Software engineer, Web3 lover, crypto addict.

padaw3n

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How Aave, one of the largest lending platforms, launched a protocol called "Lens Protocol", a permissionless, composable and decentralized social graph that facilitates the creation of a Web3 social platform.


Social network goes 3.0 

Last May 18, Aave, one of the largest lending platforms, launched a protocol called "Lens Protocol", a permissionless, composable and decentralized social graph that facilitates the creation of a Web3 social platform.

It uses existing concepts of social networks and merges them with new Web3 concepts around ownership by implementing NFTs as a core element of the protocol.

The protocol is open source and allows developers to build their own social platforms on top of it.

## What is a social graph?

A social graph is a diagram that illustrates interconnections among people, groups and organizations in a social network. Today all traditional social media like Facebook, Twitter, Instagram are centralized since all of your interactions are hosted in the company’s servers.

So this type of social graph is centralized and private, meaning all users depend on the platform's algorithms and policies and content creators do not truly own anything published on these platforms. There is no portability. Your profile, friends, and content are locked to a specific network and owned by the network operator. If you wanted to leave Facebook today for a competing social network you would need to start building up your social graph from scratch. A herculean task that many are not willing to take upon them.

Lens Protocol corrects this by building a decentralized, non-custodial social graph built on top of the Polygon blockchain that any application can plug into. Rather than being owned by large tech corporations, it is designed to allow creators to own the connections with peers.

![Screen Shot 2022-07-19 at 2.47.31 pm.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2022_07_19_at_2_47_31_pm_14b4e27e47.png)

## How do users own a social graph?

NFTs form a crucial element within the protocol, allowing the social graph to be composable and permissionless. Every post, every follow and every “like” is tokenized as an NFT and it is ownership over this NFT that gives you control of your content. Nearly all content within the protocol thereby also becomes “ownable”.

Thanks to an open social graph owned by the user any application can connect and can build a user interface. Each application using Lens benefits the entire ecosystem in that it contributes towards the further development of the social graph. Creators no longer need to worry about losing their content, audience, and livelihood based on the whims of an individual platform's algorithms and policies.

Concretely, what benefits do end-users get? For example, users can switch from one application to another while keeping their content as well as their subscribers. Lastly and perhaps most importantly, Lens Protocol is fully open source and anyone can build their own apps on top of the protocol.

## What features does Lens Protocol have?
Lens has the functions of a traditional social media like having a profile, commenting, resharing a post, and more. Users will own everything, as these key functions are powered by NFTs.

![Untitled (1).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_1_82051e14d8.png)

## CREATE PROFILE

Profile NFTs are the key element in the protocol. It's ownership over this NFT that gives you control over your content. These dynamic NFTs contain the history of all posts, mirrors, comments, and other content you create. An address can contain multiple profile NFTs, and a profile NFT can even be owned and operated by a DAO through a multisig wallet!

![Untitled (2).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_2_a69cf72c7b.png)

## POST / COMMENT / MIRROR

Publications are the lifeblood of the Lens Protocol. Profile owners can publish pictures, music, videos or other content stored on either a decentralized protocol such as [IPFS](https://ipfs.io/) or [Arweave](https://www.arweave.org/), or a centralized storage provider like AWS S3.Publications are posted directly to a user's ProfileNFTs.There are three publication types: Post, Comment and Mirror.

**Post** is the standard publication type, akin to a regular post on traditional social media platforms. A post is composed of a collection module and a reference module. The collection module contains the logic that allows other users to mint the publication in an NFT. The reference module contains the logic that determines who can comment and mirror the publication.

![Untitled (3).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_3_a2f4520fee.png)
![Untitled (4).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_4_413a15cb07.png)

**Comment** is a publication type that points back to another publication, whether it be a post, comment or mirror, akin to a regular comment on traditional social media.  Like publications, comments live in the user's Profile NFT and therefore are wholly owned by the user. A comment can have a reference module conditions. As comments are linked to a publication they are subject to the original publication's Reference Module conditions. For example a publication may have a referral module that limits comments to only those accounts that follow the author of the original publication.

![Untitled (5).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_5_15bc4263cb.png)

**Mirror** is a publication type that points to another publication. It’s like retweeting on twitter. They also are subject to the terms of the original publication's reference module. Like comments a publication can for example have a reference module that limits the mirrors to the accounts that follow the original poster.

## FOLLOW / COLLECT

Lens offers two types of Profile Interactions.
![Untitled (6).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_6_0b7e8837d5.png)

**Follow NFT** – When you follow someone, you’re granted a follow NFT. Each of these NFTs has a unique token ID that comes with innate rarity & utility. Example : The first 1000 followers have one vote each or a profile could attach a follow module that requires a user to pay 5 MATIC to receive a Follow NFT.

These are NFTs with integrated voting and delegation capability. They have built-in governance capabilities, such as vote delegation, to allow for the creation of Social DAOs using Lens Protocol. These unique traits can be used to limit voting to your most loyal fans in governance. Of course, like other NFTs they can also be sold and transferred on an open-market.
![Untitled (7).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_7_b1674a4f43.png)

**Collect **- Like what you see? You can collect publications from people you follow. A new form of self-expression, curate your collection, and show off what you love. This collect feature enables anyone to collect your content based on the price, size, and time limit you set ! So collects allow creators to monetize their content. Creators can also make their collect modules to add even more functionality!

## Lens developer garden:

You can Explore the developer garden where you can learn more about the key features of the protocol and how they work: [text](https://l.messenger.com/l.php?u=http%3A%2F%2Flens.dev%2Fgarden&h=AT0h5R2fDWPT9yuu9pO5KF7IpviEnb3J0mZLCAgoGZ2JCiffiDnN6KS9r2Bkg5S7XocDlzp5nCadjj2xZqVrPnRvv6ylwbDrwEhaVBDNW4Z_tASP_ussT5wF_lTMZvQSOag)

## Garden is growing

There are already some application running on lens protocol like:

[LensFrens](https://www.lensfrens.xyz/): Discover and follow other lens profiles based on similar Web3 footprint.
[Lenster](https://lenster.xyz/): Lenster is a decentralized, and permissionless social media app.
[Phaver](https://phaver.com/): Share-to-earn decentralized social app for the most interesting feed on your phone
[Alps Finance](https://app.alps.finance/#/login): Decentralized social trading network. Build your DeFi investing community and reputation today!
[Refract](https://refract.withlens.app/): Your crypto-friendly link board. Discover new projects, highlight interesting articles and share new ideas.

[Here](https://lens.xyz/#apps) you can find more apps powered by lens. 

![new.jpeg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/new_53787b2c20.jpeg)

## Conclusion

Lens Protocol seeks to solve the major problems of existing social networks like centralization of data and missing portability of profiles, followers and content. It takes the basic functionality of a social network but brings in lots of new cool stuff. In particular new ways for creators to monetize content and communities to rally together. Imagine every sub-reddit and every Twitter community was a DAO with native coordination tools at disposal, that’s Lens in a nutshell. Developers also seem to love it. With all these new features Lens protocol has nothing to envy traditional social networks, on the contrary it’s only getting started and has its best days ahead.

## Sources: 
[https://medium.com/@bitsnbyte/lens-protocol-the-decentralized-social-media-platform-73461dd332fe](https://medium.com/@bitsnbyte/lens-protocol-the-decentralized-social-media-platform-73461dd332fe)
[https://tokenizedhq.com/lens-protocol/](https://tokenizedhq.com/lens-protocol/)
[https://github.com/aave/lens-protocol](https://github.com/aave/lens-protocol)
[https://mirror.xyz/lensprotocol.eth/YG9iFIs2emVFRtj3JqY95Dk6opNqM0aC9YoM-Ppp5as](https://mirror.xyz/lensprotocol.eth/YG9iFIs2emVFRtj3JqY95Dk6opNqM0aC9YoM-Ppp5as)
[https://docs.lens.xyz/docs](https://docs.lens.xyz/docs)


@rosstothefuture

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How web3 technology will benefit the betting industry

Azuro Protocol: Can the betting industry benefit from web3 technology?

Azuro has recently announced the mainnet launch of their decentralized betting protocol on Gnosis Chain and the first frontend [bookmaker.XYZ](https://bookmaker.xyz) has connected to the protocol, but with hundreds of new web3 projects popping up every week, why is this news important?

Betting today is broken and is built on negative incentives that put the bookmakers and players at odds with each other. It is common in the betting industry for players to be treated unfairly by having their accounts restricted or winnings withheld for winning too often. Bookmakers go to great lengths to ensure they have the upper hand over the players and use extensive cumbersome KYC procedures in an attempt to delay or refuse large withdrawals. With no single overarching governing body to protect the players, they are often left without a solution and often have to reach out to 3rd party mediators for dispute resolution. 

In the same way DeFi disrupted traditional finance, Azuro aims to decentralize and democratize the betting industry. The use of smart contracts creates a level playing field for both players and bookmakers and allows for a trustless, transparent, and permissionless betting experience that is simply not possible in web2. 

Previous efforts have been made by reputable web 3 projects to build on-chain betting, but all attempts have failed to reach a critical level of adoption up to this point.

## The Past
In 2015 Augur, a decentralized prediction market, became the 1st ever ICO on Ethereum selling 8.8 million REP coins and raising over $5.5 million. This was an exciting time for blockchain and the betting industry but sadly the hype was short-lived as the project subsequently failed to deliver a quality user experience (UX). 

Even after 5 years of working on improving the UX, they had still not managed to design a solution that could scale. 

This led to other teams such as Polymarket having a crack at prediction markets by trying a different approach as well as pivoting away from sports betting to focus on politics or cryptocurrency-related outcomes. However, none of these projects really managed to deliver a compelling product, provide a good UX and attract enough users to their platforms. Stefan George the co-founder of Gnosis and investor in Azuro summarized it well:

“Early projects like Augur, Gnosis, and Polymarket lacked a critical understanding of sports betting, which is still the biggest market for applying the solutions that these teams were building.”

**A hybrid team of sports betting veterans and Web3 pioneers**

The Azuro team has a history of working directly in the traditional betting industry with experience in online betting, sports media, and gambling industry payments. The wealth of knowledge that the team brings to the project is unparalleled and will be key to the success of the protocol. Spotting the differences between early Web3 prediction markets and a  traditional sportsbook led the team to rethink the current peer-to-peer design and come up with something radically new.

The main problem with a peer-to-peer design stems from the fact that you are reliant on market makers to create the market, price the market, and seed initial liquidity before there is anything for players to bet on. The design is inefficient and leads to little to no markets & a lack of liquidity behind them. Prediction markets currently are closer to betting exchanges such as Betfair, which although popular with bettors, betting exchanges make up only ~1% of the total market with the majority favouring sports books.

## The Present
Azuro took inspiration from the AMM architecture used by DEXs (such as UniSwap) and adopted their peer-to-pool approach. This design can scale easily and allow for virtually an unlimited amount of liquid betting markets at any point in time. This also meant that the role of the market maker could now be split up into two separate roles: 

1. A Liquidity Provider, who seeds the initial liquidity behind the markets

2. A Market Creator, which is a combination of Odds Feed Providers and Oracles that create markets & price markets.

Unfortunately, due to the specific use case, Azuro couldn’t simply use an existing AMM design. One of the key issues with a Classic Liquidity Pool (as utilized in e.g. Uniswap V2 and V3) is that it requires the existence of two assets X and Y in the pool at all times. 

With Azuro, it would not be this straightforward, as that clarity doesn't exist in sports betting where the liquidity in the pool gets allocated to multiple betting markets, and until those are resolved — it is unclear what amount of $ they will return to the pool. Therefore, they needed a design that could handle a more complex requirement for liquidity provision, which led to the creation of an all-new liquidity pool design – [The Liquidity Tree](https://azuroprotocol.medium.com/introducing-azuros-liquidity-tree-a-new-liquidity-pool-design-for-specialized-prediction-markets-625d68be4727).

**bookmaker.XYZ The First Truly Decentralized Sportsbook Is Live**
In June 2022 the Azuro protocol was officially deployed on Gnosis Chain, an Ethereum sidechain with 5-second block speed and fees at a fraction of those on Ethereum, with 500 transactions costing approximately $0.1. Shortly after the first betting site  [bookmaker.XYZ](https://bookmaker.xyz/) connected to Azuro.

More details are available [HERE](https://azuroprotocol.medium.com/bookmaker-xyz-the-first-independent-frontend-connected-to-azuro-is-live-2d53799f32e8)

## What NFTs bring to Betting
One of the main problems of previous Web3 prediction markets’ was the lack of traditional betting features such as multipliers/parlays which allow players to add multiple bets to one slip for a larger return. These are one of the most popular types of bets in traditional betting, and other solutions have failed to provide them. 

The current betting UX on prediction markets is much closer to trading than it is to sports betting, where players buy fungible ERC-20 tokens representative of certain outcomes and sell them to realise a profit/loss depending on the result. This of course is not the desired UX and Azuro will use NFTs to provide critical features like accumulator/parlay bets and multiple outcome bets. 

Being able to mint bets as NFTs allows for secondary markets for bets as collectibles, bet cashouts (selling bets to other players before the outcome has been decided), and gamification. Metadata associated with the NFTs can be used to reward players for betting on specific events (think sign-up bonuses), create leaderboards, and also improve liquidity provision for future events/markets.

**Democratizing the Betting Industry**
The Azuro protocol will be managed by a DAO that will soon be opening up to token holders allowing them to vote on future changes to the protocol, including adding new features, how and where to spend the treasury (e.g. how much money is contributed to combatting addictions, supporting education, sports for children, etc.), how problematic markets are resolved (e.g. alleged fixed games or other).

However, the day-to-day management of Azuro is not the main intention of the DAO. Azuro aims to democratize the betting industry and shake off the bad reputation that has come from years of unfair treatment of players. Players and bookmakers are often at loggerheads with each other and with no committee at hand, the resolution is often unjust. The DAO will be at hand to help resolve these matters fairly and unbiasedly.

For the DAO to operate Azuro will be releasing a governance token - $AZUR. Azuro was always intended to be a pure token project to democratize the industry itself through open community ownership and governance and therefore actual, sufficient decentralization.

**Even More, Features Coming To Azuro**
There will be many more developments from Azuro and more updates to the protocol to provide an unrivaled UX. Plus, in the coming years as the team aims to expand beyond sports betting and into the metaverse.

Updates to the protocol will bring a richer betting on-chain experience bridging the gap between traditional UX and decentralized betting by providing accumulator/Parlay Bets, an NFT bets marketplace, additional events & markets, and Live/In-Play Betting.

