Let’s do another picture with a larger whale making a purchase. Say he wants to purchase 10 ETH.
Y purchased = XY / (Y – dY) – X = 2,500,000 / (25 – 10) – 100,000 = Cost 66,666.66 X
10 X 4,000 = 40,000 Real Y Value. 40,000 – 66,666 / 66,666 = -39.9%
Lost 26,666.
Protocol K = 15 x 166,666 = 2,500,000
Protocol Value:
15 (4,000) + 166,666 = 226,666. We started at $200,000 so the Lost 26,666 is added to the protocol and the Liquidity Providers! Thus, everything that is lost is reclaimed by the protocol for the people!
Let us move on to Arbitrage.
Arbitrage is where we spy an opportunity in a disparity between two prices for the same good on two different exchanges. The best news is that now we don’t have to predict the tokens price direction or the token, it only has to move!
If ETH goes from 4,000 to 4,400 in the wider market what will happen?
Our Arbitrage Trader Jane will want to purchase ETH from our pool for DAI. She will take out 1.5 ETH to sell in the wider market and put in DAI.
Y purchase = XY / Y – dY – X = cost in X = 2,500,000 / (25 – 1.5) – 100,000 = 6,382.9 X (DAI)
We know 4,000 X 1.5 was the original cost or $6,000 with 382.9 going to Liquidity Providers, plus a 19.14, DAI fee to the LP.
We know the pool now has 106,382.9 X and 23.5 Y (4,000) = $200,382.9 versus the original $200,000.
What about the Arbitrage?
We Bought 1.5 ETH for 6,382.9 / 1.5 ETH = 4,255 per ETH when the normal market is at 4,400! When we multiply 4,400 per ETH by our 1.5 ETH we get $6,600. We know the original cost was $6,382.9 DAI (with a 382 cost going to the LP), thus we have 6,600 DAI that cost us 6,382.9 DAI = 217.1 profit. Everyone can approximately share, Liquidity Provider and Arbitrageur.
BUT what about the new state of the pool.
106,382.9 X + 23.5 Y (4,400) = 209,782.9 it is greater by 9,400 or 23.5 X 400 than originally.
STILL 106,382.9 / 23.5 = Price 4,526.9 when the Wider Market has ETH at 4,400. Thus, this strategy will continue! It would continue because we put in 6,382.9 to get 1.5 ETH or 4,255.26 per ETH. It would continue to Y purchase = 2,500,000 / (25 – 2) – 100,000 = 8,695 for 2 ETH or 4,347 DAI per ETH. (so remember we paid 4,347 DAI per ETH to purchase 1 ETH that is worth 4,400 DAI!)
We would have 23 ETH and 108,695 DAI. This implies a new price of 4,725 in our pool. The price of ETH in terms of DAI keeps increasing as we keep taking out ETH.
What if we just held on to the assets instead?
25 Y (4,400) + 100,000 X = 210,000
23.5 (4,400) + 106,382.9 X + 19.14 X = 209,802.04. There for we lost 197.96.
We got 1.5 (4,400) = 6,600 – 6,402.04 = 197.96 found.
But Jane made $197.96 in profit if we add in the 19.14 fee! Let Paul take out 0.5 ETH more.
Y Purchase = XY / Y – dY – X = cost in X = 2,500,000 / (23.5 – 0.5) – 106,402.04 = 2,293.61 X (DAI) IN
We got 0.5 (4,400) = 2,200 – 2,293.61 = 93.61 Lost by Paul.
New State of Pool
23 (4,400) + 108,695.65 = 209,895.65 – 210,000 If held = 104.35 Lost in Pool.
197.96 Gain = 104.35 + 93.61 Loss.
Everything will balance.
However, here is where things get crazy.
What if we Add In Liquidity?
ETH goes from 4,000 to 4,400. Traders want to take out ETH and put in DAI. We will start with 0.5 ETH taken out.
Y purchase = 2,500,000 / 25 – 0.5 – 100,000 = 2,040 X to PUT IN.
4,400 x 0.5 = 2,200 – 2,040 = 160 profit to Jane!
State: 24.5 (4,400) + 102,040 = 209,840.
Hold Was: 25 (4,400) + 100,000 = 210,000 - 209,840 = 160 loss.
Price: 102,040 / 24.5 = 4,164 per ETH.
