Analyst Corner Archives - 101 Blockchains

Different Types of Crypto Wallets – Explained

Diego Geroni — Mon, 08 Nov 2021 04:15:31 +0000

Cryptocurrency is changing the way we perceive money. It has been changing many conventional precedents in the financial services industry and has caught the attention of governments, investors, technology professionals, enterprises, and the general public all over the world. The radical growth in popularity of cryptocurrency fueled the growth in cryptocurrency use. However, many people wonder about where cryptocurrency is stored.

In the most basic sense, you can imply that cryptocurrency would obviously go into a crypto wallet. Therefore, the interest in learning about crypto wallet types has also been growing profoundly in recent times. People have concerns about the consequences of their selection of crypto wallets, as it is one of the most critical decisions before investing in cryptocurrencies. The following discussion provides a detailed overview of the types of crypto wallets you can use according to different requirements.

Want to become a Cryptocurrency expert? Enroll Now in Cryptocurrency Fundamentals Course

Why Should You Worry about Selecting a Crypto Wallet?

The foremost factor that might be striking your mind while reading this is the reason for doing the same. Why should you learn about the crypto wallet categories? One of the recent password leaks involved the exposure of almost 8.4 billion passwords. The leak included various old passwords as well as many current passwords for email and bank accounts. So, when you think of cryptocurrency and the money involved in it, it is quite important to think of security.

How will you store cryptocurrency? What will be the ideal method for using cryptocurrency to minimize loss? Could you get the advantage of security for storing your crypto assets? The answers to all these questions point out a clear impression of the different types of crypto wallet. So, you need to understand crypto wallets carefully for identifying the suitable alternative among available options for your requirements.

Curious to know the impact and in-depth understanding of crypto compliance in businesses? Join Standard/Premium Plan and get free access to Crypto Compliance Fundamentals Course.

What are Crypto Wallets?

Before you try to find out the answers to “What are the different types of cryptocurrency wallets?” you need to understand crypto wallets. First of all, you need to keep in mind that ownership of cryptocurrency is different from ownership of traditional currency. Cryptocurrency is not available in the physical form and is rather considered as a group of codes. On the other hand, cryptocurrency is stored on blockchain with a specific address. Users can leverage the public key to help other users in sending crypto assets. At the same time, you can use a private key for unlocking the crypto assets in the wallet.

You can think of a crypto wallet as a traditional wallet required for maintaining the safety of your funds. However, different crypto wallet types provide improved security measures in comparison to traditional wallets. As a matter of fact, crypto wallets never store the actual cryptocurrency. On the contrary, they ensure the storage of keys to the crypto assets. The crypto wallet could hold the information for connecting individuals to funds to ensure their safety.

Get familiar with the terms related to cryptocurrency with Cryptocurrency Flashcards.

Types of Crypto Wallets

When you purchase crypto from an exchange, you can technically store the crypto where you purchased it. If you purchase small amounts of cryptocurrency, then you can find it in your accounts initially, like a bank account balance. This is one of the basic crypto wallet categories you get by default when you purchase cryptocurrency. Most important of all, the wallets on the exchanges will also offer certain layers of security.

For example, cryptocurrency exchanges have insurance policies for safeguards against losses. In addition, funds are generally stored in the accounts with FDIC insurance. However, these security measures are sometimes not enough for addressing your concerns of safe storage for cryptocurrency. This is where you would need to find the suitable types of crypto wallets which can offer security. Let us take a look at the common types of wallets you can find for crypto assets.

Watch This Video To Know About Different Types of Crypto Wallets Right Now!

Hot Wallets

One of the foremost crypto wallet types brings hot wallets to the discussion. Hot wallets are basically the wallets that connect to the internet and generally offer lesser security. On the other hand, hot wallets offer better accessibility due to their connection with the internet. Even if hot wallets are vulnerable to fraudsters and hacker attacks, they are highly user-friendly.

Cold Wallets

Cold wallets are another prominent answer to ‘What are the different types of cryptocurrency wallets?’ next to hot wallets. They are basically specific variations of cryptocurrency wallets that are designed for cold storage. Cold storage implies that the wallets store the crypto tokens of users in offline mode. As a result, they serve as vaults that you can use for everyday transactions. Interestingly, there are some types of cold wallets that connect to the internet even while retaining their basic working functionality.

Therefore, it is quite clear that people with a larger amount of crypto assets would find better benefits with cold wallets. However, a combination of both cold and hot wallets could present better value advantages for crypto users. For example, a large share of funds could be stored securely in a cold wallet, with the hot wallet allowing better flexibility for funds. So, a hybrid approach with the two crypto wallet categories blended together could offer improved security alongside flexibility.

Explore detailed comparison between hot and cold crypto wallets on the basis of different value factors.

Types of Hot Wallets

Generally, you would find all the software wallets in the hot crypto wallet types. The most common types of hot wallets include mobile wallets, web wallets, and desktop wallets.

Desktop Wallets

Desktop wallets involve downloading an application to your desktop or laptop. The application will help in generating a data file for holding the keys of the users. Users should also create a password for accessing the keys. Desktop wallets offer the advantage of ownership of your key, albeit with risks of physical damage or malware/virus infection.

Web Wallets

Web wallets are one of the prominent types of crypto wallets in the category of hot wallets. You can access the web wallets through a web browser without the need for downloading any specialized software or application. With the help of browser access, web wallets ensure accessibility for crypto assets from any location with your password, a device, and a web browser. In the case of web wallets, the website would have ownership of the keys to your crypto assets. However, alternatives like multi-sig wallets offer a certain level of control to users over their crypto wallets.

Mobile Wallets

Mobile wallets are also one of the crucial crypto wallet categories in hot wallets with functionality similar to desktop wallets. You have to install a mobile application on the phone, which would serve as the hot wallet. Mobile wallets present better flexibility for exchanging funds while presenting some security risks.

Learn about how cryptocurrencies work, and the significance of crypto in the changing finance industry through AN INTRODUCTION TO CRYPTOCURRENCY FUNDAMENTALS Ebook

Types of Cold Wallets

The next important point of discussion regarding crypto wallet types would refer to the variants in the cold wallet category. You can find two common variants of cold wallets such as paper wallets and hardware wallets.

Paper Wallets

The name gives a lot away about paper wallets when it comes to understanding them as one of the types of crypto wallets. Paper wallets are nothing but physical pieces of paper. The paper must contain all the data you would need for accessing the cryptocurrency. Cold wallets generally offer additional security.

However, the same does not hold strong in the case of paper wallets. In event of losing the paper document, you have the risk of losing the crypto assets in the wallet. Furthermore, paper wallets also present the setbacks of limitations in sending partial funds easily. In addition, the time-consuming nature of transactions with paper wallets also presents formidable setbacks for their use.

Hardware Wallets

Hardware wallets, on the other hand, truly define the principles of designing a cold wallet. They offer security by completely avoiding the online exposure of private keys. Hardware wallets save private keys on a physical device in an offline environment and work just like a flash drive. Hardware wallets are one of the most easy-to-use crypto wallet types in cold wallets because you can connect them easily to computers or any other device by using a USB drive.

Even if the device is connected to the internet, the private key does not leave the device. The device would request the transaction details and provide validation for the data, thereby completing the transaction. Then, the transaction details go to the online network, where it is documented. Some of the popular hardware wallets which are in use presently include Trezor, Ledger, and many others from different manufacturers.

Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.

Bottom Line

The understanding of different types of crypto wallets is quite essential for sensible investment in cryptocurrencies. One of the formidable aspects which have been clearly evident in recent times in the domain of cryptocurrency is volatility. At the same time, security is also emerging as a vital concern with respect to investments in cryptocurrency.

However, a detailed overview of crypto wallets and their working alongside different variants helps users in finding suitable choices according to their requirements. The common variants of crypto wallets, hot wallets, and cold wallets, have their share of advantages and setbacks. You need to find the one which suits your needs best for dealing with cryptocurrencies. Learn more about crypto wallets and make the right decision now.

*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!

The post Different Types of Crypto Wallets – Explained appeared first on 101 Blockchains.

Know the Key Features of Stablecoins

Diego Geroni — Tue, 14 Sep 2021 14:53:01 +0000

Stablecoins are one of the most recent yet highly productive interventions in the domain of cryptocurrencies. The introduction of stablecoins has been quite influential in addressing the concerns of price stability for cryptocurrencies. Considering the fact that they resolve one of the issues with cryptocurrencies, stablecoin features are most likely to be unique.

The substantially growing popularity of stablecoins in recent times has been a prolific instrument for encouraging the interest of learners in the traits of stablecoins. Why? If you are following the crypto space, then you might want to reflect on the details of the stability mechanism. The following discussion would help you find the important traits of stablecoins for understanding them better.

Want to learn the basic and advanced concepts of stablecoins? Enroll Now: Stablecoin Fundamentals Masterclass

Why Should I Learn about Stablecoins?

Before finding out the features of stablecoins, it is important to know what stablecoins are and where do they fall in the existing hierarchy of money. Stablecoins are just digital assets focused on managing volatility through tracking the value of assets with better stability, such as fiat currencies.

The continuous fluctuations in cryptocurrency prices in a short duration of time showcase the profound levels of volatility. In the case of stablecoins, you don’t have to worry about volatility. So, you can basically find a lot of similarities between stablecoin traits and that of other cryptocurrencies. However, the most important factor responsible for the uniqueness of stablecoins is evident in its stability mechanism.

You could develop a better impression of the features of stablecoins by understanding where they fall in the existing hierarchy of money. Stablecoins come in the claim-based money category with the assurance of fixed value redemptions. In addition, they also share the characteristics of privacy and decentralization.

Furthermore, stablecoins also feature similar traits as that of Constant Net Asset Value (CNAV) funds, thereby implying that customers could get their money back in return for stablecoins. So, you can notice a few stablecoin features clearly in the traits considered for their classification in the money hierarchy.

Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.

Notable Features of Stablecoins

Stablecoins are basically cryptocurrencies with the added advantage of a stability mechanism. Therefore, stablecoin traits are quite similar to that of cryptocurrencies. Prior to an overview of the important traits of stablecoins, let us reflect on the general features you can find with stablecoins.

Privacy

Stablecoin transactions are associated with a random arrangement of characters rather than linking with the identity of the owners. You could not associate the ownership of a stablecoin or related contracts with organizations or individuals. Stablecoins do not have any association with company-related data or individual data, thereby enhancing their abilities to offer privacy.

Security

One of the most crucial stablecoin features refers to the security they offer. You can store stablecoins in virtual wallets and ensure their security by using a private key. As a result, you can clearly notice that the stablecoin holder only could access the associated funds. In addition, users could also leverage advanced encryption technology for their storage devices to enhance security levels.