Azuro aims to be the first to supply the ability for games to provide betting as a key piece in in-game economies by plugging into Azuro and tapping into its liquidity. Furthermore, Azuro’s liquidity pools will soon be open for anyone to lock in their money and become the “house” and earn substantial yields generated from the revenues of the pools (and thus completely uncorrelated to the broader crypto or financial markets).

Azuro is also currently working on an SDK to make building on Azuro as simple as possible for frontends, so the ecosystem can grow to fulfil its mission as the base layer for decentralized betting.

To try out the first betting front-end built on Azuro head to - [bookmaker.XYZ](https://bookmaker.xyz)
Follow the links below to join Azuro’s communities and stay up to date with their progress.

[Twitter](https://twitter.com/azuroprotocol) | [Discord](https://discord.gg/azuro) | [Telegram](https://t.me/azuroprotocol) | [Website](https://bit.ly/39e1qEY)




Kubesqrt

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The Optimism ecosystem is getting a lot of hype at the moment. Polynomial is in a prime position to capitalize on this with their new option vaults.

Polynomial The New DeFi Derivatives Powerhouse Built on Synthetix

Polynomial is one of the new exciting projects having launched on Optimism in recent weeks. So what is it, yet another option protocol or something more?

In short: Polynomial is the first **option-selling vault to use an on-chain AMM to execute strategies**.

In the past, options were used almost exclusively by traditional financial institutions and only accredited investors had access to this opportunity. This excludes most of the retail investors, just think about the WSBets crowd with Robinhood etc. With the emergence of DeFi, projects started democratizing many financial instruments and derivatives like options in particular. First on centralized crypto exchanges and later through on-chain option protocols.

First iterations of option exchanges were focused on just buying and selling options peer-to-peer. This requires some sophistication on behalf of investors as options are more difficult to understand than, for example, your typical yield farm on top of a spot exchange like Uniswap. Nevertheless those yield farms turned out not to be sustainable in the long run, as their yield came mostly from governance token emissions (aka inflation) leading many projects into a downward price spiral over time.

Structured product vaults solve both these problems, producing organic yield and abstracting away the complexity of option trading away for end-users. However, until recently option selling vaults were still in need of a **centralized market maker** buying these options from the vaults ( e.g. Deribit or Binance).


By leveraging Lyra Finance, the first highly liquid and composable option AMM in DeFi, Polynomial was able to build vaults that are easy to access, produce high yields (15-55%) and don’t rely on market makers for liquidity.

For those who want to jump (“ape” in crypto jargon) in this new product, we’ll put together a comprehensive guide, which includes the basic know-how around options and allows you to skip the countless complicated explainers you’ll find online from traditional sources.

## WTF are Options?
If you don’t come from a financial background just like me, options can be quite overwhelming. Let's try to break them down in an easy to understand way. Options are derivatives, financial contracts that - as the name suggests - derive their value from other financial assets.

There are basically two different kinds of options, call options and put options, both of which I will explain later in detail. Options are contracts that allow the holder to buy or sell an asset (in TradFi mostly stocks, in crypto mostly BTC and ETH) at a certain price (which is called strike price) within a predefined time frame (called expiration).

So why would someone want to do that? There are basically two use cases for options:

1. Limit risk exposure. This is basically the objective of option buyers. To hedge the downside (FUD in crypto jargon) of an asset, the investor will buy put options. To hedge the upside (FOMO in crypto jargon) of an asset, the investor will buy call options.

2. Gain additional yield on an asset. An investor can sell options and collect premiums to gain yield on their assets (this can work for both the bullish and bearish outlooks).

This second option is what Polynomial is engaging in to produce yield for its users. It sells options on behalf of depositors.

**Call options**

The option seller (also called writer, owns an asset, for example ETH) gives the option buyer the possibility to acquire at a certain strike price. There can be two possible outcomes:

1. The asset price doesn't reach the predefined strike price until expiration. In that case the option seller can keep their assets and the so-called premium, which is the price paid for the option in the first place. Outcome 1 is called **“out of the money”** (OTM) in financial jargon.

2. The asset price reaches the strike price before expiration. The option buyer can exercise their right (note here they can, but are not obliged to do so, hence the option). The outcome 2 is called “in the money” (ITM). Note that there is a difference between American style options (which can be exercised any time before expiration) and the European style options (which can only be exercised on the expiration date).

![pasted image 0.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/pasted_image_0_83bdde3dcf.png)


**Put options**

The option seller (which deposits a collateral, e.g. USD) gives the option buyer the possibility to sell their asset (for example ETH or BTC) at a certain strike price. There are exactly the same possible outcomes of 1) OTM and 2) ITM for put options, as for the call options that we covered above.

![pasted image 0 (1).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/pasted_image_0_1_d369e5fbf6.png)


**Risks**

Option sellers are exposed to multiple risks. Options are complicated and selecting the correct strike price can be quite difficult. The most obvious risk for the seller is to miss out on possible upside. Option buyers on the other hand only face the risk of losing the premium they have paid in case their option expires worthless.

## How does Polynomial finance work?

Polynomial Finance uses derivatives to create products that automate various yield generating  strategies. Polynomial Earn Vaults use weekly automated covered calls/put sells to generate yield from premiums and compound it by reinvesting the yield back into the vault every week. At the moment, Polynomial offers two different products that allows the users to generate yield on ETH and USD deposits respectively.

![pasted image 0 (2).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/pasted_image_0_2_b8f539c329.png)

**Covered call**

A [covered call](https://www.investopedia.com/terms/c/coveredcall.asp)  sells the right to purchase an asset at a fixed price in the future for a premium. The vault sells the right to purchase your $ETH at a specific [strike price](https://www.investopedia.com/terms/s/strikeprice.asp#:~:text=A%20strike%20price%20is%20a,the%20security%20can%20be%20sold.). The strike price is usually higher than the spot price of $ETH at the time the options are minted (“Out-of-the-Money”). Then, Polynomial executes the trade on Lyra and there are three different ways your trade can go:

1. The options expire below the strike price
 
The vault receives the premium and the ETH back as it is not profitable for the other party to exercise the options.

2. The option expires at the strike price

This situation is similar to option one. The vault will receive the premium from the option and also the ETH back that was initially deposited to collateralize the CALL options.

3. The option expires above the strike price

In this situation the vault receives the premium from the option but they are also required to sell the ETH to the party that purchased the original call option. This means that the difference between the current ETH price and strike price minus the premium is the loss on that particular trade. The math for this scenario looks like this:

Strike Price + Premium - Current ETH price = Loss on trade

In this situation the vault takes a loss and loses some of its principal in $ETH terms. This strategy is perfect for anyone that does not expect to see large spikes in price in a short period of time, as the vault sells options on a weekly basis and selects strike prices that allow for a moderate increase in price.

The ideal market for depositors in this vault is if $ETH goes up moderately week-by-week, so they earn premiums in $ETH while the $ value of their deposits goes up. If however, there is a sharp increase in price one week users may lose some $ETH (they’ll still be up in $ terms though as their $ETH will be worth more).This vault is currently generating yield of up to 36% which is significantly above average for this asset.

To put this in perspective with a practical example, assume investor Bob is confident that the price of Ethereum will increase. Let's assume Bob bought 1 Eth at a price of 3.000 USD and is going to deposit ETH (sETH to be exact) into Polynomial's covered call options vault. Polynomial will then automatically sell Eth call options via Lyra Protocol with a strike price of 3.500 USD and expiration of 1 week. During that week the ETH price goes slightly up but remains below 3.400 USD. Therefore, no call (buy) is triggered and at the end of the week the initial investment of 1 Eth + collected premiums from the options sold are reinvested into the vault (auto compounded). The following week, Polynomial will sell ETH call options with a strike price of 3.600 USD. The following week, ETH price sees an unexpected exceptional increase to 3.900 USD and the option buyers will exercise their call option. In this example Bob incurs a net loss since realized strike price + received premiums are still below the current Eth price.

**Put Selling**


Another strategy that Polynomial offers is a [put selling](https://www.investopedia.com/articles/optioninvestor/10/sell-puts-benefit-any-market.asp) strategy where users deposit USD instead of $ETH. This involves the user agreeing to purchase an asset (in this case ETH) at a given price (strike price) in the future. The vault sells OTM put options and receives a premium for doing so weekly. The option can go in three different ways:


1. The option expires above the strike price
In this scenario, Ethereums price is above the strike price which means that the vault keeps the premium as profit and the original sUSD used to perform the put sell.

2. The option expires at the strike price

This situation is similar to the one in scenario 1, which means that the vault keeps the premium and retains the original input.

3. The option expires below the strike price

In this scenario the vault makes a loss as it is required to purchase ETH at above market rate. In this situation the vault takes a loss and continues to sell weekly covered calls. The math for this scenario looks this:

Strike price - ETH price + premium = Loss on trade

This strategy is ideal for anyone that does not expect the price of ETH to fall sharply in the short-term. In comparison to the covered call strategy this strategy is subject to more risk as the user may end up in a position where they have to purchase ETH at a less favorable price and hence make a loss.

Polynomial charges an annualized management fee of 1% of AUM and a 10% annualized performance fee. The fees are prorated and are charged on a weekly basis with unprofitable weeks being excluded from any fees.

As a practical example: Investor Alice is weary of the current macroeconomic conditions and very pessimistic in regard to the price outlook of Ethereum. Alice deposits 3.000 sUSD into the Polynomial put option vault, since she believes the Eth price will suffer. Polynomial will then automatically sell put options via Lyra Protocol with a strike price of say 2.500 USD and expiration of 1 week. During that week the Eth price goes slightly down but remains above 2.600 USD. Option buyers were not able to exercise their puts and so the premium collected from the options sold are added to the vault collateral. Polynomial will sell from the now increased collateral even more Eth put options on Lyra protocol the week thereafter at a strike price of 2.400 USD. That week unexpected macro events completely destroy investor confidence and crypto assets plummet, Eth drops down below 2.000 USD and put options are exercised. Alice will incur a loss, since the premiums collected will not make up for the negative difference of the current Eth price from the strike price (at which option buyers were able to sell Eth for sUSD).

## How to use Polynomial

Now that we know the basics of options let’s put this into practice and start using Polynomial protocol. As mentioned previously, Polynomial is a structured product that offers two option vaults at the time of the launch, with more to come later. Right now the user gets the possibility to invest in Ethereum covered call vault and in a put selling strategy vault. The user interface is completely straightforward, just navigate to the [Polynomial website](https://earn.polynomial.fi), connect your wallet in the top right corner and login via your web3 browser extension wallet.

![Untitled.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_b4000ab116.png)


A strategy overview is shown and is explained in simple terms. When selecting a vault, you can browse through the vault's performance, vault transactions and withdrawals and further explanation on risks & fees.

![Untitled (1).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_1_5d3eb1b982.png)


As a quick side note, Polynomial is built on top of Lyra Protocol which in turn leverages synthetic assets from Synthetix and therefore you will interact with synthetic tokens instead of vanilla $ETH or $USDC. 

To get started, approve the asset you want to deposit (sETH in the case of the covered call or sUSD in the case of the put selling strategy). After the transaction is confirmed, which usually takes just a few seconds on Optimism, click on get sETH and you will be redirected to 1inch exchange in a new browser window or tab.  There might be a pop up warning screen since the synthetic ETH token is not currently enabled on 1inch exchange on Optimism. Click understand and Import token, then swap as you like.

![Untitled (2).png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Untitled_2_cd14d9e7a8.png)


Heading back to the Polynomial interface click on preview Deposit and confirm the collateral deposit again in your wallet. 

At this point the user will be able to track their positions in the Portfolio section. The deposited asset is now earning yield. In our opinion, Polynomial was able to abstract away most of the complexities from options and provide the user with an intuitive product and a sleek user interface.

Withdrawals can be requested at any time but keep in mind that Polynomial sells weekly options and therefore the actual withdrawal can only be executed after expiry of the options so you may need to wait for a couple of days before being able to access your funds. If no withdrawal is requested then the deposited collateral and the generated yield go back into the vault and the week after sells even more options, which means the yield is compounded. No user interaction whatsoever is required since everything is managed automatically by the protocol.

## First of its kind

Polynomial has launched on Optimism, a Layer 2 scaling solution on Ethereum. Optimism offers extremely low fees in comparison to Ethereum and allows users with smaller budgets to enter. As well as lowering the barrier to entry, they enable easy access to high yield without the need of complicated strategies on assets that typically have significantly lower APRs. 

In addition to that, Polynomial has no competitors on Optimism and other L2s which gives it a first mover advantage. The only comparable product to Polynomial is Ribbon Finance which found success on Ethereum mainnet offering various strategies and currently expanding to some alt-L1’s like Avalanche and Aurora.

Currently Ribbon holds around $270 million in assets under management and is the largest options vault provider. Polynomial can certainly expand to such levels provided the Layer-2 scaling solutions gain more mainstream adoption and increase their TVL. 

At the time of writing the vaults offered by Polynomial have been completely filled and are currently at 450 sETH in the covered calls vault and 1,500,000 sUSD in the put selling vault. 

## Feeling optimistic about the future

Even though Polynomial has achieved plenty in a short period of time the team is working hard behind the scenes to launch more products and assets. Currently the aim is to increase TVL by opening up the vaults to a higher threshold but in the future the team is looking to expand to various other assets like Bitcoin or Solana and other option strategies such as a [long or short straddle](https://www.investopedia.com/articles/optioninvestor/08/straddle-strategy.asp) which sees the user less exposed. 

Furthermore, Polynomial may eventually decide to expand and explore other L2 protocols. It is believed that the reason that they decided to make Optimism their home is due to the option liquidity that is available on [Lyra](https://www.lyra.finance/). As ecosystems expand it is very possible we will see Polynomial across various different ecosystems such as Arbitrum. The team has mentioned wanting to build an option aggregator several times and wanting to become the best liquidity venue for on-chain options by aggregating liquidity from Lyra, Dopex, Premia, Hegic and many other decentralized exchanges. We’ll see what the future for Polynomial entails but it’s clear that the team is very talented and ready to shake the options space up.





I am passionate about Bitcoin and Ethereum and want to on-board new people to crypto.

Emanuel Coen

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How Courtyard is turning collectibles like Pokemon Cards into NFTs

Courtyard: Bringing Billions of Dollars of Physical Collectibles as NFTs


Driven by a San Francisco based [team](https://docs.courtyard.io/courtyard/about-courtyard/meet-the-team) of six people who used to work at YouTube, Apple & Google, Courtyard has set sail to conquer the open Web3 seas with the mission to **offer physical collectibles on the blockchain.**

Wait, physical collectibles on the digital blockchain? Aren’t we going full circle here? It might look so at first glance but NFT’s were never only about static digital pictures of Bored Ape’s and Punks.  As we have written before NFT’s are simply a data structure allowing to record ownership on the most secure, globally available and programmable ledger in the world. Of course NFT’s were going to find their way into music, filmmaking,  photography, writing, collectibles and every other sector of the creator and ownership economy.

[Courtyard](https://courtyard.io/) for its part has set its eyes on the billions of dollars people spend on physical collectibles every year. It has built an infrastructure to securely tokenize physical collectibles like cards, sneakers, watches and more into NFTs. The NFT acts as a digital 3D model of the underlying physical object that is safely stored by Courtyard’s partner Brink's, a world leader in secure transportation and storage of valuable assets.

As NFT’s these collectibles become instantly tradeable on-chain 24-7 around the globe. And it unleashes a ton of use cases. Other developers can come and integrate these collectibles in Metaverses and gaming experiences, DeFi protocols can issue loans against high-value pokemon or magic cards and young teenagers can make their dream come true and buy a fraction of Rolex NFT via a protocol like [Fractional.](https://fractional.art/) The bottom line is that a physical collectible receives **new superpowers** once it is turned into a digital NFT.

![2.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/2_b510d4e8d2.png)

## How does Courtyard work?

When you mint a Courtyard NFT or buy one on OpeSea you receive an NFT that essentially represents ownership over the physical collectible and gives you the right to redeem it at any time by burning your NFT. 
As a holder  of a Courtyard NFT you have several options. 

- **Trade** their physically backed NFT’s on any Polygon compatible marketplace (e.g Opense)

- **Burn** their NFT on Courtyard’s platform to redeem the underlying asset. Pending KYC, Courtyard ships corresponding collectibles globally
- **Display** their valued collection in the Metaverse as NFTs and connect with other collectors

If you want to redeem your NFT for the underlying physical collectible you’ll need to burn it through Courtyard’s redemption page and the item will be shipped to a location near you (150 countries as of now). For this purpose, Courtyard has partnered with Brink’s, a world leader in secure transportation and storage of valuable assets with locations in over 150 countries. 

This means Courtyard can truly serve the globalized Web3 customer base and guarantee that valuable collectibles are handled with utmost care. How long the shipment process takes after a user initiates the redemption remains unclear at this point as the redemption phase is to start next week. 

One big concern for users of course is authenticity. How can you trust Courtyard that the physical collectibles are authentic and in good condition?  In its documentation Courtyard claims it only sources the item from established dealers in the industry that have operated for many years in the field.

For their first drop, a batch of 800 Pokemon cards, it relied on the famous Professional Sports Authenticator (PSA) Association grading system. All cards have a bar code that allows users to verify authenticity against PSA’s database.

## Back to School Drop

![3-min.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/3_min_84fbbf9156.png)

The [Back To School Genesis Drop](https://drops.courtyard.io/back-to-school) is Courtyard’s first NFT collection and also the first of its kind. According to their own website, Courtyard has chosen trading cards for their first drop in order to best manage storage and handling of the collectibles. 


The collection features 800 unique NFTs modeled after real Pokemon cards that are physically stored by Brink’s in a secure location. All 800 cards are authenticated by [Professional Sports Authenticator](https://www.psacard.com/), PSA for short, a major authenticator of sports and trading cards. PSA classifies Pokemon cards according to different traits like condition (unsealed being the most valuable of course), year of publication, rarity, special edition, and so on. This means that the rarity traits of this NFT collection are derived from real life traits.

## Gotta Catch 'Em All!

Each NFT of the Courtyard Genesis Collection is “sealed” at mint to reproduce “the excitement of tearing open the pack to reveal the precious cards inside”. The reveal will happen a few days after the mint. Until then the sealed cards can be traded freely [on OpenSea](https://opensea.io/collection/courtyard-nft) (trading at 0.4 $ETH right now or 2x mint price).

To guarantee fairness the token metadata of each unrevealed Courtyard NFT contains a hash of the metadata for the card inside. When the token is revealed, you’ll be able to hash the now-visible metadata and verify that it matches the hash in its unrevealed state. Moreover, to ensure the token each minter gets is randomly assigned, Courtyard uses Chainlink, the most widely used randomness oracle. This way you can be sure that you really received the card you were supposed to receive and the reveal mechanism wasn’t tampered with.

## Which One to Catch?

Here are the stats:
- Mint Date: March 14th 2022

- Type: ERC721 NFT

- Price at mint: 0.2 WETH (ETH on Polygon)

- Chain: Polygon

- Total: 800

- Pokemon Editions: Mostly Base Set Unlimited & 1st Edition

![4-min.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/4_min_87225872f7.png)

On their [Instagram](https://www.instagram.com/courtyard_nft/) Courtyard teases with some high ranking Pokemon cards that are part of the Genesis drop. Ranging from the 1st Edition Holo Zapdos currently [ranked](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/zapdos-holo-1st-edition-16/605286) at around [$500](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/zapdos-holo-1st-edition-16/605286) to a Base Set Holo Charizard at around [$30K](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/charizard-holo-1st-edition-4/605253/).
With the mint price at 0.2 ETH the whole collection brought in 160 ETH in sales. According to Courtyard’s website the team has chosen the mint price based on the **average value** which implies they spent around $500k to acquire the 800 cards. It also means the reveal process will be like a lottery, some people will receive a card that will be worth a lot more than the 0.2 $ETH they spent and some will receive a pokemon card worth a bit less than what they spent. However, it will be interesting to see how the market prices these NFTs. Maybe they will trade at a premium compared to their “fair market value” in the physical world.  Just like with physical unsealed Pokemon cards you never know what you’ll get, and that’s all the thrill. You can browse current offers [here](https://opensea.io/collection/courtyard-nft). 

And here’s the list of high value cards featured on the official Courtyard Instagram (7/800):

- [1999 Pokemon Base Set 1st Edition Shadowless Holo Mewtwo #10 PSA 9](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/mewtwo-holo-1st-edition-10/605269/)
- [1999 Pokemon Base Set Shadowless 1st Edition Holo Zapdos #16 PSA 8](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/zapdos-holo-1st-edition-16/605286)
- [1999 Pokemon Base Set Shadowless 1st Edition Holo Chansey #3 PSA 8](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/chansey-holo-1st-edition-3/605249)
- [1999 Pokemon Base Set Holo Charizard #4 PSA 10](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/charizard-holo-1st-edition-4/605253/)
- [1999 Pokemon Base Set 1st Edition Shadowless Holo Venusaur #15 PSA 10](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-game/venusaur-holo-1st-edition-15/605284)
- [2015 Pokemon Japanese Pikachu Poncho Magikarp #150/XY Promo PSA 10](https://www.psacard.com/auctionprices/tcg-cards/2015-pokemon-japanese-xy-promo/pretend-magikarp-pikachu/values/2181590)
- [1999 Pokemon Fossil 1st Edition Holo Hypno #8 PSA 10](https://www.psacard.com/cardfacts/non-sports-cards/1999-nintendo-pokemon-fossil/hypno-holo-1st-edition-8/641229)

![Screen Shot 2022-03-18 at 1.57.59 pm-min.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2022_03_18_at_1_57_59_pm_min_711fdcc876.png)

These seven cards have an approximate fair market value of around $280K (according to PSA). This means that the remaining 793 cards are left with around $120K in total value or an average per card  cof 150$. This average is only derived by the total value of the 7 cards, of course the real number most likely differs as we only know the approximate value 0.88% of all cards.

Don’t treat any of this as financial advice but merely an idea on how to calculate chances. It doesn't take in a lot of other important factors like potential price increase or depreciation over time or the actual rarity of the featured cards.  At time of writing the unsealed Genesis NFTs are trading at a floor price of 0.4 ETH and only around [50 items are listed for  sale. ](https://opensea.io/collection/courtyard-nft)



Courtyard: Bringing Billions of Dollars of Physical Collectibles On-Chain

In this episode we talk to Sam Bankman Fried from FTX.
Sam is one of the most well known figures in the crypto space. He's a notorious trader moving billions of dollars on a daily basis. He is so busy that he only sleeps a couple of hours a day on a bean bag next to his desk.

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In this episode we talk to Sam Bankman Fried from FTX.
Sam is one of the most well known figures in the crypto space. He's a notorious trader moving billions of dollars on a daily basis. 

Podcast w. Sam Bankman Fried from FTX on Building A Crypto Exchange Powerhouse | Cryptotesters

[Spotify](https://spoti.fi/3t3QE7N), [Apple Podcast](https://apple.co/3vwWXT7), [Google Podcast ](https://bit.ly/3eN4Mxr)

In this episode I talk to Sam Bankman Fried from [FTX](https://ftx.com/#a=cryptotesters).

Sam is one of the most well known figures in the crypto space. He's a notorious trader moving billions of dollars on a daily basis. He is so busy that he only sleeps a couple of hours a day on a bean bag next to his desk.

He recently got a lot of mainstream media attention for donating over $5m dollars to the Joe Biden campaign.

We talk about:

- FTX's fast growth and success reasons
- Plans for Blockfolio and Maps.me
- The FTT token
- Relationship with Binance
- His involvement in the Solana ecosystem

### Sponsors

Thanks to Bitwala and Indexed Finance for sponsoring our podcast!

[Bitwala](https://bitwala.x89scb.net/1xYMd): Get €20 as welcome bonus if you sign-up to their crypto wallet app using our exclusive link: [https://bitwala.x89scb.net/1xYMd](https://bitwala.x89scb.net/1xYMd)

[Indexed.Finance](https://indexed.finance/): allows you to buy passively managed indices for Crypto and DeFi’s hottest markets, passive portfolios at your fingertips.

Sam Bankman Fried from FTX on his Masterplan to Build an Exchange Powerhouse

In this episode we talk to Stephan Ponnet  Founder of AvadoCloud. Avado produces Blockchain Nodes which users can run at home and are extremely easy to set-up.

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In this episode we talk to Stephan Ponnet  Founder of AvadoCloud. Avado produces Blockchain Nodes which users can run at home and are extremely easy to set-up. Using an Avado device even non-technical people can run nodes in decentralized network and earn crypto tokens for doing so.

Podcast with Stefaan Ponnet, Founder of AvadoCloud | By Cryptotesters

[Spotify](https://spoti.fi/3sz7qeX), [Apple Podcast](https://apple.co/3dxwM8x), [Google Podcast](https://bit.ly/2P40Dw2)

In this episode we talk to Stephan Ponnet Founder of [AvadoCloud](https://ava.do/). Avado produces Blockchain Nodes which users can run at home and are extremely easy to set-up.

Using an Avado device even non-technical people can run nodes in decentralized network and earn crypto tokens for doing so.

In the episode we talk about how he got the idea for Avado, how he built the first prototypes and why he thinks everyone should run their own node. We also walk through the variety of networks that Avado supports and the long-term vision of his project.

### Special Opportunity 
[Metric.exchange](http://metric.exchange/) is holding a trading competition to reward early users for doing swaps and limit orders on their new exchange! Prizes totalling over $50000 equivalent in $METRIC token and DAI.

Thanks to Bitwala and Indexed Finance for sponsoring our podcast!

[Bitwala](https://bitwala.x89scb.net/1xYMd): Get €20 as welcome bonus if you sign-up to their crypto wallet app using our exclusive link: [https://bitwala.x89scb.net/1xYMd](https://bitwala.x89scb.net/1xYMd)

[Indexed](https://indexed.finance/): allows you to buy passively managed indices for Crypto and DeFi’s hottest markets, passive portfolios at your fingertips.



Stefaan Ponnet Founder of AvadoCloud about Democratizing Access to Blockchain Nodes

In this episode we talk to Alex Salnikov, who is the founder of Rarible.com one of the largest NFT marketplaces in the crypto space. We discuss how he got into NFTs, why he thinks that what we’re currently seeing with NFT art is just the tip of the iceberg and why there could be much larger technological disruption ahead, as well as the challenges that Rarible faces and how it intends to tackle them.

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In this episode we talk to Alex Salnikov, who is the founder of Rarible.com one of the largest NFT marketplaces in the crypto space. 

Podcast with Alex Salnikov from Rarible.com on NFTs, the Metaverse and the Tokenization of Intellectual Property

[Spotify](https://spoti.fi/3sHilnv), [Apple Podcast](https://apple.co/2OcPFE9), [Breaker](https://www.breaker.audio/cryptotesters/e/84250166)

In this episode we talk to Alex Salnikov, who is the founder of [Rarible.com](https://rarible.com/) one of the largest NFT marketplaces in the crypto space. We discuss how he got into NFTs, why he thinks that what we’re currently seeing with NFT art is just the tip of the iceberg and why there could be much larger technological disruption ahead, as well as the challenges that Rarible faces and how it intends to tackle them.

Thanks to [Bitwala](https://bitwala.x89scb.net/1xYMd ) and [Indexed Finance](https://indexed.finance/) for sponsoring our podcast!

**Bitwala**: Get €20 as welcome bonus if you sign-up to their crypto wallet app using our exclusive link: [https://bitwala.x89scb.net/1xYMd](https://bitwala.x89scb.net/1xYMd ) 

**Indexed**: allows you to buy passively managed indices for Crypto and DeFi’s hottest markets, passive portfolios at your fingertips.






Alex Salnikov from Rarible.com on NFTs, the Metaverse and the Tokenization of Intellectual Property

In this episode we speak with Nate Hindman, Head of Growth and Mark Richardson, Lead Research at Bancor. We talk about the history of Bancor, how it came to develop its first AMM, why it was ultimately less successful than Uniswap in that period and how its new version solves a lot of the issues that have existed in AMMs in the last couple of years: impermanent loss and single-sided liquidity.

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In this episode we speak with Nate Hindman, Head of Growth and Mark Richardson, Lead Research at Bancor. 

Bancor Podcast on Building a Next-Generation Decentralized Exchange | Cryptotesters

[Spotify](http://spoti.fi/2OKaG92), [Apple Podcast](http://apple.co/2OK7VES), [Breaker](https://www.breaker.audio/cryptotesters/e/82940391)

In this episode we speak with Nate Hindman, Head of Growth and Mark Richardson, Lead Research at [bancor.network](http://bancor.network/).

We talk about the history of Bancor, how it came to develop its first AMM, why it was ultimately less successful than Uniswap in that period and how its new version solves a lot of the issues that have existed in AMMs in the last couple of years: impermanent loss and single-sided liquidity.

Thanks to our sponsor [Bitwala](https://bitwala.x89scb.net/1xYMd) for sponsoring our podcast!

Get €20 as welcome bonus if you sign-up to their crypto wallet app using our exclusive link: [https://bitwala.x89scb.net/1xYMd](https://bitwala.x89scb.net/1xYMd)







Nate & Mark from Bancor on Building a Next-Generation Decentralized Exchange

Fynn

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Ribbon Finance Review by cryptotesters. Earn yield on your crypto assets with DeFi's first structured products protocol.

Ribbon Finance review: How to make money selling options

How to make money selling options with Ribbon

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In this article we analyze the differences between various index projects and try to show investors which DeFi index is the best to invest in.

In this article we analyze the differences between various DeFi index projects and try to show investors which one is the best buy.

A Comparison of DeFi Index Projects (PieDao, IndexCoop & Indexed Finance)

It is well established that in order to grow your personal wealth - you need to invest. Luckily, you don’t need to be a token-picking genius in order to invest into the fast growing DeFi sector like a professional - you can simply invest in a DeFi index which automates your entire investment strategy for you.

An index fund (ETF) is a portfolio or basket of assets constructed to match or track the components of a financial market sector, such as the Standard & Poor's 500 Index (S&P 500). When a certain asset goes up or down in price, the index will re-balance and return to the percentage allocation it aims for that particular asset. 

This model of investing allows investors to develop a passive form of portfolio management strategy and takes away a lot of the workload required to manage a successful portfolio. One of the largest benefits of an index is that it offers diversification. By spreading your investment over a number of assets you are taking less risk than if you would only invest in one.

> “Don’t look for the needle in the haystack. Just buy the haystack!” John C. Bogle

Would you have picked Amazon from the 1000’s of internet companies emerging in the dot-com era? Probably not. Betting on a Internet Tech fund on the other hand would have been a far less controversial bet and would equally have paid off handsomely.

Index funds are starting to become popular in the DeFi space, with several projects like [Indexed.Finance](https://indexed.finance/), [IndexCoop](indexcoop.com) and [PieDao](https://www.piedao.org/) each experimenting with different mechanics. A DeFi index differs from traditional indices in that all the investment operations are automated and executed by smart contracts instead of human fund managers. Moreover, the governance of DeFi index protocols is oftentimes completely decentralized, meaning that token holder can decide the future direction of these indices and set the most important parameters.

## Why should I buy a DeFi index?
Especially in times of a bull market where an entire sector is performing well (on average), it is oftentimes more attractive and more convenient to pick up an index token tracking an entire sector than to individually pick winners & losers.

Not to mention that for many newcomers with smaller budgets (<$5k) it is much more gas-efficient to buy a DeFi index token and get exposure to 10 projects in one trade, than buying the 10 tokens individually. Not to mention, that the Top 10 hottest projects change frequently, what could have been the best DeFi projects a month ago will be forgotten a couple of months later. A DeFi index would automatically adjust to the new reality and include the new DeFi token projects into its index.

However, with all the index projects to choose from, it can be hard for retail investors to pick the right DeFi index for their needs. 

In this article we’ll  try to give you a quick overview of the different DeFi index projects. For those who want to learn more about the technical subtleties we'll attempt to break down the differences between these projects in thelater sections, focusing on three characteristics: indexing methodology, portfolio structure and rebalancing. These are the core components of any DeFi index and largely determine its performance (assuming they track the same assets).

## Which is the best DeFi index to buy?
Before we go into the technical differences let's go over the three things that matter most to investors when choosing which DeFi index to buy.

1. Performance
2. Asset selection
3. Fees

![DEFI_index_performance.jpeg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/DEFI_index_performance_a0ad958adc.jpeg)

Based on these criteria it seems like DEFI5 and CC10 from [indexed.finance](http://indexed.finance/) are the best index picks. Their performance has been excellent and on top of that they are the only two indices that don't charge holders a management fee. 

DEFI5 tracks the Top 5 assets in the DeFi space, the so called "blue chips", whereas CC10 is a bit broader and incorporates five more assets as shown in the graphic above.

## How do these DeFi indices differ?
Now let's explore the differences between various DeFi index projects. The core components of any DeFi index are its methodology, the portfolio structure and the rebalancing method to bring the asset weights back to target.

### Indexing methodology
Indexing methodology includes the criteria tokens need to meet in order to be considered in an index as well as the method of weighting them within the portfolio, both initially and when setting rebalancing targets. 

### Portfolio structure
Portfolio structure refers to the type of contract used to hold the index’s underlying tokens, whether those assets are used to generate additional revenue by being deployed in other DeFi protocols, and any relevant fees. 

### Rebalancing 
Rebalancing describes how a fund changes its composition to match the weight targets set by the indexing methodology. This needs to happen in order for the index to accurately track the performance of its underlying tokens. If the market cap of one token in the index rises for example and another one declines, the index might need to increase its exposure (weight) to the increasing token. 

If you don’t understand what these terms mean, don’t worry, they will become more clear as we go through examples.

## Index Coop
![Screen Shot 2021-01-25 at 4.06.24 pm.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2021_01_25_at_4_06_24_pm_8d8cc7cec6.png)

- Indices: DPI ($AAVE, $SNX, $UNI, $MKR, $YFI, $COMP, $LRC, $REN, $KNC, $BAL)

- TVL: $130M 

- Governance token: Yes

- Liquidity Mining: Yes - for staking DPI - ETH

- Fee: 0.95% annualized

[Index Coop](https://www.indexcoop.com/) is a project building crypto indices on Ethereum. The governance token INDEX is used to make decisions regarding upgrades, maintenance and deployment of indices. At present, Index Coop has a single index: the DeFi Pulse Index (DPI), which is a token set using [Set Protocol](https://www.tokensets.com/) as the underlying framework.

### Indexing Methodology
DPI is managed by INDEX governance, which uses criteria based on token and project characteristics to determine eligibility for the inclusion of an asset within the index. Tokens are weighted by circulating market cap as collected from Coingecko.

On the third week of each month, DPI has a Determination Phase, where INDEX token holders reweigh the current tokens in the index and submit any additions or removals of tokens in the index and submit them on chain. Other holders can then verify the accuracy of this data and approve the resulting targets for the index’s portfolio composition.

Further details about the indexing methodology can be found on [pulse.inc](https://www.pulse.inc/).

### Portfolio Structure
DPI is a Set Protocol “token set”, and is similar to a traditional index fund in that DPI tokens represent proportional ownership of the underlying assets, which are held in the set amounts proportional to their weights until each rebalance.
DPI tokens can be issued to users who deposit the underlying tokens in amounts proportional to their weights, or redeemed to claim the underlying tokens.

Evidently, most users don’t issue the DPI by supplying the individual tokens but rather market buy it on decentralized exchanges like Uniswap or on the IndexCoop website.

DPI charges a 0.96% Streaming Fee, which is an annual percentage of the index’s market cap which the manager (Index Coop) may claim.

### Rebalancing
On the first business day of each month, DPI begins a Reconstitution Phase. In this phase, smart contracts are used to execute trades on decentralized exchanges to rebalance the index toward the weight targets set in the Determination Phase, as well as add and remove tokens from the index. This occurs over the course of the day so that trades may be chunked to minimize slippage.

## PieDAO
![Screen Shot 2021-01-25 at 4.28.41 pm.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2021_01_25_at_4_28_41_pm_6e15719678.png)

- Indices: 6 (BCP, DEFI ++, DEFI +L, DEFI+S, BTC ++, USD ++)

- TVL: $15M 

- Governance token: Yes - $DOUGH

- Liquidity Mining: Yes - for supplying liquidity to 3 BCP, DEFI+S or DEFI+L on Balancer in combination with ETH 

- Fee: varies but most indices have a 0.58% streaming fee

PieDAO is a protocol for managing ETFs, which are referred to as “Pies”. The governance token DOUGH is used to vote on decisions regarding deployment of pies, protocol upgrades and selection of underlying assets and weights within Pies.

Pies take a variety of forms, with some being similar to token sets with constant assets and weights, and others acting as a sort of mix between mutual funds and index funds, with pre-set rules that take both DOUGH holders’ sentiments and market data into account when assigning tokens and weights.

Note that PieDao also has a second product called PieVaults, which [we covered previously](https://cryptotesters.com/tutorial/pie-dao). PieVaults also track the performance of a set of underlying tokens **but additionally they lend assets in various DeFi lending protocols such as Compound & Aave** to generate yield. That means the vaults are not 100% collateralized, which makes it a more risky product than a normal index, and why we didn’t include it here.

DOUGH holders may create and vote on governance proposals to deploy new pies or rebalance existing ones, but each pie has its own methodology:

BTC++ is a basket of equally-weighted Bitcoin wrapper tokens, while USD++ a basket of US dollar stablecoins has weights assigned by governance according to the tokens’ perceived trust minimization qualities and stability relative to the dollar.

DEFI+L includes large cap DeFi tokens, weighted by governance using a combination of tokens’ market caps and their Sentiment Scores, which are based on DOUGH holders’ views of the projects’ relative potential for growth and other characteristics such as their P/S ratio.

DEFI++ is a mixture of 70% DEFI+L tokens and 30% DEFI+S tokens.

### Portfolio Structure
Pies are Balancer Smart Pools with swap fees typically set to 1%. This means that the underlying tokens of each index sit in a AMM liquidity pool. Each token in a pie has a weight in the contract which represents the proportion of the total Pie value held in that token. Tokens within Pies can be traded at prices determined by their weights and balances, as well as the swap fee.

By using an AMM as the **holding mechanism for their liquidity**, pies can generate returns beyond the growth of the underlying tokens whenever the fees accrued through swaps are greater than the impermanent loss from arbitrage.

Pies each have their own streaming fees, paid out linearly to DOUGH holders as a proportion of the Pies’ market caps.

### Rebalancing 
When PieDAO modifies the target weights for the underlying assets in a pie, they do not immediately take effect. Instead, a “poke” function on the pool is used to slightly adjust tokens’ weights toward their target weights set by governance. 

This creates small arbitrage opportunities (moments at which the prices in the AMM are not on par with the external market) within the pie which arbitrageurs can execute to move the actual balances toward their targets. Weight adjustments are executed linearly over a number of blocks so that pokes can not happen in quick succession. 

Over time this allows large scale rebalancing of the pool without relying on external markets to execute rebalancing trades.

## Indexed Finance
![Screen Shot 2021-01-25 at 4.57.09 pm.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2021_01_25_at_4_57_09_pm_ed8385cda0.png)
- Indices: 5 (DEFI5, CC10, DEGEN, ORCL5, NFTP)

- TVL: $30M 

- Governance token: Yes - $NDX

- Liquidity Mining: Yes - for supplying liquidity to DEFI5 or CC10 on Uniswap 

- Fee: No fee

Indexed Finance is a protocol focused on **passive portfolio management**. This means that the entire re-balancing and re-weighting of the indices happens automatically through on-chain processes. 

Governance is only needed to vote on decisions such as market sector definitions ( which projects should be considered for a new index), deployment of indices and approval of new management strategies. 

### Indexing Methodology
The current indexing strategy tracks specific market sectors, which are initially defined by governance with a set of criteria for token eligibility. A controller contract stores a list of tokens for each sector (up to 25 tokens) which is managed by governance according to the sector’s inclusion criteria.

Market sectors’ tokens are periodically sorted on-chain by their fully diluted market caps, which are extrapolated from their moving average prices as recorded on a Uniswap oracle. When an index pool is deployed, it is assigned a target size which is used to select the top tokens in that market sector. For example, the CC10 index has 10 tokens and its corresponding market sector list might have 15 tokens.

At deployment, tokens are weighted by the square roots of their market caps. Once a week, these weights are recalculated and assigned as new target weights on the pools autonomously. Each time a pool has been re-weighed four times, it may be re-indexed, meaning the index might remove on asset and swap it out for the next best candidate from the category list.

### Portfolio Structure
Index pools use a **fork of Balancer** with modifications that enable gradual re-weighing and re-selection of the underlying assets. Each token in the pool has a weight which represents the proportion of the total pool value held in that token. Tokens within a pool can be traded at prices determined by their weights and balances, as well as the pool’s swap fee, which is 2.5%.

By using an AMM as the holding mechanism for liquidity, index pools can generate returns beyond the growth of the underlying tokens whenever the fees accrued through swaps are greater than the impermanent loss from arbitrage. Note, the fee is higher than PieDAO’s to protect users from impermanent loss.

### Rebalancing
When the controller updates the weight targets on a pool, they do not immediately take effect. Instead, the actual token weights are moved toward their target weights whenever swaps are executed, with a maximum frequency of once per hour. This creates small arbitrage opportunities over time which arbitrageurs can execute to move the actual balances toward their targets.

When a new token is added through re-indexing, the pool uses price data from Uniswap as well as the pool’s own market cap to price swaps for that token within its AMM until the balance reaches 1% of the pool’s value, after which it is priced normally.

## DPI vs. PieDao & Indexed
As an index holder the technicalities behind the different index implementations might not really matter for you on the first sight but on the long-term they have an impact over the performance of the index token you hold.

For example, consider the way the different indexes re-balance. During a rebalancing a part of the tokens are sold to reach the target weights assigned by the protocol. In the case of the DPI index, this happens once a month, after the index has been assigned new weights by the methodologist (the core team). 

This means that the index holders are exposed to the price movements of that particular day when the DPI index re-balances. It might be the case that on the particular day the DPI buys new tokens they are at peak prices.

PieDao and Indexed.Finance both have a different portfolio structure. Here, the assets sit in an AMM liquidity pool and the re-weighting happens gradually as traders trade with the pool and thereby bring the balances to where the pool wants them to be. Since the buying happens gradually and never all at once, the pools are able to re-balance at cheaper prices.

For example, if the pool wants to decrease its exposure to the AAVE token, it will **gradually** decrease the Aave weight in the pool. This, in return, will attract traders to buy AAVE from the pool since it will cause AAVE to trade at a discount compared to external markets. 

Now you might notice that selling tokens for cheaper than the external markets (creating arbitrage opportunities) is not ideal for index token holders who own a share of the pool. This is why PieDAO and Indexed.Finance both charge a swap fee. In the case of Indexed.Finance this fee is 2.5% whereas PieDao charges a 1% fee.

