Have you ever wondered how Decentralized Exchanges process trades and discover prices? If you are still stuck in the loop, these platforms employ a unique set of computer programs known as AMM, a.k.a Automated Market Maker, to facilitate transactions. Decentralized financial markets are gaining traction due to their ability to disintermediate transactions. Unlike the traditional systems, Decentralized Finance uses AMM to enable a fluid system that borders on autonomy, liquidity, and automation, allowing anyone to earn fees for providing liquidity. But how do these protocols' function? Why is it so quick and simple to establish a market for the latest food coin, and how do mainstream AMM like Uniswap change the dynamics of decentralized exchange? Let's find out how. What is an Automatic Market Maker? An automatic Market Maker (AMM) is a decentralized exchange protocol that allows digital assets to get traded permissionless and automatically. This protocol uses liquid pools rather than the traditional system of buyers and sellers. AMM is a financial instrument unique to Ethereum and decentralized finance (DeFi). This new technology is decentralized, always available for trading, and does not rely on traditional buyer-seller interactions. This inventive mode of exchanging assets embodies the ideals of Ethereum, crypto, and blockchain technology: no single entity controls the system, and anybody can build and participate in new solutions. The Automated market makers depend on liquidity pools and providers to function correctly. What is a Liquidity Pool? A liquidity pool is a smart contract or a cryptocurrency reserve to facilitate future trades. On the other hand, liquidity providers provide these funds to pools. Liquidity pools mainly accept two Cryptocurrencies, namely BTC and ETH. These tokens are exchanged in the same way Forex traders buy and sell currency pairs. For instance, using an AMM, a trader can, for example, sell Bitcoin to buy Ether and vice versa from a BTC/ETH liquidity pool. However, if there isn't enough liquidity on the market to instantly match buy and sell orders, slippage can occur when an asset's price shifts before the trade get completed. Slippage sets in when the processing of large order volumes drives the prices of an asset up or down. Some Liquidity pools and AMM accept other distinct Cryptocurrencies simultaneously. It all depends on the AMM and decentralized exchange you use. How Do AMM Work? Unlike the traditional Order book exchange, you do not need to have a counterparty on the other side to facilitate a trade. Instead, you interact with your smart contract, which automates your trading process. You can think of this protocol as a peer-to-contract (P2C) protocol. AMM uses preset mathematical formulas to ensure the ratio of assets in liquidity pools remains as balanced or harmonious as possible and to eliminate discrepancies in pooled asset pricing. Protocols such as Uniswap have gained much traction in the last months. Uniswap uses the X * Y = K equation where X denotes the value of Assets A, Y indicates the value of assets B, and K is a Constant. This equation implies that regardless of changes in the value of assets A or B, their products must always be equal to a given constant. Let's look at an ETH/USDT liquidity pool as an example to see how this works. When traders buy ETH, they add USDT to the pool and remove ETH from it. This process reduces the amount of ETH in the pool, causing the price of ETH to fulfill the balancing effect of x * y = k. In contrast, as more USDT gets added to the pool, the price of USDT falls. When USDT is purchased, the cost of ETH in the pool decreases while the price of USDT increases. The Uniswap protocol remains the most prominent and extensive AMM, especially as new applications get added to the platform. The most current of these applications is the foray into the world of digital art - NFTs, using Sudoswap. Uniswap Integrates Sudoswap to Access Deeper NFT Liquidity As the leading decentralized exchange in the crypto market, Uniswap is integrating the decentralized NFT marketplace - Sudoswap, to effectuate an efficient NFT liquidity when the Uniswap NFT platform launches. Sudoswaps Automatic Market Maker platform, fondly called sudoAMM, allows users to buy NFTs on the Uniswap platform while benefiting from the on-chain liquidity. Contrary to order books that are susceptible to downtime and centralization risks, sudoAMM is decentralized and on-chain, which means anyone, once they have Ethereum, can source the same liquidity used by the Sudoswap marketplace. Final Thoughts Automated Market Makers address the flaws in traditional market-making. The conventional method necessitates manual labor, which takes considerably longer for traders and market makers. The decentralized finance industry has advanced significantly as a result of this new source of liquidity. AMM will continue to play an essential role in the development of DeFi as it proliferates. Only a few companies are currently offering practical solutions in the AMM space. Because of their ease of use, AMM has undoubtedly carved out its territory within DeFi. What are your thoughts? Do you think AMM is an effective Decentralized Finance tool to boost liquidity on the Blockchain? Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

What is the secret behind the success of some cryptocurrency projects? Why are some tokens priced so low when others are so high? How do you decide if a token has value or not? These are the investors' most common questions before diving into crypto. This article will cover the basics of tokenomics and how it can help you make informed decisions when investing in new blockchain projects. What is Tokenomics? Tokenomics is a new concept that has emerged with the age of cryptocurrency. It refers to the study of economics and the game theory of cryptocurrencies. The token, also known as cryptocurrency, is the core value holder within a blockchain network to transact value between users. Transferring value can include paying for services or products or staking the token to run a node. These computer nodes secure and validate transactions for the blockchain network. Staking, similar certificates of deposit, returns the interest to a user for "staking" or removing that currency from circulation for a fixed period. The goal of tokenomics is to create a new type of economics that will be more inclusive, transparent, and decentralized. The cryptocurrency market is highly speculative, so investors need to understand how tokens work before they invest in them. Some factors to consider when gauging the potential future value of a cryptocurrency are what the token does, who created it, the token use cases, and its value proposition. The quality and success of a new cryptocurrency depend on what its Tokenomics are. How Does Tokenomics Work? Tokenomics measures the relationship between the token and the project's success. It measures the demand for the token, the supply of the token, utility of the token, and other factors in determining the project's long-term viability. Typically with increased token demand, projects grow in value. Similarly, the price usually increases if the token supply is limited and the demand exceeds the supply. Why is Tokenomics Important? Tokenomics is vital because it can help you determine if a token has value or not. If the token has a high utility, and if the token is scarce, it has value. The amount of value depends on the relationship between the token's demand, supply, and adoption. Creators define tokenomics when constructing their blockchains. These rules govern how much is in the cryptocurrency supply, the mining reward, and what consensus mechanism the blockchain utilizes. There are many tokenomics factors to consider when evaluating a cryptocurrency's potential investment value. Now let's take a look at the basic tokenomics concepts. The Basics of Understanding Tokenomics Token Utility: The token utility is the reason for its existence. The best tokens have a clear and specific utility on the network; they are essential in the network's operation. Network Utility: The network utility relates to the token's value within the network. With higher token usage within the network, the higher the network utility will be. Network Adoption: Network adoption is the rate at which people use a token. The higher the token adoption by the public, the higher the token and network utility will be. Retained Token Value: Token value is directly related to the token price, supply, and demand. The higher the token price, the greater the token value. 