Ease of Usability

Stablecoin holders could use them by newly emerging tools and services that allow faster conversion and exchange of stablecoins into fiat currency. As a result, they can enable funding of currencies directly through a user’s virtual wallet through conversion and exchange solutions.

No Intermediaries

The lack of intermediaries is one of the significant features of stablecoins. Just like cryptocurrencies, stablecoins remove the fees and limitations that come with governmental control, regulations, and other centralized authorities. However, unlike cryptocurrencies, stablecoin owners have the assurance of protection due to backing against stable assets like fiat currencies.

Decentralization

Another crucial trait of stablecoins is decentralization, which is one of the basic highlights of a stablecoin design. You don’t have any authority to control the flow of stablecoin. In addition, stablecoin exchange is not restricted to one place, thereby avoiding possibilities of disruptions after malicious hacking attempts. All stablecoin holders in the network have the transaction data stored, thereby ensuring dispersal of transaction data throughout the network.

For all those who don’t know how to build a career in enterprise blockchains, here’s an ultimate course you must enroll in: How to Build Your Career in Enterprise Blockchains

Unique Traits of Stablecoins

While these are the general features you can find in stablecoins, you might still be wondering about ‘what is the most important trait of a stablecoin?’ and the possible answers. The distinct traits of stablecoins primarily refer to the aspects which help in ensuring stability. Here are some of the notable ways in which you can identify the distinct features of stablecoins.

Unit of Account

The foremost aspect in understanding the way stablecoins offer stability is to know how they work as a unit of account. The pegging mechanism is highly significant for establishing the pricing in case of stablecoins. Therefore, stablecoins have the potential to foster a new approach towards becoming an independent unit of account worldwide. Some of the promising examples of such applications are evident in a fixed amount of a desirable subject like water, time, or minerals being monetized.

Medium of Exchange

Your search for answers to ‘what is the most important trait of a stablecoin?’ can end with understanding how stablecoin could encourage the adoption of cryptocurrencies. Stablecoins can serve as an efficient medium of exchange while reducing the risks associated with volatility.

As a result, they can provide effective improvements in the convenience of the financial operations of an enterprise. At the same time, stablecoins also feature improved predictability along with ease of cross-border transactions. The trait of stablecoins to serve as a medium of exchange is highly significant in fostering the scope for their long-term adoption.

Store of Value

The list of features of stablecoins could remain incomplete without considering their ability to serve as a store of value. Stablecoins are slowly turning into stores of value over the course of time, especially because of the limited volatility levels associated with them. Most important of all, the stablecoin traits as a store of value ensures that they could offer flexible access to generally used store-of-value items like currencies, assets, and commodities. Furthermore, stablecoins could also leverage their store of value feature for winning the trust of depositors.

Interoperability with dApps

The next important addition among stablecoin features would refer to the flexibility for using stablecoins with other dApps. Businesses using smart contracts could use stablecoins for improved predictability of operation costs. At the same time, the interoperability of stablecoins with decentralized apps or dApps could also offer better prospects for infrastructure management. Stablecoins offer ease of programming, and you can tailor stablecoins in accordance with the needs of users or enterprises.

Performance Measurement

Another prolific entry among the stablecoin traits would refer to the accuracy in financial performance valuation. Stablecoins take away the volatility and ensure promising improvements in accuracy for the assessment of the performance of projects.

Want to learn about the practical implementation of blockchain in the financial sector? Enroll Now: Blockchain in Finance Masterclass

What is the Most Important Feature of a Stablecoin?

The whole assortment of features of stablecoins shows the possibilities of leveraging them in various ways for strengthening the prospects for a brighter future for the crypto world. Stablecoins offer the most important feature of stability and have been tailored primarily for managing the volatility of digital assets. You need to note that stablecoins have been tailored for working as a store of value in the distributed ledger technology or the blockchain ecosystem.

As a result, they can offer the value of relief from administrative limitations and high fees. Basically, stablecoins have the capability of serving as a bridge between the conventional financial systems and DLT markets. How? Stablecoins are capable of offering payment methods for both worlds with a higher range of similarities. In addition, the stablecoin traits are also serving unique advantages in use cases for facilitating payments within traditional financial systems.

Are there any setbacks of stablecoins?

One of the most important questions regarding the features of stablecoins brings the limelight on potential risks associated with them. Stablecoins obviously have a lot of promising features which can transform conventional financial systems, processes, and infrastructures altogether. However, stablecoins also share some of the risks that are related to other cryptocurrencies.

Generally, the issues of regulatory uncertainty and cybersecurity emerge as some of the notable risks with stablecoins. For example, the security of algorithms used for maintaining stablecoin value is highly crucial. In addition, stablecoin is also associated with certain risks associated with the storage and maintenance of assets backing the stablecoin. So, it is clearly evident that stablecoins have quite a fair share of setbacks alongside some interesting features.

Want to learn about the different types of stablecoins and their key elements? Check An Overview of Stablecoin Presentation Now!

Final Words

The arrival of stablecoins has sparked immeasurable interest in the features of stablecoin and how they work. Stablecoins introduced the much-needed stability in the cryptocurrency world to show how crypto can also serve as a vital instrument for financial exchanges. The notable traits of stablecoins have similarities with cryptocurrencies, as you can find decentralization, privacy, and interoperability with dApps. However, stablecoins are different from other cryptocurrencies by the unique pegging mechanism which establishes them as a store of value.

Therefore, you can easily notice that the stability mechanism is the most important feature in a stablecoin. As the world opens up gradually to the concept of crypto, stablecoins can serve as a vital push to the adoption of cryptocurrencies. Enterprises can capitalize on the element of trust due to stability and discover new ways for digital transformation with crypto.

The post Know the Key Features of Stablecoins appeared first on 101 Blockchains.

Top 4 Use Cases of Tokenization

Gwyneth Iredale — Thu, 19 Aug 2021 06:20:53 +0000

Enterprises are exploring the possibilities of blockchain technology and ways to leverage it for their benefit. According to a recent worldwide blockchain survey by Deloitte, almost 95% of enterprises in the survey indicated possibilities for investment in blockchain technology in the coming year. On the other hand, the applications of blockchain by enterprises are largely restricted to the scope of recordkeeping for transactions.

In addition, the concerns of scalability or privacy for enterprises also keep them away from public blockchain networks. However, enterprises have to realize the promising potential associated with blockchain, such as in examples of tokenization use cases. Let us find out more about tokenization and how it finds practical applications across different use cases.

Want to learn the fundamentals of tokenization? Enroll Now: Tokenization Fundamentals Course

What is Tokenization?

Before we move towards an outline of blockchain tokenization use cases, it is important to reflect on a brief understanding of tokenization. Many people are quick to relate blockchain to cryptocurrencies without realizing its hidden potential. Token, in the case of blockchain, actually offers digital representation for a unit of value.

You can assign a token to anything of value, such as digital assets or digital representations of real-world assets. Tokenization can help you transform any real-world asset into a digital asset, thereby enabling easier exchange and transfer of assets. Therefore, tokenization basically implies transferring real-world assets to blockchain or transforming the items of value into tokens that reflect the values.

Why Should You Focus on Tokenization Use Cases?

Now, you would be eager to find out the possible factors which drive focus towards use cases of tokenization. Here are some of the important benefits of tokenization that validate its feasibility for a diverse range of use cases.

Tokenization could enable a formidable reduction in barriers to investment, thereby encouraging retail investors to trade assets that were traditionally expensive and featured lower liquidity.
Tokenization could foster asset liquidity by reducing the threshold for market entry alongside the minimum amount of capital for transactions.
Another prolific value advantage in a tokenization example would be the facility of simpler interaction with regulators for adoption of uniform standards.

However, tokenization of different types of assets comes across as one of the formidable obstacles in the form of regulatory uncertainty. Without adequate preparation of legal frameworks in many jurisdictions for transactions using blockchain, regulatory uncertainty becomes a mandatory setback in tokenization.

Furthermore, the lack of common technical standards for trading platforms dealing with tokenized assets also presents challenges. How will tokenization overcome these challenges? The answer to this question can be discovered through reflection on the existing state of tokenization for different types of assets.

Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.

Use Cases of Tokenization

Tokenization basically implies the transformation of real-world assets into digital tokens on blockchain-based systems. The adoption of tokenization depends considerably on a detailed impression of its practical use cases. When you try to find answers to ‘what is an example of tokenization,’ you could come across many promising responses. Here are some of the top use cases related to tokenization which you can find helpful for understanding tokenization clearly.

1. Tokenization of Precious Metals

For many centuries, gold has retained its reputation as a valuable asset and investment vehicle. However, you would have to encounter various complications in moving and storing gold. Furthermore, a major share of the global supply of gold comes under ownership of national banks as reserve assets or brokers serving as representatives of the sole parties which can sell gold directly to average investors.

The use cases of tokenization for precious metals such as gold are rightly valid on the grounds of the comparatively illiquid nature of the market for precious metals. In the case of illiquid markets, larger corporate firms could look for settling bilateral agreements while encouraging information asymmetries along with restrictions on price discovery.

One of the highest barriers for entry in the precious metals market directly points out high minimum investment requisites. In addition, the tightening of international regulations also calls for effective traceability of metals from the production stages to customers across the complete supply chain.

Tokenization provides the benefit of fractionalization, which can reduce entry barriers alongside empowering smaller players to access new markets. Subsequently, the tokenization use cases for precious metals with increased market participation could lead to improved market liquidity.

On the other hand, the larger number of market participants would imply the need for evolution to multilateral trades. With tokenization, support for atomic swaps and smart contracts could ensure secure and almost real-time settlement of complicated multi-party trades.

The notable examples of projects which ensure tokenization of precious metals include Cache. Gold (CGT), Pax Gold, and DGLD. These projects have shown the possibility of increasing fairness in gold markets by introducing instant liquidity and negligible fees.

2. Tokenization for Real Estate Assets

Another prominent entry among blockchain tokenization use cases directly refers to tokenization of real estate assets. The applications of tokenization in real estate focus on creating fractional ownership for a specific asset by leveraging blockchain-based tokens. Tokenization in real estate could involve the digitization of financial instruments, securities, and digital assets.

With the help of Ethereum blockchain, it is possible to program digital assets for including transaction history and ownership rights. In addition, the tokens also include rules for ensuring compliance of the asset issuing, distribution, and transfer processes to regulations. For example, tokenization in real estate can focus on including controls for ensuring the transfer of tokens to specific counterparties only.

The tokenization example in real estate would refer to Elevated Returns. The New York-based asset management firm successfully completed its first real estate deal based on tokenization in 2018. The company had placed the deal for the St. Regis Resort in Aspen, Colorado, with a total value of $18 million on Ethereum blockchain.

