Good morning lions I hope you're well and keeping upto date with all the Cryptocurrancy movement. It's been a rough few days and the market has taken a hit but as always it will probably bounce back in time. But for the mean time let's look at some of the changes in how and what's out there.
It's important to start off by giving a nod to the Ethereum token that started Reflective Finance called Reflect token, you can head over to its official website to find out more about the token here
Reflective Finance or RFI as its known is a new form of yield farming token without many of the risks associated with traditional yield farming. You get yield directly to your wallet just by holding the token.
Traditional yield farming in decentralised finance requires investors to stake or lock their tokens into a smart contract established by a central authority. This in turn provides a subsidy paid in fees by the amount you stake. These subsidies are referred to as Divs.
These divs are usually paid in the minting of new tokens so the more people that buy into a yield farming contract and stake also increases circulating supply.
Quite often the project leads will undertake buy backs and burns to retain a low circulating supply and secure a high market place. Low circulating supply has been something that investors look for when investing. (Not sure what, but they do)
Locking your tokens in a Vault comes with added risks, you have to trust the team your staking in not to run off with your tokens, the risk to being hacked and vaults being targeted by hackers is high as seen in multiple news stories of yield farming vaults being robbed, many to millions of dollars worth of cryptocurrancy.
You then have the fees, you need to pay fees to claim your divs and depending on if you're restating or selling you have to pay more fees.
Then ontop of that is liquidity, liquidity issues present when all the tokens are staked or owned and people can't purchase them which can stagnate projects.
This is where RFI changes the game a little and can prevent much of the barriers and risks associated with decentralised finance.
Instead of staking tokens into a smart contract investors get divs paid directly to them into their wallets. All that needs to be done is HODL the token.
Instead of paying fees for transactions the contract pays your div fees and depending on the size of your HODL amount is the percentage of the yield you receive. So the more you have the more you get changing the initial flat percentage rate. This inturn provides an incentive for people to purchase more of the token.
Liquidity and divs are also handled differently, instead of minting new tokens all tokens are already in circulation. What occurs is fees are charged on sales in way of a tax. Many are moving to a 10% tax which ensures 5% of every sale goes to providing liquidity and 5% distributed to HODLers. An ever revolving door of transactions, yields and liquidity.
Safemoon is one token that comes to mind that seems to have pulled it off nicely. I was a little concerned at this token and didn't think people would buy into its method. Not because it's a bad idea, it's a great idea. But people don't like paying taxes or fees. Removing the fact that without the fees there is no wealth generating opportunity. It is the fees that are paying the divs but people often think money is free.
The thing that puts people off is the large circulating supply, people think large supply means low value, this isn't the case and I think in time more and more people will see that.
What brings more money is more people and more buy ins, when the token price is huge it becomes a whales game. The market is predominantly still just speculation and people wanting to pump and dump and make fast money.
This model attempts to mitigate whale manipulation by providing a larger spread and making it harder for one person to take control.
With all things time will tell if RFI advances and is adopted but I think it will have a bright future amongst newer investors and investors with a long term hold in mind.
What are your thoughts on RFI?
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