The Jadeite (one highly valued form of Jade) is being bought and locked into secure vaults, where it will underpin the value of tokens and NFT’s on the Jade City platform.

Jade Vault is the UK-based Company who are building and providing the inventory of processed (and ethically sourced) Jadeite.

The platform is also offering the opportunity to purchase Jade products as NFTs, where you have the option to receive the physical item, providing an authentication method and provenance solution to an industry that is saturated with products pretending to be real.

Jade City is presently in an early stage of development and aims to go live in Q2 2024.

As Jade City grows it will evolve into an entire blockchain-powered Jadeite Economy.

Jade City will be the first platform where Jadeite can not only be safely traded and stored, but users will also be able to earn, play, and shop using tokenised physical Jadeite while also taking part in the governance of the virtual City.

In order to gain access to Jade City and all the future benefits, citizenship must also be obtained through ownership of a Jadeite Tribe NFT.

The mint date is yet to be announced but you find out more on their website jadecity.io and social media.

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Instagram
LinkedIn

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Technological risk

Technical and operational failures are one of the biggest threats to Defi at the moment. This is due to the current limitations of the blockchain and not being infallible.  As Defi has grown so have the number of cyber attacks, bugs and network congestions which can cause an investor to lose their funds.

Hackers stole $120 million from Defi protocols in 2020 through 15 separate attacks. Only 50% of the stolen funds were later recovered.

Asset risk

The blockchain cannot eliminate the risks which are inherent to investing.  There is extreme volatility in the Crypto markets opening the investor up to holding assets which can decline in value rapidly and cause liquidity risks.

In extreme circumstance this can lead to panic selling and something known as a “bank run” which can send prices plummeting, sometimes to zero.   The market is heavily weighted with retail investors, which increases the volatility.

Compliance/legal risk

Defi is still in its early stages and many of the services that are offered are by unincorporated bodies that appear to operate outside of regulatory obligations. As most of the services that Defi essentially offer are digitized and automated software programs, there is no longer the need for the intermediary, such as the bank, which in turn can lead to several risks and result in an uncertain regulatory environment.

No direct guidance from regulatory bodies can lead to a host of problems whether it be anti-money laundering or consumer protection. Regulators in the U.S and elsewhere are increasingly talking about ways to rein in these risks by pushing for greater regulatory clarity.

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Staking is a phrase you will hear frequently in the Crypto industry and it can be a complex idea or simple one depending on how deep you want to dig. Crypto Staking is similar to depositing money in a bank and in return you earn a percentage-rate reward over time for locking up your assets. Before delving into the practicalities of staking, we first need to understand the mechanism that underpins the staking process; Proof of Stake.

What is Proof of Stake?

Proof of stake is new consensus mechanism that emerged with the idea of increasing blockchain speed and efficiency and allowing for blocks to be mined without relying on specialised mining hardware, such as ASIC computers but instead network participants. Participants can pledge their coins to the cryptocurrency protocol for a chance to add the new block onto the blockchain in exchange for staking rewards.

Participants that stake larger amounts have a higher chance of being chosen as the next block validator. This model is far more energy efficient than proof of work, as it doesn’t have to rely on miners to validate the blocks.

The Practicalities of Staking

On a very practical level, Staking involves transferring funds from a cryptocurrency wallet to a blockchain validator node in order to support the security and operations of a blockchain network. The reason your assets receive rewards whilst being staked is that the blockchain validator puts your assets to work using a proof of stake (PoS) model.

This process is used to ensure that all transactions are verified and added to the blockchain. It is important to note that staking is only available with those cryptocurrencies that use the PoS model.

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Decentralised Finance, or more commonly known as DeFi, is an umbrella term for peer-to-peer financial services hosted on the blockchain that are geared towards disrupting the conventional financial system.

DeFi allows users to earn interest, borrow, lend, buy insurance, trade derivatives and trade assets without relying on any third party like banks or brokerages to facilitate the transaction. It also does away with the lengthy KYC process required to transact with any of these organisations.

More importantly, users have full control over their assets, differing dramatically from the centralised financial organisations we all currently utilise.

The Benefits

One of the main benefits of DeFi is the easy access to financial products, particularly for those individuals who do not have access to the current financial system. According to the world Bank Data from 2017, approximately 1.7 billion adults globally are estimated to be “unbanked”.

Summary

In summary the aim of DeFi is to create a financial ecosystem that is open source, permissionless, transparent and operates without any central authority. Once fully adopted, DeFi has the potential to totally disrupt the current financial system as we know it.   

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Passive income is income generated from investments where the investor does not have to actively work in order to make the investment grow. In the Crypto space there are a number of areas where passive income can be earned of which the most popular are currently Mining, Staking, Lending, Yield Farming and Liquidity Providing.

Mining

What is Mining

Mining cryptocurrency is the original form of earning passive income in the cryptocurrency space using the original consensus algorithm, Proof-of-Work. Miners will compete against each other to solve complex mathematical problems and verify transactions on the blockchain. The fastest miner to solve the puzzle will win the right to produce the next block on the blockchain and in turn be rewarded with crypto coins or tokens.

Bitcoin: The Early Days

In the early days of Bitcoin this was relatively easy and an everyday computer could be used. As the competition increased, miners were forced to use more energy and more power to retain the same success. Today cryptocurrency mining has become mainly a corporate business where there are large mining farms using hundreds of ASICS (Application-Specific Integrated Circuits) and large amounts of electricity.       

Staking

What is Staking?

You can stake your crypto by transferring specific coins from a cryptocurrency wallet to a blockchain validator node in order for them to support the security and operations of a blockchain network. The reason your assets receive rewards whilst being staked is that the blockchain validator puts your assets to work using a proof of stake (PoS) model. This process is used to ensure that all transactions are verified and added to the blockchain.

The Pos Model

It is important to note that staking is only available with those cryptocurrencies that use the PoS model. PoS is a more energy efficient alternative to the proof of work model used by Bitcoin and Ethereum1.0 currently use.

There are cases where you have to add or delegate funds to a staking pool but on the whole exchanges will do this for you. Some examples of coins that can be staked are Polygon (MATIC), Terra (LUNA), Polkadot (DOT) and Binance (BNB)

Lending

What is Lending

Lending has become very popular way of earning passive income in the crypto industry as it returns a far higher interest rate than a bank would pay for a cash deposit. The basic values of lending crypto are the same as traditional cash loans in that you can lend your assets for a chance to earn interest and in the case of crypto you are lending your digital assets.  There are four main ways to lend in the crypto arena which are as follows:

• Peer to Peer Lending (P2P) allows you to lock up your assets for a period of time in return for collecting interest payments at a later date.  The system allows the users to set the terms on the amount they want to loan and whether the interest rate should be fixed or set by you based on the current market rate.
• Centralised Lending  (CeFi) allows you to deposit your assets with a third party provider where the interests and lock up periods are fixed and in return the user earns interest (typically paid in the deposited assets). Popular CeFi lenders include BlockFi and Nexo.

• Decentralised Lending are autonomous lending protocols where there is no third party involved.  It allows users to execute lending services directly on the blockchain via smart contracts-powered lending pools to earn interest. Popular Defi Lenders include Compound (COMP) and Aave (AAVE).

• Margin Lending is where the user can lend their crypto asset to traders to trade and get repaid the loans with interest.

Liquidity Provider & Yield Farming

What are Liquidity Pools

Another popular way to earn passive income in the Defi markets is by depositing your crypto assets into decentralised liquidity pools. Liquidity pools provide the liquidity required by decentralised exchanges that allow trading to take place. By doing this you become a “Liquidity Provider”. In return for providing liquidity to these trading pools, the user will be awarded both trading fees and LP tokens (Liquidity Provider tokens). 

LP Tokens

As a Liquidity provider (LP) you will hold LP tokens which gives the LP the option to stake their LP tokens in something known as a “yield farm” which will generate additional yields in the form of cryptocurrency. This essentially means that while your pooled assets are earning a share of all the trading fees your LP tokens are also earning rewards.

Popular Decentralised exchanges with liquidity pools include Uniswap (UNI) and Pancakeswap (CAKE)

The post Ways to Earn Passive Income from DeFi appeared first on InCrypto Hub Dashboard.

Two of the common DeFi earning products you will see are staking and yield farming, sometimes simply referred to as farming. Both ideas involve lending out your coins, for which you are rewarded, but work in very different ways.

Staking requires delegating an individual coin to a blockchain or validator node, for example. It uses a smart contract to manage your lending and you will earn rewards for as long as you leave it there. Some staking protocols allow you to stake and unstake whenever you choose however others will lock your tokens for a fixed period of time. It is well worth noting these conditions incase you want quick access to your coins in future.

Yield Farming refers to lending your coins into liquidity pools to enable trade on a decentralised exchange. This requires the creation of LP tokens which are a combination of two of your coins which you want to lend. For example if you wanted to supply liquidity to an Ethereum – USDT pool, you would combine your ETH and USDT into an ETH-USDT LP token. The lenders are then paid rewards which are a cut of the trading fees that other users pay to the protocol.

Earning Potential

Staking

Staking rewards are fixed and either given as an APY or an APR. This will be a percentage of the amount you lend, over a specific time period. APY is different to APR because it factors in compounding your rewards over the lending period. Rates are typically between 5-10%.

Yield Farming

Yield farming requires much closer management of your coins but can yield much higher rewards. In more stable farms you could expect an APY around 100% but this can increase drastically into the thousands.

Reward Mechanism

Staking

Staking rewards are the network incentive given to validators that fundamentally help the blockchain to function.

Yield Farming

The rewards for yield farming come from trading fees in a decentralised network. The amount is determined by the liquidity pool and can fluctuate depending on performance.

Security

Staking

Staking your coins is governed by a set of rules, defined by the blockchain’s consensus. It is generally a safe practice for your investment, if you trust the network and they have a good reputation. If anyone tries to manipulate the system they risk losing the coins.

Yield Farming

Yield Farming security relies on the design of the DeFi protocol.  There is a much greater chance for vulnerabilities to be exploited, which could result in losing your investment.

Impermanent Loss

Staking

No risk of impermanent loss, the value of your coins stay as they should be.

Yield Farming

Big risk of impermanent loss due to the nature of LP tokens being minted at a 1:1 ratio. When you come to withdraw your coins, unless the price ratio of the two coins has stayed the same, you will receive a different amount to your investment.

Time

Staking

Depending on the network, you may be required to stake for a fixed period of time. There may also be an ‘un-staking’ period which can range from a few days to a several weeks, before you receive the coins back to your wallet.

Yield Farming

No lock up periods – you are free to farm for as long as you like!

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