Interestingly, Elevated Returns had plans for selling almost half of St. Regis Resort in the form of a single asset. Subsequently, the company settled on offering an 18.9% share in ownership through tokens. Elevated Returns leveraged Indiegogo for sales in collaboration with Templum Markets LLP.

Start your blockchain journey Now with the Enterprise Blockchains Fundamentals

3. Tokenization in Logistics

The search for answers to ‘what is an example of tokenization in the real world’ will obviously take you to logistics. The logistics industry depends profoundly on the Bill of Lading as a method for issuing proof of ownership. However, the Bill of Lading presents notable discrepancies like delays in delivery or reclaiming of goods if you lose or misplace the Bill of Lading.

CargoX is one of the promising solutions which leverage tokenization for addressing the issues in traditional methods used in logistics. The company utilizes an open system based on the Ethereum blockchain known as the Smart Bill of Lading or B/L. The Smart B/L system has been tailored for working just like the token system.

With the new system by CargoX, the carrier could create the Smart B/L by using their app. Then, the carrier can send the Smart B/L to the exporter. After receiving money from the importer, the exporter can transfer the ownership of Smart B/L token to importers. Subsequently, the importer at the receiving end could claim ownership of the goods by showing Smart B/L token to the carrier. Therefore, it is clearly evident how the use cases of tokenization are transforming the field of logistics.

4. Non-fungible Tokens

Non-fungible tokens or NFTs are one of the popular examples of the application of tokenization on the basis of blockchain. NFTs are suitable for tokenization of assets that cannot be divided into smaller units or exchanged with a similar item. For example, it is difficult to divide ownership of a specific piece of artwork in the real world.

Any individual purchasing a piece of artwork would get complete ownership over the artwork. However, tokenization can transform such conventional precedents easily. The most prolific tokenization use cases in NFTs would point your attention towards NFT Art.

Digital art is one of the most promising use cases for non-fungible tokens in the present times. The tokenization of real artworks helps in promoting authenticity alongside easier transfer of ownership to artists or the highest bidder in an auction for purchasing the artwork. NFTs use the power of blockchain technology and cryptography to ensure better scope of digital proof regarding authenticity and scarcity of virtual artworks.

For example, CryptoPunks, an early addition among NFT projects which shows the feasibility of tokenization for virtual art. You can also find another plausible tokenization example in the Rarible marketplace. With the help of the Rarible marketplace, you could easily procure digital collectibles as NFT art.

Aspiring to Become a Certified NFT Expert? Enroll in Certified NFT Professional (CNFTP) Course Now!

Final Words

The distinct use cases of tokenization showcase the promising potential of tokenization to revolutionize business operations across various industries. While tokenization enables prolific value benefits for the average investor, enterprises could also leverage it for a complete transformation of their business models. The examples of tokenization use cases in precious metals, real estate, NFTs, and logistics show that tokenization is more than a concept now.

Most important of all, the examples showcase how tokenization could offer promising improvements in operational efficiency. Apart from the optimization of business processes, tokenization could also encourage development of new platforms with collaborators from different industries. Learn more about tokenization and how it can change the world right now!

The post Top 4 Use Cases of Tokenization appeared first on 101 Blockchains.

Blockchain Ecosystem Explained

Diego Geroni — Tue, 10 Aug 2021 07:41:08 +0000

The year 2008 introduced a prominent, revolutionary intervention in the world of technology with blockchain. Satoshi Nakamoto established the foundations of a peer-to-peer electronic cash system and thus paved the way for many groundbreaking applications of blockchain in different sectors. While the focus of blockchain in the initial years largely revolved around cryptocurrency applications, it has slowly evolved to programmable chains which could be tailored for various use cases. As a result, we can witness the blockchain ecosystem growing exponentially in recent years. However, it is important to understand the ecosystem and what value it delivers for blockchain as new, emerging technology. The following discussion helps you uncover the significance of the blockchain ecosystem in 2021 and a brief overview of the significant components of the ecosystem.

Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.

What is the Blockchain Ecosystem?

It is important to note that the success of blockchain applications does not come just like that. As a matter of fact, you need many visionaries with promising and innovative ideas alongside technology experts with the right skills for translating the ideas to reality. This is where you would come across the blockchain ecosystem definition, as the effectiveness of blockchain lies in its use for the automation of cross-enterprise workflows.

The definition of blockchain ecosystems basically points to a group of elements capable of interacting with each other and the surrounding world for creating an environment with desired special features. You can also define a blockchain ecosystem as the agreed-upon governance structure for a specific use case. The governance structure provides a definition of the acceptable behavior of participants, data ownership, funding, exit and entrance criteria, and conditions for information sharing among participants.

You could find credible advantages with a distributed ledger such as decentralization, independence, improved flexibility, audit trail, better transparency, and many more. However, blockchain is also subject to additional concerns, just like any other new technology in modern enterprise operations.

Some of the notable concerns, in this case, including managing the selection of appropriate information for the network and the identity of authors of the concerned information to the shared chain. All of these issues come under the scope of emerging blockchain ecosystem ideas, and relevant planning for their management ensures the success of the project.

Start learning Blockchain with World’s first Blockchain Skill Paths with quality resources tailored by industry experts Now!

Value of Blockchain Ecosystems

Distributed ledger technology can facilitate cross-enterprise collaboration with the benefit of decentralization. As a result, it can offer astoundingly exciting possibilities for enabling functionality for employees and customers, albeit for most organizations, it can lead to new workflows and approaches for planning development projects.

The first step begins with the identification of a suitable use case for blockchain with better performance than existing solutions. For example, a blockchain-based solution may work better in use cases where data must be shared among dozens of stakeholders. Once you have identified the viable use case, you should define the business value from the new project. So, what is the value of the blockchain ecosystem in 2021?

Blockchain applications follow peer-to-peer interactions by leveraging shared ledgers which facilitate information exchange and business process management throughout an entire ecosystem. At the same time, blockchain also provides adequate support for collaboration without compromising independence. Blockchain can help you in the automation of business processes alongside ensuring selective availability of information to ecosystem participants.

For example, enterprises could choose to avoid giving information on internal business processes to customers while informing them about their manufacturing responsibilities. So, blockchain delivers visibility, albeit with the organization’s control on the type of information to be shared and the identity of the person with whom the information must be shared.

All these traits imply the need for thinking about blockchain solutions from the perspective of an ecosystem of stakeholders. The responsible deployment of blockchain solutions depends considerably on stakeholders within and outside the organization and their abilities to take advantage of trust and transparency in the blockchain. Therefore, a clear analysis of the blockchain ecosystem in 2021 becomes imperative for understanding the dynamics and incentives of the ecosystem.

Not sure how to build your career in enterprise blockchains? Enroll Now in How to Build Your Career in Enterprise Blockchains Course

Blockchain Ecosystems and Collaboration

Discussions on blockchain ecosystems ultimately round up to the topic of their main purpose. As a matter of fact, the basic idea behind ‘what is the blockchain ecosystem?’ revolves largely around collaboration. Once an enterprise proves the capability of a blockchain solution to deliver unique business value, it must look forward. The next step focuses on scaling the concerned solution throughout multiple supply-chain partners.

Now, it is important to note that the majority of blockchain projects feature cross-enterprise workflows. Therefore, collaboration is definitely one of the crucial success factors for blockchain applications. The governance and operations of the ecosystem would be significant in defining approaches for sharing information across multiple participants.

On the other hand, a lack of emphasis on an ecosystem or prior planning has created formidable setbacks for blockchain projects. As a result, only a trivial share of proposed blockchain projects actually move into production stages. A blockchain ecosystem in 2021 would help in fostering integration throughout enterprise boundaries.

Subsequently, enterprises could deliver products and services which they couldn’t have been able to deliver on their own. With the focus on an ecosystem perspective, enterprises could look beyond the traditional prospects with blockchain technology. Furthermore, ecosystem thinking could also help in overcoming the dynamic limitations associated with a specific blockchain network.

Are you looking to build a career in blockchain? Check out this video

Driving Improved Collaboration with Blockchain Ecosystems

The existence of blockchain ecosystems points out various possible reasons, with many primary drivers making a formidable statement. First of all, a closed ecosystem with participants involved in producing a good or service has been one of the primary drivers. The example of a renowned apparel manufacturing company shows a closed blockchain ecosystem.

The apparel manufacturing company invited all suppliers from Tier 1 to Tier 3 on blockchain for tracking product lifecycle. The other possible option among emerging blockchain ecosystem ideas would be an industry-wide consortia. The industry-wide consortia could work for improving visibility into fair-trade items like palm oil or coffee.

As you can notice clearly, both ecosystems have different governance approaches and requirements. With the participation of additional buyers and sellers in the ecosystem, services would become more valuable. So, you can notice that many of the successful ecosystems begin with a small footing and then expand gradually.

Starting with a massive ecosystem has formidable setbacks and has limited chances for success. However, successful ecosystems for collaboration come with a clearly defined workflow and governance by leaders. As a result, the model can ensure faster benefits while ensuring the future development of the ecosystem. With the increasing maturity of the network, operations and network governance could change according to evolving requirements of participants.

Get familiar with the terms related to blockchain with Blockchain Basics Flashcards.

Developing a Distributed Ledger Technology Ecosystem

The focus on driving the use of blockchain ecosystem components for improving collaboration has led to many generalized ecosystem models. Many technology providers have started documentation of various generalized models for ecosystem management. Some of the notable mentions among the models for ecosystem management include the prime tenant model or the minimum viable ecosystem (MVE) model. The development of these models would definitely garner attention in the coming years. Interestingly, these models emphasize beginning an ecosystem on a small scale in the initial stages for improving control.

In the initial stages, you can begin with the supply chain for one particular product line. The supply chain must be capable of expansion as the organization grows while showcasing the advantages of blockchain clearly. Subsequently, the solution could grow further for encompassing multiple product lines and probably set some new industry standards.

Blockchain solutions have to be developed around the smaller ecosystems existing already with scope for future expansion. Companies want to move beyond their traditional limits by participating in blockchain ecosystems. As a matter of fact, ecosystems empower businesses for delivering products or services, which was traditionally impossible for them.

Types of Blockchain Ecosystems

You know that a blockchain ecosystem basically refers to a network of participants in a blockchain network with shared business objectives, relationships, and processes. The network is capable of creating and transferring business value efficiently. At the same time, it is important to note that blockchain is actually a complicated alliance that brings in various actors with shared goals.

However, the different actors have different perspectives on achieving the desired objectives. The individual participants in the ecosystem could have different business models with distinct contributions to the ecosystem. It is not a surprise if you find that some of the ecosystem participants are competitors. Basically, everyone in the ecosystem is there for the business value they receive.