The tradeoff here is the following: a higher fee protects index holders better from impermanent loss but a lower fee attracts more trading volume. 

**PieDAO & Indexed:** 
```Value appreciation of the index tokens + Trading fees earned - impermanent loss```


**DPI:**
```Value appreciation of the index tokens - rebalancing costs (trading fees + slippage) - management fee```

## PieDAO vs. Indexed Finance
The main difference between PieDao and Indexed relates to their governance. Indexed uses a model that is very “governance light”. All the logic relating to how Indexed.Finance indices re-weight is encoded on-chain. The price data comes from a Uniswap price oracle which triggers the re-weighting of the liquidity pool that we mentioned earlier. Once an index is deployed, governance doesn’t have to do anything except if it wants to update the portfolio contracts or change the methodology of an index.

With PieDao the weights are set by governance votes so it requires more participation. PieDao also has some indices with static weights like the BTC++ or USD++ which don’t require any governance because they are not intended to rebalance.

## Summary
Of course, there are other things to watch out for when choosing which DeFi index to buy. The security of the protocol is important, the TVL, the management fees, how the governance is set up and how much token holders can weigh in on important decisions.

Since DeFi indices are a relatively young category within DeFi, it is still too early to benchmark the performance of these various indices. In one year from now, it will be easier to compare which one is most interesting to hold as an investor. The same goes for security. The longer a protocol has existed out there with a significant amount of user funds without being hacked, the more likely it is that its code is secure. 

Without a doubt, we can say that exciting new things will happen within the DeFi index space. The fact alone that DeFi index holders can participate in the governance of their favourite index protocol is a 10x improvement over traditional finance. The competition between these various projects is ultimately beneficial for consumers as it will force experimentation and show which DeFi index design is the best.










A Comparison of DeFi Index Projects

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The ability to provide fixed-rate lending makes the DeFi space more accessible for mainstream users and institutional investors. In this areview we explore how Notional works.

Fixed Rate Lending & Borrowing with Notional Finance | Review by Cryptotesters

In 2020 we witnessed the explosive growth of decentralized finance (DeFi). What started as a small, insular movement is slowly reaching the mainstream. The benefits for users are hard to ignore: users are able to seamlessly lend, borrow and exchange tokens within a financial system that is secure, transparent, and globally accessible. According to DuneAnalytics more than 1m unique “users” have interacted with DeFi applications to date. The Total-Value-Locked in DeFi is [approaching $17b](http://defillama.com/) with no signs of slowing down anytime soon.

While the stars seem well-aligned for [DeFi](https://cryptotesters.com/blog/what-is-decentralized-finance), it is also evident that a couple of financial primitives are still missing before this system can be considered fully mature. One of these primitives is fixed rate financing. 

## What is fixed term financing and why is it needed?
Until now, most [DeFi lending platforms](http://cryptotesters.com/defi-lending-rates) like Compound, Cream, Aave etc. offer **variable interest rates for lending and borrowing**. Since they work with liquidity pools, the interest rate for every asset is determined algorithmically. 

If a lot of lenders **deposit** assets into the pool and there is **little borrowing demand** for the asset, the interest rate will be low. If the borrowing demand then increases, the interest rate will automatically surge to incentivise more lenders to supply more of the asset into the pool. As a result, interest rates are changing all the time on a block-by-block basis.


The reasons why fixed interest rates are crucial for DeFi adoption are quite evident. Users who lend their assets want to have certainty. It is simply more desirable to know how much interest you’re going to receive if you deposit your assets for a certain time period. In absence of fixed interest rates, DeFi users have to manually chase the best interest rates themselves, by withdrawing their assets and sending them to a higher-earning lending platform, which is both time and resource expensive. 

On the borrowing side, which is mostly composed of large traders, the need for fixed rates is even more urgent. These users borrow assets to pursue lucrative trading strategies. In essence, they borrow assets to put them to productive use and achieve a return on investment (ROI) that is higher than their cost of borrowing. If the cost of borrowing suddenly surges, the whole trade strategy could backfire.

## How Notional Finance works
From a user perspective, the process is quite intuitive, especially if you’re already familiar with other DeFi lending platforms. Since Notional is still in beta, the only asset you can borrow is DAI and the maximum amount you can borrow is capped at 997 DAI (these caps will be lifted in the next 2 weeks!)

1. Select a maturity for your loan (3 weeks or 3.5 months)

2. Select the amount you want to borrow

3. Choose how much collateral you want to deposit (min. 140%)

4. Confirm

![Notional1.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Notional1_669b3e901d.png)

Like on any other DeFi lending platform, the borrowed amount is paid out automatically to your [Ethereum wallet](https://cryptotesters.com/best-ethereum-wallets) once you have confirmed the loan.

![Notional2.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Notional2_86b912cf42.png)

Your loan position is reflected in the Notional dashboard. You can repay your loan at any point or extend it (“Roll”) to a longer maturity date if you wish. 

That’s pretty much it. Although the process is intuitive, the result is quite impressive! We were able to get a fixed loan at a 3% interest rate until April of 2021!

One last thing to note: although the interest rate is fixed, this doesn’t mean you’re liberated from having to ensure that your collateral level stays at a healthy level (min. 140%). To that end, you can deposit or withdraw collateral as you see fit in the Portfolio section.

## How does Notional Finance work under the hood?
The most important building block of the Notional system are fCash tokens. They are transferable tokens that represent a claim on a positive or negative cash flow at a specific point in the future. Essentially an internal accounting unit to keep track of who is owed what at any given time.

1. Positive fCash balances: are assets that can be **redeemed** for currency at maturity.

2. Negative fCash balances: are obligations or debt, where the owner has to **provide** currency at maturity.

These different obligations are tokenized and traded in Notional’s custom AMM implementation. Think [Uniswap](https://cryptotesters.com/tutorial/understanding-uniswap) but using a special liquidity curve that has been designed to **minimize slippage when trading fCash tokens**. This detail is crucial for Notional, as small changes in the exchange rate can cause large changes in the interest rates.

Every user in the system interacts with Notional’s liquidity pools. Furthermore, each maturity date has its own liquidity pool to ensure that lenders and borrowers have somewhere to buy and sell fCash at a good price. Let’s consider the fDAI pool with a maturity date of December 1 2020.

![Notional3.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Notional3_4ce52ab322.png)

### The Lender
A lender who deposits 100 DAI in notional effectively buys positive 105 fDAI (equity). The 105 fDAI are redeemable for 105 DAI at the maturity date. The exchange rate that the user gets implies a fixed interest rate on the loan between the moment of purchase and Dec1 2020.

### The Borrower
A user who borrows 100 DAI at a fixed interest rate, mints negative 105 fDAI (debt) and sells it for 100 DAI. By selling fDAI for currency, he/she receives the DAI up front in exchange for the obligation to repay a fixed amount on December 1 2020. This all happens under the hood in one transaction for the borrower. 

### The Liquidity Provider
The last missing piece in this system are the liquidity providers. Liquidity providers deposit the currency (in our case DAI) into the liquidity pool and ensure that there is always enough liquidity for lenders and borrowers to exit the system.

Like other AMMs, returns on the Notional AMM are driven to a large extent by trading volume, total liquidity in the pool, and the fees charged on trading. The more trading on a given liquidity pool, the greater the amount of fees accrue to liquidity providers. For more in-depth information on how liquidity providing works check out [Notional’s docs](https://docs.notional.finance/traders/using-notional/providing-liquidity).

## Conclusion
The ability to provide fixed-rate lending makes the DeFi space more accessible for mainstream users. Fixed rate borrowing on the other hand, will be a relief for institutional investors and traders and make crypto investing more similar to traditional finance.

It will be interesting to see if Notional will be able to attract enough liquidity to bootstrap the system and allow users to lend & borrow large amounts.  

Notional is currently getting ready for their full launch and will be running user interviews with the DeFi community over the next week. If you are keen to help Notional, you can sign up for an [interview here](https://docs.google.com/forms/d/e/1FAIpQLSc2FN5V4tKalYkjoX0KG52Uo1Ju2O1BAPkH_EucE1imXXrb7w/viewform?usp=sf_link) and earn $20 for your time if selected. 






Fixed Rate Borrowing & Lending with Notional Finance

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Options are one of the most important financial primitives in the traditional finance world. Now they are finally available in DeFi, on steroids with Hegic protocol.

Options are one of the most important financial primitives in the traditional finance world. Now they are finally available in DeFi with Hegic protocol.

How to trade options in DeFi with Hegic | By Cryptotesters

A new protocol has taken the DeFi space by storm: HEGIC. Coded over a period of a couple of months in a [city library](https://twitter.com/0mllwntrmt3/status/1305100993047265283) by an anonymous developer called Molly Wintermut, HEGIC is currently growing at lightspeed with over $50m being locked in the protocol and a [market cap of $85m](https://www.coingecko.com/en/coins/hegic).

### What makes Hegic special? 
In its current form, Hegic is a non-custodial options trading platform allowing users to buy put & call options on ETH and WBTC. Unlike centralized option trading platforms, Hegic is completely non-custodial, KYC less, composable (meaning it integrates with the rest of DeFi) and lets liquidity providers participate in the economic success of the platform.

![Hegic_LP.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Hegic_LP_d71b3617dd.png)

Before we go through each of these characteristics and the in’s and out’s of the platform in detail, we’ll do a short introduction on options.

## What are Options?
Options are financial instruments that allow the holder to buy or sell an asset at a specified price. They are derivatives since they derive their price from an underlying asset. The terms of the option are set by the options contract.

1. **CALL options**: allow the holder to buy the asset at a determined price within a specific timeframe.

2. **PUT options**:  allow the holder to sell the asset at a determined price within a specific timeframe.

Each option contract has a specific expiration date by which the holder must exercise the option. The price for which the option holder can buy (or sell in the case of a PUT option) the asset is known as the **strike price**. The fee that the option holder has to pay for having the right to buy (or sell) at the specified price is known as the **premium**.

## Why are Options popular?
Let’s begin by making clear that the global option markets are gigantic. Option contracts can exist for any financial asset whether it’s stocks, commodities or real estate and their volumes often exceed the underlying spot market volume (where buyers & sellers trade assets at face value) by multiples.

There are many reasons why options are so popular with traders. Let’s go over a few.

### Higher Potential Returns
The returns that can be achieved with options are uncapped. Consider a CALL option on Ether with a strike price of $500. If ETH goes up to $10.000 within the timeframe specified in the option contract, your return will be $9500 (minus the premium).

### Capital Efficient
Options allow traders to get the same level of exposure to the price movement of an asset than if they would trade on the spot market, while putting up much less capital.

For example, the ETH CALL option in the example above might cost $200, much less than if you would buy 1ETH at $500 on the spot market. 

### Less Risky
There are a couple of reasons why options are less risky than other instruments chosen by traders to get exposure to the price of an asset. For one, your downside is capped. Using our example one more time, the most you can lose is the $200 premium you paid for the right to exercise the option. If the price of ETH goes to $10 you would simply let the option expire without exercising it, while if you had bought 1ETH at $500 on the spot market you would have lost $490.

Compared to margin trading, which lets traders finance a large purchase by leveraging their capital, there is also no liquidation risk. It’s a fact that crypto markets can be volatile and whereas a margin loan can be instantly liquidated if there is a sudden downswing, options are only temporarily affected by price swings. If the asset price recovers after the downswing, the option can still be exercised at a profit.

### Hedging
Options are also an efficient and relatively inexpensive tool to hedge your positions. In simple terms, hedging is a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset. For example, if you are LONG on bitcoin, you can buy a PUT option that allows you to sell bitcoin at a favourable price if bitcoin were to crash. This PUT option would thus “insure” your overall portfolio from a crash in the bitcoin price.

## How to buy an option on Hegic?
Buying an option on Hegic is incredibly fast and seamless. Needless to say that like every application on Ethereum, no KYC is needed and your [Ethereum wallet](https://cryptotesters.com/best-ethereum-wallets) can be connected in one simple click.

![HEGIC_CALL_OPTION.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/HEGIC_CALL_OPTION_865c0f9900.png)

Next, you choose the asset you want the option contract for and the type of option. PUT options allow you to sell your asset at a specified price and CALL options allow you to buy the asset at a specified price. Usually, PUT options are for shorting an asset and CALL options are for long exposure.

You can then set the strike price, which determines the price at which the option becomes exercisable and define the duration of the option contract. You can play around with the inputs and see how they influence the premium or “Total Cost” you have to pay for the option contract.

![WBTC_OPTION.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/WBTC_OPTION_2e2c0ed93e.png)

Once you bought the option you will automatically see it appear in the hegic.co dashboard. In our case for instance, we bought a CALL option to buy 0.5 WBTC at a price of $15000 with an expiry date in 31 days (18 at the time of writing). Since the price of bitcoin moved upwards since the purchase, our option is currently in the money (ITM). If we would exercise it today, we would exit with a profit of $558. 

The profit can simply be calculated by subtracting the strike price and premium from the current asset price, in our case: 

```Profit = 0.5 *(17916-15000) - premium```

Note, that the option break-even price can fluctuate as the premium which you pay at the beginning when you buy the option is priced in ETH. Thus, if the price of ETH goes up or down it will affect the dollar value of your premium and therefore ultimately your profit.

If your option is in-the-money (ITM) at any time during the option's duration, you can manually exercise the option but you have to do it before the option expires else you won’t receive the payout. 

If you prefer a video tutorial to guide you through this process, watch DeFi Dad’s tutorial on “[How to Buy options on Hegic](https://www.youtube.com/watch?v=9P5cScthjsY)”.

## Providing Liquidity on HEGIC
One of the breakthroughs of DeFi is that it removes middlemen and allows users to participate in the important operations of the protocol. As such, users can provide liquidity to the option pools to collateralize the protocol. Options need to be collateralized by the platform since they represent an obligation to pay the user in case the option becomes exercisable. Centralized option trading platforms would do this in-house as it is a source of revenue but in Hegic this task is outsourced to the community. The more liquidity is provided, the more usable the protocol becomes as option holders can take larger positions at a better price.

The rationale for supplying liquidity is that, if, the premiums paid by option holders are higher than the payouts to options holders, the liquidity providers will accrue profits proportionate to their share of the pool. Moreover, liquidity providers receive $HEGIC rewards for contributing to the protocol and taking on risk.

![HEGIC_LP_PROVIDER.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/HEGIC_LP_PROVIDER_83bd1533af.png)

In our case, we contributed 35ETH to the ETH option liquidity pool. At the time of writing, we have a slightly positive P&L and we have also accrued over 10.000 $rHEGIC tokens (more on those later).

Effectively, when you provide liquidity to either the ETH or WBTC option pool you are short on volatility in the respective market. What this means is that if price movements are not too significant, liquidity providers have little risk exposure. 

In normal market conditions, PUTS and CALLS cancel each other out, meaning that if PUTS are in the money CALLS expire out of the money and vice versa. However, in the crypto market the option pool is often skewed towards CALL options, as most people are bullish on crypto prices. In the case of a sudden bull run, this is a risk you need to be aware of and take measures against, should you decide to become a liquidity provider.

## HEGIC tokenomics
$HEGIC is the future governance token of the Hegic protocol. More importantly, at present HEGIC is needed to buy a staking lot. Each staking lot requires 888.000 HEGIC tokens (currently $222.000). In return, staking lots receive **100% of the settlement fees** in ETH and WBTC generated by the protocol.

Since this is a lot of money for most ordinary people, developers in the community are already busy developing HEGIC staking pools that let users participate in a staking lot with any amount. 

Two Hegic staking projects already live are [zlot.finance](https://zlot.finance/) and [hegicstaking.co ](https://www.hegicstaking.co/) and a third is currently being developed by yearn.finance. 

The case for the HEGIC token is the following: the more option volume is turned over on the platform, the more settlement fees will be earned and the more interesting it will become to acquire enough HEGIC tokens for a staking lot.

In total, there are 3,012,009,888 HEGIC. By far the largest chunk of the supply, namely 40%, is reserved for liquidity mining until 2023. 80% of these rewards for Hegic protocol users go to liquidity providers and 20% go to option holders since both perform crucial tasks for the development of the protocol. The remainder of the supply is split across the Hegic Development Fund (core team), Early Contributors (third party developers building integrations & community tools), liquidity provision for the HEGIC token on [decentralized exchanges](https://cryptotesters.com/blog/what-are-decentralized-exchanges-and-how-do-they-work) and finally 3% was sold on the IBCO (read more [here](https://github.com/jmonteer/hegic-resources/blob/main/docs/Hegic%20FAQ.md)).

### Hegic Rewards for Liquidity Providers
When you provide liquidity to the option pools you receive a token called writeETH as proof for your deposit in the option liquidity pool. This token must be staked to receive $rHEGIC. In our case we provided 35ETH and received 11,200 $rHEGIC over a period of two weeks.

Now what is [$rHEGIC](https://etherscan.io/token/0x47C0aD2aE6c0Ed4bcf7bc5b380D7205E89436e84) you may ask. In short, $rHEGIC is an IOU. It will be exchangeable 1:1 against $HEGIC in the future but not now as the HEGIC core team wants to foster long-term alignment with the protocol. For $rHEGIC tokens to be exchangeable one of the following milestones needs to be reached: on-chain trading volume > $100M or on the 11/11/2021. Until then $rHEGIC can not be used for much. However, since it represents a claim on $HEGIC in the future it can be sold on Uniswap (albeit at a discount). 

![rHEGIC.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/r_HEGIC_f77d4eb480.png)

### Hegic Rewards for Option Holders
Users who purchase options on Hegic, receive utilization rewards (20% of total rewards) for holding options and using the Protocol. The exact amount you receive depends on the value and the duration of your options. Since they are distributed proportionally, it also depends on how much other option holders exist at the time of your purchase.

## Conclusion
All in all, HEGIC is one of the most interesting protocols in DeFi at the moment. Options are the missing piece in the array of financial primitives that are being replicated from the traditional finance world. Moreover, although HEGIC is only a couple of months old, it already has a vibrant community of developers contributing to the development of the protocol.

It will be interesting to watch if Hegic can attract more liquidity in the option pools. This liquidity is needed to cut the fees option holders have to pay for their options, which are currently not competitive with centralized option platforms. However, already today the platform offers advantages that centralized competitors will **never** be able to offer. No KYC, distributed ownership but most importantly composability. We can see the first effects of composability with Andre building on the Hegic stack to offer options on any ERC-20 token, not just ETH or WBTC.

Equally important, is the development of a secondary market for tokenized Hegic PUT and CALL options. Currently on HEGIC options can only be exercised when they are in-the-money. In other words it is worthless, as long as your option has not passed the break-even price. In traditional markets, an option also has value on the secondary market when it is out-of-the-money but volatility is high.


HEGIC PROTOCOL: Bringing option trading to the DeFi space

BasedXeno

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While bitcoin is the cryptocurrency with the largest market cap, Ethereum offers many opportunities to use bitcoin and earn interest. In this tutorial we explore how to do it and which DeFi applications work best with bitcoin.

While bitcoin is the cryptocurrency with the largest market cap, Ethereum offers many opportunities to use bitcoin and earn interest. In this post we explore how.

How to bring Bitcoin to Ethereum and earn interest in DeFi | By Cryptotesters

While the price of Bitcoin has increased sixfold within the past 12 months, and institutional buyers are entering at a steadily increasing pace, it can feel a little, well, boring to sit and watch while the Ethereum ecosystem vibrates with exotic software oddities transforming traditional financial primitives into new and improved forms. This revolution is [DeFi](https://cryptotesters.com/blog/what-is-defi). 

While merely owning Bitcoin already puts you among a select group of people at the bleeding edge of financial technology, there is always the tantalizing prospect of earning interest on it as an income-generating asset. There's a strong case to be made that Bitcoin is the "[soundest money](https://21lessons.com/14/)" ever created, and the best collateral the world has ever seen. So how can we put it to work? While there are "safe" ways to do this via centralized [crypto exchanges](https://cryptotesters.com/best-cryptocurrency-exchanges), the real magic is happening right now in the Wild West of yield farms & lending protocols, and so far the bulk of the action is taking place on Ethereum, far away from the tiny, simple blocks of the Bitcoin network.

Not to worry! In order to participate in the DeFI revolution that is currently underway in the Ethereum ecosystem, Bitcoin owners actually have several choices at their fingertips. First, we'll provide a brief overview of those choices, and then go into more detail about the various opportunities available. You can also be confident that you're not alone in wanting to be able to participate in the DeFi ecosystem - the number of Bitcoins represented on the Ethereum network have increased at an exponential pace, with over [170,000 Bitcoin now wrapped in some form](https://duneanalytics.com/eliasimos/btc-on-ethereum_1).
![dune.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/dune_b5b7fb62bb.png)
To begin with, the most important point to understand is: if you want to utilize the value of your Bitcoin within DeFi, for earning yield, taking out loans, or speculating, you'll need to have your Bitcoin "wrapped" so that it can be represented within the Ethereum network as a native token that can interoperate with other Ethereum-based services. The primary tokens that you'll use for this purpose are WBTC, HBTC and renBTC (there are others but these are the dominant options), and once you have one of those tokens you can put on a snazzy beret, load up your MetaMask, stick a crusty baguette into your Sushiswap tote and enter the infamous "[Future of France](https://twitter.com/lemiscate/status/1367413627054141441?s=20)".

## Why does Bitcoin need to be wrapped on Ethereum?
Let's quickly cover why Bitcoin needs to be "wrapped" in the first place. Each blockchain, such as Bitcoin, Ethereum or Polkadot are unique protocols - much like TCP or HTTP - and as such require a specific structure of communication. At their core, they simply don't speak the same language. The problem of how to get these different blockchains to be able to communicate with each other efficiently is an ongoing challenge with multiple solutions currently being trialled but, as it stands currently, we can't just plug a Bitcoin into another network - it needs to be transformed into code that the other network can understand. 

To get Bitcoin onto the Ethereum network we need a [native ERC-20 token](https://ethereum.org/en/developers/docs/standards/tokens/erc-20/) that represents Bitcoin. Of course, this leads to another issue - how can an Ethereum token represent actual Bitcoin? How can it maintain a pegged value? How do we get our Bitcoin back when we're done? The answer is that the underlying Bitcoin needs to be verifiably held somewhere by "custodians" - be they highly trusted institutions with [multisig keys](https://en.bitcoin.it/wiki/Multisignature), a decentralized custodian in the form of an incentivized network, or some form of hybrid approach - all with the design of allowing Bitcoin holders to feel safe having their Bitcoin held in return for the ability to deploy a native Ethereum token representation.

Now that we know why Bitcoin needs to be wrapped in order to participate in DeFi, let's look at the various ways you can get it.

## Buying wrapped Bitcoin on a centralized exchange or via a DEX
There are three main ways to get BTC into DeFi. 

### Option 1 - Centralized Exchanges 
You have the option of purchasing WBTC, HBTC or renBTC directly on centralized exchanges such as [Binance](https://ftx.com/#a=cryptotesters), [FTX](https://ftx.com/#a=cryptotesters), Huobi, [Coinbase](https://coinbase-consumer.sjv.io/NDj07) or Kucoin, but of course this comes with the standard caveats that centralized exchanges carry, such as not owning the private keys and having to KYC (although fiat on-ramping without KYC is an art unto itself). From there you can send your WBTC to an [Ethereum wallet](https://cryptotesters.com/best-ethereum-wallets) and head on out into the DeFi ecosystem.

### Option 2 - Decentralized Exchanges
If you **already** have ETH in an Ethereum wallet, then the journey to getting wrapped Bitcoin is even easier - you can head over to a [decentralized exchange](https://cryptotesters.com/best-decentralized-exchanges) such as Uniswap, Sushiswap, 1inch or Bancor and trade ETH for WBTC or renBTC, and in a couple of minutes you'll have some fresh bales of ERC-20 BTC ready to lug out onto the fields for a solid day of good, hard farming. The benefit of this approach is that there's less work and you are able to buy wrapped Bitcoin that can later be redeemed for actual Bitcoin once you're happy with your yield.
![Screenshot 2021-03-11 at 17.14.29.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screenshot_2021_03_11_at_17_14_29_f44512fb17.png)

### Option 3 - WBTC Cafe
The third main option for getting WBTC is to use [wbtc.cafe](https://wbtc.cafe/), an ultra-basic looking site that will swap BTC to WBTC and vice-versa. The cafe is very simple - input the amount of BTC you'd like to convert to WBTC, and add an Ethereum wallet address that you'd like to receive the WBTC. Then send the chosen amount of BTC to an address you'll be given, and in return an equal amount of WBTC minus both RenVM and Bitcoin network fees will be sent to your Ethereum address. 
![Screenshot 2021-03-11 at 17.12.51.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screenshot_2021_03_11_at_17_12_51_3ccd157ca1.png)

Personally my recommended methods of swapping BTC to a wrapped representation is to use options 1 or 2, as the wbtc.cafe method is both slow & mildly terrifying.

## The different Bitcoin tokens on Ethereum

### What is WBTC?
WBTC is "Wrapped Bitcoin"; an Ethereum ERC-20 token that is backed on a 1:1 basis with custodially-held Bitcoin, and is currently the most widely-used method of bringing BTC to DeFi, accounting for [~72% of all the BTC on Ethereum](https://defipulse.com/btc). The community-led project (initiated by parties including Kyber Network, Ren, and BitGo) was launched on the Ethereum mainnet in January, 2019, and aims to help bring the huge volume of Bitcoin trading over to the Ethereum ecosystem.

To facilitate the conversion from Bitcoin to WBTC, and to assure the fully-collateralized backing of WBTC with BTC, users initially convert their BTC through a trusted WBTC partner. You can personally verify that the WBTC is backed by an equivalent amount of BTC through a "[proof of reserve](https://wbtc.network/dashboard/audit)" system. WBTC is governed by the WBTC DAO, which makes decisions on adding & removing merchants and custodians via a multisig contract. With that being said, the default option is to purchase WBTC that is already on the market via a CEX / DEX.

Once BTC has been converted to WBTC, a range of opportunities emerge, such as the ability to [earn interest on bitcoin](https://cryptotesters.com/best-crypto-savings-accounts) by lending WBTC, utilizing Bitcoin-centric protocols like [Badger](https://badger.finance/) to earn yield, or provide liquidity to pools on decentralized exchanges such as Sushiswap and Uniswap.

There is a credible argument that WBTC does not adhere to true decentralization, and that the system is in the same class as the Circle-governed USDC. The WBTC system entails a reasonably high custodial risk as the BTC for WBTC is held in custody by a multi-sig wallet, which means that it is relatively centralized, and is also slow to be released on demand, unlike a hybrid-decentralized solution like renBTC.

Instead of covering HBTC in its own section, it should be enough to say that HBTC stands for Huobi Bitcoin, and is Huobi exchange's own version of wrapped Bitcoin. HBTC accounts for around 12% of the wrapped Bitcoin currently on the market, and is a centralized, custodial option like WBTC.

## A brief introduction to Ren: RenVM, RenBridge and renBTC
Ren is a decentralized protocol, designed as a solution to bridge assets across blockchains. One of the assets issued by the Ren protocol is renBTC, an ERC-20 token that provides an Ethereum-network representation of underlying Bitcoin. renBTC is backed on a 1:1 basis and is redeemable for the underlying BTC. While under the hood there are large technical differences, trust assumptions and custody methods between WBTC and renBTC, the simple explanation is that in both cases BTC is given to a custodian in exchange for an Ethereum representation. 

The difference in technical details, however, is that Ren is largely decentralized rather than relying solely on a  set of trusted parties, and this allows RenVM to facilitate the process at a much faster rate. The architecture is supported by Ren Darknodes - nodes that host the RenVM, incentivized by being compensated in with fees that are paid by the user for cross-chain movement. These darknodes are bound to act honestly because they have to put up collateral which gets slashed if they don't adhere to the rules of the Ren protocol.

### RenBridge
[RenBridge](https://bridge.renproject.io) is the user interface that enables you to bridge BTC to renBTC. RenBridge 2 was released on the 15th of February, 2021, and brings BTC, BCH, Zcash and Doge to Ethereum and Binance Smart Chain. 

## Earning yield on Ethereum with your wrapped Bitcoin
So now that you've got your Bitcoin on the Ethereum network, it's time to start generating some sweet yield.  I'll use the example of having WBTC and putting it to work in this section. The first thing we need to do is choose a DeFi protocol that provides a solid APY for WBTC, so let's check out Curve Finance.

Curve is one of the most trusted and popular [automated market makers](https://cryptotesters.com/blog/what-is-uniswap) (AMM) in the DeFi landscape, and the Curve sBTC pools are very attractive, with APYs as high as 20%. In order to contribute to the sBTC pool you need to have sBTC, renBTC or WBTC in your Ethereum wallet, as well as some ETH in order to pay for gas. We can then visit Curve, and go to the sBTC pool to deposit our WBTC.
![curve-2.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/curve_2_b303170129.png)
We could provide one or all three versions of wrapped Bitcoin to the pool, but in this case we just provide WBTC. Behind the scenes Curve does some magic and will split the WBTC that we deposit into the three different types of wrapped Bitcoin needed to provide liquidity to the pool.

Select "Deposit and stake in gauge", and your Metamask will prompt you for approval of the transaction fee. 

![curve-3.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/curve_3_1f93c9d383.png)

Once that's done you can head over to the "[Profit](https://www.curve.fi/sbtc/profit)" page where you'll see your accrued profits in your selected denomination (BTC, USD, tokens). 

Over time, your staked Bitcoin will start earning fees that are collected by Curve and distributed to liquidity providers. The fees themselves are compounding, meaning that your collected fees go back into the pool and earn more fees on your behalf. You can claim your rewards at any time, of course but with Ethereum gas fees being as they are you'll probably want to wait until you've collected a reasonable amount to make it worth your while. 

If you feel like you've farmed enough profit to be satisfied, or would like to put your Bitcoin to work somewhere else, you can always withdraw your deposited WBTC via the Withdraw page.

If this all sounds like a lot of work, you're not wrong! Luckily, there is another option that removes a lot of the extra steps, one that is now acting like a magnet for a lot of the Bitcoin entering the Ethereum ecosystem.

## Enter Badger - The Schelling Point for Bitcoin on Ethereum
With the growing interest in bringing Bitcoin as collateral to DeFi, a dominant player has emerged in the recent months in the form of the fair-launched, community-owned [Badger DAO](https://badger.finance/), a strongly YFI-influenced project focused on optimizing wrapped Bitcoin yields. The primary benefit of using Badger rather than managing the yield farming yourself is that Badger identifies and aggregates virtually every Bitcoin-based opportunity into one place, and adds some sweetener into the bargain in the form of Badger's governance token: BADGER. 

Badger offers yield-generating opportunities in the form of [Sett's](https://badger-finance.gitbook.io/badger-finance/sett/overview) - tokenized Bitcoin vaults that model Yearn.Finance V1 vaults, allowing users to deposit assets and gain access to automated strategies across DeFi protocols.These Setts sit on top of DEX liquidity pools, such as [Curve's renBTC, sBTC and tBTC pools](https://www.curve.fi/pools), which themselves offer yield in exchange for adding liquidity. Let's take a look at how an automated strategy works, using Badger's sBTC SETT Vault:

1. Deposit wrapped BTC into the Badger sBTC pool

2. Receive back a sBTC LP (liquidity pool) token

3. The sBTC LP token is deposited into the BadgerDAO vault 

4. The vault accrues value via swap fees & harvests CRV

5. $BADGER governance token can be claimed periodically

![sett-vault.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/sett_vault_90a096f767.png)

Badger places a really strong emphasis on the community, and has assembled a talented and constantly growing team of "Badger builders" who take it upon themselves to expand the ecosystem, improve existing products and [create new products](https://badgerdao.medium.com/the-badger-cetedel-program-edbf62c120b6) that strengthen the value of the Badger DAO. There are lively discussions about new ideas & proposal in the Badger discord, and a growing number of online evangelists, including crypto influencer & recently-elected Council of Badgers seat holder [Gabriel Haines](https://twitter.com/gabrielhaines): 

> "Badger has a very simple narrative - to bring BTC to DeFi...if you want to come into DeFi today with your BTC first you need to go to wbtc.cafe to wrap, then you need to go to Curve to LP, then you need to go to Yearn to automatically lock in your yield. This process is hard. Badger is building a platform that will allow BTC holders to get into DeFi all on one page in a few clicks."

One of the main benefits of using a yield aggregator like Badger is that the often painful [gas fees](https://cryptotesters.com/blog/ethereum-gas) associated with managing staking & LPing is "socialized" - the costs are distributed across all members, leading to smaller overall fees while at the same time enabling an individual user to enjoy the benefits of intelligent rebalancing strategies, without needing to know all of the technical details of the underlying protocols, so using Badger gives the Bitcoin user access to largely passive DeFi investing.

While at the moment the BADGER token that is offered as part of the yield rewards when staking & LPing via badger.finance ostensibly has no intrinsic value outside of governance, it should be noted that all fees generated via the Badger dapp go to the Badger DAO treasury, and holders of the BADGER token are able to vote on future proposals that could choose how to distribute these fees. 

## What are the risks of using Bitcoin on Ethereum?
Moving your Bitcoin to the Ethereum network isn't risk free. It's important to understand that and to be aware of the risk-reward before you start moving your hard-earned Bitcoin across, some of the risks are outlined below:

- When you use a custodial service like WBTC, you are trusting a centralized or partially-decentralized entity and its associated infrastructure, which entails associated systemic and human risk
- Exposure to 51% attacks on both the Bitcoin and Ethereum networks
- The RenVM network entails certain unique risks based on the network design, including collusion and attacks on the network
- There is always smart contract risk on the Ethereum network, and audited contracts are no guarantee of safety
- Yield is often delivered in the form of a protocol's governance token, which in itself may not have intrinsic value or may drop sharply in value in comparison to Bitcoin, ultimately leading to much lower realized yields

Ultimately the safest place to keep Bitcoin is on Bitcoin, but with the risks being understood the potential return generated on bridging BTC to Ethereum can make it worthwhile. If you enjoyed this tutorial and would like to discuss it with fellow crypto enthusiasts, hop into our [community Telegram channel](https://t.me/joinchat/Tg0yEnDhEQN6Qt4J).




How to earn yield on bitcoin using DeFi

Lui Kohl

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PieDAO allows users to buy indexes of tokens to get exposure to a variety of tokens in the DeFi space without having to purchase each of them individually.

A beginners guide to index investing and staking in DeFi with PieVaults

For those of us overwhelmed with the constant flurry of activity in [DeFi](https://cryptotesters.com/blog/what-is-defi) wanting something to “set and forget” while it earns for us, PieVaults might be the optimal solution. In this article I’ll briefly introduce index investing and then look at how PieDAO facilitates it. We’ll explore their shiny new PieVaults and what they can do for you. Lastly, we’ll take a look at their oven and how it can almost completely eliminate your entry[gas costs](https://cryptotesters.com/blog/ethereum-gas) when minting new pie tokens. 

Let’s start with the basics. I’ll assume you already know about [DeFi](https://cryptotesters.com/blog/what-is-defi). If not, start [here](https://cryptotesters.com/blog/what-is-defi). 

## What is index investing? 
Index investing is when you have an asset that represents a basket of other assets. The idea is that by holding many goods the risk is diversified and mitigated. Put simply: if your thesis is that DeFi or crypto in general will go up but you don’t know which project in particular will outperform, then an index would suit you nicely. A well known example of an index fund is [Vanguard's S&P 500](https://investor.vanguard.com/etf/profile/VOO) fund which tracks the top 500 most valuable publicly traded US companies. Index investing has been growing in popularity in traditional stock investing for decades reaching [$10 trillion-in-assets](https://www.ft.com/content/a7e20d96-318c-11ea-9703-eea0cae3f0de). 

As of recently,  index investing has come to DeFi with a suite of improvements over its traditional counterparts. One innovative provider of index investing in DeFi, which we will be exploring here, is [PieDAO](https://www.piedao.org/).

![Screenshot 2021-01-04 at 22.52.07.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screenshot_2021_01_04_at_22_52_07_5ca82574b6.png)

## What is PieDAO?
To understand PieDAO, it’s easiest to start from scratch. It is a DAO (Decentralized Autonomous Organization) whose members propose indexes that could produce great returns, referred to as "pies". The community then backtests the indexes and research them further, weight them for risk and so on. Once satisfied that the pie would be valuable for investors, the DAO votes on whether to add it to the catalog or not. If the vote passes, a shiny new pie goes to market and can be traded on Uniswap or Sushiswap. More advanced users can also choose to directly mint the pies. 

Now you have an idea what PieDAO is and how pies are created, let’s move to their newest, freshest pie using the brand spanking new PieVault tech. 

## The YPIE
PieDAO has just [released](https://medium.com/piedao/announcing-ypie-pievault-and-sushiswap-collaboration-a89b102e81e7) a new pie, the [Yearn Finance Ecosystem Pie](https://pools.piedao.org/#/pie/0x17525e4f4af59fbc29551bc4ece6ab60ed49ce31) (YPIE). The pie is designed to give its holders  complete exposure to the Yearn network, currently including high quality projects such as: Sushi, Cream, Pickle and more. The secret sauce is in the PieVault tech powering this pie.

 ![ypie_image.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/ypie_image_2e9beda7b1.jpg)

PieVault tech gives the pie superpowers of metagovernance, native staking, lending and interest bearing assets. 

This means when you buy the YPIE token, the underlying assets held in the YPIE will be deployed across DeFi, accrue interest and bounce between various protocols for the best return. Because PieVaults access the underlying assets, it’s possible to participate in the governance proposals of each native protocol. For example, YPIE holders can use their AAVE tokens held in the YPIE fund to participate in Aave governance votes. 

DOUGH, PieDAO's native governance token for, acts as a proxy to vote gas-free through Snapshot across all the underlying assets. 

![image1.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/image1_c5df4ad3c2.jpg)

Let’s dive a bit deeper into what is happening once you own some YPIE tokens. Every YPIE token represents a share of the total pool assets and the rewards earned by the YPIE fund accrue to token holders in the base YPIE token. 

As an example, if you hold one YPIE token worth $1 and the total pool value is $10, your token represents 10% of the pool's assets. As the whole pool collects yields from the various strategies it pursues, every share can be redeemed for an ever large amount of base assets. If you are familiar with traditional ETFs, this is similar to an accumulating ETF, where the dividends are rolled back into the fund, rather than paid out. 

## Additional Rewards with Sushiswap
While the YPIE token puts the underlying assets to work earning rewards for you, in typical DeFi fashion, the token itself can also be staked to earn additional yield. YPIE is currently featured on SushiSwap’s [Onsen](https://sushiswap.fi/pair/0x5f30aac9a472f6c33d5284f9d340c0d57ef33697) menu, Sushiswaps new liquidity mining program, which means you can either trade or mint some YPIE and then stake it as a liquidity provider to earn $SUSHI. 

![sushi_pie.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/sushi_pie_e7b9e1be58.jpg)
## Minting Pies
Now for the cherry on top, it’s possible to mint your new YPIE tokens while saving 97.5% of the gas costs. To this end, PieDAO has an oven where the pies are baked. In practice, this means anyone can add ETH to the oven and once a 10 ETH limit is hit, the oven runs and mints new YPIE tokens with the gas costs being eaten by the DAO treasury. 

The oven checks every 15 minutes and note that there is a 30 ETH cap for every baking session to minimize risk per bake, any remaining ETH is rolled into the next bake. Importantly, once your tokens are baked, you can withdraw your fresh wafting YPIE and go stake them.

![baking.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/baking_d404612d52.jpg)

## Selling your YPIE
Now let’s complete the journey, imagine some time down the track you’d like to take your profits. As alluded to earlier, when you hold YPIE you own the token as well as the underlying assets. That means when you sell, you are welcome to either directly trade the YPIE token for ETH or redeem it to receive the underlying assets. For those already investing in traditional indexes this must sound like a futuristic concept. Imagine holding a vanguard index where you can decide to redeem it against all the underlying assets at any point without any paperwork or other hassles. Welcome to DeFi. 

![redeem.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/redeem_ebfa06ccee.jpg)

## Conclusion
To close the loop and offer a TLDR, PieDAO offers index investing with superpowers. The YPIE token is a complete portfolio of the Yearn ecosystem that empowers you to stake the YPIE token for Sushi as well as stake, lend, bounce and govern the underlying assets. 

In 2021 PieDAO is looking to create more pies taking advantage of PieVaults, in discussion currently:

- An [aggressive yield farming pie](https://forum.piedao.org/t/pip40-yield-farming-autoharvesting-and-reinvesting-pie/340/7) that auto harvests and reinvests yield 

- A blue chip lending pie including Yearn, Aave, Synthetix and Sushiswap 

- Converting BCP (Balanced Crypto Pie) which is composed of 33.33% wBTC, 33.33% wETH, 33.33% DeFi into a PieVault to put the 33.33% of DeFi to good use lending and governing 

To learn more, head to [PieDAO](https://pools.piedao.org/) or directly to [YPIE](https://pools.piedao.org/#/pie/0x17525e4f4af59fbc29551bc4ece6ab60ed49ce31). If minting with 97.5% gas savings sounds good, check the oven out [here](https://pools.piedao.org/#/oven). 


Dennis Daiber

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raders and investors analyze chart patterns in order to better understand the current situation on the market. Applying known indicators and patterns to historical price data they try to forecast the future performance of an asset. 

Traders and investors analyze chart patterns in order to better understand the current situation on the market. Applying known indicators and patterns to historical price data they try to forecast the future performance of an asset. Learn how.

The Basics of Chart “Analysis”: How To Read Crypto Trading Charts Patterns By Cryptotesters

Traders and investors analyze charts in order to better understand the current situation on the market. Applying known indicators and patterns to historical price data they try to forecast the future performance of an asset. 

There is an abundance of advanced chart patterns that cover any edge case, and you can dive into this world with a bit (a lot) of experience under your belt. But first: What is the purpose of a chart?

A chart, when you see it on TV, mostly consists of a squiggly up-and-down line. But that doesn't help you understand the respective market at all. These very basic depictions of a price curve are mainly there to give you a rough idea of the price development over a long time period. To be able to more closely examine a chart, most traders turn to charting tools such as TradingView, in order to get very detailed and granular price data sourced from various crypto exchanges along with a set of tools to analyze these charts. This practice is commonly referred to as “technical analysis”.

We believe that you can develop an edge over the majority of crypto market participants by understanding a few very basic principles of technical analysis. In this article, we’ll therefore walk you through the most useful heuristics and commonly used terminology in order to provide a glimpse into the world of technical analysis.

*Caveat: Technical analysis is not a science that can be blindly trusted. It can provide useful heuristics to make an educated guess where the market might be headed. Most traders use a combination of technical analysis and fundamental analysis to make informed bets.*

## What are Candles?
The most common form to visualize the price on any asset is the “candle.” It conveys, at a first glance what exactly happened during the observed time period. A candle usually consists of three parts:

- The **body** is either red or green, denoting the direction the price has taken during this time.
- The **upper wick** denotes the highest price during the trading period.
- The **lower wick** shows the lowest price of the asset during the trading period.

![candle.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/candle_f150716883.png)

(If you wonder what “bullish” and “bearish” refer to, we encourage you to read up on “[The A-Z of Trading](https://www.bitwala.com/blog/trading-terminology/)”).

In most charting software (we use [Tradingview](https://www.tradingview.com/)), candles can be configured to range from “yearly” to as little as “one second”. Your configuration depends mostly on the horizon of your investment - if you want to trade bitcoin today, you need not worry about the next 5 minutes or days, you’re more interested in guesstimating where it might be headed over the next weeks, months or years.

Here are two representations of the  bitcoin chart in two different configurations:

### Weekly Chart
![_WEEKLY_01.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/WEEKLY_01_53b406f5c4.jpg)
Each vertical candle represents the price development of seven consecutive trading days. Since the chart is mostly composed of green candles, we can infer that the price has risen all throughout, and that we're on our way to a new ATH  (“all time high”). 

### Monthly Chart
![_MONTHLY_01.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/MONTHLY_01_fe92b99231.jpg)
Each vertical candle represents the price development of 30 to 31 consecutive days. You can see that in the period circled in both charts, the price action is displayed less detailed (ie “smoothed”) and does not distract from the overall view as much as in the weekly view. Increasing the interval of the candles can remove some “noise” that is irrelevant to your investing timeframe. 

## Support, Resistance and Trend Lines
When looking at the chart of an asset the first time, it’s a good idea to zoom out and digest the complete history of prices the asset has traded at. You can then easily ascertain the relative performance of the coin in question. Most importantly, you can grasp where the respective highs and lows for an asset lie, if historically it is trading “rather high” or “rather low” in relation to recent prices. Additionally, you’ll be able to deduct areas of “resistance” and “support”.

Although bitcoin’s narrative of “[lambo moon](https://www.bitwala.com/blog/trading-terminology/)” tells us a story of ever increasing prices, in reality there have been numerous periods where price has either oscillated around a specific region or “chewed” at breaking above or below a certain number. 

These levels are commonly referred to as  “support” or “resistance”, depending on whether the price is above or below these levels. If the current price of a crypto asset is above a region around which the price has traded intensely, we refer to the region as a “support”. If it is trading below the line we label it as a “resistance”. 

These lines tell us that around a certain price level a large number of market participants has in the past **felt comfortable selling their asset (“resistance”) as it has reached a “high” price or buying the asset as it is historically not likely to become cheaper (“support”)**. They are mostly applied in the shape of a horizontal line that touches as many closing or opening prices as possible. 

With very basic knowledge, one can attempt to make an educated guess whether the price is likely to meet this area again, and, if it does, how it could perform thereafter. 

### Example: Monthly
A basic example of a support- and resistance formation can be found in the monthly chart of Bitcoin starting end of 2017. 

First, we mark the ATH from December 2017.  A line extended from there (the top end of the wick of the December 2017 candle) will cut through to the present day without touching the price curve. This tells us the price level hasn’t been crossed and thus the line serves as a (weak) resistance. 

Then, from the bodies of the December 2017 and January 2018 candles, we draw another parallel line. Notice that the line has a total of five touchpoints with no interference:

- 1 & 2: represent the upper ends of the December and January candles (price closes below the line, the line is thus a resistance line)
- 3: The upper wick of the June 2019 candle, resistance confirmed
- 4: The close of the October 2020 candle resistance tested
- 5: The opening (lower end) of the November 2020 candle. Finally price breaks the resistance!

![_MONTHLY_02.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/MONTHLY_02_c3f40679b2.jpg)

### Example: Weekly
We can apply the same technique to the weekly chart of the same interval and come to different conclusions.

First, we mark the ATH from December 2017:  A line extended from the top end of the wick of last week of 2017. This line “hangs free” until present day and has no further touchpoint. As the current price trades below this line, it serves as a (weak) resistance. 

![_WEEKLY02.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/WEEKLY_02_bf8633c869.jpg)

From the bodies of the candles (last week of December and first week of January), we draw a parallel line. Notice that the line has only three touchpoints:

- 1 & 2: The upper ends of the Weekly Candles from December / January
- 3: The upper wick of “last week”

This then puts the current price below both of these lines - they are *resistance* lines. 

Interpretation: From looking at both charts, we can infer that:
 
- short term (weekly), it might be difficult to reach a new all time high very soon (because of two resistance lines above the current price)

- long term (monthly), we face only one resistance line (the ATH), and one support which, if established, could serve as a base for repeated recovery attacks on the ATH

From there you can make an informed decision. If you are a short-term investor, you might face the risk of both weekly resistances being confirmed: The price may drop, so you don’t buy. If you are a long-term investor, you could proceed with the buy and set a stop-loss at the support (automatically selling if the support price is reached).

## Trend Lines
A variant of the horizontal support or resistance is the “trend line”. It is, while also straight, applied at an angle across as many closing or opening prices as possible. It can equally serve as support or resistance, depending on the relative location in regards to the current price.

A perfect example would be the 2018 bear market (daily candles):

![trend_line.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/trend_line_6d4c2e0ff5.jpg)

You can see that the price of bitcoin over the course of months has touched (“tested”) the $6000 mark without breaking below. In addition, we notice a tendency of the movements away from the $6000 price becoming weaker of time. To market participants, it became obvious that the price would either fall dramatically if it didn’t break the resistance, or move up sharply if the support held and the price moved outside of the trend line. The rest, as they say, is history.

### Considerations
Here are some things to consider when looking for trend lines:
- Make sure most price movements happen within the desired price corridor you’re looking to observe. 

- Make sure the line is touched, not breached, by a majority of open/close prices in the timeframe you’re looking to observe. 

- The bigger the timeframe, the more meaningful the line.

- More than one line can be applied to a chart, but don’t overdo it, you won’t see the forest for the trees.

## Moving Averages
**Moving Averages** are technical indicators used to smooth out the price data from volatile markets by creating a constantly updated average price. Moving averages are a good way to evaluate momentum, confirm trends and define support and resistance areas. There are two main types of moving averages: simple and exponential. **Simple Moving Average (SMA)** is calculated by taking  the arithmetic mean of a given set of prices over a certain number of days. For example it can be a 20, 50, 100 or 200 day moving average. **Exponential Moving Averages** provide greater weight to the price on more recent days, making it more responsive to the most recent data points. For our purposes we will apply the **SMA**.

### Applying Averages
Essentially, Moving Averages filter out the “noise” when trying to [interpret charts](https://www.bitwala.com/academy/how-to-understand-a-bitcoin-chart/). Because it is a lagging indicator based on what happened in the past, it cannot be used to predict the price, but rather provides confirmation to an analysis.

![50-100-200.jpg](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/50_100_200_830b5c0ee6.jpg)

Looking at the daily chart post-2017, we observe that the three Moving Averages: 
- 200 day (red)
- 100 day (blue)
- 50 day (green)
pull apart as price drops. As price bottoms and becomes less volatile, they trend back together. 

We are looking for moments when the Moving Averages not only trend together, but when one MA is crossed by another MA of a smaller time frame.  In particular, we are looking for “Golden Crosses”, which form between the **50 and the 100** as well as the **100 and the 200 MAs** respectively, as they bear significant relevance statistically.

Towards the end of the time series, there’s a spectacular convergence of three “crosses'' that markets look for when analyzing moving averages. 
- (1) the 50MA crossing the 100MA: A “Golden Cross”, indicating that the price is rapidly climbing 

- (2) the 50MA crossing the 200MA. 

- (3) finally, the 100 MA crossing the 200MA: Another Golden Cross!

This second Golden Cross confirms our assumption from the previous Golden Cross. 

Notice that at this point, while price has already recovered to pre-crash prices around the $6000 mark, there is still a massive upward trend that follows. 

### Take Aways
Here are some key points to take into account when observing Moving Averages: 
- The “longer” the MA the more significant the price resistance or support at that level

- Crossing Moving Averages indicate a meaningful change in trajectory of the asset. 

- “Golden Cross”  (a shorter Moving Average crossing the next-longer Moving Average from below to above) implies movement to the upside: The “newer” average prices are trending higher than the “older” average prices.

- A “Death Cross” (a shorter Moving Average crossing the next-longer Moving Average from above to below) implies movement to the downside, ie. the “newer” average prices trend below the “older” average prices.

- You don’t have to make a decision immediately after detecting a crossing of Moving Averages. If you are a long-term investor, you may wait for your assumptions to be confirmed, then make an informed decision. 

Equipped with this knowledge, you should be able to read a basic chart, ascertain the key price levels of any coin, given it has decent volume and a long enough trading history to provide at least a handful of candles and enough track record to enable calculation of Moving Averages. But as the mantra goes: “DYOR”, and this will definitely help you to do your own research. Remember, time in the market beats timing the market, so don’t pay attention to very short-term price fluctuations. Instead, zoom out, take a step back and paint some lines!

This tutorial was written by the in-house expert trading team @Bitwala, our long-term crypto sponsor. [Bitwala](https://bitwala.x89scb.net/1xYMd) is a neo-bank and crypto brokerage in-one. The [Bitwala wallet](https://cryptotesters.com/best-non-custodial-wallets/bitwala-review) also comes with a crypto debit card allowing you to cash out your crypto as well as a bitcoin interest account allowing you to deposit bitcoin to earn interest! In order to support your first trading efforts, they will give you a €20 sign-up bonus after your first trade if you sign-up using [our link](https://bitwala.x89scb.net/1xYMd).

BONUS: One lucky [new sign-up](https://bitwala.x89scb.net/1xYMd) will receive €100 paid out in bitcoin. To enter the raffle, DM us on Twitter and notify us that you signed-up.

If you’re quick enough, you’ll also be eligible for [4% crypto cashback on your card purchases](https://www.bitwala.com/cashback-bonus/) all through December!




















The Basics of Chart “Analysis”: How to read crypto trading charts patterns

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The global lottery market size was $320 billion dollars in 2019. However, the lottery market industry has seen little innovation over the last few decades and is plagued by problems. Can crypto and DeFi make it more fair?

How to play the lottery without ever losing using PoolTogether | Cryptotesters

The global lottery market size was $320 billion dollars in 2019 and is expected to reach $390 billion by 2026. However, the lottery market industry has seen little innovation over the last few decades and is plagued by problems.

For example, one can’t participate in the majority of current state lotteries remotely - tickets are only sold in physical form and only on the territory of the state conducting the lottery.

Moreover, the current mainstream lotteries are absolutely intransparent. The organizers make the rules, print and sell tickets and draw the numbers - and the process largely happens behind-the-scenes. Whatever details the players are allowed to know, they learn from TV, which is a one-way medium with no room for feedback or interaction.

These lotteries may be completely unfair - but we can’t tell because we can’t access the details of how they are conducted.

## Can we make the lottery industry more fair using DeFi money legos?
The short answer is yes - and the project building the future of lottery is called [PoolTogether](https://app.pooltogether.com/?referrer=0x79c4213a328e3b4f1d87b4953c14759399db25e2). In short, PoolTogether allows users on the internet to pool their assets together and collectively invest in yield-producing lending markets in the DeFi space like Compound. The interest generated each week goes into a prize pool which is then allocated to one random depositor at the end of the week. This process is repeated every week and users who leave their assets in PoolTogether are automatically re-enrolled for each week’s prize pool.

[Check out Gabriel Haines’ comprehensive  PoolTogether tutorial](https://www.youtube.com/watch?v=7jMupcl8fxM&feature=youtu.be)

![Screen Shot 2020-10-29 at 1.28.43 pm.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2020_10_29_at_1_28_43_pm_8ccf3ddb9f.png)

So what’s cool about this? Well, first, you can win a ton of money each week but you **can not lose**. Your deposit is just used to generate interest for the prize pool **but it remains yours**. You can withdraw it at any time.

Secondly, unlike traditional lottery, [PoolTogether](https://app.pooltogether.com/?referrer=0x79c4213a328e3b4f1d87b4953c14759399db25e2) is global by default. Anyone in the world with an ethereum wallet can participate. It effectively allows random people on the internet to team up and save together in a completely trustless way.

Last but not least, the fact that the entire system is built on the Ethereum blockchain opens up boundless possibilities and transparency. Smart contracts automate the entire operations of the platform and anyone with a bit of technical knowledge can read through the code and get an understanding how the platform works. 

Moreover, users can verify on-chain at all times if the assets deposited in PoolTogether correspond to what’s shown in the PoolTogether app, they don’t have to trust PoolTogether to act truthfully. This even extends to the selection of the prize pool winner for which PoolTogether uses Chainlink’s VRF (verifiable randomness function). This integration enables the protocol to randomly-select prize pool winners without needing to rely on the core team. Chainlink VRF is a secure RNG (random number generator) purpose-built for smart contracts that generates a provably fair source of on-chain randomness. The VRF can be independently verified by users as unbiased through a cryptographic proof. 

## Democratization of lottery
Anyone familiar with PoolTogether knows that it has been around for a while. What’s new however, is the recently launched V3, preparing the app for a gradual decentralization of its core protocol components.

As such, users will be able to independently create new prize pools using self-created yield strategies. Currently, there is only one prize pool denominated in DAI and using the Compound protocol as its yield source. This makes sense as it’s one of the safest protocols in the DeFi space. However, with the recent upgrade users can decide to create more “experimental” strategies producing higher yields and thus higher prize pools.

![Screen Shot 2020-10-29 at 1.05.39 pm.png](https://cryptotesters-images.s3.eu-central-1.amazonaws.com/Screen_Shot_2020_10_29_at_1_05_39_pm_d94a987857.png)

Another cool feature is that since the contract address of the pool is public any third-party can decide to deposit additional assets to the pool ( as shown in the picture above) - effectively sponsoring the prize pool and using it as a marketing tool to promote their token.

We’re looking forward to all the cool applications that will be built on top of the PoolTogether protocol. 

*Have you used [PoolTogether]([PoolTogether](https://app.pooltogether.com/?referrer=0x79c4213a328e3b4f1d87b4953c14759399db25e2))? Jump in our [Telegram](https://t.me/joinchat/IOe3w04NMhLuDEo3ekLeCQ) to discuss PoolTogether and other fun DeFi topics with us*









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