those who are burned — and there are a lot of beginners being burned right now – take their ball and go home, angry and resentful. However, a significant number of them stay, learn from their mistakes, and eventually become even more involved and devoted. With their newfound knowledge, they’ll be able to assemble an even stronger phalanx of users and supporters the next time pricing action grabs the public’s attention. Obviously, this loop cannot continue indefinitely. Bitcoin, in particular, will eventually find a more stable “proper” price. Maybe it’s around $50,000, and it’s already happened.
Regardless of price action, the pace of new ideas, integrations, and adoption (particularly by nation-states) is likely to continue strong in 2022. This, combined with the millions of new people learning about, using, and even inventing cryptosystems, will lay a solid basis for the next wave of enthusiasm and growth, whether it comes in three months or three years. Right now, either outcome is feasible. As a result, you should adjust your portfolio – and your expectations – accordingly.
China has been a vocal opponent of cryptocurrency for years, stepping up its efforts last year when it cracked down on Bitcoin mining. But what about non-ferrous metals (NFTs)? According to a new report from China, the country will launch its own state-backed platform for launching tokenized digital collectibles—with no crypto allowed.
According to the South China Morning Post, the government-backed Blockchain Services Network (BSN) is preparing permissioned, non-public blockchain infrastructure that will allow the government to monitor the issuance of NFT-style valuables.
The platform will not be interoperable with NFTs developed on public blockchain networks like Ethereum and Solana, and would not accept cryptocurrency payments, according to the report. Instead, collectibles and platform fees would only be accepted in Chinese yuan on the private network.
According to the source, BSN will refer to its unique brand of state-backed NFTs as Distributed Digital Certificates (DDC), with the platform set to launch at the end of this month.
According to the magazine, He Yifan, CEO of Red Date Technological, one of the technology firms behind the BSN, such collectibles “have no legal concern in China” as long as they are not affiliated with cryptocurrency. Government rules make public blockchains “illegal” in China, he added.
According to the source, the BSN has already constructed permissioned copies of current blockchain networks for business usage, and will integrate 10 of them into its NFT platform, including Ethereum and Corda versions.
For the planned launch, the company has reportedly engaged the help of 20 partners, including blockchain network Cosmos, cloud invoicing service Baiwang, and broadcasting solutions supplier Sumavision.
An NFT is a digital asset’s deed of ownership, such as an image, video clip, video game item, and so on. According to DappRadar data, the NFT market achieved $23 billion in trade volume in 2021, up substantially from $100 million in 2020.
Why does it matter?
Given the Chinese government’s attitude to bitcoin, it’s no surprise that Chinese businesses have steered clear of NFTs so far. The South China Morning Post reported this week that, in response to rising demand for NFTs in China, companies have renamed them “digital collectibles” and are largely avoiding the NFT branding.
Furthermore, due to government concerns about speculation and money laundering, companies selling tokenized digital collectibles cannot allow them to be resold. Nonetheless, Alibaba, Tencent, Bilibili, and JD.com have all released their own digital collectibles.
Given the government’s attitude on bitcoin, their claimed plan to keep the NFT market under its watchful eye using permissioned blockchain technology rings genuine. Citizens still have access to digital assets that they can own and utilize using this technique, but it appears to sidestep the speculative frenzy that has formed around actual NFTs.
However, one of the major advantages of NFTs is that they are not governed by a single entity. They can be freely bought and sold without requiring permission, and they may be interoperable, allowing them to be used across platforms and online worlds—a significant selling point as the approaching metaverse takes shape.
Users in China may not have the same rights and powers if the BSN’s concept for DDC collectibles takes hold. China’s strict oversight, like that of other tech and entertainment industries in the country, particularly the video game and film industries, may limit what citizens have access to and shut out much of the rest of the world from its large potential user base.
It may also hinder the NFT industry’s ability to actually go global and reach China’s 1.4 billion people. It also has the potential to stifle the development of an open, interoperable, NFT-driven metaverse that can fully connect the world’s people.
Despite warnings from state-owned media, Chinese companies are pouring money into the metaverse. The government’s stance on NFTs, on the other hand, may influence its future views on the metaverse, resulting in yet another walled garden.
Non Fungible Tokens got their big breakthrough in 2021 as every creative and investor went gaga about them. These tokens indicate a title of ownership over digital property such as art, music, or videos—but it was the digital art scene that sparked the NFT market, with record-breaking sales like Beeple’s $69 million Christie’s auction drawing headlines around the world.
Since then, fans have jumped on every new NFT craze, spending a lot of money on games like CryptoPunks, Bored Apes, and Loot. But, you might wonder, where are these NFTs being purchased?
NFT marketplaces have sprouted up like a vibrant virtual high street, selling digital art and collectibles at every price point imaginable. Here are some of the most popular platforms.
Open Sea was the first and by far the largest peer-to-peer NFT marketplace. According to analytics platform DappRadar, it has a total trade volume of over $6.5 billion at the time of writing, allowing NFTs anything from in-game items and collectibles to artwork, music, GIFs, and more.
Connecting your MetaMask wallet is the simplest way to sign up. However, other wallets like Coinbase Wallet, Bitski, Formatic, and others are also supported.
Purchasing an NFT is a straightforward process after you’ve connected; you only need to browse through the various collections or search for something that catches your eye, then submit an offer and wait to see whether it’s approved.
It’s also simple to upload your own NFT work. Simply go to the “Create” tab, connect your wallet as a creator, and upload your NFT, complete the description, and wait for the millions to pour in.
Axie Marketplace
The second-largest NFT marketplace is hosted by the NFT-powered video game Axie Infinity, which has a total trade volume of more than $2.1 billion on Dappradar. It only deals in Axies, which are adorable Pokémon-style digital pets that gamers can buy and sell on the Axie Marketplace.
You can also use the game’s built-in breeding mechanics to make new Axies, which you can then sell on the Marketplace. Unlike art NFTs, which are acquired just for the sake of collecting, Axie Infinity’s NFTs serve a purpose: you may use them in-game to fight monsters and other players, earning tokens that can be used to breed new species. Axie Infinity’s NFTs have proven to be so profitable that some players in the Philippines and Indonesia make a living breeding and trading them.
However, Axie Infinity is one of the most difficult NFT services to use for new users, and you’ll have to jump through a few hoops before you can even start playing the game.
You’ll need to set up a Ronin wallet, transfer ETH into Ronin, and acquire a minimum of three Axies from the Axie market in addition to an Ethereum wallet like MetaMask (which will set you back several hundred dollars). This isn’t ideal for casual passers-by, but it’s not beyond a seasoned crypto user’s capabilities.
Crypto Punks/ Larva Labs
Crypto Punks is a series of 10,000 randomly generated characters with a pixel art aesthetic and distinct traits that was one of the first demonstrations of NFTs on the Ethereum network. While they were once available for free, the only way to obtain one today is to purchase one.
That involves going to the marketplace run by CryptoPunks founder Larva Labs, where the majority of sales are made. Buying one is expensive: the cheapest Punk now costs 94.99 ETH (about $285,000), while the most valued one sold on the marketplace (number 3100) sold for an incredible $7.58 million. That explains Larva Labs’ $1.3 billion in all-time trading volume.
To begin, simply connect your MetaMask wallet, browse the available Punks (those with red backgrounds are for sale), and place your bid.
The most difficult aspect of the procedure is persuading yourself to spend such a large sum of money, but hey, that’s on you. After all, the worth of art is in the eyes of the viewer.
NBA Top Shot is a set of digital trading cards using NBA video highlight clips, and it was one of the first NFT series to find momentum with the general public. Clips are stored in your safe, encrypted blockchain-verified wallet when you purchase a pack, where you can view them or resell them on the NBA Top Shot Marketplace.
The popularity of NBA Top Shot can be attributed to the fact that its makers, Dapper Labs, have made it simple for the average user to get started. Linking your Google account to Dapper is the simplest method to sign up for NBA Top Shot, after which you’ll be asked to input your phone number for SMS authentication.
After that, you must complete a few account creation processes, including picking your favorite team. After that, you can join a drop on fresh packs, which will put you in a virtual queue before you can grab a pack. Following another SMS verification, you can pay using an existing crypto wallet, a Flow wallet, your Dapper money, or, more conveniently, a credit card.
Rarible is a community-owned platform that offers a wide range of digital art and collectibles. It is one of the main NFT marketplaces on Ethereum. According to Dappradar, it presently has the fifth-highest all-time trading volume, with $210 million changing hands.
You can buy and sell all kinds of material, just like on OpenSea. Sellers can also make many NFTs for a single image in order to sell it multiple times.
Users who have dabbled in comparable NFT marketplaces like OpenSea will feel right at home with Rarible’s user interface, which is easy enough for relative crypto newbies to utilize.
You can log in using MetaMask, Coinbase Wallet, MyEtherWallet, or any mobile wallet that supports WalletConnect. You can use funds in your wallet to buy, or you can top up your wallet with fiat cash by bank transfer or debit card once you’ve signed up.
Whereas Rarible’s design overwhelms you with a dizzying array of flickering GIFs and live auctions, SuperRare’s UI is far more pared-back and simple.
It’s also a lot more curated, as it bills itself as a social network that promotes the development and collection of crypto art. It collaborates closely with artists, requiring work to be submitted and vetted before it can be listed; in other words, quality above quantity.
A compatible wallet, such as MetaMask or Formatic, is required to sign up for SuperRare. There is an additional step that requires you to create a username and password that is linked to your wallet address, but it just takes a few seconds, so you’ll be browsing the platform’s exclusive NFTs in no time.
KnownOrigin, like SuperRare, promises to deliver a more curated, gallery-like experience for the discerning NFT enthusiast. It’s all-time trade volume is under $6.9 million. All of its artwork files are stored on IPFS, which gives the underlying assets some protection. With a heavy focus on digital art, this is a marketplace that avoids the wackier features of the NFT universe, therefore no wacky avatars or charming monsters will be found here.
KnownOrigin is straightforward to use, at the risk of sounding like a broken record. Simply link your wallet, such as MetaMask or Formatic, and you’ll be bidding on your own desired NFT assets in no time.
Foundation
Foundation, which bills itself as a “creative playground” for artists, currently has a total trading volume of slightly over $79 million. The NFT of popular Internet meme Nyan Cat, Edward Snowden’s debut NFT, and an audiovisual digital collectible made by producer Richard D. James, better known as Aphex Twin, have all taken place there.
Foundation’s marketplace is straightforward to use once you’ve connected your MetaMask or other software wallet with WalletConnect. You can put bids on timed auctions just like you would on a standard auction site.
MakersPlace is another niche NFT marketplace that prides itself on having a number of exclusive digital fine art collections. Although its total volume is minimal ($23.5 million at the time of writing), it contains many one-of-a-kind items that add to its exclusivity.
The site fell down in February 2021 when legendary crypto artist Beeple offered a collection of NFTs for $1 each. T-Pain, Shakira, and Tom Morello of Rage Against the Machine have all signed up for the site, which has hosted a number of NFT drops by singers.
It’s simple to become a buyer on MakersPlace, and you can even save time by logging in with your Google or Facebook accounts.
As part of the registration procedure, you’ll have to choose five artists to follow, and you’ll be able to buy their creations with either your MetaMask ETH balance or (more conveniently) your credit card. If you’re a creator, you’ll need to fill out an online form to request an invitation to join the platform, which will be reviewed by the curators.
Nifty Gateway, one of the first wave of large NFT marketplaces, has a significant supporter in the form of cryptocurrency exchange Gemini, which purchased the site in 2019. Nifty Gateway made waves during the NFT boom by brokering the sale of Beeple’s CROSSROAD for $6.6 million in February 2021, which was one of the first multimillion-dollar NFT deals. By May, the platform’s gross sales value had surpassed $300 million.
The portal hosts artists such as The Weeknd, Grimes, and Eminem, and delivers a tightly curated selection of NFT drops on a tri-weekly schedule. It also features a marketplace where you may look through curated collections, verified artists, and a larger selection of work from unconfirmed artists.
Because of Nifty Gateway’s close connection with Gemini, getting started is a reasonably simple process. To begin, you’ll need to create an account on the site (and use Stripe to authenticate your identity if you wish to sell NFTs). You’ll need to fund your account, either with a credit card or by sending ETH to a deposit address. After that, you’re ready to purchase NFTs from the marketplace.