Add In: we add in based on the ratio already in the pool, so, we add 0.5 ETH (2,200) and (4,164 /2) 2,082 DAI. For a cost of 4,282.
This represents a liquidity provider adding liquidity and balancing the pool.
New State: 25 (4,400) + 102,040 + 2,082 = 214,122
Ownership: The new LP has (0.5 / 25) * 214,122 = 4,282 – 4,282 = Break Even.
But he still wants in on the ride up, fees, and special tokens from the app!
Old State: 25 (4,400) + 100,000 = 210,000
New State: 25 (4,400) + 102,040 + 2,082 = 214,122 = 4,122 profit to the pool thanks to using the system!
Thus, the system will grow and is better than traditional finance where usually someone will win, and someone will lose. So far the Arbitrageurs, Liquidity Providers and Liquidity Pool all stand to make money! By trading together we can make it though whatever weather and we can succeed instead of trading going to the house.
Things to note: 1) You want to look before you leap and supply tokens in pools where the Y / X price is lower than the market price! 2) Be in at the right time. 3) You can ride up or down as an Arbitrageur and as a Liquidity Provider you love that back and forth game as it equals more fees and more money to the pool! 4) You do want to add liquidity. 5) Look for disparity between the market price and the pool as both a Liquidity Provider and an Arbitrageur! Some of you may not believe the math so we will do it again.
ETH goes from 4,000 to 4,400. Traders want to take out ETH and put in DAI. We will use 1 ETH taken out.
Y purchase = 2,500,000 / 25 – 1 – 100,000 = 4,166 X to PUT IN.
1 (4,400) – 4,166 = 234 profit.
State: 24 (4,400) + 104,166 = 209,766.
Hold Was: 25 (4,400) + 100,000 = 210,000 - 209,766 = 234 loss.
Price: 104,166 / 24 = 4,340.25 per ETH.
Add In: 1 ETH at 4,400 and 4,340.25 for 8,740.25
New State: 25 (4,400) + 104,166 + 4,340.25 = 218,506.25
Ownership: The new LP has (1 / 25) * 218,506.25 = 8,740 - 8,740 Break Even.
Old State: 25 (4,400) + 100,000 = 210,000
New State: 25 (4,400) + 104,166 + 4,340.25 = 218,506.25 = 8,506.25 profit to the pool.
For fun what if we went further to get 2 ETH?
25 (4,400) + 100,000 = 210,000 Versus our 23 (4,400) + 108,695 + 26.9 (0.003 of DAI added) = 209,921.9
210,000 - 209,921.9 = $78.1 lost or $78.1 / $200,000 or 0.00039%
Put in 8,695 + 26.9 = 8,721.9
Got 8,800 - 8,721.9 = $78.1 profit.
108,721.9 / 23 = 4,727 ETH
How Can We Determine the Pool Size and how much of it we get after Arbitrage?
We can withdraw half a ETH at a time:
Y purchase = 2,500,000 / 25 - 0.5 – 100,000 = 2,040 Cost in X (Better than 4,400 Per ETH)
Y purchase = 2,500,000 / 24.5 – 0.5 – 102,040 = 2,162
Y purchase = 2,500,000 / 24 – 0.5 – 104,202 = 2,180.97
Y purchase = 2,500,00 / 23.5 – 0.5 – 106,382 = 2,313 (2,200 is Half an ETH so we must stop.)
COST TOGEATHER = 8,695 X for 2 ETH
OR
Y purchase = 2,500,000 / 25 -2 – 100,000 = 8,695 X COST to PUT IN / 2 ETH = 4,327.5 per ETH that is LESS Than 4,400 ETH in the wider market so put in 8,695 for 2 ETH and sell for Arbitrage at 8,800!
Can we know the Pool Size after Arbitrage with a Simple Formula given a Price?
Yes.
ETH price = Token / ETH
ETH price = 100,000 / 25 = 4,000.
ETH in pool = sqrt (K / ETH price)
ETH in pool = sqrt (2,500,000 / 4,000) = 25 ETH our start!
ETH in pool after 4,400 ETH price = sqrt (2,500,000 / 4,400) = 23.83 our remaining ETH!
Token in pool = sqrt (K * ETH price)
Token in pool = sqrt (2,500,000 * 4,000) = 100,000
Token in pool after 4,400 ETH price = sqrt (2,500,000 * 4,400) = 104,880.88 X Put in.