4 Types of Cryptocurrency Tokens Tokens fall under various classifications, but this article will focus on four broad categories: Transactional & Payment Cryptocurrency, Platform & Infrastructure Cryptocurrency, Security Tokens, and Utility Tokens. Transactional & Payment Cryptocurrencies As the name suggests, these assets are mainly for payments. For example, you could use payment currencies to pay for goods or services or bills or trade digital currencies for local fiat currencies like the US dollar. Apart from payments, these cryptocurrencies are limited in functionality. The most famous example is Bitcoin (BTC), but others include Litecoin and USD Coin (USDC). Platform & Infrastructure Cryptocurrencies Specific blockchain infrastructure and platforms require payment for computing resources to run programs on a shared blockchain network. These computing resources require Platform & Infrastructure cryptocurrencies as payment. For example, the Ethereum blockchain runs using the cryptocurrency Ether (ETH). The Ethereum blockchain infrastructure allows users to create and use decentralized applications. Other examples include Binance Coin (BNB), Cardano (ADA), and Cronos (CRO). Security Tokens These are backed by a physical asset and represent ownership in that asset. For example, shares in a company or gold bullion are considered examples of securities. Security tokens often intend to help their holders gain access to an investment opportunity (e.g., equity) or earn income related to the underlying asset. Security tokens are subject to federal securities regulations. Security tokens provide a secure and scalable method to hold an investment that may be difficult to keep in large quantities physically. One example is Pax Gold (PAXG), a digital token backed by one fine troy ounce (t oz) of physical gold stored in Brink's vaults. Utility Tokens These grant token holders access a company's product or service without intrinsic value outside that company's ecosystem. They can be used as a means of payment in that ecosystem or traded on secondary markets like exchanges if they are publicly tradable. Basic Attention Token (BAT) is an example of a utility token that rewards users and advertisers when utilizing the brave browser. What Makes a Good Cryptocurrency Investment? Good cryptocurrency investments depend on useful utility, functional network utility, mass network adoption, high retained token value, and limited token supply, causing scarcity. One example of a good cryptocurrency investment is a utility token with multiple use cases. If a utility token has a wide array of use cases, the Metcalf Ratio will be higher. (The Metcalfe Ratio measures the relative value of a network based on the number of connections in a system.)The higher the ratio, the more valuable the network becomes. Utility tokens can purchase goods and services and incentivize network participation and voting rights in specific applications. Utility tokens have the potential to become one of the most important financial instruments ever created. They have highly flexible and scalable use case applications, not just within the company issuing them but across the entire blockchain network and beyond. Final Thoughts Investing in the right crypto project can be difficult. Understanding the tokenomics of the coin is essential to know whether the project has potential future value or not. Typically, tokens are the gas used to power a blockchain network engine. Understanding the nature of tokenomics helps you to grasp how digital currency works and its underlying values. The next time you're looking to invest in a new crypto project, make sure to understand the tokenomics and rules that govern that blockchain network. Do you think tokenomics will help you make an informed decision on your next crypto investment? Share your thoughts below in the comments. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

Bitcoin is a decentralized digital currency outside the central bank and government control. It has become an increasingly popular form of payment in recent years. Bitcoin has experienced a lot of ups and downs since its introduction in 2009. The price of bitcoin is volatile, gaining and losing value quickly. The fluctuating price makes it difficult for governments to regulate. With little regulation, some illegal activities occur on the network, but the actual network percentage amount is a misconception. According to Chainalysis, “Bitcoin’s Illegal Activity Is Only 0.15% Of Transaction Volume”. And according to Altcoin News, “Fiat Is 800 Times More Used in Illegal Activities Than Bitcoin”. This article suggests that more than 99% of all Bitcoin transactions are legal. Bitcoin is a digital currency that is decentralized, meaning there is no central bank or authority that controls it. Released in 2009, Bitcoin gained a value of $0.08 per bitcoin by 2010. Since then, the price has grown exponentially to over $10,000 per bitcoin in 2017. The advantages of Bitcoin are also many, but some disadvantages make governments and banks cringe. Advantages of Bitcoin: – Decentralized – no central bank or authority controls it – Semi-Anonymous – transactions only have an address, no owner name – Nominal transaction fees – you can send money with small fees – Fast transactions – you can send money to anyone in seconds – Secure – all transactions are secured with cryptography – Anti inflationary – deflationary Bitcoin is more deflationary than standard currencies – Transparent – all transactions are publically visible to everyone – More efficient than traditional finance – Bitcoins have a much lower transaction cost than other payment methods Disadvantages of Bitcoin: A significant disadvantage of Bitcoin is that any government or central bank does not back it. Without backing, the value of Bitcoin can fluctuate wildly, making it a risky investment. Another disadvantage of Bitcoin is its lack of regulation. Without regulation, people who use Bitcoin are not protected against fraud and theft in the same way as people who use fiat currency (traditional currencies). Introduction: Bitcoin, the Digital Currency that is on Everyone’s Mind Bitcoin is a digital currency created and released to the public in 2009. It is decentralized, meaning it doesn’t need a central authority to keep track of transactions. Bitcoin is gaining popularity, and many see it as an investment opportunity. Bitcoin is a new type of asset class, with the potential for price appreciation like stocks and bonds, but with price volatility like gold and silver. The goal of bitcoin is to create a new type of money without any restrictions or boundaries. Bitcoin is decentralized, meaning there is no central authority to keep track of transactions; instead, the network does it for you. One interesting feature of Bitcoin is that a finite number of coins can be mined. When this “mining” process was first introduced in 2009, each coin had been valued at less than $0.01. Since then, the value has increased to over $8,000 per coin in December 2017 and more than $11,000 in the following years. Bitcoin’s value Makes it a Target for Crime Keywords: bitcoin crime rates, bitcoin laundering, bitcoin price manipulation. Bitcoin is an anonymous, decentralized currency that can buy anything online. These features make it attractive money for criminals due to its anonymous nature. The total illegal activity on the Bitcoin network accounts for less than 0.2%, which is relatively insignificant. Governments, banks, and law enforcement agencies exaggerate Bitcoin’s unlawful activity and portray the entire network negatively. This inaccuracy and false inflation of nefarious transactions have led the general public to view Bitcoin as harmful, negative, or risky. Possibility of Bitcoin Being Regulated from Beyond its Sphere Bitcoin is a digital currency that has been around for more than ten years—created as an alternative to fiat currencies, which centralized the government’s control. Bitcoin is decentralized, meaning any government or bank does not own it. One of the reasons why Bitcoin has been successful in the past decade is because it’s unregulated. As a result, it’s gained popularity among those who want to avoid banks and governments. However, this may not last much longer as countries are starting to regulate Bitcoin more and more. For Bitcoin to survive in the future, it must be regulated to achieve mass adoption. People want to use it without being penalized by their government or bank. Bitcoin regulations in the past decade have been largely unsuccessful because Bitcoin is decentralized, meaning there is no authority to govern. However, this may not last much longer as countries are starting to regulate Bitcoin more and more. Governments are beginning to crack down on bitcoin, swallowing the tough pill where they can’t control it but only regulate it. Bitcoin Gains Popularity but Loses Usefulness and Stability Bitcoin is the first cryptocurrency in the world, and it has been gaining popularity since it came into existence. It was created by an anonymous person or group of people named Satoshi Nakamoto. Bitcoin gained popularity because it was a decentralized peer-to-peer currency outside the traditional banking network. Bitcoin does not have a central controlling authority, and there are very few regulations for this cryptocurrency. However, Bitcoin’s usefulness as a currency has become questioned because of its instability. The price of bitcoin changes daily, making it hard to use for purchases. It is not stable enough to be used as a currency because you never know how much you will need to spend on anything from one day to the next. With the instability of Bitcoin, more people have been investing in Stablecoins. These cryptocurrencies are more stable than bitcoin, typically pegged to a fiat currency like US Dollars. Stablecoins can be used for payments because they maintain stable value daily. Many retailers do not accept Bitcoin as a form of payment, but here is a list of companies that do: Microsoft Overstock Home Depot Starbucks Whole Foods NewEgg Namecheap AT&T Bitrefill Conclusion: The future of Bitcoin is Uncertain Bitcoin is a digital currency with no physical form, unregulated by any country. It was invented in 2009 by an unknown person or group named Satoshi Nakamoto. Bitcoin operates on blockchain technology, a decentralized public ledger that records transactions between two parties without needing a financial institution. The peer-to-peer community architecture powers bitcoin. Volunteers run the decentralized network and contribute computing power toward the collective good. Designed to create a transparent system with no hierarchy, Bitcoin has surpassed all expectations. The future of bitcoin remains uncertain, but one thing’s sure: Bitcoin will continue to be an essential economic tool, regardless of its volatility or legality. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

The recent crash of the UST stablecoin and LUNA, its sister token, has left many questioning the value of algorithmic stablecoins. Stablecoins are becoming popular because they offer a refuge from the volatility inherent in cryptocurrencies without having to leave the crypto market. Stablecoins are designed to be stable and pegged to fiat currencies. In the case of US Dollar-pegged stablecoins, their price is supposed to be $1 at all times. Each stablecoin project has its different way of maintaining the peg. For example, tether (USDT) and Circle (USDC) have cash or equivalent assets in their reserves, making up at least 100%. So you know that the actual holdings of its issuers back both USDT and USDC trades. Similarly, MakerDAO's stablecoin DAI is decentralized and overcollateralized. That means Ethereum (ETH) funds back it in its smart contracts. Algorithmic stablecoins have emerged as a new type of stablecoin that is more appealing than traditional centralized stablecoins. Examples include TerraUSD (UST), magic internet money (MIM), and neutrino USD (USDN). Algorithmic stablecoins derive backing from an on-chain computer code designed to regulate the supply and demand of the stablecoin. The Terra blockchain runs the largest algorithmic stablecoin platform. UST is the stablecoin, and the native cryptocurrency, Terra (LUNA), backs it. For the rest of this article, we'll use "LUNA" to refer to Terra (LUNA) to avoid confusion. Algorithmic stablecoins provide a way to hold your currency and get stabilized returns simultaneously. They usually don't have any backing assets in reserve, so they are often undercollateralized. Still, they offer a great alternative long-term play with an attractive yield. What are algorithmic stablecoins? "Algorithm" is a confusing word. But it simply means a set of code to outline specific steps. For example, Facebook's timeline adjusts according to an algorithm, including how relevant the post is to you based on your past behavior. In cryptocurrency, an algorithm is a code that operates when specific parameters are met and recorded onto the blockchain. However, the algorithmic stablecoins use an algorithm to maintain a consistent value. These algorithms typically link two coins and then adjust their prices based on supply and demand from investors. While algorithmic stablecoins match the price and value of real-world assets, they have no tangible physical backing assets. Algorithmic stablecoins have three main types: Rebase Seigniorage Fractional-algorithms Each coin type uses a different algorithm to adjust and maintain value. In some cases, algorithmic stablecoins can be very beneficial. They do not require a third party to maintain stability and can effectively adjust the number of coins in circulation based on demand. It represents how blockchain and encryption should work, with code controlling cryptocurrency and zero human input. In early May 2022, the algorithmic stablecoin TerraUSD or UST was a top 10 cryptocurrency by market cap. Let's see the logic behind the Terra Luna cryptocurrency and the TerraUSD algorithmic stablecoin. Terra Luna (LUNA)/TerraUSD (UST) Relationship Terra Luna is a regular cryptocurrency, and TerraUSD (UST) is an algorithmic stablecoin. LUNA supports UST. However, LUNA is not a physical asset. Instead, it's a volatile cryptocurrency. The two coins are closely related, and the value of one is affected by the other. For example, if the price of TerraUSD exceeds a dollar (due to the U.S. dollar value peg), the algorithm will burn a portion of TerraUSD, effectively destroying it. On the other hand, if TerraUSD falls below the U.S. price, some LUNA will be burned. At the same time, for every minted LUNA, a TerraUSD is burned by the algorithm, and vice versa. UST investors also can deposit their funds in an account using the Anchor Protocol, which promises them a 20% APY return on the UST they deposit. This attractive interest rate acts as a huge incentive and drives the demand for UST. But when the Anchor Protocol decided to convert this return into a variable rate that could be as low as 15%, people started selling their UST because it no longer seemed worthwhile to hold it that way. The change severely impacted its price and the demand for UST. Anchor Protocol's native token, ANC, also plummeted due to the decision, losing a significant portion of its value in just a few days. Due to these factors, both LUNA and UST crashed severely in May 2022. Both cryptocurrencies now hold only a fraction of their previous value. In short, the UST's peg to the U.S. dollar slipped, which was then detected by the algorithm connecting the two, causing Luna's printing to increase to support the price. By printing more Luna, the cryptocurrency price crashes as people scramble to sell, putting further downward pressure on UST. The collapse of LUNA and UST has called into question the entire concept of algorithmic stablecoins; these stablecoins are considered venture capital investments. So, what exactly makes algorithmic stablecoins so unstable? (If you want to learn more about LUNA Crypto Crash, please visit my blog here) Why are algorithmic stablecoins so dangerous? Algorithmic stablecoins pose a considerable risk because real-world assets do not back them, so they are not strictly stablecoins. They have no collateral, meaning their price stability is not as certain as you think. Like many other cryptocurrencies, algorithmic stablecoins require demand to maintain value. We all know that the need for coins in the crypto industry can change dramatically due to various factors, and this alone remains a significant weakness of algorithmic stablecoins. Furthermore, depending on the algorithmic stablecoin, a collapse in the value of one coin in an algorithmic pair could have a knock-on effect on another currency. We saw this in the LUNA/UST disaster. So, algorithmic stablecoins can carry even more risk if something goes wrong. New trends in stablecoin regulation It is worth mentioning that with the rapid fermentation of UST's loss of anchor, many regulatory agencies have also put the supervision of stablecoins on the agenda. May 12 news, U.S. Treasury Secretary Yellen: Terra is a real example of stable currency risks. The U.S. Treasury Department is preparing a report on stablecoin risks. Yellen reiterated the need for a comprehensive stablecoin framework. Ashley Alder, chairman of the International Securities Commission (IOSCO), an association of market regulators, said that a joint body responsible for coordinating global cryptocurrency regulation is urgently needed and could become a reality within the following year. On May 9, the Federal Reserve released its latest financial stability report, highlighting the risk of a stablecoin run. Some money market funds (MMFs) and stablecoins are still prone to runs, and domestic bank capital risks are low. However, the report wrote that some money market funds, bond funds, and stablecoins still have structural vulnerabilities. Back in January, Fed researchers published a study on the risks and benefits of stablecoins, saying the Financial Stability Oversight Board could step in to oversee stablecoins if Congress doesn't enact new laws targeting the industry. On May 11, the European Commission is considering limiting the ability of stablecoins to replace fiat currencies in widespread use, according to a document. E.U. finance ministers have proposed draconian measures to prevent stablecoins from returning to the euro. They have called for a halt to issuing a single-day volume that exceeds 1 million or the transaction volume exceeds 200 million euros. The document is marked "off-paper," which does not reflect the committee's official position. E.U. lawmakers and the government are trying to finalize a landmark cryptocurrency law known as Market Regulation in Crypto Assets (MiCA), with the committee holding closed-door negotiations later. Algorithmic stablecoins are still a gamble While the idea of an algorithmic stablecoin certainly seems to have some merit, there are still many factors that could easily affect its value and cause substantial economic losses. Therefore, before investing in any algorithmic stablecoins, check the algorithm to understand its logic and where your investment goes. Are you still think algorithmic stablecoins are a good investment or gambling? Leave your comments and join the discussion. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

Recently, the hottest topic has been the updates on the progress of Ethereum 2.0. Its founder Vitalik published an article detailing the three key reasons Ethereum switched from PoW to PoS, which caused extensive discussions in the cryptocurrency community. Vitalik Buterin posted that PoS is a superior blockchain security mechanism compared to PoW. There are three reasons: PoS provides higher security at the same cost PoS is easy to recover from attacks PoS is more decentralized than ASIC PoW has two main advantages, but Vitalik Buterin believes these advantages are pretty limited: PoS is more like a "closed system," which leads to higher wealth concentration in the long run; PoS requires "weak subjectivity," and PoW does not become unnecessary. Do you agree with Buterin's views on PoW and PoS? What do you think about PoW and PoS? Before I go deep to share my opinions about the above questions, I would like to dive into the differences between the PoW and Pos and share the basic concepts. What is the blockchain consensus mechanism? A consensus mechanism, also known as a consensus algorithm, is how nodes in a network come to a consensus on which blockchain transactions are valid. Remember, a blockchain is a digital ledger of information distributed to everyone in the network. Each node has an exact copy of the blockchain state and previous transactions. To update this ledger and maintain its universal consistency, nodes in the network must agree on which new blocks are valid and which blocks to add to the chain. To reach a consensus, at least 51% of nodes on a network must agree that a block is valid and added to the ledger. We just covered consensus mechanisms and how cryptocurrencies utilize them. However, different cryptocurrencies have different consensus mechanisms, significantly affecting energy usage, security, and scalability. What is Proof of Work (PoW)? Satoshi Nakamoto designed PoW (Proof of Work) for the Bitcoin network, a process known as mining. Every 10 minutes, along with the generation of new blocks, the Bitcoin network will issue a certain amount of Bitcoins and reward it to the mining node that solves the block. Professionally speaking, miners must operate on the SHA-256 cryptographic hash function when miners mine a new block, and the random hash value in the block starts with one or more 0s. As the number of 0s rises, the amount of work required to find this solution grows exponentially, and miners try to find this solution repeatedly. The mining node that calculates the correct answer first can obtain the bookkeeping right of the current block and simultaneously receive the reward of newly issued bitcoin. Mining solves the problem of rewarding nodes that contribute to the Bitcoin network. POW and the longest chain mechanism make the Bitcoin network ultra-secure. Under such a consensus mechanism, even Bitcoin, without a central institution for credit endorsement, has gained the widespread trust and has a strong vitality worldwide. In layman's terms, PoW means distribution according to work, more work, and more pay. What is Proof of Stake (PoS)? PoS proof of stake, an upgraded consensus mechanism of Pow; according to the proportion and time of tokens occupied by each node, the mining difficulty reduces to equal proportions, thereby speeding up the speed of finding random numbers. PoS attempts to solve PoW's Achilles heel, energy requirements, and resource waste. This mechanism determines the accounting rights by calculating the percentage of the total coins you hold and the time you have the coins. The difficulty of obtaining the node's accounting right is inversely proportional to the rights and interests held by the node. Compared with PoW, the resource consumption caused by mathematical operations reduces to a certain extent, and the performance improves accordingly. However, it is still based on the hash operation competition to obtain the record. The way of accounting rights is weak in regulation. The fault tolerance of this consensus mechanism is the same as that of PoW. For example, Stellar, Dogecoin, etc. PoS is common in the real world, and stocks are the best-known example. Stocks record the proof of equity. The more stocks owned, the higher and more voting rights and income rights are. In layman's terms, PoS distributes according to money, and money generates money. Let's see the difference between them: 1. Consensus Mechanism PoW: The higher the computing power, the higher the probability of mining a block. Miners compete with each other to solve complex mathematical puzzles using computing resources. PoS: The more tokens you stake, the better your chance of becoming a validator of a new block. An algorithm randomly selects a winner based on the number of tokens staked. 2. Mining equipment PoW: Specialized mining hardware such as Application Specific Integrated Circuits (ASICs), Central Processing Units (CPUs), and Graphics Processing Units (GUPs). PoS: Any computer or mobile device connected to the Internet. 3. Rewards PoW: The first miner to mine a block gets the block reward. PoS: Validators receive a portion of transaction fees from blocks they validate. 4. Cyber Security PoW: The larger the hash value, the more secure the network is. PoS: Pledge and lock cryptocurrencies on the blockchain to ensure network security. As Vitalik Buterin said: Is Proof-of-Stake better than Proof-of-Work? From personal opinions, Vitalik described the advantages of PoS observed from his perspective. I agree with most of his views, but I can't fully agree with the conclusion that PoS is more secure. There are some factors to consider, such as Openness, consensus scale, longer-term opportunities for fair participation, etc. PoW is more open than PoS; Vitalik himself said that, but he did not say what PoS loses when converted to PoW. I understand that an essential part of this is the people involved or the complexity of the system's game. The miner ecology in PoW is self-contained. They care about more practical factors such as electricity bills, machines, motherboards, power supplies, etc. Therefore, regardless of the activities on the chain, the core business logic of their participation in mining is established. PoS will increase the high probability of abandoning these people and lead to network security personnel paying more attention to on-chain activities because they mortgage on-chain assets, which is not better than the current PoW consensus mechanism. Let's talk about the opportunity for long-term fair participation. The fairness achieved by PoW comes from the fact that the energy itself is sufficiently dispersed and diversified. No matter how updated the algorithm is or the energy required—the barrier of entry for any latecomers is more complex. Introducing external power (computing power) maintains the chain's security; however, the closed nature of PoS will have an initial threshold for participation. No matter how decentralized it is, it must not use energy such as electricity to more directly complete long-term cost accounting and fair. Conclusion: Both PoW and PoS have advantages and disadvantages. But it seems that PoW has many benefits. Take a look at the top coins in the circulating market capitalization list. Most of them are PoW. With many nodes in large clusters, PoS may be more centralized. Although PoW can be fully decentralized, it has the disadvantage of high energy consumption. Don't you think combining PoW + PoS could be a good solution? Leave your comments and join the discussion. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

Have you ever heard of the Bitcoin 210,000 block theory to increase the value of your Bitcoin holdings? Two hundred and ten thousand isn't just an arbitrary figure—proven science corresponds to that number. This article demonstrates why you should think about the 210,000 block theory and how you can verify your BTC transactions on-chain. If you have been in the crypto and blockchain space for a while, you may have heard this theory: You should HODL Bitcoin for at least 210,000 blocks. What does HODL mean? HODL is an acronym for "Hold On for Dear Life," referring to holding cryptocurrency regardless of price volatility. HODL originated years ago from a typo in an old Bitcoin forum where one user said he was holding bitcoin. Hold on for Dear Life - 210,000 blocks later According to the HODL theory, bitcoin held for at least 210,000 blocks after being sent will appreciate. As of September 26th, 2022, there are no transactions with a lower fiat valuation compared to 210,000 blocks in the future. For example: If someone received a bitcoin payment in Block 500,000, it should be held until block 710,000 to determine price appreciation compared to block 500,000. Every bitcoin (or satoshi) ever mined or transacted has a higher fiat valuation after 210,000 blocks have elapsed. The block reward "halving" event is understood Bitcoin has value because it has a supply cap of 21 million, and it can't be duplicated, creating scarcity. The block reward halving that occurs every 210,000 blocks, roughly every four years, restricts the supply of bitcoin even further. Every 210,000 blocks, the number of newly mined bitcoins halves reducing the supply. Bitcoin's supply mechanism is hard coded into the network and controlled through maths-based inflation. Bitcoiners refer to saving as HODLing, a nod to the word's origin from the Bitcoin forum. This inflation keeps the price of bitcoin rising and incentivizes saving based on this theory. A test of the theory is required We did a basic test of this theory, and the results were terrific. We tested all transactions using Bitcoin price data dating back to July 18th, 2010. The code is accessible here. Every bitcoin transaction ever sent has a higher fiat value after 210,000 blocks have passed. The theory explains why—every single transaction has a higher value. There are two methods to test this theory using traditional finance terminology. In this case, I will provide a more detailed explanation. A priori simulation You cannot backtest for any transactions mined in the first 210,000 blocks, as there were no blocks that existed 210,000 blocks before. For transactions, not 210,000 blocks old, you can only look backward and see the fiat price of bitcoin. Suppose you just sent one bitcoin last week. It would be a few years before that transaction was 210,000 blocks old. To test this theory for such a transaction, you would have to go 210,000 blocks backward (210,000 blocks backward) and see how much one bitcoin was worth then. After look how well you would have done if you had sent the same transaction 210,000 blocks ago. What if a transaction is already 210,000 blocks old? Then the code tested its 210,000 blocks forward performance. Performance testing forward Take any transaction and add 210,000 to the block number to see the current price if the transaction were to be processed now. Time must pass (approximately four years) for a transaction to be 210,000 blocks old before you can test whether this theory stands the test of time. For example, A glance at the valuation of bitcoin in block 560,000 would tell you whether you received a transaction in block 350,000. In Block 350,000, one bitcoin has a value of ~$247. Whereas one bitcoin in block 560,000 has a value of ~$3,581. That's a 14.5x return on investment! It's essential to test both ways With certain transactions, you can examine the difference between fiat values in both directions to see the 210,000 block hold theory in action more than once with the same Transaction ID (TxID). For example, you can look at blocks 130,000 and 560,000 to see the fiat value of a transaction from block 350,000 in both directions. Both will provide proof of this theory as one bitcoin for block 130,000 is worth ~$31. You can test the theory yourself When you verify any blockchain transaction for yourself, you can see how beautiful it is that the technology is entirely public and transparent. You can choose any TxID you like, but I recommend finding one on your own. It's more enjoyable when you see how much money you would have made if you invested in bitcoin sooner. Seeing how much you've gained is even more exciting. Look up the block that the TxID is from on blockchain.com's block explorer. Add or subtract 210,000 from that block number, depending on the block. Blockchain.com's block explorer lets you see the current and past fiat values for each transaction sent. Make sure that a fiat valuation appears in the green box. The value depicts the amount of Bitcoin sent in that transaction. To toggle between Bitcoin and USD (or other fiat currency), click the toggle switch in the upper right. Hovering your mouse pointer over this same box and clicking will switch between the fiat value of that bitcoin and the USD value at the transaction time. Divide the current valuation by the valuation sent to determine the percentage gain. For example, one bitcoin today is worth $5,000 and $500 210,000 blocks ago, for a 1,000% gain. Not too shabby for some magical internet cash. TL;DR version: Whether you're a newbie to bitcoin or a veteran who has been in the space for years, I encourage you to look up some transactions on the blockchain and compare fiat valuations with a 210,000 block difference. I am confident that you will be pleasantly surprised by the numbers. I haven't found a lower fiat value after 210,000 blocks. You might want to save some bitcoin for at least 210,000 blocks and see what happens. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

Someone paid $69 million for digital art?! A sound investment or insane? It's incredible, especially for many who are hearing about this technology for the first time. NFTs and the underlying technology are the cause. The other headlines are a $6 hundred thousand dollar cat gif, a $3 million tweet, or the Beeple artwork "Every day's: The first 5000 days", selling for $69.3 million. It's undeniable that NFTs are selling for outrageous prices. As a blockchain enthusiast currently kickstarting an NFT creative company, I would say this is an excellent opportunity for creators to gain luxuriant benefits and attain the right relevance they've wanted. With no entry barriers, this new development means galleries or authenticators can't take a cut of the profits. Creators can collect royalties from every continuous sale of their work in the collectors' online market. Regarding why NFTs have become a trend, from the perspective of an NFT creator, I would like to share some interpretations from different perspectives. NFT from an Intellectual Property (IP) perspective Bored Ape Yacht Club (BAYC) and its parent company Yuga Labs have captured the NFT interest of the general public. On March 12th, when Yuga Labs acquired the Crypto Punks and Meebits NFT series from Larva Labs, I appreciated the pattern of Yuga Labs. In this business, In the acquisition, Larva Labs is more like Pixar: a top-level IP incubation factory; however, as an IP operation platform, Yuga Labs not only has self-developed IPs but also enables acquired IPs. Comparing a company that sells pictures with the entertainment giant Disney, I think it is no exaggeration to call Yuga Lab the "Disney in the NFT era." As an expert with a background in successful IP incubation and operations, I often think about how to get more traffic at a lower cost. The content, channels, and marketing methods are all designed and changed with this core focus. Throughout the past 100 years, Disney has also encountered many bottlenecks in growth. It has continued introducing new IPs and expanding distribution channels to maintain its leading position, including developing entertainment program production, theme parks, toys, books, games, media networks, and other businesses. Disney acquired Pixar, Marvel, and 21st Century Fox. Disney also developed the Disney+ streaming service during the pandemic and recently announced that it will enter the Metaverse. Another exciting example is Line Friends. From 2014-2018, I served as the business development director of Line Friends in China; I participated in the entire process of IP incubation from 0 to 1. LINE is a social media application developed by NHN Japan, a Japanese subsidiary of the Korean Internet group NHN. As an emotion package that comes with LINE, the popularity of Brown Bear, Connie Rabbit, and Sally Chicken are complementary to the popularity of this instant messaging software. LINE FRIENDS has also become a standalone brand, operating character IP, and its business includes gaming, theme parks, animation coffee shops, etc. The global revenue in 2018 exceeded hundreds of millions of dollars. The IP cases range from film and television works and daily necessities to emoticons. We can see that with the change in communication media, shortening the cycle of cultivating IP and the commercialization chain, the communication mode is lighter, and the reach efficiency is a geometric growth. At the same time, the design presentation and style of IP are constantly changing. The Unlimited Potential of BAYC and Yuga Labs In August 2021, NBA superstar Stephen Curry purchased a BAYC and replaced it with a Twitter avatar, which was not only the headline news in the Crypto industry but also became the number one trending search on Twitter that day. Since then, many celebrities have purchased the BAYC series and changed their avatars, including Dallas Mavericks owner Mark Cuban, top 100 DJs Steve Aoki, Marshmello, The Chainsmokers, singer Post Malone, Mike Shinoda of Linkin Park, football star Neymar, rap superstar Snoop Dogg, Justin Bieber, socialite Paris Hilton, Eminem, and other superstars. As of January 2021, Hello Kitty is the second-highest-grossing IP in the world, with $84.5 billion to date (the first is Pokémon, born in 1996, generating $100 billion in revenue). According to recent data from NFTGo.io, the total transaction volume of Bored Ape Yacht Club (BAYC) has exceeded 2 billion US dollars, and the market value has reached 1.5 billion US dollars. And BAYC launched in the market less than two years ago: The total turnover of the Crypto Punk series reached 2.7 billion US dollars. In April 2022, the price of the APE coin reached around 23 US dollars, and the token market value exceeded 10 billion US dollars. And these numbers don't reflect the actual future commercial IP value. Yuga Lab pioneered a subversive copyright system for the Web3 era YugaLabs initially formulated an unequivocal statement, confirming that owners "own the NFT" and "own the underlying work of NFT, the bored ape," and the owner can utilize the NFT you have for commercial use. This kind of "decentralized copyright" is an open force that gives NFT holders objective monetization ability. In the copyright system of the Web3 world - the community determines the height of IP, and the community here can be people, enterprises, or a Dao organization. After Yuga Labs acquired Crypto Punks and Meebits, it plans to grant the commercial rights of all CryptoPunks and Meebits series to their respective owners, so what will be the results of allowing NFT owners to commercialize these high-value IPs? Let me give a few examples: 1. In December 2021, Adidas co-branded Bored Ape Yacht Club to issue Adidas Originals Into The Metaverse NFT, with sales of 5,924 ETH (about $23 million) and a turnover of nearly $100 million so far. 2. Universal Music Group (UMG) purchased Bored Ape Yacht Club number 5537 to form Kingship's virtual band together with the NFT it bought earlier. The three members of Kingship are from the Bored Ape Yacht Club series, and the other NFT is from Mutant Ape Yacht Club Series. 3. The world's top electronic music festival, Tomorrowland, announced that on July 24th, the NFT artist Ape Rave Club would premiere on the main stage, becoming the protagonist of the music festival. A digital artist from the BAYC NFT series, Ape Rave Club NFT series, plans to release original crypto-native music through the NFT platform. Final Thoughts Now, the world's entertainment giants, top clothing brands, and big-name stars are entering the arena using their decades of resources to spread BAYC, giving it leading content and matching the best channels from their perspective. Today, the floor price of BAYC exceeding 80 ETH is unattainable for most people, and BAYC is only 10,000 after all. However, the production and launching of popular NFT series continue, and the resources and ideas of NFT holders also determine the space for the monetization of NFT IP. The "decentralized copyright" system of web3 has realized the business model of "low-cost, high-traffic" IP monetization through the holder's channels and resources, which undoubtedly puts forward a new direction for the traditional IP business model. 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Non-fungible token, or NFT, is a unique digital asset representing ownership of items like video clips, music, drawings, and more. NFT first came into the limelight in March 2021 when digital collagen fetched millions of dollars in a Christie's auction. Many people have since embraced these digital certificates of ownership, which can be purchased or sold using cryptocurrency. However, many don't know that you don't fully own an NFT when you buy it—spending money on items auctioned or traded as NFTs doesn't make you the owner of the media associated with that particular token. Blockchain technology keeps track of who owns the tokens, which is very difficult to change. If you buy an NFT, the original owner will still have some control over it. The reality of NFT control and ownership is both positive and negative. On the one hand, you won't have absolute power over the NFT, and the owner can still have a say. On the other hand, the original owner can't make all decisions by themselves without your approval. Understanding your ownership rights in NFT is critical. You must also know the rules, regulations, and restrictions to avoid disappointments. Limited rights to NFTs NFTs allow owners of a collection or piece of work to reach their target audience. Many creators could not claim ownership of unique items like the first-ever video uploaded on YouTube or the first Instagram post. But with NFTs, that's a thing of the past. Today, people can claim ownership, provided they are the rightful owners or creators. The creators are the copyright owners, meaning they can do what they choose with their work. When you buy an NFT from an owner, you become a holder of a digital certificate, also known as the NFT. However, you do not have other rights over the piece of work, such as the right to share or make copies. The same applies to buying a physical collectible. You may own wall art, but you don't have the right to make it available to the public. You also don't have the right to prevent someone from reproducing the image on the art without your consent. The only way to obtain rights over such work is to get the copyright transferred to you by the creator. Of course, the other ways if you are, in fact, the actual owner. The biggest challenge of digital content is that it can easily be shared and reproduced online. Doing so is considered copyright infringement. However, the NFT license sometimes includes terms for assignable rights. Some NFT creators allow buyers to use the copyright to their work in a limited way, while others don't permit the commercial use of their work. Buyers need to understand that purchasing an NFT is mainly to have something unique owned by a celebrity, famous brand, or anything. Until terms are changed, buyers will continue having limited rights to share or reproduce creative work. Terms, copyright, and rights differ depending on the NFT smart contract. However, there are cases where the blockchain cannot determine if a piece of work is authentic. In some incidences, other people's work has been tokenized as NFTs, leading to copyright infringement. It's essential to ensure that you're buying an NFT from the original creator. Reasons why NFT rights are limited The main reason rights over NFTs are limited is to prevent creative works from being stolen. Another reason is to regulate the use of NFTs, which ultimately protects them from non-permissible usage. This restricted use also helps to ensure NFTs benefit individuals who need to use them, such as artists. Limiting rights on NFT makes it easier to use them. For instance, it's much easier to sell a product or item if you know the person you're selling it to will use it as intended. Selling to people you know is particularly important if you exchange products and services using NFTs. The restrictions on NFT can also protect you from making bad decisions regarding your property. For example, if someone else owns an NFT of your property, they could prevent you from taking action that could work against the interest of both parties. NFT rights are limited in various ways. One is using a smart contract, where specific restrictions are put in place and followed before using an NFT. Another way is using a trust, where an appointed person known as a "trustee" regulates the rights buyers and sellers have on NFTs. Regardless of your chosen method, ensure that the restrictions are fair enough and will not have any people who own the NFTs outright. NFT technology is relatively new, but NFTs are certainly here to stay. As technology advances, we should expect more growth in this new exciting area of the blockchain industry. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

Tron has united a global group of investors and developers around a vision to reshape the internet using cryptocurrency. Tron launched at the peak of 2017's crypto-mania. Despite wide criticism of Tron's technology, the commitment to spreading the message of innovation has never faltered. Tron didn't advertise its innovations, unlike many other projects. Other projects pioneered the fundamental components of Tron – decentralized applications, smart contracts, tokens, and delegated proof-of-stake consensus – before its launch. Tron made its technology components compatible with Ethereum (ETH) (which sparked accusations that it borrowed too much of its ideas). Tron's creator Justin Sun, translated its technical documents into a wider variety of languages to further differentiate Tron from other cryptocurrency projects. These documents fueled an Asia-focused go-to-market strategy. The Tron Foundation, the non-profit overseeing its development, gained greater mainstream attention in 2018 after it acquired peer-to-peer networking pioneer BitTorrent. After the BitTorrent acquisition, BitTorrent tokens launched on the Tron blockchain in 2019, allowing Tron to market its new cryptocurrency to millions of existing users. Who created Tron? Entrepreneur Sun Yuchen (Justin Sun) founded Tron in early 2017, a two-time recipient of Forbes' "30-Under-30" award in Asia. Sun established Peiwo, a Chinese audio content application, before co-founding the non-profit Tron Foundation in 2015. In addition, Ripple, the for-profit company that maintains the XRP cryptocurrency, was represented by Sun in 2015. Early investors, including Clash of Kings founder Tang Binsen and OFO Dai Wei, were enticed by Sun's business background. These supporters boosted the September ICO, which raised millions in cryptocurrency from the public using a token on the Ethereum blockchain. In 2018, Tron released a second white paper detailing its technology. Origin of Tron Tron was initially developed as an Ethereum token but migrated to the Tron blockchain network in 2018. Investors traded their Ethereum tokens for Tron's TRX cryptocurrency during the process, destroying the original Ethereum tokens after this migration. Big-picture thinking Tron's protocol issues cryptographic keys controlling access to TRX and TRX token balances, just as Ethereum does (ETH). A Tron blockchain-based data exchange network has three layers: Core Layer – Accepts computer code written in Java or Solidity (Ethereum development language) and relays them to the Tron Virtual Machine, which runs the program or smart contract. Application Layer – Used by developers to build wallets and decentralized applications. Storage Layer – Designed to segment blockchain data (the record of the blockchain's history) and its state data (which preserves the status of smart contracts). DPoS is a type of Delegated Proof-of-Stake Tron uses a 27-member rotating cast to maintain its ledger's history and validate transactions to reach consensus. Every six hours, super representatives are elected and, if elected, gain the ability to collect new TRX created by the protocol. New blocks are added to the blockchain every 3 seconds, rewarding valid block creators with 32 TRX. The total annual distribution of Tron is 336,384,000 TRX. On top of super representatives, users may operate witness, complete, and Solidity nodes on the Tron blockchain. Witness nodes propose blocks and vote on protocol decisions, while full nodes broadcast transactions and blocks. Blocks are synced by Solidity nodes from full nodes and provide APIs. You can stake TRX on Tron To vote for super representatives on the Tron network, users must have "Tron Power." When a user freezes 1 TRX, they receive 1 Tron Power for every 1 TRX they choose not to spend. Upon unfreezing the cryptocurrency, users lose their Tron power and the ability to vote. There are no tokens built on top of the Tron blockchain that have Tron Power like TRX. Users earn rewards by locking up funds using a process similar to staking on blockchains like Tezos or Cosmos. Why is TRX valuable? The currency powering the Tron blockchain is called a "tronix," the smallest denomination of which is a "sun," after Justin Sun, the protocol's creator. Tron's initial coin offering (ICO) in 2017 created 100 billion TRX. TRX tokens were distributed as follows at that time: Public sale: 40 billion TRX Private sale: 15 billion TRX Reserved for the Tron Foundation: 35 billion TRX Reserved for Peiwo (the project's initial supporter): 10 billion TRX There are some nuances to the Tron economy that distinguish it from competitors. Tron uses a "bandwidth points" system to determine whether a user must pay for a transaction. Every byte of data consumed during a transaction destroys one bandwidth point. Every account receives 5,000 free bandwidth points every day. Suppose a user does not have enough bandwidth points to execute a transaction, burning 0.1 TRX per byte of data. Burnings of 9,999 TRX from accounts wishing to become super representatives are an example of penalties on the network that reduce the TRX supply. Beginning in January 2021, the protocol will no longer create TRX. All new TRX will come from the Tron Foundation's original token allocation. What advantages does TRX provide? You must purchase TRX to use specific Tron-based applications, so if you want to use a Tron game or service and don't have any TRX, you're out of luck. To participate in Tron's consensus system requires TRX. Therefore if you want to stake coins and vote on the protocol's operations, you must own TRX. Traders with a positive view of blockchain's potential applications may wish to invest in TRX. As Tron's platform allows users to develop custom applications and tokens, these types of investors may favor the token. Holding or owning TRX cryptocurrency also enables the ability to generate passive income through staking. Tron also has cheaper transaction fees when compared to Ethereum. When gas fees are high on the Ethereum blockchain, users may consider alternatives like Tron to cut costs. Final thoughts The price of Tron typically trades between $0.05 and $0.15, making it much more affordable for some. Tron has also been in the top 20 cryptocurrencies by market cap for years. The adoption of Tron over the last five years could suggest that the project has long-term future potential. With all the advantages that Tron brings to the table, it's at least worth considering when comparing blockchains to build on. What are your thoughts? Do you think Tron has long-term potential, or will it collapse like LUNA? Leave your comments. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

As the popularity of NFTs continues increasing, the debate surrounding ERC-1155 and ERC-721 has been gathering steam. Although NFTs have functionality that allows for minting on different blockchains, Ethereum has emerged as the preferred open-source blockchain network for developers to create smart contracts and decentralized applications. Ethereum is particularly synonymous with its ERC-721 and ERC-1155 NFT token standards, which are associated with the increasing popularity of NFTs and applications. Ethereum token standards, also known as Ethereum Request for Comment (ERC), allocate specific functions for the different token types and allow for smooth interactions between applications and smart contracts. What is an NFT Smart Contract? A smart contract is a program contained in a blockchain that allows the network to store data indicated in an NFT transaction. Blockchain transaction information is accessible anytime. In addition, the smart contract ensures the stored information is transparent and immutable. The NFT smart contracts are responsible for verifying ownership and handling transferability. NFTs can also be programmed to do more than just the essential functions by adding extra features. Some of these functionalities include handling royalty payments, connecting to other digital assets, and more. With smart contracts, you can also have permanent identification information. They also prevent NFTs from being split into smaller units for selling. The other use of smart contracts is to ensure that digital assets have value. The smart contract core includes a series of statements written to the blockchain as a code and operated by a computer network that performs all programmed actions. These actions execute only if the programmed conditions are met and verified. Standards of NFT Smart Contracts The term "standard" defines the underlying principles that enable a piece of technology to function without issues. NFT standards build NFT tokens on top of a blockchain protocol. As mentioned, Ethereum was the first blockchain to create and utilize NFTs. Below, let's get a close look at the primary NFT standards driving the market. ERC–721 The ERC-721 token standard originated to create NFTs and remains the most popular. The standard is free and open source, describing how to create NFTs on Ethereum. Each token is individually unique and often priced independently. Many artists prefer ERC-721 tokens, flexibility, and value the technology offers. In addition, duplication is not possible. In some cases, ERC-721 tokens are indestructible, but only if the smart contract does not include a burn function. ERC-721 NFTs have revolutionized digital content, including games, art, music, and applications. ERC–721 is at the core of the projects like Decentraland or CryptoKitties. ERC–1155 The ERC-1155 standard allows you to register fungible and non-fungible tokens in one smart contract. It's an upgraded version of the ERC – 721 standard with added functionality. Tokens created with the ERC-1155 standard have the same functions as ERC–20 and ERC–721 tokens. However, the standard parts have improved and are generally more efficient. The cost of minting or exchanging tokens using the ERC–1155 standard is lower per transaction. ERC–1155 is also more efficient in batch token transfers than other NFT standards. For instance, selling music as an NFT, you can use either ERC–1155 or ERC-721. However, if you sell several editions of your music, the ERC–1155 will help you create several copies of your music. ERC 721 Standard & ERC 1155 Standard, How Do NFT Smart Contracts Verify Authenticity and Prevent Counterfeiting? Ethereum NFT smart contracts ensure the validity of every transaction. Including all development processes and launching the token on the blockchain. As such, NFT metadata is traceable, including the address of the wallet and its activity. Metadata makes it easier to identify the origin of the NFT, track the purchase, and determine the authenticity of the deal. Anyone can view transaction history details on the Ethereum blockchain, which is transparent. With metadata information publically available, it is reducing counterfeiting significantly. This way, it's easier for the owner to prove ownership of an NFT, even if someone tries to copy it. The different uses of NFT smart contracts NFT smart contracts have theoretically limitless functionality, including: An NFT smart contract eliminates the need for a third party in NFT transactions. Smart contracts replace financial intermediaries' additional costs and can give a fee percentage to the NFT creator. Computer code and transactions are faster and more efficient because it doesn't involve much human effort. All the wallets, transactions, and ownership are public, keeping the network transparent and open for all. Since all information is available to the public, it isn't easy to hack transactions. Final Thoughts NFTs smart contracts allow you to create and invest in NFT tokens. ERC-721 and ERC-1155 have all demonstrated themselves to be standards, and which one you choose is a matter of your needs. NFT transaction information is in the public domain, promoting transparency and reducing fees. However, this doesn't mean that NFTs are 100% secure. With all new technology, scammers are out there, so you should be very careful. Are you looking to incorporate NFTs into your upcoming projects? If you need any help on your NFT project, please contact Blingy Lab - Our global talents secure your project with expertise crossing all facets of web3, dApp design, community, and process; we bring the leading edge of technology and talent to your projects. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

At the heart of cryptocurrency is blockchain technology. This technology facilitates seamless transactions between the buyer and seller without an intermediary. Transaction processing takes a few minutes to a couple of hours, depending on the blockchain protocol and consensus method. All pending blockchain transactions collect in a public waiting area called the 'mempool.' They will remain there until a validator or miner picks them and creates a block, which is then validated by nodes and later added to the blockchain. Miners and validators have, however, discovered ways to profit from pending transactions as they sit in the mempool. The process is known as Maximal Extractable Value or Miner Extractable Value (MEV). What is MEV? MEV is an invisible tax that miners collect from blockchain users. It's the maximum value a miner extracts from transactions when creating a block on a blockchain network. An algorithm trader under the username "Pmcgooghan" first discovered this activity in 2014. He warned of the possibility of miners moving around transactions to profit and benefit them. Phil Daian further explained the MEV phenomenon in 2019 in the "Flash Boys 2.0" research paper. The research highlights how MEV dynamics behaved in real-time and its effects on the blockchain and users. The concept became popular after researchers Georgios Konstantopoulos and Dan Robinson underscored in a 2020 blog post that the mempool is a 'dark forest' because of the intense competition and shady methods used to capture MEV. MEV has since grown into a considerable industry, encouraging researchers in blockchain to double their efforts in responding to this growing trend. As of today, miners have been reorganizing transactions on Ethereum account for millions of dollars of extracted value since the start of 2020. How does extracting MEV work? There are many ways to extract MEV from block production. A concept first utilized in proof-of-work, where miners were able to rearrange transactions in a block, hence the name 'mine extractable value.' The Ethereum Foundation recommends that validators and miners receive their full amount because they guarantee the successful extraction of an MEV. However, it notes that independent network participants known as 'searchers' extract a significant portion of MEV. The searchers use complex algorithms to find profitable MEV ventures. They also use bots to program the process. Validators and miners often receive a share of the total MEV amount because searchers are usually keen on paying a fee in exchange for the chances of including their profitable transactions in a block. Here are the various tactics used to extract MEV: Front-running Bots Known as 'generalized front-runners' are often used to identify profitable transactions and replicate a transaction with a high gas price to convince miners to pick their transactions over others. Sandwich attack A malicious form of front-running used to manipulate cryptocurrency prices. Sandwich attacks often happen when a searcher spots a large pending trade on a DEX (decentralized exchange) and places a future trade on it so they can benefit when there's a price change. Ultimately, the sandwich attack will impact the total cryptocurrency a user receives as the attacker benefits from the price difference. Dex arbitrage The varying demand for tokens often leads to different prices on the DEX. If there are substantial price differences between exchanges, MEV bots usually buy cheaper tokens and sell them to another exchange at a higher price. In the end, token prices for exchange remain the same, making DeFi (decentralized finance) market more efficient. This strategy may be competitive, but it's highly profitable. Liquidation DeFi lending platforms, also known as DeFi lending protocols, allow you to secure a loan. However, you must first deposit some cryptocurrency as collateral. If you cannot repay the loan, the platform will allow another user to liquidate the collateral and collect a fee from the borrower. In this case, MEV searchers will seek to find borrowers who can be liquidated and earn the fee. Use cases - Is MEV good or bad? MEV extraction methods like sandwich and front-running attacks are harmful and often result in network congestion and increase gas prices for other users. However, tactics like arbitrage help users get the best prices on different exchanges. Efforts have been put in place to curb the effects of malicious MEVs like Flashbots. Conclusion There's so much to cover about MEV. Cases MEV extraction have been increasing every day, which has led to high gas prices of Ethereum. Searchers and miners often use bots to capture MEV extraction, even though some are harmful. It's, however, recommended to use safer tactics. It's also important to remember that MEV is risky and not guaranteed despite the high levels of blockchain security. You always have to be careful when mining or searching. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!

A decentralized autonomous organization (aka. DAO) is a set of smart contracts that govern organizations. Autonomous refers to removing central control points of failure. Some of the most significant DAO protocols thrive because of decentralization. Core members of a DAO are responsible for making critical decisions involving the organization's operation. Many believe DAOs are only partially autonomous because they require proper human interaction. Some even question whether complete autonomy is possible; should "DAO" be renamed to "DO"? What is a DAO? As previously mentioned, a DAO is an entity that operates without centralized governance. It's a committee that agrees to work using specific rules for its common interest. The committee members own and manage the DAO using governance tokens, membership tokens, or NFTs to signify ownership. The organization's operation can require voting, sometimes known as improvement proposals. These proposals, if approved, make the final decisions based on a majority vote. DAOs have qualities that make them more appealing compared to regular organizations. In a traditional organization, when someone makes a decision, it typically has to be approved by a manager before reaching a level for actual implementation. DAOs have no hierarchy, meaning all members can act on proposals. The community members vote on proposals to help future protocol operations. When the DAO reaches an agreement, these protocols and changes alter the future process of the DAO using smart contracts. The community members must agree on proposals; otherwise, the proposal does not pass. Examples can include increasing or decreasing a token's supply, changing governance procedures, sending or withdrawing payments, etc. Why DAOs? In the ever-evolving Web3 industry, DAOs represent a critical innovation in decentralized governance and organization operation. DAOs offer accessibility, security, decentralization, and transparency. While there are a few drawbacks to DAOs, they certainly have many benefits. The autonomous and decentralized structure of DAOs is a prominent advantage. The autonomous system housed in smart contracts ensures all members are independent, facilitating freedom for DAO members. DAOs also offer the opportunity for every member to contribute towards running or improving the organization. Stakeholders can submit their proposals and ideas and vote to improve DAO protocols. DAOs provide a neutral environment for the organization to operate. Without managers and intermediaries, DAOs remove the potential for conflicts and power plays. A comparison: DAOs and Traditional Organizations: DAO Usually flat and fully democratized. Members require voting for any implementation of change. DAOs automatically count votes, and the outcome is implemented automatically without a trusted intermediary. Offered services, handled automatically in a decentralized manner (for example, the distribution of philanthropic funds). All activity is transparent and fully public. A Traditional Organization Usually hierarchical. Depending on the structure, a sole party can demand or enforce change, or voting can occur. Internal vote counting and manual implementation of voting outcomes are allowed if voting is allowed. Requires human handling or centrally controlled automation which is prone to manipulation. Activity is limited to the public and typically private. DAO examples To help this make more sense, here are a few examples of DAOs use cases: A Charity – you could accept donations from anyone worldwide and vote on which causes to fund. Collective ownership – you could buy physical items or digital assets, then members vote on what to do with them. Grants and Ventures – you could start a venture fund that pools investment capital and determines which ventures to back based on voting. Money repaid could later be redistributed amongst DAO members. A Business - A business could incorporate and structure itself as a DAO. Wyoming was the first state to enact legislation enabling businesses to operate legally under a DAO structure in the United States. History of DAOs? The first DAO was created in 2016 by Ethereum supporters. It quickly became one of the biggest spectacles in the Ethereum ecosystem to date. People were allowed to send Ether in exchange for DAO tokens in its early stages. At that time, the DAO raised more than $150 million in Ether. The platform enabled people to express their ideas to the community and receive project funding. Unfortunately, DAO was hacked a month later after its official launch. The DAO was exploited for $50 million in DAO tokens as a hacker stole them. The hack event resulted in the Ethereum blockchain creating a hard fork, meaning that the blockchain reverted to "undo" the hack. The Ethereum network split into two blockchains. One was Ethereum which erased the hack, and the other was Ethereum Classic which continued operating using the original chain. It was not until a few years later that the concept of DAOs started gaining popularity again. But the hack raised questions about the accountability and governance of DAOs and the centralization of the Ethereum blockchain. In 2019, Ethereum members started several projects, mainly focusing on simple structures and how to use DAOs safely. Examples include Aragon, MakerDAO, MolochDAO, DAOhaus, and others. Why are DAO projects still struggling with being fully autonomous? DAOs need help to become completely autonomous mainly because complete decentralization is complex, and true Artificial Intelligence has yet to reach maturity. There has been no liability from decision-makers, making the founding team distrust a system where everyone is a decision-maker. When you rely on an extensive community with direct consequences, it creates anxiety in the group and affects the decision-making process, ultimately affecting the entire company. Nearly all regular start-ups have only a handful of decision-makers because one wrong decision can significantly affect the company's growth. Many early founders are cautious about who they involve in their core team. Founders make decisions quickly and move fast. However, this is different for DAOs, emphasizing the importance of consent and making decisions as a team. DAO is a community-led organization, and founders must have confidence in the community when it comes to making the right decisions for the long-term benefit of the organization. Who can join the community is allowed, presenting challenges for the primary team to trust intentions. As such, some protocols would require a thorough recruitment process to find the right members. What is the next phase of DAO? For DAOs to remain true to their nature, where members have an equal voice in decision-making, decentralization must happen in several stages. Communities should be allowed to develop proposals and make decisions, but DAO councils maintain the organization's integrity. There are a few successful councils, such as PieDAO, Uniswap, MakerDAO, and others. These councils have systems where proposals go through numerous stages before approval. Communities are a crucial part of DAOs, and DAOs must develop structures that rely only partially on the primary team. While voting is essential in DAO, protocols must involve engagement and work with builders in the future. Final Thoughts DAOs are decentralized and secure, but not due to the organization's structure. Most activities with DAOs involve core members of the organization making critical decisions. If DAOs have to remain completely autonomous, decentralization has to happen in stages. However, while creating an entity where everyone is allowed to participate in the operation of the organization actively is not easy, DAO represents a revolution where management spreads out, and people can work together effectively. Follow my Twitter @JoyyuanWeb3 to learn about the trends of Blockchain, Crypto, and Web3!