You can also link your Gemini exchange account to your Nifty Gateway account, allowing you to make purchases and withdrawals using your Gemini exchange account balance (your Gemini account can be topped up using bank transfer, wire transfer, crypto deposits and trades).
Bakery Swap
BakerySwap is a smaller NFT marketplace than OpenSea, but that’s not surprising given that most NFT markets are built on Ethereum, while BakerySwap was one of the first to start on Binance Smart Chain (BSC). One element of the site is the NFT marketplace, which allows users to trade and swap liquidity assets directly with one another.
The NFT marketplace is simple enough to use, requiring only a MetaMask connection. Because this platform is based on the Binance Smart Chain, NFT assets can only be acquired with BNB rather than the more commonly used ETH.
Binance NFT MarketPlace
Binance NFT marketplace is, as you might expect, an NFT platform provided by Binance, the world’s largest crypto exchange. The company intends to create an NFT marketplace with exclusive offerings and collaborations in order to entice the exchange’s large user base to its platform.
If you already have a Binance account, you’ll be happy to know that it will operate with Binance NFT instantly. It’s as simple as bidding on any items that grab your eye after you’ve gotten in. Depending on what the producers have specified, you can use ETH, BNB, or BUSD.
The most recent NFT mini-boom occurred on Solana, a blockchain that competes with Ethereum. On marketplaces like Solanart, collections like Degenerate Ape Academy, Aurory, and SolPunks have witnessed trading volumes of hundreds of millions of dollars.
Solanart, unlike OpenSea, is a selected collection of NFT collections, with a small selection of NFTs available for purchase.
To begin purchasing Solana NFTs on Solanart, you must first download a Solana wallet, such as Phantom or Solflare, and load it with Solana from your preferred exchange. Phantom has a direct integration with the crypto exchange FTX, which makes depositing funds from that exchange a breeze.
It’s only a question of going to your preferred NFT, connecting your Solana wallet to the marketplace, and placing your bid from there.
Singapore, Jan. 14, 2022 – WhaleFin, the flagship digital asset platform of Amber Group, today announced a partnership with a leading non-profit organization, Whale and Dolphin Conservation (“WDC”), to help raise awareness in protecting whales and dolphins across the globe. As part of the partnership, WhaleFin officially adopted a 46-year-old female humpback whale named Salt, widely known as the most famous whale in the world.
This collaboration comes on the heels of Amber Group’s recent launch of WhaleFin, an “all in one” digital asset platform positioned to empower diverse market participants of all backgrounds to build and manage wealth in a continuously transforming digital era.
As an integral part of Amber Group’s larger sustainability initiative, WhaleFin is committed to marine wildlife and habitat protection, supporting the many creatures of our oceans and the ecosystems that ensure their survival. The WhaleFin community also contributes to the protection of Salt and her family with every login. In addition, Amber Group is committed to leveraging the power of the crypto industry and collaborating with organizations and institutions worldwide to promote industry-wide environmental change and increase awareness for whales and dolphins’ protection globally.
Partnering up with WDC was an easy decision after learning about their mission and all the great things they do. At Amber Group, we strive to maintain supportive and impactable environmental governance standards while concurrently continuing to expand upon our digital asset services products with longevity and sustainability in mind.
said Michael Wu, CEO of Amber Group and WhaleFin Product Lead.
Our company’s success is inextricably linked to the sustainability of the world around us, and we want to utilize our WhaleFin platform to help truly make a difference for whales and dolphins that play a vital role in the marine ecosystem that keep our oceans safe.
WhaleFin’s recent collaboration with WDC is one of Amber Group’s key milestones in helping create a more sustainable planet.
In October 2021, Amber Group solidified a strategic partnership with climate tech company Moss Earth to help combat climate change. To help reduce the environmental impact of crypto transactions, Amber Group purchased $2 million worth of Moss Carbon Credit Price (MCO2) tokens, approximately enough to offset the cost of over 280,000 bitcoin transactions.
While the partnership between WhaleFin and WDC makes overcoming the world’s overarching and ongoing battle to ensure optimal funding for research, maintenance of effective habitat protection, and marine wildlife conservation programs dedicated to the cause one step closer, there is still much work to be done.
“We need to protect and restore the ocean as if our lives depend on it, because they do,” said Chris Butler-Stroud, Chief Executive at Whale and Dolphin Conservation. “With the support from companies like Amber Group joining our Climate Giant Project, we can scale up our conservation work to support ocean-based solutions to the climate crisis and in doing so, protect every whale for their sake and ours.”
Initiated by WDC, the Climate Giant Project aims to support whale populations globally, restore the health of marine ecosystems, and make a positive impact on our oceans’ carbon capture. The project consists of a series of activities, key among them being adopting whales and helping to protect their habitats. In addition, WhaleFin and WDC are working together to use blockchain technology as a force for good. To learn more about how WDC is helping protect whales and dolphins and how you can get involved, please visit https://uk.whales.org.
WhaleFin is the flagship digital asset platform powered by the fintech unicorn Amber Group. Founded in 2017, Amber Group now operates globally with offices in Asia, Europe, and the Americas. The firm provides a full range of digital asset services spanning investing, financing, and trading. Amber Group is backed by prominent investors including Paradigm, Dragonfly, Pantera, Polychain, Sequoia, and Tiger Global. For more information, please visit www.whalefin.com.
About Whale and Dolphin Conservation
Whale and Dolphin Conservation (WDC) is the leading charity dedicated to the protection of whales and dolphins. WDC has thirty years’ experience funding vital conservation, education, and research projects around the globe. WDC has around 80 staff worldwide working in 6 locations. Whale and Dolphin Conservation is a Registered Charity in England and Wales with the number 1014705 and Scotland with the number SC040231. For more information, please visit https://uk.whales.org.
According to a new report, increased investment in cryptocurrencies and crypto markets has resulted in a huge increase in crypto frauds and thefts, with a global loss of over $10 billion last year.
Crystal Blockchain, a corporation that specializes in investigative analytics for blockchain and cryptocurrencies, launched the “Crypto Hacks & Scams Report 2021” and it indicated an increase of more than 80% in crypto frauds and thefts.
The Central Bank of Nigeria (CBN) has outlawed other banks and financial institutions from transacting in cryptocurrency.