Therefore, the selection of a model for shared blockchain projects depends on the person who must participate in the network for best effectiveness. On the other hand, emerging blockchain ecosystem ideas also help in the evolution of the initial model into other models. Here are some of the notable types of collaboration models used for blockchain ecosystems till now.

One-Leader Ecosystem

The first entry among variants of blockchain ecosystems refers to a single-party blockchain project with cross-enterprise workflows. The example of Bumble Bee Foods showcases a one-leader blockchain ecosystem. It has been able to develop an ecosystem comprising of different stakeholders in the fishing industry. The primary focus of the ecosystem rests on improving the traceability of yellow-fin tuna fish from the ocean to dinner tables.

The different stakeholders in the fishing ecosystem, including the fishermen, packagers, transportation personnel, distributors, and retailers, could record details on blockchain networks. The information entered by all participants can be available to the customer with a QR code. As a result, it can improve the confidence of buyers in the brand and the food on their table. Bumble Bee has multiple stakeholders, and the one-leader ecosystem initiative serves as a strategic fit for them with revolutionary prospects.

New to blockchain? Enroll now in our Enterprise Blockchains Fundamentals

Joint Venture or Consortia Ecosystems

When you think of a blockchain ecosystem in 2021, you would obviously think of multiple participants. The joint venture or consortia ecosystems showcase examples of building ecosystems with two or more organizations or governments gaining control. The consortium model for developing blockchain ecosystems has taken the upper hand over formal joint ventures.

However, enterprises have to come across a notable concern when thinking of strategic business associations in blockchain ecosystems. Participants have to decide whether to form a new legal entity for the association or just carry on with formal contractual agreements. Some of the notable factors which could define this decision include taxation, regulatory and financing requirements.

Regulatory Blockchain Ecosystems

The final variant of blockchain ecosystems would focus on shared projects across government agencies that have to self-report for compliance. The example of a shared project by Marine Transport International and the Recycling Association in Britain showcases a regulatory blockchain ecosystem. Both parties aim to leverage a blockchain-based tool for collecting data and addressing compliance requirements for shipping recyclable waste.

A clear overview of the different types of models for blockchain ecosystems shows one of the most common yet crucial considerations in building ecosystems. Enterprises should not forget the source of funding for the blockchain ecosystem definition. It is also important to note that business model funding and ecosystem funding are completely different. Business model funding could include fees for service, annual contributions, for-profit versus non-profit concerns, transaction fees, and other funds.

On the other hand, enterprises have to consider the direct cost for connecting to the ecosystem and delivering all the individual responsibilities of the organization on the ecosystem. At the same time, enterprises must also focus on resource considerations alongside required funds for operations and governance. The detailed identification and review of all these factors are crucial for setting up your desired blockchain ecosystem in 2021.

Curious to learn about blockchain implementation and strategy for managing your blockchain projects? Enroll Now in Blockchain Technology – Implementation And Strategy Course!

Components in Blockchain Ecosystem

Generally, the topic of blockchain ecosystems in 2021 takes the limelight to different models for collaboration. However, one of the most critical aspects in understanding blockchain ecosystems refers to their components. So, what are the components you can find in an emerging blockchain ecosystem? The answer to this question will obviously take you to the different participants in the ecosystem.

Each participant has a specific role in the ecosystem with contributions of data and resources needed by other participants. Furthermore, the identification of blockchain ecosystem components and the ways in which they interact with each other is essential for planning the development of the ecosystem.

Here are some of the notable components you need in blockchain ecosystems, along with their roles in the ecosystem –

Leaders

The leader in a blockchain ecosystem definition would refer to the organization which visualizes the ecosystem and its business value. The leaders in blockchain ecosystems are generally the creators of the project and primary beneficiaries of the work in ecosystems.

Core Group

Core group is also one of the notable additions among components of blockchain ecosystems. It represents a group of active or leading organizations responsible for controlling, streamlining, and optimizing operational activities. The core group could also refer to organizations actively involved in the management of the ecosystem.

Active Participants

The active participants in the blockchain ecosystem refer to the collection of primary participants in the network who are responsible for contributing and governing workflow and data.

Users

Users in blockchain ecosystems are the participants obtaining benefits from the network with the ability for accessing their own data. However, users do not get any responsibilities in the active management of the network.

Third-Party Service Providers

The final addition among blockchain ecosystem components would include third-party service providers. They are actually the third parties that offer services to the network. The services could include IT support, infrastructure, or application support services along with many other services, especially with a fee.

It is also important to note that all the participants in the ecosystem must take on one of these roles. On the other hand, some participants could also take on the roles of multiple components in the ecosystem for specific cases. You can dive deeper into details of the components in a blockchain ecosystem in the second edition of this article.

Governance for Blockchain Ecosystems

Presently, many international standards development organizations and developer communities are working on the definition of standards for blockchain ecosystems. The three variants of standards under development presently include generic standards, blockchain-specific standards, and industry-specific standards.

It is important to note that all the parties in ecosystems work for the common objectives of blockchain standardization. Governance for blockchain ecosystems has to bring stakeholders from different levels on one platform while addressing the needs of scalability, interoperability, and adoption.

Start learning Blockchain with World’s first Blockchain Career Paths with quality resources tailored by industry experts Now!

Bottom Line

On a final note, you can clearly notice the significance of a blockchain ecosystem in 2021 for enterprises and blockchain technology in general. The future of blockchain depends a lot on the adoption of its use cases across different industries alongside enabling its use in a collaborative approach. As the number of organizations in the blockchain network continues to increase, they would need to interact with each other.

By capitalizing on the value of collaboration, blockchain ecosystems could empower all participants with access to information and value. Subsequently, it is also important to consider the feasibility of different types of ecosystem models for distinct use cases and requirements. If you want to learn more about blockchain ecosystems, enroll in the blockchain courses and start extending your knowledge now!

The post Blockchain Ecosystem Explained appeared first on 101 Blockchains.

Mintable vs Nifty Gateway vs OpenSea vs Rarible Comparison

Diego Geroni — Mon, 02 Aug 2021 07:54:49 +0000

Confused to differentiate Mintable, Nifty Gateway, OpenSea, and Rarible? This detailed comparison of Mintable vs Nifty Gateway vs OpenSea vs Rarible will clear all your doubts. Let’s dive in!

The early part of 2021 witnessed profound and stark growth in the popularity of non-fungible tokens or NFTs. non-fungible tokens transformed the approaches for proving ownership of digital goods. As of now, the most expensive NFT sale fetched a humongous $69 million. The popularity of NFTs is also evident in the fact that NFTs had almost 20,000 to 40,000 unique buyers in any 30-day period between March 1 and May 31, 2021.

The popularity of NFTs is the foremost reason for discussing a Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison. NFTs are gaining popularity, and users need some platforms for buying, selling, and trading NFTs, which are evident in these choices. The following discussion provides an overview of each tool followed by a comparison between them on different factors.

Understanding Top NFT Trading Platforms

When you want to start with NFT trading, you need a marketplace for buying and selling NFTs. The different marketplaces available online presently have unique benefits and focus on specific use cases. The most preferred NFT trading marketplaces in the present times include Mintable, Nifty Gateway, OpenSea, and Rarible. Before we find out the best alternative among these four choices, let us take a look at an overview of these platforms.

Mintable

Mintable is basically a platform tailored for creation, distribution, purchasing, selling, and digital trading assets on the blockchain by using non-fungible tokens of NFTs. The Ethereum blockchain enables developers to leverage smart contracts and serves as the foundation of Mintable. Mintable is actually a collection of smart contracts operating together alongside enabling regular users to the creation of digital items on the blockchain without having any previous knowledge of programming or coding.

Mintable allows users to transform digital content into NFTs residing on the blockchain. The digital content could include books, images, videos, musical tracks, or even complex digital files. Users can just enter the details for describing their item and use the Ethereum blockchain for taking their digital item to the masses. Users could browse the Mintable marketplace for making bids and purchasing digital items. The items reside on the blockchain and go into your wallet when you purchase them.

Ethereum blockchain helps in recording all the transactions, thereby offering undisputable proof of ownership. At the same time, it also ensures that the seller gets their due credit for the sold item. All the items on Mintable include a preview image illustration which helps in recognizing them easily in your wallet. Certain digital items on Mintable could include private files, accessible only to the owners.

In addition, Mintable also enables content creators to monetization of their digital brand without any initial crypto investments. Mintable allows the sale of digital content in the form of NFTs. The content creator’s imagination plays a crucial role in the integration of NFTs in their workflow.

Want to get an in-depth understanding of non-fungible tokens (NFTs)? Enroll now in NFT Fundamentals Course.

Nifty Gateway

The second entry in the Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison, i.e., Nifty Gateway, is actually an exclusive NFT platform. Nifty Gateway brings an exclusive combination of crypto technology and digital collectibles alongside artworks for creating a rich marketplace of high-value assets that can be traded. As a result, it can deliver promising chances of improved investment potential for digital assets. Nifty Gateway allows users to buy and sell non-fungible tokens or NFTs, otherwise referred to as Nifties.

The non-fungible token is actually a digital token recorded on a ledger, terms as the blockchain. NFTs bear promising similarities to cryptocurrencies in terms of documentation of the transactions. At the same time, Nifty Gateway enables the transformation of different types of assets such as art, games, and music into NFTs.

Presently, Nifty Gateway serves as an exclusive marketplace for music and art under the supervision of the Nifty team. The team enables the best musicians and artists to create NFTs for selling on Nifty Gateway. Users who have an NFT could use Metamask for uploading it to the Omnibus Wallet of Nifty Gateway. Nifty Gateway allows NFT deposits in the Omnibus Wallet. Furthermore, you can also apply on the Nifty Gateway website to become an NFT creator and selling your artwork.

Want to understand the difference between fungible and non-fungible tokens? Here’s a guide to fungible vs. non-fungible tokens that focuses on their differences.

OpenSea

The next addition in the Mintable vs Nifty Gateway vs OpenSea vs Rarible discussion would bring OpenSea to the table. It serves as a prolific decentralized P2P marketplace that can support purchases, sales, and trade of rare digital goods. The rare digital goods could include art, gaming artifacts, and collectibles developed on NFT technology and operating on Ethereum blockchain.

As a matter of fact, OpenSea claims that it is the largest marketplace for digital goods. The claim of OpenSea appears valid to a certain extent with the broad assortment of items available on OpenSea. You could find more than 200 categories of items with the most reasonable pricing for new items.

The OpenSea platform allows users for digital trading art, sports NFTs, decentralized domain names, digital collectibles, utility NFTs, virtual worlds, and trading cards. Most important of all, OpenSea is the preferred platform in the case of many renowned NFT projects such as Gods Unchained, Cryptopunks, Cryptokitties, and others.

Interestingly, OpenSea allows any individual to trade NFTs on a global scale without taking custody of items in its marketplace. On the contrary, OpenSea leverages a smart contract for trading, and users could store their assets in their desired wallets. The interesting highlight about OpenSea refers to the fact that it takes only 2.5% of the purchase price of NFTs.

Rarible

The final player in the Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison, i.e., Rarible, is also one of the credible competitors among NFT marketplaces. Rarible works as a decentralized NFT marketplace as well as a minting platform. It enables digital artists with capabilities for creation and sale of tokenized artwork. Rarible is the most recent addition among the other entries in this comparison, as it arrived in early 2020. The striking feature of Rarible is the facility for adding different types of additional content such as hidden messages and high-resolution files in their artwork.

In addition, Rarible also allows content creators to configure smart contracts for the collection of royalties on their artwork in the future. From a more technical perspective, you can define Rarible as a DAO or Decentralized Autonomous Organization. The DAO enables users to create and selling ERC-20, ERC-1155, and ERC-721 tokens with utmost safety while ensuring the security of the Ethereum environment.

Rarible brings the perfect blend of NFT technology and a DAO marketplace. Furthermore, Rarible was also the first to introduce a governance token like RARI in the world of NFTs. The RARI token offers the privileges for submitting and voting on proposals such as platform rules and fees management.

Learn the concept, elements, future and use cases of NFTs from the E-book: Non Fungible Tokens (NFTS) – A Definitive Guide

Differences between Mintable, Nifty Gateway, OpenSea and Rarible

Now that you know about the four top preferences among NFT marketplaces in the present times, it is reasonable to reflect on their differences. The Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison would take various factors into account for a clear definition of the differences. Here is an outline of the differences between the four NFT marketplaces in various categories.

The Platform

The first point of comparison between Mintable, Nifty Gateway, OpenSea, and Rarible refers to the company information. Mintable stands out as the odd pick in this case as it is a Singapore-based venture. The other three players are US-based. In terms of the date of launch, Rarible exhibits a rare case by being the latest addition. While Mintable and Nifty Gateway were launched in 2018, OpenSea was one year earlier and had arrived in 2017. Rarible arrived in early 2020, although it had been launched in 2017.

Audience

The audience for the NFT marketplaces also serves as a crucial factor in the Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison. The audience of Mintable comprises any individual searching for a platform for digital trading items and earning crypto. Nifty Gateway is suitable for people seeking an online platform to create their own collection of high-quality, limited-edition NFTs.

If you want a marketplace for trading blockchain-based digital assets by leveraging a smart contract, you can go for OpenSea. Rarible is the right pick for you if you want a creator-focused NFT marketplace for the creation, sales, and collection of digital items secured in blockchain.

Curious about the Ethereum Technology ? Enroll now: The Complete Ethereum Technology Course

Training Support

Training support is one of the significant aspects in defining the differences between NFT marketplaces. The features of an NFT marketplace would be futile if users don’t know how to use them. Therefore, the facility of training support for users in getting started with an NFT platform and understanding the basic processes and tasks is highly crucial for finding efficient choices.

All four platforms offer the facility of documentation as training support. On the other hand, Nifty Gateway and Rarible also include the facility of live online training. You wouldn’t get these advantages with Mintable and OpenSea. It is also important to note that Mintable, Nifty Gateway, OpenSea, and Rarible do not offer the facility of in-person and webinar-based training.

Technology Integrations

The final aspect in the Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison would focus on the flexibility of technology integrations. When you are adopting an NFT platform, you must be worried about the possibilities of using the functionalities of other tools. Mintable offers support for integration with,

Ethereum
Metamask
Rainbow Wallet
Unstoppable Domains
Trust Wallet

Nifty Gateway offer integrations with Ethereum and Metamask only. On the other hand, Rarible also supports integrations with Coinbase Wallet, WalletConnect, MyEtherWallet, Torus, and Fortmatic alongside Ethereum and Metamask.

Want to know about the Future Applications And Challenges Of NFT? Check out this detailed guide here!

However, OpenSea is obviously the biggest shark when it comes to technology integrations as it provides support for integration with various other tools. OpenSea provides the flexibility for integration with the following tools,

Ethereum
Metamask
Arkane
Authereum
Coinbase Wallet
Mintbase
Dapper
Fortmatic
Portis
Bitski
Opera Touch
Kaikas
WalletConnect
Torus
WalletLink
Unstoppable Domains

Mintable vs Nifty Gateway vs OpenSea vs Rarible – Comparison Table

You could get an abridged version of the Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison in the following difference table.

Please include attribution to 101blockchains.com with this graphic.

Become a member now to check On-demand Webinar Demystifying Non-Fungible Tokens (NFTs)!

Final Verdict

The detailed overview of the Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison leads to many interesting observations. First of all, we came to know that Rarible is the latest addition to the NFT platforms. At the same time, the discussion also shed light on the facility of training support for using the platforms.

While all the platforms offer official documentation as training resources, Nifty Gateway and Rarible go a step further with the facility of live online training. However, the support for technology integrations served as a decisive factor in comparison between the four NFT platforms. OpenSea offers support for integration for a maximum number of tools at 16, while Mintable supports integration with 5 tools and Nifty Gateway with 2.

Finally, the difference between the four platforms on the basis of the audience helps in finding the ideal choice. The audience section in Mintable vs Nifty Gateway vs OpenSea vs Rarible comparison shows that each platform serves specific purposes. So, you could choose the ideal NFT platform which could fit perfectly with the requirements in your desired use case. Learn more about NFT trading platforms and how to use them to your advantage right now!

The post Mintable vs Nifty Gateway vs OpenSea vs Rarible Comparison appeared first on 101 Blockchains.

Frequently Asked Questions for EIP-1559

Diego Geroni — Thu, 22 Jul 2021 06:42:35 +0000

In this article, we will discuss the top frequently asked questions for EIP-1559.

Ethereum is one of the revolutionary platforms which completely changed the conventional approaches of using blockchain. It has introduced the concept of EIPs or Ethereum Improvement Proposals for enabling the addition of new features and processes. Recently, the discussion around EIP 1559 has gained profound attention as it is ready to become a part of the London Hard Fork of Ethereum in July 2021.

Introductory guides on EIP 1559 could offer promising insights on the need for EIPs and a basic overview of EIP 1559. However, EIP-1559 FAQs are the most crucial instrument for understanding the new EIP specification comprehensively. The following discussion covers some of the notable frequently asked questions about EIP 1559.

Become an enterprise Ethereum expert. Enroll Now: Ethereum Fundamentals Course

FAQs about EIP 1559

The definition and working of EIP 1559 showcase an adequate impression of its functionalities for the evolving Ethereum landscape. On the other hand, it is reasonable to encounter many doubts from the perspective of users, token holders, and miners. Let us take a look at the top frequently asked questions for EIP-1559 as follows.

1. What is EIP-1559?

One of the first and most obvious entries among EIP 1559 questions draws attention towards its definition. It is actually a proposal for introducing radical transformation in the Ethereum fee market with some key changes. First of all, the EIP-1559 introduces a replacement for the existing gas limit. Now, the EIP-1559 introduces two different values, such as the long-term average target and the hard per-block cap.

The long-term average target is similar to the existing gas limit, while the hard per-block cap amounts to two times the existing gas limit. The definition in the EIP-1559 FAQ also brings attention to the base fee. Transactions have to pay the base fee, and it is burned with adjustment on a block-by-block basis for ensuring a value that enables sustaining the average block gas usage similar to a level resembling the existing gas limit.

Know more about EIP-1559 here

2. What are the benefits of EIP-1559?

The importance of EIP-1559 benefits in discussions on frequently asked questions for EIP-1559 is unquestionable. EIP-1559 presents many prolific reasons for considering its value for the Ethereum landscape in general. The first benefit of EIP-1559 is evident in the better overall experience of using Ethereum through the new transaction fee mechanism. As a result, the adoption of Ethereum could increase at a margin.

The process of burning the base fee in EIP-1559 ensures the internalization of a part of the revenue generated by miners. Therefore, the new EIP variant showcases adequate promises for transforming Ether into a productive asset. The benefits of EIP-1559 in EIP 1559 questions also focus on the reduction of the inflation rate for Ether. Subsequently, ETH could become more appealing as a store of wealth and grow its target market.

Also Read: 4 Common Myths About Ethereum’s EIP 1559 Upgrade

3. Can EIP-1559 reduce the price of gas?

It is also important to reflect on the impact of EIP-1559 on gas prices on the Ethereum network in the EIP-1559 FAQ. Although many assumptions paint EIP-1559 as a favorable intervention for reducing gas prices, the primary intent of the Ethereum Improvement Proposal is completely different. The higher predictability of the base fee with EIP-1559 could lead to lower gas prices.

However, the reduction depends on assuming predictability due to lesser instances of users making unreasonably higher payments for gas. In the case of EIP-1559, the base fee will improve or depreciate by 12.5% following the instance of blocks reaching over 50% capacity.

4. Is it reasonable to use a second price as an alternative?

Many people have pointed out to possibilities of using second price or kth-price auctions for dealing with inefficiencies in first-price auction systems. Kth-price auctions imply that every individual has to pay a gas price similar to the lowest gas price included in the block. Now, the efficiency of such types of auctions becomes clearly evident from the perspective of conventional economic analysis.

However, frequently asked questions for EIP-1559 also focus on the setbacks with kth-price auctions. The kth-price auction system presents a vulnerability to collusion, thereby implying the improbable chances of using it as a replacement for the existing auction mechanism for pricing transaction fees in Ethereum.

5. What is the impact of EIP-1559 on user experience for configuring transaction fees?

The central assumption with EIP-1559 focuses on tailoring fees in accordance to block demand with better transparency to users. Some of the wallets, such as Metamask, could offer better estimates without having to depend on external price prediction mechanisms. The role of the protocol in managing the base fee contributes profoundly to the user experience while setting transaction fees.

Aspiring to become an Ethereum developer? Here’s the comprehensive guide on how to become an Ethereum Developer.

6. What about user experience in network congestion?

The concerns of network congestion also serve as an important topic in EIP 1559 questions. In the time of higher network congestion, the base fee shifts by 12.5% in the extent of demand, surpassing the ideal gas limit per block until the reduction in the demand. Users could get a better impression of congestion in the network from the extent of the base fee. Therefore, users could choose to pay the premium price during high network congestion. On the other hand, users could also opt for a lower transaction fee and wait for a reduction in network demand.

7. Can tips lead to bidding wars?

EIP-1559 FAQ entries also point out concerns arising from tips. Wallets could simplify the selection of tips through observation of tips that have been accepted previously on the chain. The wallets could increase the tip for a transaction sent by them which has not been accepted quickly. In the case of higher network congestion, tips can lead to bidding wars by detecting congestion. Wallets could then provide options to users for setting priority for their transactions.

Here’s a guide to know about A-Z Blockchain Terms.

Final Words

The frequently asked questions for EIP-1559 can provide insights beyond the basic understanding of the Ethereum Improvement Proposal. The specification gives new opportunities for transforming the existing mechanism for determining transaction fees on Ethereum. The detailed resolution of FAQs regarding EIP-1559 could clarify any doubts which you might come across while understanding EIP-1559.

Most important of all, FAQs give a chance for understanding the unique functionalities and responses of the Ethereum network in certain scenarios. If you want to learn more about EIP-1559 and other related concepts, then it is reasonable to dive further into answers for more FAQs now!

Learn the basic and advanced concepts of Ethereum. Enroll now in Ethereum Fundamentals Course.

The post Frequently Asked Questions for EIP-1559 appeared first on 101 Blockchains.

Central Bank Digital Currency on Corda – An Ultimate Guide

101 Blockchains — Wed, 21 Jul 2021 08:06:48 +0000

Central bank digital currencies (CBDC) is a tangible use case for distributed ledgers, already being implemented and explored by many of the largest nations. COVID-19 has accelerated the shift to a digital first mindset. Our increased time at home and online has brought into focus the efficiency potential and opportunities presented by digital and programmable money, as cash use has continued to decline.

Distributed ledger technology is one of the key technologies being evaluated by global central banks to pave the way for the next phase of the digital economy and to accommodate the needs of the modern financial world.

CBDCs present a way for banks and traditional financial services providers to achieve true digitalization. The rise in fintech and open banking has driven greater collaboration and competition across financial services. CBDCs extend the safest form of money available to banks, businesses and the public – central bank money – via new digital rails to further increase the potential for innovation.

As per a report by Coindesk, as many as 80% of central banks are considering a central bank digital currency while 40% are already in a proof-of-concept stage including China, Japan, Australia, and Singapore.

Enroll Now: Beginner’s Guide to Corda Development Course

What are CBDCs?

A CBDC is a digital payment instrument and store of value issued by, and as a liability of, a central bank or monetary authority. The main difference between a CBDC and other digital currencies is that it is denominated in the national unit of account of the central bank’s country or currency zone. CBDC, issued on distributed ledger and digital asset management infrastructure like Corda allows the digital financial system to stay in sync, with the appropriate identity, transaction privacy, resilience and governance controls required.

In other words, contrary to the existing process of printing money, CBDCs are a way of issuing digital tokens that represent fiat currency and provide a payment instrument for retail and wholesale banking. Just like money, CBDCs would be supplied, regulated and controlled by the central bank, making them very different from other cryptocurrencies, or even stablecoins.

Must Read: Advantages Of Central Bank Digital Currencies (CBDCs)

CBDCs and R3’s Corda

The Corda blockchain platform is one of the few being used extensively by global central banks, financial market infrastructure providers, and commercial banks for the exploration and implementation of CBDC projects.

Corda and R3’s ecosystem of global banks provide a ready-made network to integrate programmable money that can interoperate with currencies across different central banks’ networks. This allows central banks to tap into the global market and provide new services to both financial institutions and/or the general public. Compared to other blockchain networks, Corda enables much faster transaction processing, provides regulators the ability to trace transactions, and also preserves privacy by facilitating transactions in a point to point manner.

To know more about Central Bank Digital Currency on Corda, check out the detailed graphic here-

Please include attribution to 101blockchains.com with this graphic.  </a>

Learn the concepts of Corda blockchain with the Corda flashcards!

Mentioned below are some other factors why Corda’s core design is suitable for building CBDCs and regulated financial markets:

1. Data privacy

Being a permissioned blockchain with a peer-to-peer architecture, Corda ensures transactional data is only shared among concerned parties on a need-to-know basis – rather than distributing it over the whole network. Therefore, it allows control over data privacy while maintaining the necessary transparency and trust between counterparties.

2. Strong identity model

Corda’s identity model ensures that participants are represented as legal entities and managed consistently. Therefore, the intrinsic characteristics of Corda make it a perfect fit for CBDC implementations as a robust approach to identity brings trust and security to the network.

3. Scalability

The peer-to-peer architecture, scalable consensus model, workflows that can run in parallel, and other enterprise grade optimizations ensure that Corda can achieve unparalleled scalability. For example transaction validation is completed by notaries, and multiple notaries can be added to a network to increase throughput and reduce latency.

In addition to its core features, R3 has invested development work in the CBDC space,

launching its Digital Currency Sandbox following a year-long working group with over 140 central banks, FMIs, commercial banks, and service providers. The working group output provided reference models for retail and wholesale CBDCs, and a CBDC taxonomy to drive standardization in the way the ecosystem talks about CBDC. These learnings are now translated into the sandbox which enables central banks, commercial banks, exchanges, payment providers, and more to dive deep into the technology supporting a CBDC and develop strategies and applications for engaging alongside an emerging ‘ready-made payments ecosystem’.

Along with the rest of the sandbox ecosystem, users can simulate the issuance of a digital currency with demos and documentation. Participants will also learn how each transaction works on Corda, the only Distributed Ledger Technology (DLT) platform built specifically for highly regulated industries.

Preparing for Corda interview? Here we bring the expert guide that will cover the top corda blockchain interview questions for your preparation!

Types of CBDCs

1. Retail CBDC

Retail CBDCs, or general purpose CBDC issued to the general public represent the harder of the primary use cases for CBDC with many open conceptual questions about their potential design and implementation. While no production use cases yet exist, central banks are committing increasing resources to these projects. Central banks’ motivations include promoting financial inclusion, facilitating monetary policy, enabling participation in a tokenized financial ecosystem, fostering competition, providing a cash alternative, or generally modernizing payments.

A prominent example of Retail CBDC on Corda is the project by Riksbank. Riksbank identified the opportunity to provide the ‘e-Krona’ and started exploring the possibility of issuing a CBDC, using blockchain technology. On April 15, 2021, the Swedish bank governor revealed the target of having an operational digital currency in five years.

The project has already run in a testing environment where users were allowed to hold e-kronor for performing financial activities such as deposits, withdrawals, and making payments through a mobile app. Other possibilities are the use of smartwatches and other smart wearables for making payments using e-kronor.

2. Wholesale CDBCs

Wholesale CBDCs are primarily used to establish a seamless digital payment ecosystem between banks. Using wholesale CBDCs, banks can protect themselves from the build-up of credit risk through a real-time settlement process controlled by code. The transfers happening between banks in this scenario are “atomic” with the transfer of value represented by the exchange of tokenized CBDCs between parties made directly and without intermediaries.

Enroll Now: Central Bank Digital Currency (CBDC) Masterclass

As a result, there are a number of wholesale CBDC projects that have explored R3’s distributed ledger technology. A few of them are mentioned below:

Project Jasper

The Bank of Canada started exploring the possibility of a Central bank Digital Currency which led to the initiation of project Jasper on R3’s Corda DLT platform. The project was released in three phases to understand its usefulness in the interbank settlement process and was marked as one of the most successful initiatives by the Bank of Canada.

From March of 2016 to June of 2016, the first phase of project Jasper was carried out. Phase 1 was focused on the storing and transferring of central bank-issued digital receipts on a distributed ledger providing security and auditability.

Phase 2 started in May of 2017 where the project was built on R3’s Corda introducing a liquidity savings mechanism for frictionless settlement between the banks.

Finally, phase 3 was initiated in October of 2017 after recognizing the powers of a DLT-based CBDC system along with the liquidity savings mechanism as well as atomic “Delivery vs Payment” transactions. This phase marked the development of a proof of concept for the project.

Project Ubin

The Monetary Authority of Singapore (MAS) was not far behind in exploring the powers of distributed ledger for their financial ecosystem. The MAS initiated project Ubin in two phases.

Phase 1 was started in November 2016 which was successful in creating an efficient digital payment structure for interbank settlement using the digital representation of the Singapore dollar.

Phase 2 of Ubin started in June 2017 to explore different DLT platforms including R3’s Corda for the primary purpose of implementing a decentralized real-time gross settlement (RTGS) system along with Liquidity savings mechanisms.

Project Inthanon-Lionrock

Started in March of 2017, LionRock on Corda explored the possibility of building an interbank settlement system including securities issuance, lifecycle, and delivery-vs-payment.

The project is a joint initiative by the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT) to explore the possibility of CBDCs.

More recently, notable projects using Corda and partnering with R3 also include Project Helvetia run by the BIS Innovation Hub, SIX Group AG, and the Swiss National Bank and Project Jura.

Also Check: Top 10 Corda Use Cases You Should Know About

Benefits of CBDCs

In general, CBDCs have the following benefits:

Transactions can be peer to peer, allowing for individual participants to custody their own money or assets, or hold accounts direct with central banks
The underlying technology of blockchain ensures global integrity of the system in which CBDC exists
Overall system risk has the potential to be greatly reduced with CBDCs
Increased availability and accessibility due to the possibility of using mobile devices for digital transfer of value
Cross-border payments using CBDCs can be completed in seconds and at a very low transaction fee as compared to the existing system
They allow more control over money supply and new tools for the implementation of monetary policy
Efficient tax control and tracking of payments is another benefit.

Specific to R3’s Corda, building CBDCs have numerous benefits aligned with the Corda features as listed below:

Corda facilitates unparalleled data privacy which becomes a crucial factor for digital settlements
Strong identity management on Corda allows a streamlined payment ecosystem in the digital space
The scalability offered by Corda is a perfect fit for CBDC applications.
Transactions and settlements are deterministic and validated by notaries rather than using a probabilistic approach.

Want to know more about Corda? Enroll now in Beginner’s Guide to Corda Development Course and learn the basic and advanced concepts of Corda.

The post Central Bank Digital Currency on Corda – An Ultimate Guide appeared first on 101 Blockchains.

Key Features of Decentralized Finance (DeFi)

Gwyneth Iredale — Tue, 20 Jul 2021 07:10:02 +0000

Aspiring to learn about the key features of Decentralized Finance? Here we have covered the DeFi features in detail!

The applications of technology in the domain of financial services are not new in today’s world. Many transactions at banks as well as other financial service institutions are carried out with the help of technology. On the other hand, technology has always played the role of support in facilitating such transactions.

Decentralized Finance (DeFi) has changed the conventional notions regarding finance by bringing the best of cryptocurrency foundations and blockchain technology for the management of financial transactions. Therefore, the attention on DeFi features has increased profoundly in recent times.

People are eager to know how DeFi aims at the democratization of finance through the replacement of legacy, centralized institutions with peer-to-peer relationships offering a broad spectrum of financial services. How would DeFi enable the democratization of access to financial services? The following discussion helps you find out the features that would help DeFi transform the face of finance as we know it.

Want to know more about DeFi? Enroll Now: Introduction to DeFi Course

Understanding the Definition of DeFi

Please include attribution to 101blockchains.com with this graphic.

The first and most important requirement for finding out features of decentralized finance is the definition of DeFi itself. Decentralized finance, or DeFi, points out the transition towards peer-to-peer finance systems from conventional, centralized financial systems. DeFi follows the power of decentralized technologies developed on the Ethereum blockchain.

The DeFi ecosystem features a massive network of financial instruments and integrated protocols with different use cases. As of now, more than $13 billion has been already locked in Ethereum-based smart contracts, thereby opening up new prospects for decentralized finance.

The fundamental details about DeFi from its definition can give you an idea of its basic objective. However, it is difficult to find out more about its working without reflecting on its features. So, let us take a look at some of the notable features of DeFi by delineating its components.

Want to explore in-depth about DeFi protocol and its use cases? Enroll in Decentralized Finance (Defi) Course- Intermediate Level Now!

Components in DeFi

The first and essential aspect for understanding the characteristics of DeFi largely points out to an understanding of its components. The components in DeFi are basically the same as the ones you find in other financial ecosystems existing right now. DeFi components could be stablecoins and services such as lending services and crypto exchanges.

Smart contracts deliver the framework needed for working on DeFi apps. The components of a DeFi system are important features of DeFi. Each component has a specific function in developing the DeFi system and is an essential feature in DeFi. Here are the four important layers which make up the DeFi stack and are crucial for the popularity of DeFi.

Settlement Layer

The settlement layer is one of the notable DeFi features as it is the basic layer on which other DeFi solutions are developed. It includes a public blockchain along with the native digital currency. The transactions on DeFi apps generally use the native digital currency, which could be or could not be traded in different markets.

Protocol Layer

Software protocols are basically rules and standards tailored for the governance of specific activities or tasks. The protocol layer features a collection of principles and rules which all the participants in a particular industry must follow. DeFi protocols enable interoperability, thereby opening up the scope for use by multiple entities simultaneously for the development of a service or app. The protocol layer is essential for obtaining the desired liquidity levels in the DeFi ecosystem.

Application Layer

The application layer is one of the notable features in DeFi, which answers the question of ‘Why is DeFi so popular?’ effortlessly. According to the name, one can clearly infer that the application layer houses consumer-facing applications. The decentralized applications represent the underlying protocols in abstract forms as basic consumer-oriented services. Many applications on the crypto landscape, such as lending services and decentralized exchanges, are found on this layer.

Aggregation Layer

The final layer in the DeFi tech stack is also one of the top features of decentralized finance. The aggregation layer includes aggregators connecting different applications from the previous layer for providing service to investors. For example, aggregators could help with the seamless circulation of money among various financial instruments for improving returns.

Want to explore an in-depth understanding of security threats in DeFi projects? Enroll in DeFi Security Fundamentals Course Now!

Key Features of Decentralized Finance

It is also possible to get a clear impression of the characteristics of DeFi by reflecting on the benefits they offer. The benefits actually showcase the value proposition offered by DeFi or the features which you can include in your DeFi solutions. Here are some of the notable features you could find with DeFi.

Permissionless

One of the foremost features of DeFi which grab attention is the permissionless nature of DeFi applications. DeFi does not follow the conventional principles of access followed in traditional finance. On the contrary, it follows the open, permissionless access model. Any individual could access DeFi solutions through an internet connection and a crypto wallet. With these two essentials, you could leverage DeFi irrespective of the geography or amount of funds. As a result, DeFi could welcome almost any individual to the financial system.

Programmability

Another notable entry among features of decentralized finance is programmability. It is essential to note that majority of the DeFi solutions available now are based on the Ethereum blockchain. Therefore, the opportunity for accessing smart contracts with higher chances of programmability in DeFi could help in automatic execution. At the same time, the programmability in DeFi also opens up new avenues for creating new financial instruments and digital assets. Therefore, DeFi has all the necessary support required for addressing any type of conventional financial service function.

Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.

Transparency

One of the most striking and obvious DeFi features would pay attention to transparency. Every transaction has to be broadcast to other users on the network in the case of the public Ethereum blockchain. All the users should verify the transaction broadcasted to them. It is important to note that all the Ethereum addresses are basically encrypted keys accompanied with pseudo-anonymity.

The enhanced transparency regarding transaction data enables comprehensive data analysis. At the same time, transparency also ensures the availability of information about network activity to any user. Ethereum and DeFi protocols based on Ethereum are also tailored with open source code which is easily available for any user so that they could view, audit, and develop on the existing code.

Immutability

The concept of financial inclusion for everyone is one of the promising responses for ‘why is DeFi so popular?’ albeit with concerns regarding immutability. The exchange of information and financial transactions in DeFi requires the assurance of data integrity. So, it is important to have tamper-proof data coordination throughout the decentralized architecture of blockchain.

As a result, it can contribute profound improvements in security and scope for audits. Immutability is not only an essential feature but also a credible value advantage of introducing blockchain in the world of finance. With the assurance of safe and secure data transmission without any unauthorized modifications, DeFi could offer the assurance of integrity for all transactions.

Want to understand the best ways to use DeFi development tools like Solidity, React, and Hardhat? Enroll now in DeFi Development Course!

Interoperability

The characteristics of DeFi also take the discussion towards interoperability as one of the prime requirements in the financial services ecosystem today. The composable software stack of Ethereum helps in ensuring that DeFi protocols and applications are tailored for integrating with each other and complementing one another. DeFi gives adequate flexibility to developers and product teams.

Now, developers could easily create new solutions or add functionalities on top of existing protocols. At the same time, developers and product teams could also leverage the traits of DeFi for customization of the interfaces and integration of third-party applications. As a matter of fact, interoperability is one of the reasons for which DeFi protocols are referred to as legos. Just like Lego blocks, you have to find the right way to fit two DeFi protocols together for specific use cases.

Non Custodial

The final and most important trait of DeFi refers to the fact that users keep complete control over their assets and personal data. The use of web3 wallets such as Metamask helps users in effective interaction with permissionless financial protocols and applications. With better control over your personal data, DeFi solutions can foster a new age of financial services tailored for the customer.

The different DeFi features are quite crucial entries in almost all discussions related to the origins and growth of decentralized finance. The different features of DeFi protocols make them suitable for various DeFi use cases such as,

Asset management
Decentralized Autonomous Organizations (DAOs)
Lending and borrowing
Gaming
Insurance
Decentralized exchanges
Data and analytics
Margin trading
Staking
Tokenization

Catch up on the latest trends in decentralized finance (DeFi) and its connection to crypto with comprehensive courses and webinars through DeFi Skill Paths

Bottom Line

On a final note, it is clearly evident that features of decentralized finance bring the ideal mix of cryptocurrency and blockchain features. The different features of DeFi showcase the adequate potential for driving in more users in the future.

For example, the transparency factor allows users to develop trust in financial services, while decentralization ensures that they are not vulnerable to large-scale hacks. At the same time, immutability in DeFi protocols also ensures that sensitive financial information does not fall into the wrong hands. If you want to learn more about the value of DeFi, start exploring more about it with the DeFi course.

The post Key Features of Decentralized Finance (DeFi) appeared first on 101 Blockchains.

Pros and Cons of Decentralized Finance (DeFi)

Gwyneth Iredale — Wed, 14 Jul 2021 05:48:50 +0000

Decentralized finance has a profound influence on the way banks operate and introduce shifts in the general financial ecosystem. At present, there are many contradictory views regarding decentralized finance for the right reasons. Some perceive DeFi as a revolution, while others think of it as an opportunity, and then there are people who find it as a scam.

Therefore, a neutral impression of the world of DeFi could provide a clear idea of their role in the overall financial system. Let us find out more about the pros and cons of decentralized finance in the following discussion. With a comprehensive view of the pros and cons related to DeFi, readers could identify the true potential of DeFi.

Want to become an enterprise DeFi expert. Enroll Now: Decentralized Finance Course

Understanding DeFi

Before starting with the discussion on DeFi pros and cons, it is important to understand DeFi briefly. The financial services domain has been responsible for encouraging many of the notable use cases pertaining to blockchain technology. Blockchain presents vital opportunities for transforming conventional finance through online payments and virtual assets storage and trading. With the rise of DeFi, the applications of blockchain in finance have started to gain significance.

The term DeFi actually points out an acronym for decentralized finance. It basically refers to the assortment of blockchain-based applications offering peer-to-peer alternatives for conventional financial services and institutions. The recognition of DeFi has been growing profoundly in recent times, as a result of which it has been drawing in substantial volumes of capital. So, what exactly should drive you to find out the advantages and disadvantages of decentralized finance?

To know more about decentralized finance, check this detailed video now

Why Focus on the Pros and Cons of Decentralized Finance (DeFi)?

The market demand for DeFi is becoming more prominent with each passing day. According to estimates by DeFi Pulse, a renowned data aggregator meant for decentralized finance, the total value in DeFi protocols presently amounts to almost $11.5 billion. Just a year ago, the total value locked in DeFi protocols was just around $1 billion, thereby exhibiting promising growth.

Even if the monetary value associated with DeFi does not match up to conventional financial markets, DeFi has grown profoundly. In just a matter of one year, DeFi has been able to score mind-boggling popularity. The faster growth rate also reflects profoundly on the strength associated with the value proposition in DeFi.

Learn the fundamentals of Decentralized Finance (DeFi) with DeFi Flashcards

Pros of DeFi

The promising aspects related to DeFi discussions point out to effective observation of the advantages and disadvantages of DeFi. The DeFi movement aims at introducing various benefits for customers and investors. Some of the notable advantages of DeFi would include the elimination of intermediaries alongside centralized control.

In addition, it would aim at improving the accessibility of financial markets to institutional investors. At the same time, DeFi would also work on the creation of new investment opportunities that can take the concept to new levels. In order to achieve the benefits, DeFi solutions rely largely on the fundamental traits associated with blockchain technology.

1. Permissionless

The first and foremost factor which defines the identity of decentralized finance is the term ‘decentralized.’ The pros and cons of decentralized finance rely largely on the defining nature of the concept. Decentralization is one of the basic tenets of blockchain, and it helps in reducing the need to depend on corporations.

Furthermore, decentralized finance also takes away the pressure of depending on institutions for oversight, data storage, server space, and other factors. Blockchain networks are successful in achieving all these aspects by ensuring that specific transaction histories can be easily circulated throughout all members.

The decentralization approach is quite helpful for democratization of banking and finance. DeFi could ensure simple and effective access to financial services for every individual. DeFi pros and cons discussions would also show that majority of DeFi solutions run on Ethereum. Ethereum is the second-largest blockchain protocol, and its permissionless nature ensures that it is highly decentralized in nature.

Furthermore, it should be readily accessible to any individual associated with development and use of DeFi applications. The permissionless nature of blockchain in DeFi applications could also get the support of interoperability from blockchain. As a result, it can ensure flexible options for ensuring different types of third-party integrations.

At the same time, it is also crucial to observe how the permissionless blockchain features are not specific to Ethereum. Since Ethereum is a preferred network for developing smart contracts, it is a reliable choice for building DeFi applications.

Build your identity as a certified blockchain expert with 101 Blockchains’ Blockchain Certifications designed to provide enhanced career prospects.

2. Immutability

The effective utilization of cryptography along with consensus algorithms such as proof-of-work has helped blockchain in achieving actual immutability. So, the advantages and disadvantages of decentralized finance have enabled the true benefits of immutability in finance.

With the help of immutability, it is practically impossible to manipulate any record on the blockchain network. In addition to the features of decentralization, immutability offers the promising assurance of security. Interestingly, the blockchain functionalities for immutability ensure the integrity of DeFi solutions in carrying out financial transactions.

3. Transparency

While immutability is an essential requirement for the DeFi landscape to provide assurance of security, transparency is also one of the notable additions among DeFi pros. Decentralization obviously entails better transparency, and the distributed ledger features information about all activities on the blockchain network.

The cryptographic principles for blockchain also ensure the documentation of information only after verification of authenticity. The advantages and disadvantages of DeFi showcase how customers could benefit from the transparency of DeFi applications.

For example, transparency in DeFi applications could improve due diligence. At the same time, DeFi applications could also support people in identifying and avoiding possible financial scams as well as negative business practices. With a proper audit trail, DeFi applications could make it easier to identify who made changes to a transaction, at what point of time, and in which way. As a result, there would be little left to compromise the integrity of financial ecosystems.

Start learning Blockchain with World’s first Blockchain Skill Paths with quality resources tailored by industry experts Now!

4. Lending and Borrowing Applications

DeFi has also been a significant player in fostering the development of peer-to-peer lending and borrowing solutions. Such types of lending and borrowing solutions offer substantially promising benefits for end-users. The pros and cons of decentralized finance would obviously reflect on cryptographic verification mechanisms.

At the same time, they also provide the assurance of smart contract integration. The facility of such functionalities ensures the elimination of intermediaries like banks which are generally responsible for the verification of parties in a transaction. In addition, it also works for verification of the process associated with lending and borrowing transactions.

As a result, DeFi enables a faster and easier verification process in lending and borrowing applications. Simultaneously, DeFi also ensures safeguards for counterparties in a transaction. DeFi applications in lending and borrowing would also facilitate the benefits of faster transaction settlement with better accessibility.

Presently, lending and borrowing applications account for the most renowned DeFi applications. One of the most notable examples showcasing DeFi pros and cons, albeit with a focus on the pros, is Compound. It is a decentralized lending platform that allows lenders to supply crypto assets to a specific number of lending pools.

The lending pools feature available for other people to borrow, and lenders would receive a share of the interest paid back by borrowers to the pool. The interest rate earned by a lender relies profoundly on the contribution they make to the pool. In addition, the liquidity of crypto-assets also plays a crucial role in determining the internet rate on DeFi lending platforms.

Want to understand the best ways to use DeFi development tools like Solidity, React, and Hardhat? Enroll now in DeFi Development Course!

5. Savings Applications

The advantages and disadvantages of decentralized finance also bring the limelight on the growing dominance of DeFi savings products. People could also leverage DeFi for the effective management of their savings. Users could start earning interest on assets that they lock in lending protocols like Compound. Therefore, many DeFi savings applications have emerged in recent times.

Such types of applications offer the ability for plugging into various lending protocols to improve the ability of users to earn interest. At this point in time, it would be reasonable to mention ‘yield farming.’ Yield farming has been one of the favorable aspects of the DeFi ecosystem, especially for showcasing how users move their idle crypto assets across various lending protocols for better returns.

6. Tokenization

Any discussion on the advantages and disadvantages of DeFi without the mention of the advantages of tokenization is not complete. Tokenization is one of the notable topics which have emerged recently in the blockchain sphere. Ethereum enables robust smart contract capabilities, thereby opening up the roads for issuing crypto tokens.

Crypto tokens basically worked as digital assets present on a blockchain alongside having different features and uses. Some of the notable examples of tokens include utility tokens native for a particular dApp, real estate tokens, or security tokens.

Tokens are capable of helping you achieve different functionalities. The real estate tokens could help you achieve fractional ownership of physical properties. On the other hand, security tokens could also serve effectively as digital shares in specific applications. Most important of all, tokenization could also ensure better exposure to other assets, physical as well as digital.

The assets could include digital currencies, fiat currencies, oil, or gold. The crypto-synthetic assets have collateral in the form of tokens in the Ethereum-based smart contracts. Interestingly, one of the biggest synthetic asset platforms, Synthetix, presently has around $600 million locked in smart contracts.

Catch up on the latest trends in decentralized finance (DeFi) and its connection to crypto with DeFi Skill Path

Cons of Decentralized Finance

Many of the prominent discussions around decentralized finance in the present times focus largely on the advantages of DeFi. However, it is important to get a neutral impression of DeFi pros and cons for estimating its potential effectively. As a matter of fact, the majority of problems and risks associated with a DeFi project are primarily associated with technologies they are related to. The challenges with blockchain are generally responsible for fuelling the cons of DeFi. Here are some of the critical setbacks that you can encounter with the adoption of DeFi.

1. Scalability

DeFi projects are undoubtedly suitable for enabling financial inclusion for a broader population. However, DeFi projects encounter formidable difficulties in the scalability of host blockchain from various perspectives. First of all, the DeFi transactions require unbelievably extended periods of time for confirmation.

At the same time, the transactions on DeFi protocols could become highly expensive during the period of congestion. For example, Ethereum could showcase capabilities for processing almost 13 transactions every second with Ethereum at full capacity. On the contrary, the centralized counterparts for DeFi could accommodate thousands of transactions in the concerned period.

Want to explore an in-depth understanding of security threats in DeFi projects? Join Standard/Premium Plan and get free access to DeFi Security Fundamentals Course Now!

2. Uncertainty

The concerns of uncertainty also make a mark in the advantages and disadvantages of decentralized finance. In event of instability in a blockchain hosting a DeFi project, the project could automatically inherit instability from the host blockchain. As of now, the Ethereum blockchain is going through various changes. For instance, the mistakes committed during the transition from PoW consensus to the new Eth 2.0 PoS system can lead to risks.

3. Concerns of Liquidity

Liquidity is also undoubtedly a critical factor in DeFi based projects and blockchain protocols. As of October 2020, the total value locked in DeFi projects amounts to more than $12.5 billion. Therefore, it is clear that the DeFi market is not as big as the traditional financial systems. So, it can be difficult to put your trust in a sector that does not have much as the usual financial sector.

4. Shared Responsibility

Among all the advantages and disadvantages of DeFi, the shared responsibility factor works negatively for users. The DeFi projects do not take responsibility for your mistakes. All they do is taking away the intermediaries, and it is the users who have to take responsibility for their funds and assets. Therefore, DeFi space needs tools that could prevent possibilities of human mistakes and errors.

Start learning Blockchain with World’s first Blockchain Career Paths with quality resources tailored by industry experts Now!

Bottom Line

The advantages and disadvantages of decentralized finance have been the most valuable inputs for determining the value of DeFi today. One of the clear observations from the pros and cons of DeFi points out the fact that the pros outshine cons by a huge margin. Decentralized finance has become a promising favorite for transforming the conventional benchmarks of financial services.

Most important of all, DeFi could foster the application of blockchain in the financial services sector. With the value benefits of transparency, immutability, and decentralization, DeFi space still has to encounter obstacles like scalability. You can enroll in the DeFi training course and enhance your knowledge about DeFi. Learn more about the advantages and disadvantages of DeFi to draw viable conclusions.

The post Pros and Cons of Decentralized Finance (DeFi) appeared first on 101 Blockchains.

Analyst Corner Archives - 101 Blockchains

Different Types of Crypto Wallets – Explained

Why Should You Worry about Selecting a Crypto Wallet?

What are Crypto Wallets?

Types of Crypto Wallets

Hot Wallets

Cold Wallets

Types of Hot Wallets

Desktop Wallets

Web Wallets

Mobile Wallets

Types of Cold Wallets

Paper Wallets

Hardware Wallets

Bottom Line

Top 10 Questions You Should Know Before Enrolling for a Blockchain Certification

Questions You Must Know Before Pursuing a Blockchain Certification

1. What are the general prerequisites to enroll for a blockchain certification?

2. How will a blockchain certification help in elevating my professional career?

3. What is the validity of a blockchain certification?

4. How will the blockchain certification enhance my CV?

5. Does the blockchain certification create value for multiple job roles?

6. Does the certification program include the related training program?

7. How much time will I get to complete the certification?

8. Will I get expert support for my queries after enrolling in the blockchain certification?

9. What is the average salary of a certified blockchain professional?

10. Is it good to go for a blockchain certification while I’m a fresher?

Final Words

Know the Key Features of Stablecoins

Why Should I Learn about Stablecoins?

Notable Features of Stablecoins

Privacy

Security

Ease of Usability

No Intermediaries

Decentralization

Unique Traits of Stablecoins

Unit of Account

Medium of Exchange

Store of Value

Interoperability with dApps

Performance Measurement

What is the Most Important Feature of a Stablecoin?

Are there any setbacks of stablecoins?

Final Words

Top 4 Use Cases of Tokenization

What is Tokenization?

Why Should You Focus on Tokenization Use Cases?

Use Cases of Tokenization

1. Tokenization of Precious Metals

2. Tokenization for Real Estate Assets

3. Tokenization in Logistics

4. Non-fungible Tokens

Final Words

Blockchain Ecosystem Explained

What is the Blockchain Ecosystem?

Value of Blockchain Ecosystems

Blockchain Ecosystems and Collaboration

Driving Improved Collaboration with Blockchain Ecosystems

Developing a Distributed Ledger Technology Ecosystem

Types of Blockchain Ecosystems

One-Leader Ecosystem

Joint Venture or Consortia Ecosystems

Regulatory Blockchain Ecosystems

Components in Blockchain Ecosystem

Leaders

Core Group

Active Participants

Users

Third-Party Service Providers

Governance for Blockchain Ecosystems

Bottom Line

Mintable vs Nifty Gateway vs OpenSea vs Rarible Comparison

Understanding Top NFT Trading Platforms

Mintable

Nifty Gateway

OpenSea

Rarible

Differences between Mintable, Nifty Gateway, OpenSea and Rarible

The Platform