Last Thursday May 20 we had a live session for the community in Spanish, Omar Alvarez, member of Expanse, explained the basic concepts and did some practical exercises to learn in Eggs.cool about Yield Farming. This is the summary of the live content:
Also check other articles in this Newsletter
WHAT IS THE BLOCKCHAIN?
It is the internet of transactions or of value A chain of blocks (block chain), also known as a distributed ledger (distributed ledger) A distributed database that records blocks of information and interweaves them Blocks of interlocking information from current to current above and until reaching the genesis block.
WHAT ARE ALTCOINS?
Altcoins is a simplified construction of the words “alternative” and “coins”. It could therefore be translated literally as “alternative currencies”. The term Altcoins refers to cryptocurrencies that are derived from the source code of Bitcoin also known as “Forks”, that is, branching, fork.
WHAT IS EXPANSE?
It was created as the first stable fork of Ethereum by Christopher Franko.The idea is to use cutting-edge block technology to build anything the community and team can imagine, with a self-funded design to keep it truly decentralized.
It has a five-year history of constant growth and stability. With great ideas, the team is growing and other projects are now coming on board to help make the dream come true.
WHAT IS A CRYPTOCURRENCY?
It is an application of the Blockchain (a subset of crypto-based digital currencies.)
A type of unregulated, digital money that is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community
WHAT IS A TOKEN?
A token is “a unit of value that an organization creates to govern its business model and empower its users to interact with its products, while facilitating the distribution and sharing of benefits among all its shareholders.”
HOW ARE THEY DIFFERENT?
The main distinction is that tokens require another blockchain platform to function and cryptocurrencies have their own blockchain to function.
Cryptocurrencies can have a limit and will generate rewards for mining, tokens do not, tokens need the crypto blockchain to work and pay gas based on the Crypto to which they belong.
WHAT IS ERC-20?
• Ethereum Request for Comments 20 – is the community approved version.
• They are smart contracts that run on the Ethereum Blockchain.
• They have a name, they have a limit and a number of decimal places, transfers can be made, they have all the functionalities of a smart contract.
WHY CREATE A TOKEN?
Mainly because these tokens created using the ERC-20 standard benefit from Expanse’s existing infrastructure instead of having to build a completely new blockchain for them, saving time and resources that this entails.
On the other hand, the creation of new tokens strengthens the Expanse ecosystem, boosting the demand for Exp, which makes the entire network even more secure.
And finally for its interoperability. If all the tokens created on the Ethereum network use the same standard, those tokens will be easily interchangeable and can easily work with other Ðapps from the same ecosystem.
WHAT IS DEFI?
Decentralized Finance – It seeks to develop small traditional financial pieces but with an extra degree of transparency and decentralization.
These pieces are combinable with each other, in order to develop an entire ecosystem of small solutions
Together they form a great finance solution that overrides the need for opaque, centralized financial institutions that no longer add value.
WHAT IS AMM?
Automated Market Maker – Robots that are always willing to give you a price between two assets.
They make you the “bank” by providing liquidity to a “liquidity pool” (liquidity reserve). This basically allows anyone to become a “market maker” of an exchange, and earn commissions for the provision of liquidity.
It is a type of decentralized exchange (DEX) protocol that relies on a mathematical formula to determine the price of assets. Instead of using an order book like traditional exchanges
WHAT IS THE FORMULA?
Eggswap uses x * y = k, where x is the amount of one token in the liquidity pool, and y is the amount of the other. In this formula, k is a fixed constant, which means that the total liquidity of the reserve must always be the same.
P2P VS P2C?
P2P: Peer-to-peer You sell your token A for Token or Crypto B to another user who is buying Token A for Token B (You have dollars, you want BTC, someone sells BTC for your dollars)
P2C: Peer-to-Contract you do not need a counterparty or demand is a contract that provides the liquidity of the token.
WHERE DOES LIQUIDITY COME FROM?
Liquidity is provided by the Liquidity providers LPs or liquidity providers, they provide funding to the contract and earn from the transactions that occur in them.
They do it in Token A / EXP pairs and there the liquidity is provided, in exchange you receive LP Tokens and it is one of these that you can Staking.
The transaction costs (Fee’s) are shared between the Exchange and the liquidity providers.
WHY IS IT IMPORTANT TO ATTRACT LIQUIDITY?
Due to the way AMMs work, the more liquidity in the reserve, the less slippage on large orders. That, in turn, can bring more volume to the platform, and so on.
The price is determined by an algorithm. In a simplified way, it is determined by how much the relationship between the tokens in the liquidity pool changes after a trade. If the ratio changes by a wide margin, there will be a great deal of slippage.
WHAT IS THE “SLIPPAGE” IN TRADING?
Market orders are filled at the best available price, that means they keep filling the orders in the order book until the entire order is executed.
If there is no liquidity, then there could be a big difference between the price you expect your order to complete and the price at which it is completed. This difference is called slippage.
WHAT IS IMPERMANENT LOSS?
Impermanent loss occurs when the price ratio of the deposited tokens changes after you have deposited them into the pool. The greater the change, the greater the temporary loss. This is why AMMs work best with token pairs that have a similar value, such as stablecoins or wrapped tokens.
If the price relationship between the pair remains in a relatively small range, the impermanent loss is also negligible.
WHAT IS IMPERMANENCE?
“Impermanence” assumes that if assets return to the prices where they were originally deposited, losses are mitigated. However, if you withdraw your funds at a different price ratio than when you deposited them, the losses are much more permanent.
WHAT IS YIELD FARMING IN THE DEFI?
Yield farming is a way to earn more crypto with your crypto. It is done through a Smart Contract, in exchange for your service, you earn commissions in the form of crypto.
Yield farming, also called liquidity mining, is a way to generate rewards with cryptocurrency portfolio securities. Simply put, it means locking cryptocurrencies on deposit and earning rewards.
PRACTICAL EXERCISE
- Enter Eggs.cool in google Chrome
- Configure Metamask with the Expanse address
- Add the contract of the token we are looking for.
- Accept the P2C contract of the pair that we want to add liquidity
- Add liquidity using EXP / Steak
- Collect the Eggs
- Staking the Eggs generated.
- Exchange Generated Eggs for EXP
You can watch the Live transmission in here.