The crypto currency markets had a tumultuous 2021, according to the latest report, starting with a strong gain that drove some prices to all-time highs in the spring before collapsing in May and attempting a recovery over the summer. Bitcoin reached a new all-time high in November before reversing course in December, contradicting expectations that it would continue to rise.
Despite the CBN prohibition, Nigeria was ranked as the second most interested countries in bitcoin, behind El Salvador, despite the country’s difficulty in obtaining the trillion-dollar cryptocurrency. South Africa and Kenya have also been listed as two of Africa’s leading crypto currency markets.
According to the new research, as of December 17, 2021, there were 115 security attacks, 40 DeFi protocol attacks, and 26 fraudulent schemes, resulting in the theft of about $10 billion in crypto assets.
According to the Crystal database, about a third of all stolen funds (in Bitcoin or BTC) were distributed through fraudulent exchanges, which are described as having been involved in exit schemes, criminal behavior, or having had cash seized by the government. Exit scams entail a cryptocurrency making money off of early investors by “drawing out” all of their money from the market.
Cryptocurrencies, such as Bitcoin and Ethereum, have gained increasing popularity among investors as a result of the mounting uncertainty caused by the COVID-19 pandemic.
According to a report released in April 2021 by Markets and Markets Research, a market research firm, the cryptocurrency market size is predicted to expand from last year’s $1.6 billion to $2.2 billion by 2026, at a compounded annual growth rate (CAGR) of 7.1 percent. Many countries and banks have begun to buy cryptos, according to the report. The report went on to say that banks in the US were developing their own blockchain-based systems, which included digital currencies, to enable B2B crypto-currency transfers between their customers.
While it was highlighted that crypto assets had resulted in a massive loss of value, the International Monetary Fund (IMF) assessed that crypto constituted a threat to global financial stability in its most recent research report.
In 2021, the ecosystem’s market worth skyrocketed, expanding far beyond Bitcoin. According to the IMF report, operational, cyber, and governance risks, integrity and Anti-Money Laundering and Counter-Financial Terrorism (AML/CFT) hazards, data availability/reliability issues, and cross-border obstacles are all part of the financial stability challenges posed by crypto.
The financial system will be more exposed as a result of a surge in crypto scams and frauds, according to the report.
Chainalysis also emphasized that crypto crimes increased by 81 percent last year. The cryptocurrency exchange platform also lost over $7.7 billion in crypto money worldwide. The advent of “rug pulls,” as outlined in the research, was one of the primary factors that contributed to the growth in crypto scams. Rug pull is a new sort of scam in which “developers of a cryptocurrency project, generally a new token, abruptly depart it, taking customers’ funds with them.”
The research highlighted that rug pulls increased in quantity in 2021, despite a large drop in crypto scams between 2019 and 2020, that is to say, customers lost over $2 billion in cryptocurrency in all scams, accounting for approximately 90% of all value taken in rug pulls. According to the Chainalysis analysis, the number of financial scams active at any given time has never been higher.
The Chief Economist, Care Ratings, a Credit Rating Agency, Madan Sabnavis, said, “Several gullible people are investing in this fictitious currency and will be losing money as all trading is a zero-sum game.
“Crypto is fuzzy as there is no underlying that backs the price. For gold there is a metal, for equity there is share but for crypto, there is no such thing.”
The quantity of money stolen through crypto assets has been steadily increasing. According to the Chainalysis research, decentralized finance (DeFi) attacks became the most popular means to steal crypto in the period 2020-2021, with the total value of stolen virtual assets in crypto doubling. Rug pulls, a relatively new scam type, helped to fuel the growth of DeFi hackers. Crypto scams and security breaches, in addition to DeFi breaches, are prevalent.
As a result, crypto scams or frauds account for more than 65 percent of all stolen funds. Regulators face severe data gaps due to the anonymity of crypto assets and the lack of worldwide norms.
“The problem is that all such transactions are opaque,” Sabnavis continued, “and one cannot be certain whether the money is being diverted to narcotics or other unlawful activity.” A lot of money is being siphoned to the crypto markets these days, which is bad for the country.”
Following El Salvador’s introduction of bitcoin as legal tender, hundreds of Salvadorans say that money has vanished from their digital wallets.
The government offered each resident $30 in bitcoin via their Chivo wallet, a digital account created up by the government, in September. The currency might be used to pay for groceries or taxes.
Hundreds of citizens, on the other hand, say that their payments were not accepted by stores and that monies had vanished from their accounts according to a Twitter user tweeting under the pseudonym El Comisonado. El Comisionado has collected over 50 examples of Bitcoin inexplicably going missing from Salvadoran Chivo wallets.
“The Government has not responded, nor does it acknowledge the errors,” He said
“It’s one of the things people are demanding, that they respond to their complaints. Many have waited several months for a response to get the money back,” He added.
Zaira Navas, a member of the El Salvador National Civil Police and Rogzy, a Bitcoin commentator, have experienced similar issues.
“I don’t think Chivo is secure and no one can verify it since the code is not open source,” Rogzy said. “Today very few people use Chivo, because many do not know how it works,” El Comisionado reportedly added.
Of course, this isn’t the first time President Bukele has run across a Bitcoin roadblock in his effort to embrace cryptocurrency.
El Salvador’s Bitcoin journey
President Bukele first claimed that El Salvador would embrace Bitcoin as legal cash in May, speaking to a raucous Bitcoin maximalist crowd at the 2021 Bitcoin Conference in Miami.
His policy has been a source of contention since then. Bukele’s draconian Bitcoin intentions have prompted citizens to take to the streets time and time again. Bukele’s Bitcoin policy has been attacked by some of the world’s most powerful financial institutions, including the World Bank and the International Monetary Fund.
Bukele’s authoritarian streak has been well documented, and while it may have existed before El Salvador’s Bitcoin Law, it has been present ever since the president became a Bitcoin maximalist.
Mario Gomez, an outspoken critic, was jailed without a warrant earlier this year for criticizing the government’s stance. Shortly after Gomez’s arrest, two Salvadoran business people spoke up (under the condition of anonymity).
“The cops aren’t required to take anyone to court.” “They merely kidnap one of the vocal dissidents for a couple of hours or days to intimidate him,” one stated.
“It breaks my heart to watch Bitcoin maximalists all around the world praising this,” one said. “If they actually sat down and studied the rules and regulations, it is utterly antithetical to everything they preach.”
Fraudsters will continue to look for a place to thrive as long as new technology is introduced into the world. Unfortunately, because Bitcoin is a borderless digital currency, it provides a lucrative opportunity for cryptocurrency scammers.
In the blockchain realm, there are a number of cryptocurrency frauds. Blackmail, fraudulent exchanges, fake giveaways, social media phishing, copy-and-paste malware, phishing emails, ponzi and pyramid scams, and ransomware are just a few of the most popular.
It is important to understand that the decentralized structure of Bitcoin allows you to maintain complete control over your money. However, it makes establishing a comprehensive regulatory and law enforcement system more difficult. If scammers are successful in convincing you to make mistakes while using Bitcoin, they may be able to steal your BTC, and there is nothing you can do to retrieve it.
It’s critical to understand how con artists operate and how to spot potential red flags. There are numerous Bitcoin scams to be aware of, but some are more prevalent than others. As a result, we’re going to look at eight of the most prevalent Bitcoin scams and how to avoid them.
Common Cryptocurrency Scams (And how to avoid them!)
Blackmail
Scammers frequently use blackmail to threaten individuals with the publication of sensitive information unless they are compensated in some way. This compensation is frequently in the form of cryptocurrency, particularly Bitcoin.
Scammers use sensitive information about you that they either find or fabricate to force you to transfer them bitcoin or other types of money.
The greatest method to avoid being blackmailed out of your bitcoins by scammers is to be cautious when choosing your login credentials, which websites you visit online, and who you share your information with. When two-factor authentication is possible, it’s also a good idea to use it. If you know the information they’re using to blackmail you is untrue, you might be safe.
Fake exchanges
Fake exchanges, as the term implies, are forgeries of actual cryptocurrency exchanges. These frauds are typically marketed as mobile apps, but they can also be found as desktop applications or fraudulent websites. You must be cautious because some phony exchanges appear to be identical to the real ones. They may appear respectable at first glance, but their primary objective is to defraud you of your funds.
These phony exchanges typically entice crypto traders and investors by providing free cryptocurrencies, competitive pricing, minimal exchange costs, and sometimes free gifts.
You should bookmark the true URL and double-check it before logging in to avoid being duped on a fraudulent exchange. Binance Verify may also be used to verify the legitimacy of URLs, Telegram groups, Twitter accounts, and other things.
When it comes to mobile apps, double-check the developer’s information, the number of downloads, the number of reviews, and the number of comments.
Fake giveaways
Fake giveaways are designed to defraud you of your cryptocurrency by promising something in return for a little payment. Scammers will usually ask you to pay money to a bitcoin address first so that you may get additional bitcoins in return (e.g., “send 0.1 BTC to receive 0.5 BTC”). However, if you conduct these bitcoin transactions, you will not get anything and your cash would be lost forever.
Fake giveaway scams come in a variety of forms. Some scams may ask for other cryptocurrencies instead of BTC, such as ETH, BNB, XRP, and others. They might ask for your private keys or other sensitive information in some instances.
Scammers target popular tweets, viral stories, and announcements on Twitter and other social media platforms to create fake freebies (like a protocol upgrade or an upcoming ICO).
The simplest method to prevent being a victim of a bogus giveaway scam is to never enter any giveaway that requires you to contribute something of value first. Genuine freebies will never require money.
Social Media Phishing
Social media phishing, like counterfeit giveaways, is a typical Bitcoin scam that you’ll most likely come across on social media. Scammers will develop an account that seems like it belongs to someone with a lot of influence in the crypto world (this is also known as impersonation). Then they’ll send out phony freebies via Twitter or direct chat messages.
Double-checking that the individual is who they claim they are is the greatest approach to prevent getting defrauded by social media phishing. On various social networking networks, such as Twitter and Facebook, there is frequent evidence indicating this, such as blue checkmarks.
Copy and paste Malware
Scammers use copy-and-paste malware to take your money in a very subtle way. This form of spyware takes over your clipboard data and, if you’re not careful, sends money to fraudsters directly.
Let’s imagine you wish to give your friend Bob a Bitcoin payment. He offers you his bitcoin address, which you may copy and paste into your bitcoin wallet, as is customary. If your device is infected with copy-and-paste malware, however, the scammer’s address will immediately replace Bob’s when you paste it. This implies that your bitcoin payment will be in the scammer’s hands as soon as it is transmitted and verified, and Bob will get nothing.
To prevent being a victim of this sort of fraud, you must exercise extreme caution when it comes to computer security. Be aware of communications or emails that appear to contain contaminated attachments or harmful URLs. Pay close attention to the websites you visit and the applications you install on your computer or mobile device. Installing an antivirus and checking for dangers on a regular basis is also a good idea. It’s also critical to maintain the operating system (OS) on your device up to date.
Phishing Emails
Phishing comes in a variety of forms. One of the most popular is the use of phishing emails to persuade you into downloading an infected file or clicking a link that takes you to a malicious website that seems legitimate. When they impersonate a product or service you use often, these emails are very harmful.
Scammers tend to add a message urging you to take immediate action to protect your account or assets. They may request that you update your account information, change your password, or upload documents. The majority of the time, their purpose is to obtain your login credentials in order to attempt to breach your account.
The first step in avoiding phishing email scams is to double-check that the emails are from a legitimate source. If you’re still unsure, you can call the company directly to verify that the email you got came from them. Second, you may verify the URLs for misspellings, odd characters, or other anomalies by hovering over them (without clicking).
You should avoid clicking the links even if you can’t locate any red flags. If you need to access your account, you should use other methods such as manually inputting the URL or bookmarks.
Ponzi and Pyramid Scams
Ponzi and pyramid schemes are two of the most well-known financial con games ever devised. A Ponzi scheme is an investing method in which new money is used to pay returns to older investors. The money stops flowing when the con artist can no longer attract fresh investors.
Doing your research on the cryptocurrencies you acquire – whether an altcoin or Bitcoin – is the greatest method to avoid either of these schemes. You’ve probably stumbled onto a Ponzi or pyramid scheme if the value of a cryptocurrency or Bitcoin fund is solely dependent on fresh investors or members joining it.
Ransomware
Ransomware is a sort of virus that locks or stops users from accessing valuable data on their mobile or computer devices unless a ransom is paid (usually in BTC). When aimed at hospitals, airports, and government facilities, these attacks can be particularly devastating.
Typically, ransomware would encrypt important files or databases and threaten to remove them if payment is not made by a certain date. However, there is no certainty that the assailants will follow through on their vow.
You can defend yourself against ransomware attacks by doing the following:
Install an antivirus program and maintain your operating system and software up to date.
Ads and questionable links should be avoided.
Email attachments should be avoided. Files that end in.exe,.vbs, or.scr should be treated with caution.
Regularly backup your files so that you can restore them if you become infected.
At NoMoreRansom.org, you’ll find helpful ransomware prevention advice as well as free recovery tools.
There are numerous Bitcoin scams to be aware of. Knowing how these scams work, on the other hand, is a vital first step toward entirely avoiding them. You’ll be able to keep your crypto possessions secure and healthy if you can avoid the most typical Bitcoin frauds.
On current blockchains like Ethereum, smart contract programs can be run across a decentralized network of nodes. Smart contracts are growing increasingly popular and expensive, making them a more enticing target for cybercriminals. In recent years, hackers have targeted a number of smart contracts.
However, attackers are now adopting a more proactive tactic rather than seeking for vulnerable contracts. Instead, they send out contracts that appear weak but contain hidden traps in order to deceive their victims into falling into traps. The word “honeypot” is used to characterize this type of contract. What exactly is a honeypot crypto trap, though?
Honeypots are smart contracts with a design flaw that allows an arbitrary user to drain Ether (Ethereum’s native currency) from the contract if the user pays a specific amount of Ether to the contract ahead of time. When the user attempts to exploit this apparent defect, a second, yet undiscovered, trapdoor appears, preventing the ether draining from succeeding. So, what is the purpose of a honeypot?
The goal is for the user to focus solely on the obvious flaw and disregard any indications that the contract has a secondary flaw. Honeypot assaults work because people are routinely duped, just as they are in other types of fraud. As a result, people’s avarice and assumptions make it difficult to measure risk.
How does the honey pot scam work?
The user’s money will be imprisoned in crypto cyber attacks like honeypots, and only the honeypot inventor (attacker) will be able to recover it. In most cases, a honeypot functions in three stages:
The attacker uses a contract that appears to be susceptible and baits the victim with money.
The victim tries and fails to take advantage of the contract by transferring at least the required amount of money.
The attacker takes the bait and the money that the victim lost during the exploitation attempt.
An attacker does not require any special abilities to set up honeypots with Ethereum smart contracts. In reality, an attacker has the same abilities as a regular Ethereum user. They simply require the funds to set up and bait the smart contract. In general, a honeypot operation consists of a computer, applications, and data that simulate the behavior of a real system that can be enticing to attackers, such as Internet of Things devices, banking systems, or public utilities or transit networks.
Despite the fact that it appears to be part of the network, it is separated and monitored. All attempts to communicate with a honeypot are viewed as hostile because legitimate users have no reason to do so. Honeypots are widely used in the demilitarized zone of a network (DMZ). This method keeps it connected while separating it from the leading production network. While attackers access a honeypot in the DMZ, it can be watched from afar, lowering the risk of a compromised main network.
Honeypots can be put outside the external firewall, facing the internet, to detect efforts to enter the internal network. The honeypot’s exact location is determined by its complexity, the type of traffic it seeks to attract, and its proximity to vital corporate resources. Regardless of where it is placed, it will always be isolated from the production environment.
While diverting attackers’ attention away from real-world assets, logging and watching honeypot activity provides information into the degree and types of threats that a network infrastructure faces. Cybercriminals can take over honeypots and use them against the corporation that set them up. Honeypots have also been used by cybercriminals to gather information about researchers or organizations, act as decoys, and spread misinformation.
Virtual machines are widely used to host honeypots. If the honeypot is infected with malware, for example, it can be quickly restored. A honeynet, for example, is a network of two or more honeypots, whereas a honey farm is a centralized collection of honeypots and analysis tools.
Both open source and commercial solutions can help with honeypot setup and administration. Honeypot systems that are offered individually as well as honeypot systems that are supplied in conjunction with other security software and marketed as deception technology are both available. On GitHub, you may get honeypot software that can help newbies learn how to use honeypots.
Types of Honey Pots:
Honeypots based on the design and implementation of smart contracts are divided into two categories: research and production honeypots. Honeypots for study are used to collect information on attacks and assess hostile behavior in the field.
They examine both your environment and the outside world to gather information about attacker trends, vulnerabilities, and malware strains that adversaries are currently targeting. This data can assist you in making decisions about preventative defenses, patch priority, and future investments.
Production honeypots, on the other hand, are designed to detect active network penetration while also misleading the attacker. Honeypots provide additional monitoring possibilities and fill in common detection gaps associated with detecting network scans and lateral movement; hence, data collection remains a primary priority.
Production honeypots run services that would normally run alongside the rest of your production servers in your environment. Honeypots for study are more involved than honeypots for production, because they store more data types.
Depending on the level of sophistication required by your firm, there are several layers within production and research honeypots:
High-interaction honeypot: Similar to a pure honeypot in that it provides a vast variety of services, but it is less complex and stores less data. Although high-interaction honeypots aren’t meant to be full-scale production systems, they do run (or appear to operate) all of the services often associated with them, including working operating systems.
Using this honeypot form, the deploying organization can observe attacker behaviors and strategies. Honeypots with a high level of engagement need a lot of resources and are difficult to maintain, but the benefits can be worthwhile.
Mid-interaction honeypots: These resemble the application layer’s properties but lack the operating system. They attempt to obstruct or confuse attackers so that organizations have more time to choose how to respond correctly to an attack.
Honeypot with low interaction: This is the most common honeypot utilized in a production setting. Low-interaction honeypots provide a few services and are mostly used as a detection tool for early warnings. Because honeypots are easy to set up and maintain, many security teams deploy a large number of them around their network.
This large-scale, production-like system is run on numerous servers as a pure honeypot. It’s jam-packed with sensors and contains “private” data and user information. Even though it can be complex and difficult to handle, the information they provide is invaluable.
Several honeypot technologies
The following are some of the honeypot technologies in use:
Client honeypots: The vast majority of honeypots are servers that monitor network traffic. Client honeypots continually monitor the honeypot for any suspicious or unusual changes, as well as malicious servers that target clients. To keep the research team safe, these systems are frequently virtualized and have a containment plan in place.
Malware honeypots: These detect malware by observing how it replicates and attacks. Honeypots (like Ghost) are designed to resemble USB storage devices. If a machine is afflicted with malware that spreads through USB, for example, the honeypot will trick the infection into infecting the mimicked device.
Honeynets: Rather than being a single system, a honeynet is a network of numerous honeypots. Honeynets are meant to track an attacker’s actions and motives while keeping all inbound and outgoing communication contained.
Spam honeypots are used to emulate open mail relays and open proxies. Spammers will test the available mail relay by sending themselves an email. They will send out a massive volume of spam if they are successful. This type of honeypot is capable of detecting and recognizing the test and successfully blocking the ensuing flood of spam.
Because structured query language injections can often go unnoticed by firewalls, some businesses will utilize a database firewall to create fake databases and provide honeypot support.
How to spot a crypto honeypot?
One way to spot a honeypot crypto fraud is to look at the trade history. In principle, a cryptocurrency should allow you to buy and sell it whenever you want. In a honeypot scam, there will be a lot of buyers for the coin, but it will be difficult to sell. This means it’s not a genuine coin, and you should stay away from it.
Furthermore, using a data science method based on contract transaction behavior, contracts can be classified as honeypots or non-honeypots.
Where can honeypots arise in Ethereum smart contracts?
Honeypots could show up in three areas of Ethereum smart contract development. The three tiers are as follows:
Despite the fact that the Etheruem virtual machine (EVM) adheres to a well-defined set of standards and norms, smart contract writers can present their code in ways that are misleading or ambiguous at first glance. For the unwary hacker, these approaches could be costly.
The solidity compiler is the second area in which smart contract developers can profit. Some compiler-level defects are well-documented, but others aren’t. Unless the contract has been evaluated in real-world scenarios, these honeypots can be difficult to detect.
The third type of honeypot is the Etherscan blockchain explorer, which is predicated on the fact that the data offered by blockchain explorers is incomplete. While many people trust Etherscan’s data, it doesn’t always reflect the complete picture. Wily smart contract developers, on the other hand, can take use of some of the explorer’s idiosyncrasies.
How to protect yourself against HoneyPot scammers?
This section will show you how to prevent being a victim of honeypot scams. There are tools that can help you see red flags and steer clear of these currencies. If the currency you’re considering buying is on the Ethereum network, for example, use Etherscan, and if it’s on the Binance Smart Chain, use BscScan.
Determine the Token ID for your coin and enter it on the proper page. On the next screen, click “Token Tracker.” There will be a tab named “Holders.” All of the wallets that contain tokens, as well as the liquidity pools, are visible there. Regrettably, there are many different combinations of objects to be aware of. To protect yourself from honeypot crypto frauds, you should be aware of the following warning flags:
Various ways to protect against honeypot crypto scams
No dead coins: A project is relatively secure from rug pulls (but not a honeypot) if more than half of the coins are in a dead wallet (usually identified as 0x000000000000000000000000000000000000dead). Be cautious if less than half of the coins are dead or none are dead.
No audit: If a reputable company audits a honeypot, the possibilities of it being a honeypot are nearly always eliminated.
Avoid cryptocurrencies using only one or a few wallets if you have a lot of them.
Examine their website: This should be very basic; but, if the website appears rushed or has poor construction, this is a red flag! To find out when a domain name was registered for a website, go to whois.domaintools.com and enter in the domain name. If the domain was registered within 24 hours or fewer of the project’s commencement, you may be certain it’s a scam.
Examine their social media accounts: Stolen and low-quality images, grammatical errors, unappealing “spammy statements” (such as “put your ETH address down!”), no connections to relevant project information, and so on are common features of scam projects.
Another great tool for finding honeypot crypto is Token Sniffer. Enter the Token ID in the top right corner to find the “Automated Contract Audit” findings. If there are any alerts, stay away from the project. The “No prior similar token contracts” indicator can be a false positive because many applications now use contract templates.
Go to PooCoin, enter the Token ID again, and keep an eye on the charts if your coin is listed on the Binance Smart Chain. If there aren’t any wallets selling your preferred coin, or if just one or two wallets are selling it, stay away. It’s most likely a honeypot. If several wallets are selling the chosen coin, it isn’t a honeypot. Finally, before parting with your hard-earned cash to buy cryptocurrencies, you should do your homework.
Difference between a honeypot and a honey net.
A honeynet is a collection of two or more honeypots connected by a network. A honeypot network that is connected can be advantageous. It enables companies to monitor how an intruder interacts with a single resource or network point, as well as how an invader moves between network points and interacts with multiple sites at once.
The purpose of the honey net is to persuade hackers that they have successfully entered the network, thus increasing the realism of the setup by adding additional phony network locations. Deception technology refers to honeypots and honeynets with more modern implementations, such as next-generation firewalls, intrusion detection systems (IDSes), and secure web gateways. Intrusion detection systems are devices or software programs that monitor a network for hostile activity or policy violations. Deception technology with automated capabilities allows a honeypot to reply to potential attackers in real-time.
Honeypots can help businesses stay on top of the constantly shifting risk landscape as new cyber threats arise. Honeypots give critical information to assure an organization’s readiness and are possibly the finest way to catch an attacker in the act, despite the fact that no attack can be predicted or prevented. They’re also an excellent resource for cybersecurity specialists.
Pros and Cons of honeypots
Honeypots gather data from real attacks and other illegal conduct, providing analysts with a plethora of information. Furthermore, the number of false positives is reduced. Ordinary cybersecurity detection systems, for example, might produce a large number of false positives, whereas a honeypot reduces the amount of false positives because real users have no need to contact the honeypot.
Honeypots are also worthwhile investments because they only engage with malicious acts and do not necessitate high-performance resources to process massive amounts of network data in search of assaults. Finally, honeypots can detect harmful activity even if an attacker is utilizing encryption.
Honeypots provide a lot of benefits, but they also have a lot of disadvantages and risks. Honeypots, for example, only collect information in the event of an assault. There have been no efforts to gain access to the honeypot, so there is no data to investigate the attack.
Furthermore, the honeypot network only collects harmful traffic when an attack is initiated against it; an attacker who senses a network is a honeypot will avoid it.
Honeypots are easily distinguishable from lawful production systems, implying that expert hackers may use system fingerprinting techniques to quickly distinguish a production system from a honeypot system.
Despite their isolation from the real network, honeypots inevitably connect in some fashion to provide administrators access to the data they contain. A high-interaction honeypot is considered riskier than a low-interaction honeypot since it aims to entice hackers into gaining root access.
Honeypots can help researchers discover hazards in network systems, but they shouldn’t be utilized instead of traditional IDS. If a honeypot isn’t set up properly, for example, it could be used to get access to real-world systems or as a launchpad for attacks on other systems.
Money is used by almost everyone in almost every business and by almost every individual. Money is used to buy items and services for everyday use, but it is also employed for business operations by international companies. Despite the fact that money has such a strong impact on everyone’s life, it has always been under the jurisdiction of central entities like banks and governments. On the other hand, the emergence of cryptocurrencies and tokenomics drastically changed the world’s view of financial systems.
In this case, tokenomics emerged as a viable option for implementing monetary policy on blockchain networks. The word is unmistakably new, and it has recently made significant progress in challenging traditional economic standards centered on cryptocurrency.
What is Tokenomics?
The study of the economic structures and rules that regulate the exchange, production, and distribution of tokenized products and services is known as tokenomics (also known as token economics or crypto-economics). Blockchain technology has become the driving force of innovation on the internet.
As a result of these advancements, economic transactions based on tokens that do not require centralized intermediaries such as banks or large corporations have become more portable. These commercial systems differ from traditional industrial economies in that they are decentralized, scale with little capital, and offer high transaction security.
Economists use official money supply data to measure currency issues in a typical economy. M1, M2, and, depending on the country, M3 or M4 are the typical names for the numbers they report. The four M categories are not discussed in depth in this tokenomics analysis; only know that M1 is a measurement of the most liquid funds, M2 is less liquid, and so on. These figures aid in the transparency and monitoring of several aspects of a currency’s supply.
What is a Token?
Tokenomics defines crypto tokens (or simply tokens) as units of value established by blockchain-based projects on top of an existing blockchain. Crypto tokens are similar to cryptocurrencies in that they can be traded and have value, but they are a different form of digital asset. Tokens are value units issued by an organization in general, but they are built specifically on top of an existing blockchain in the context of tokenomics. Tokens have been rebranded with the arrival of blockchain, but tokens have always existed. Concert tickets, parking tokens, and driver’s licenses are all examples of tokens that show value yet are limited in scope.
How do Tokenomics play out?
It’s critical to learn more about tokens in order to have a better understanding of tokenomics and how it works. Tokens are simply units that serve a certain purpose while retaining value based on a variety of factors. Tokens are valuable assets that can be used for reasons other than monetary exchange.
The tokenomics paradigm is primarily reliant on cryptocurrencies as tokens. Tokens could be used in a network for a variety of uses other than trading assets. The concept of tokens with cryptocurrency received a huge boost with the introduction of Ethereum.
Factors comprising Tokenomics
Allocation and Distribution
The majority of crypto coins are either premined or released through a fair launch. A fair launch, according to Finextra, is when the entire community mines, earns, owns, and governs a cryptocurrency. Before the coin is public, there is no early access or secret allocations. This is why it’s called a fair launch: everyone has the same opportunity to participate.
Premining, on the other hand, occurs when a large number of crypto tokens are created and distributed among insiders — usually project developers, other team members, and early investors — before the coin is released to the general public.
Premined tokens are common in today’s crypto projects, thus this isn’t always a sign that only insiders would profit. To avoid a “pump and dump” scenario, investors interested in a new, premined token can check the token’s holdings across various exchanges to see if there is a wider distribution, reducing the risk that a single investor or a small group will flood the market with the token, causing the price to plummet.
In general, the more broadly spread a token or project is, the more legitimate it is, and the more probable it is that the project’s original investors and developers will seek greater participation.
Supply
Supply is crucial in any asset since it determines the price. There are three categories of supply in tokenomics: circulating supply, total supply, and maximum supply.
The quantity of tokens that have been created and are owned by investors is known as the circulating supply of a token. The total supply refers to the total amount of tokens in circulation, which is frequently greater than the circulating supply. Finally, the maximum supply refers to the total number of tokens that can be generated or mined at any given time.
The law of supply and demand dictates that the more tokens distributed by a developer team, the lower the price will be.
Market Capitalization
The market capitalization of a token is the total amount invested in the crypto project so far, similar to the market value of a stock. The fully diluted market cap, which is the possible market cap if the token’s maximum supply were already in circulation, is another essential indicator. This provides investors with a rough estimate of the token’s entire value.
The greater the market capitalization of a token and the lesser its circulating quantity, the more valuable it may become in the future.
Model
Inflationary and deflationary token models are the two most common types. The token model, like supply, shows an investor how much supply there might be now and in the future. An inflationary token is similar to fiat currency like the dollar or euro in that it has no maximum supply and can be issued indefinitely. Inflation usually happens when governments raise the money supply.
A deflationary token model, on the other hand, is one in which the token supply is limited, such as Bitcoin, which has a limit of 21 million coins. In order to reward the validators and delegators in the network, most proof-of-stake coins, such as Ethereum, are inflationary.
Why is Tokenomics important when investing in Crypto?
When it comes to crypto tokenomics, there are several variables to consider. The ability to comprehend how the digital currency will be used is perhaps the most crucial. Is there a clear link between the asset and the platform or service that’s being built? If there is, there is a good likelihood that a developing service will necessitate purchases and usage, resulting in a price increase. What may the token be used for if there isn’t one?
Tokenomics in determining Crypto currency Value.
Tokenomics can help you figure out how much an asset will be worth in the future. Many newcomers to cryptocurrency may believe things like, “If this coin becomes as valuable as Bitcoin, then one day…”, but in reality, this may never be achievable. Consider the two cryptocurrencies Bitcoin Cash and Tron, which were stated earlier. Because Bitcoin Cash and Bitcoin have the same total supply, the idea that one could become as valuable as the other in the future seems plausible. However, with over 100 billion Tron in circulation, for one coin to be worth thousands of dollars, Tron would have to become the most valuable company in the world’s history – how feasible is that?
While the answers to these questions may appear difficult, they will provide an additional perspective on crypto assets and aid in determining whether one asset is more likely to have a bright future than another.