IF we want to be sure we know we have 25 – 23.83 taken out 1.1634 ETH and added 4,880 X
Y purchased = 2,500,000 / 25 – 1.1634 – 100,000 = 4,880 X Put in as cost for 1.1634 ETH.
At a Cost of $4,195 X or DAI per ETH when we can now sell on the wider market for 4,400!
Let’s look at our pool.
23.83 (4,400) + 104,880 = 104,880 + 104,880 = 209,761 + (4,880 *0.003 = 14.64 fees) = $209,776.
Started at 25 (4,000) + 100,000 = $200,00
IF we held 25 (4,400) + 100,000 = 210,000 less 209,776 = $224 Lost to LP.
We got out 1.1634 ETH @ 4,400 X per ETH = $5,119. We spent $4,880 to get it making $239.
Jane our Arbitrageur made $239 and our Liquidity Provider lost $224 the difference is the fees.
WHY is this number different from $105 above? Because we bought a further 0.83 ETH Above. Above we went further and took out a total of 2 ETH. Below we took out only 1.1634 ETH leaving 0.83 in the protocol. This is considered a more balanced sweet spot without going to close to the expensive axis! Above we have taken out 2 ETH and have 108,695 in the protocol / 23 ETH gives us a cost per ETH at 4,725. If we plug that into the formula ETH pool = sqrt (2,500,000 / 4,725.86) = 23! Token in the pool = sqrt (2,500,000 * 4,725.86) = 108,695! The astute reader may consider that when we put in 8,695 X / 2 ETH above we had 4,347.5 Cost Per ETH. The astute reader may also realize 104,880 / 23.8366 = 4,400. Thus, the cost is more expensive as we continue toward the axis. So, we want a sweet spot and if we cannot get the sweet spot, the pool will have to rebound making more in fees! That sweet spot is 104,880 / 23.8366 = 4,400. Allow us to demonstrate! This is the battle between the sweet spot and the rebound. Sounds like dating doesn’t it?
Worth or Price is X / Y and in the pool! Cost is what you pay into the protocol, keep an eye on it! Let us do another example with the battle between equilibrium and the bounce back. 1) is the bounce back 2) is equilibrium. Add in liquidity at the same ratio as in the pool.
This means acting as a Liquidity Provider can hedge your risk! It is also set it and forget it, as long as you are comfortable spanning the dips and riding the fees to eventual profits. Now one does not have to be in or out at the right time, the protocol will literally always work. However, one should also share the protocol, to insure more liquidity and provide the ability to battle the ridged banks. We think by trading together, smartly, and with an eye on the pool this can be done. However, we have to point out some of the flaws. First, arbitrage trades are going to happen fast and with the advent of A.I they are only happening faster and are taking over the industry. It is also dangerous to be on a fringe pool with little liquidity and quick arbitrageurs. When the wolves are at the door one must have a long term strategy and diversify ones holdings; sometimes this includes entering pools with multiple coins or stable coins! Our secret page can explain the history of stable coins and how to use them today. The future of the industry is filed with hope, and we hope being a Liquidity Provider would get one sole access to being an arbitrageur, like a V.I.P at a club. We also think Liquidity Providers won't be left out and can hedge and increase their bets with fees, while creating a new house. Are there problems, in our opinion yes. But we hope we have outlined more solutions! We think if you can time the market, enter the market and share the market things will work out. As usual do your due diligence, keep your eyes on the details and work with proven protocols! You can always profit but you must also always be careful!
Thus, we would also like to illustrate how a decrease in ETH price could work so you are not obsessed with the graph always going up!
Let’s say ETH falls to 3,800. We will buy 1 ETH on the open market and put it into the protocol to earn X.
-dX = XY / Y + dY – X = DAI Out
-dX = 2,500,000 / 25 + 1 – 100,000 = -3,846 Therefore dX = 3,846 DAI out when we paid 3,800. What if we bought ETH for 3,600?
The pool is now 26 ETH and 96,153 X our Price is 3,698.
Let’s buy more ETH!
Y purchase = 2,500,00 / 26 – 1 – 96,153 = 3,847 Dai to put in for 1 ETH. What if ETH goes back up to 4,000 we can sell!
As we mentioned Price can be misleading (it is not about price it is about the protocol!): To Clarify!
Let’s say we have 23 ETH and 108,695 DAI, our DAI = 4,725.86 DAI per ETH and a K = 2,500,000. This is simply to illustrate that you cannot buy 1 ETH for $4,400 and sell it for $4,725.86 in the protocol immediately and get that exact amount, you must go through the formula! We want to buy ETH for cheap on the wider market and sell it to the program where it is more expensive to bring everything back into alignment and make money. We want to put ETH in the protocol and take out DAI so it will balance! 1 ETH = 4,400 DAI.
1) Put in 1 ETH as dY
-dX = XY / Y + dY – X = 2,500,00 / 23 +1 – 108,695 = -4,528 DAI out; this trade is successful. You can not get out 4,725.86 DAI.
Put in 2 ETH as dY
-dX = XY / Y + dY – X = 2,500,00 / 23 + 2 – 108,695 = -8,695 DAI out / 2 = 4,375 per ETH. Cost us 8,800 trade unsuccessful. Note: Protocol is back to its start!
2) Put in 4,400 DAI as dX
-dY = XY / X + dX – Y = 2,500,000 / 108,695 + 4,400 – 23 = -0.894 ETH out x 4,400 = 3,936 DAI out; trade is unsuccessful, we are going the wrong way taking out dY!
3) Purchase with 4,400 DAI for Y to PUT IN = Cost.
X Purchased = XY / (X – dX) – Y = Y Cost to PUT IN
X Purchased = 2,500,000 / (108,695 – 4,400) – 23 = 0.97 ETH to PUT IN; this trade is successful. We put in 0.97 ETH and get 1 ETH of value.
Purchase with 4,725 DAI for Y to PUT IN
X Purchased = 2,500,000 / (108,695 – 4,725) – 23 = 1.045 ETH to PUT IN x 4,400 = 4,599; this trade is successful. We put in 1.045 Y x 4,400 = 4,599 and purchase 4,725 DAI taking them out of the protocol.
Purchase with 8,695 DAI for Y to PUT IN
X Purchased = 2,500,000 / (108,695 – 8,695) – 23 = 2 ETH to PUT IN x 4,400 = 8,800 Cost for 8,695; trade unsuccessful.
Purchase with 10,000 DAI for Y to PUT IN
X Purchased = 2,500,000 / (108,695 – 10,000) – 23 = 2.33 PUT IN x 4,400 = $10,254 Cost for 10,000. Unsuccessful.
4) Purchase 1 ETH for X to PUT IN
Purchase Y = XY / (Y– dY) - X = X to PUT IN
Purchase Y = 2,500,000 / (23 – 1) – 108,695 = 4,941.36 X PUT IN; this trade goes against equilibrium and is expensive!
ETH is overvalued at this point as it becomes more and more rare it becomes more and more expensive. As it becomes increasingly rare and expensive you must add it back to the protocol to bring balance and make money! This is also to illustrate simply that you must become familiar with the above four equations and logic and that prices are not always what they seem! It is not the price; it is the math!
Better for all involved.
So, who are the users of this beautiful system? First are the swappers, they want to trade anything for anything with tight spreads. We can cut costs to lower than 2%, which is quite competitive. Then there are the Liquidity Providers, who want to supply tokens and earn a passive income from trades and fees. They also earn the slippage. Third, are the Arbitrageurs looking for a difference in the price of our token in the liquidity pool and the larger market, unlike in traditional finance they don’t have to bet on the price going up or down or for which item, they merely speculate it will move! If token Ys value increases they can buy it from the pool and sell it elsewhere for more, if it falls they can put it to the protocol for higher. If token X moves they can do the same. Fourth, are the token owners who want to add liquidity and notoriety to their token. An Automated Market Maker can bring prestige, liquidity and trades to these currencies! Finally, those who are underbanked in the world would use this platform as it is cheap and has ease of use. So, Liquidity Providers want to get in at the right time, Arbitrageurs want the price to move and everyone wants to share the protocol! We would argue this is far better for all users than traditional finance, where someone will win and loose and you must go through the central middle man and all spreads and fees go to them. By trading together we are giving power to the people and all the users can find a home. Remember, every time the market moves the pool will rebalance, whether it is done by Liquidity Providers providing liquidity or from Arbitrageurs. Thus, more people will be able to profit versus people trading traditionally, and the fees and spreads still go to all the users!
New Developments: Concentrated Liquidity.
Concentrated Liquidity allows Liquidity Providers to supply liquidity to a given price range along the price curve! You make fees when the assets trade between your range and not when it is outside. Thus, you can exit your positions easily and predictably to help stop divergence loss. This is akin to giving traders stop loss orders on a traditional exchange. Check out this article for more on Concentrated Liquidity it promises to make Liquidity exponentially more effective! This is what the big boys Uniswap and PancakeSwap are doing to increase liquidity and profits for the Liquidity Providers.
The Big Picture Battle.
We will now have a bird’s eye view battle with the banks. First, they would say if you took all your money and put it into ETH you would make 10%. Yet, by using half of your funds in a stable coin like DAI you are hedging and will only lose or gain 5%. Plus consider with our secret page stable coins like DAI can be quite lucrative. Also, there are pools with ETH and BTC so you can play with both.
Also, we must consider we made 5% but another 4.89% for the Arbitrageur (239 / 4400) at equilibrium, and hopefully 5% for the Liquidity Provider adding in 0.3% of fees. So, we made 15% and the banks simply made 10%.
Additionally, we don’t have to be right about the price direction anymore, any move can make us money, and the fees keep rolling in. The banks once made the spread, and we think of course that led to scandals like GameStop. Now the spreads go to you! Also know, you don’t have to be in at the right time, the protocol will always work for you. You just need to get in fast to lock in more fees, tokens and slippage as a Liquidity Provider, and make the difference and drive prices back to parity as an Arbitrageur. No matter what the money will flow, and this is thus a more noble and sincere path for society to take in the modern era. With the advent of AI arbitrage trades are only going to be happening faster and in a more decentralized fashion. In the spirit of crypto, we think a more distributed method is best. We think being an Arbitrageur will be quite rare, so we hope to give that right to special V.I.P liquidity providers! We will now open your mind to the possibilities out there.
On PancakeSwap.
With lower fees and lots of liquidity, PancakeSwap plans to be fun. PancakeSwap is an oasis of different products for different users. First, you can supply liquidity to earn tokens and Liquidity Pool (LP) tokens. You can then deploy those staked LP tokens and earn CAKE with Yield Farms. However, you should look at the farms first and supply liquidity after you have figured out the farms that offer the best bonuses and that you want to participate in! Work backwards and then earn some CAKE in addition to your staked LP tokens. CAKE is the native token on PancakeSwap and must be earned not bought! If you want to swap tokens PancakeSwap has a product for that. PancakeSwap also has a robust Perpetual Trading platform that can give incredible leverage to your position totally blowing the competition out of the water. There is also veCAKE where you can vote on proposals and upgrade the platform. You can vote on fees, boost yields to farms and set CAKE emissions! There is also bCAKE for boosted cake that lets you boost your cake yield to lock in for yield farming. This can be up to 2.5X! You can also simply stake CAKE in syrup pools where there is less risk and syrup. PancakeSwap also has rCAKE where you can share in some of the revenue created by the protocol. Anyone with BEP-20 tokens can put them up for grabs in the protocol but they also offer a product for teams to launch their token on PancakeSwap for some publicity and notoriety, if you want access to these new rollouts you want to get some iCAKE for IFO CAKE or Initial Farm Offering Cake. PancakeSwap is also rolling out the Zap router to allow you to quickly get in and out of trades, to provide concentrated liquidity and to let you stake only one side of a token pair! This is truly novel, and the chefs also provide a way for you to make trades secret so they cannot be front run by miners or bots on the Ethereum or Binance blockchains. You can also Wrap ETH to get WBETH, it accrues mining fees like all ETH and can also be used on the fly to be levied into new DeFi protocols. Other protocols are being built into PancakeSwap, including new games linked into the ecosystem, along with NFTs for fun and for achievements like best trader or greatest returns; the top players can be rewarded with bonuses from the platform. You can also play the lottery with your CAKE to get your shot at the jackpot in cash! Finally, you can buy crypto on PancakeSwap with a visa card for 3.95% in fees. PancakeSwap is integrated into Binance so it will get more users and more users means more CAKE. Remember CAKE can be used to Stake in low-risk syrup pools, can be locked into yield farms for longer terms and rewards, you can play the lottery and use it to invest in games and NFTs promoting your successful trading, or one can turn it into veCAKE for voting or bCAKE for boosting Yield Farms! It can also be turned into iCAKE for Initial Farm Offerings or be burnt. There is a lot going on here and certainly PancakeSwap will be one of the tastiest.
On UniSwap.
Uniswap started as a post from Vitalik Buterin and then transformed into a grant to Hayden Adams to produce a unique AMM. According to DeFi Lama it is one of the biggest players in the game and covers many of the bases. It has ease of access for anyone to enter the protocol, it is guided by simplicity, and quite robust. You can simply create a ERC-20 Token yourself and add it to the system! With UniSwap you can plug and play on Ethereum and swap tokens, provide liquidity and add your own tokens easily! You can also do flash swaps and use less gas than any player on the Ethereum system. It may be beneficial to work with both of the above-mentioned AMMs and put your easy dollars to work!
On Balancer.
Balancer promises to be the underdog with a shot at going huge. They can have pools with up to 8 assets and are attracting a lot of liquidity. However, with more pool comes more opportunity for arbitrage! The same can be said for their ability to weight pools with ratio other than 50:50. The future will surely be fun!
NFTs.
NFTs or Non-Fungible Tokens are a new development in the crypto sphere. A Non-Fungible Token means it cannot be broken down into parts. It is unique and lasts forever! Some don’t like it because at this point in the game there is a bottle neck where only the most popular artist like ApeCoin are making money. However, NFTs have the true ability to expand! On decentralized blockchains every business can up their game. McDonalds could mint NFTs for kids instead of giving a toy in their happy meal. Kids can collect and share their tokens and McDonalds gets free advertising at a fraction of the cost of the previous system. This promotes synergy and brings people into McDonalds more. Mc Donalds could then expand and issue Investment Tokens that get a share of McDonalds revenue when online orders are exchanged. They could also use NFT or Investment tokens to levy discounts on their app, or be used as an investment coupon. Or, for example, ApeCoin can sell Ape NFTs and then upgrade and sell regular tokens with a claim on that revenue. Not only will capitalism use NFTs so will your government!
Your government may soon use NFTs to prove you have a passport or driver’s license. With a mark from them to you, one could prove their ID is real. The same could be done for University Degrees or vintage Louis Vuitton goods. Also, unique NFTs could be used to get you access to a club or a spot on an Air Line in first class or a hotel stay, that can be sold and transferred. By using authority and authenticity, NFTs can support not just artists but the travel industry!
NFTs could be used to incentivize people to travel the world. If you go to Tokyo or the Eifel Tower you could earn an NFT. This could be funded by governments who want to get people to visit their country or by advertising companies looking to give back. With ease of transfer and encrypted validation NFTs can be the future of business.
A lot of NFTs use artificial randomness to work. They develop thousands of critters for the masses, then give them unique programmed traits made by randomness to add spice to the marketplace. It truly is a one two punch. And that one two punch is found with OpenSea and Magic Eden. Be sure to act fast to get new token air drops and also be sure to ride the waves as NFTs have a long way to go! As always one must be careful as some multi-million NFT sales we actually made by the auction house or the artist to add hype and not skill or art. In the future Magic The Gathering card game may mint NFTs for cards and champions. The NHL may also provide NFTs of all their best players. It is also a fact that you can use your NFTs as collateral to get loans! There is a lot to do but for now we will focus on the two biggest marketplaces. Also, remember almost every game universe can tote NFTs so the fun future is really in your hands!
On Magic Eden.
Magic Eden is a decentralized exchange for NFTs. It is easy to get into the game with and you can see where the game is going, as they provide up to date information on transactions and the base price. We can see how much liquidity has moved in the last 24 Hours and plot from there. We can get the metrics for each collection so you can find the most popular or potentially popular by not just judging art quality as a curator but also by how well each collection is selling! You can search based on Bitcoin, Solana, and Ethereum. Judge the NFTs by rarity, randomness, base level price and liquidity and see where your journey takes you. So, start buying at the right time with the support of advanced metrics and simply get into the game with your own art collection!
On OpenSea.
OpenSea is the largest and most popular NFT exchange. They differentiate their NFTs by Art, Gaming, Photography, Profile Pictures, and Music. OpenSea creates hype by using new token drops giving bonuses and notoriety to their artists on the platform. You can create your own NFT and you can stay in touch with the next artists all in one place.
In summary NFTs are fun and have a long way to go. If properly used and marketed they could bring a benefit not just to the artist but to whomever earns or holds the said token. In the future many NFTs may have attributes, such as a claim on revenue, access to a club, a university degree, or perhaps hockey stats to help them battle in a game universe, and not just algorithmically adjusted mass production, still the hype is here! And if you want the hype to grow you should consider a business to take anything and turn it into a piece of art. This will take the offline world online and turn work into art and infamy, so it lasts forever! This is what Chainlink is doing bringing the offline world online with oracles. Tokens are the future, and they are for everyone.
On Tokens
Tokens are typically Utility or Investment. However, they can also represent abstract assets or be a derivative of another token.
Utility tokens are required for an action. Say for example you have a carwash, to open the door you need a utility token. To print a blueprint at a university you need a token proving you are a student and that you can access the 3D printer. If you have a National Geographic database or a Wikipedia of information, you could require a utility token to access the database or to write information to the database. Utility tokens could be required to access the secret part of my website or buy ammunition.
Investment tokens give you a claim on something, for example, revenue. If you own a carwash and say each token is entitled to a 10% dividend from the carwash we can get a workable number for its value based on the performance of the carwash and the number of coins. Investment tokens can also tether the real and online worlds together. For example, we could have a priceless Van Gogh and sell shares, so when it sells I get my part, thank you very much. We could use this kind of tokenization for funding. You can sell $100,000 worth of tokens giving a claim on 10% of your revenue. However, you must be careful and ensure all these things are tethered to the earth! It is imaginable that one could say give me $100 and I will give you a $10 10% Dividend a year for 10 years. Then I take $90 and do the same next year. This will eventually fail and is called a Ponzi scheme. If you are interested in the math the Ponzi scheme at full capacity will explode in 10 years. Plus, the tokens value will eventually collapse without wholesome revenue to support its growth. All one must do is look at the Smart Contracts and see the token will cannibalize itself. This is not just bad business it’s bad math. To beat a Ponzi Scheme we must be diligent, tether value to reality, maintain transparency and offer higher dividends. We have to see value locked and value flowing through the system, and a tether to the real world, not the matrix. So, we can do the math and have a museum where we collect all funds and divvy them out based on where people went in the museum, giving credit to our favorite creators and artists. Then these same tokens could be transferred as they transfer real value! Money can be passed around and around without fail as it came from a legitimate source! Immediate payments and perpetual work beats the Ponzi Scheme every time! That is the essence of a value of an Investment token.
Tokens should also be unique. We can have a Justin Bieber token whereby Bieber issues $120 worth of Bieber Coin and says with Bieber Coin we can get a $100 ticket for $90. So, people would buy Bieber Coin for the discount and the speculation because they love Bieber, thus Bieber makes $10! It is good for all Beliebers. We could also have a Coin that can be used as a coupon. You give $1 of the coupon to save $1, however we can resell this Coin to an investor and recoup our losses on and on the cycle goes! This is a unique way to support your brand!
Most tokens are made by Proof-of-Work or Proof-of-Stake systems. Proof-of-Work means tokens like Bitcoin have millions of miners solving complex mathematical puzzles to amaze you and validate transactions. This shows, transparently, the worth of a network and tethers value based on what was spent to mine new coins and validate the system. This is called a hash rate. Proof-of-Stake means you get rewards for verifying transactions based on your pocketbooks worth of the token. This is done by Ethereum and turns gas costs over to the miners. However, we believe in a third form of creation for tokens and that would be Proof-of-Truth.
In addition we could have a forum. Every post gets a $1 ad beside it. To post perhaps you have to pay a utility coin, perhaps not. This $1 would be put up by an advertiser. Perhaps he had to buy a utility coin, perhaps not. Then 20% of the add revenue can go to the poster or holder of the forums investment token. Then we sell 30 cents per dollar of ForumCoin. This could happen as posts happen, or before hand, via a governance vote, so we can see exactly what the dividends per coin would add up to! This could supercharge our forum and be noted as Proof-of-Truth as the value of ForumCoin is based exactly in how well the forum does. Contributors are happy, advertisers are happy, and we made way more than Facebook ever could. Then users may hoard our tokens just for fun and increase its value!
Let us do the math. For every post in our forum we put a single ad. This ad is worth $1. We then mint 1 forum coin that will earn $0.20 in real dollars, bitcoin, another coin, or our forum coin. