I have read a dozen of posts around the new cubdefi.com, yet none of them really address core questions of why it is needed and where the value actually comes from or what it is actually about in a way I easily can understand. This is my attempt to explain everything in a human language without any hype...
All this is in how I personally understand it and I might be totally wrong on some of the aspects. So please let me know in the comments if anything is factually incorrect so I can adjust my view.
1. Automated Market Makers
In the traditional finance markets, buying or selling stocks, currencies,... happens in a way where people are putting orders to sell at a certain price and buy at a certain price, when they meet a trade is made and a new price is established on the exchange they are using. Smart Contracts that run on Blockchain Technology allowed a new model to do this in a decentralized way. Instead of having order books at both sides, 2 pools are created that include a certain currency let's say Ethereum which is worth 1800$ and USDT which is worth 1$ and these are directly traded against each other.
Example:
So if one pool has 100 ETH in it and the other pool has 180000 USDT in it, a price of 1800$ is established for ETH/USDT trading pair. In order to buy ETH, you deposit USDT into the USDT pool and will get some ETH from the ETH pool which will adjust the price since there are now less ETH and more USDT in the pools. This adjustment is done by an automated market maker algorithm.
2. Yield Farming
In order to give people a bigger incentive to provide liquidity or use a platform, most projects created their own coin that was being rewarded on top of the liquidity provider fee giving better returns since those tokens could be sold on the market. The idea behind them from what I understand is that they are 'governance tokens' and give a vote in the decisions and the direction a platform is going. Part of the revenue being paid out to token holders potentially giving them a passive income stream if one day it becomes widely adopted. This mechanism caused the DeFi craze in 2020 as people started to deposit coins, take loans against them, use those to deposit on another platform, and so on in order to get as many of these coins that were being given out as incentives to use all the different platforms to get a very high yield (Yield Farming)
3. Copycats
Similar to the ICO craze in 2017 where money was thrown blindly at anyone with a whitepaper and a plan of a project, everyone now was jumping the DeFi bandwagon and a lot of copies were made with their own twist while most smart contract chains also started implementing DeFi since it was hot. There first was Sushiswap which is a copy of Uniswap who gave out tokens to their users draining a lot of the liquidity from Uniswap who later also introduced their own token. Countless others both on Ethereum and different chains followed and all of them tend to get this initial liquidity spike because yields at the start are very high. Many of these can be found on defipulse.com
4. Ethereum Gas Fees & Binance Chain
Since Ethereum has yet to scale while demand for many of these DeFi platforms spiked, the gas fees started to increase to a level where only whales can comfortably use the network pricing out all the mid & small stake users. Layer 2 on Ethereum is not ready yet which gave the perfect opportunity to Binance and their Binance Chain to step in as an alternative to Ethereum. Getting a network effect is one of the most difficult things in crypto since people don't want to install yet another wallet and projects can't just move to another chain easily.
Binance Chain is a copy of Ethereum that can be used in Metamask which is the wallet all Ethereum users already have installed. Everyone is also using Binance as a centralized exchange which allows to withdraw ERC-20 tokens directly to the Binance Chain. The main difference between both chains is that Binance Chain runs on just 21 node validators which makes it way more centralized with the advantage of having much lower gas fees. Nobody really knows how many BNB Binance owns, but knowing that Changpeng Zhao, the CEO from binance suggested a rollback of the Bitcoin chain after they got hacked (Read Article) along what happened with them using customer funds in the hostile takeover of Steem in 2020, it's hard not to see some major red flags.
They also are pushing their own chain having it as the primary withdraw option for ERC-20 tokens showing much lower fees which is causing a lot of confusion for new people in crypto who often make the wrong choice. This is creating a lot of hassle for projects that receive deposits to the wrong chain See Tweet. They also at some time halted Withdrawals to the Ethereum network trying to push their own chain claiming 'Ethereum was congested' which backfired as they got a lot of criticism for it. See Tweet. Pancakeswap also took everyone by surprise getting a lot of volume out of nowhere which helped to drive adoption. There are inidcations that a lot of the initial volume was fake (read Tweet) and it kind of worked as more people actually started to adopt it.
5. Leofinance
6. Uniswap & Pancakeswap Craze
A while back, there was a craze around every project wanting to have a trading pair running on Uniwap. Not so much because it has all too much function for tokens to be traded since there are crazy high transaction fees, but more as a way to stay relevant and get some eyes on the project. Having a trading pair against Ethereum also indirectly helps to keep up the price since it's measured against ETH and it takes coins off the market into the liquidity pool. Splinterlands created wrapped DEC giving a lot of rewards, LEO did the same thing with Wrapped LEO a while back. The same craze now seems to be happening for Pancakeswap with every project wanting to have a trading pair on the Binance Chain which has lower gas costs.
7. Cubfinance
Basically, you can provide liquidity to farms with most of them requiring a deposit fee of 4% which gets used to buy and burn CUB (80%) & LEO (20%) tokens. The same thing can be done in dens that don't have the risk of impermanent loss but also pay out less. There is an inflation of CUB tokens which gets paid out to those liquidity providers and those staking in the dens. There are crazy high returns very early on which gives an incentive for more people to join which so far has gotten over 7 Million of funds to be locked into the platform.
Value CUB token
The value of CUB still has to be discovered and it goes up and down a lot now selling for 3.8$ currently at this time of writing . It is now being mined and there also has been an airdrop to LEO token holders. I guess a lot will depend on how popular the product actually gets and if more people start using it over time to buy and sell coins on the cubdefi.com website along with providing liquidity which will result in more CUB being burned. A combination of supply/demand/token burn will form the price and it's nearly impossible to put an exact number on it.
Personal Thoughts & Plans
When it comes down the Leofinance and the LEO token, I really like how the team continues to build and expand finding more ways to burn LEO tokens which will support the price to a certain extend. Looking at the total supply and the inflation, it can be seen that many coins have already been burned. Off course if the price goes up, more money needs to come in in order to keep this up which has gotten more difficult as of late (see chart below or posts from @leo.stats)
I'm personally not a fan of the Binance chain even though I do see how they solve a problem at the moment and think it will do well. CUB is not something I would be willing to literally bet the farm on but I'm happy to keep the CUB tokens I have gotten airdropped and will stake them on cubdefi.com similar to what I have gladly done with the LEO tokens. I have never been into yield farming providing liquidity just to get my hands on tokens that are being given as incentives before and I'm not about to right now. It is nice to see many people making some good gains these past days and I will take the opportunity to finally test out the Binance Chain myself in the coming days. This is about as far as my view goes on all this.
That's how I understand all of it at the moment, please make sure to let me know in the comments if I'm wrong or incomplete on anything so I can adjust my view and make adjustments. Thanks!
|
|
|
|
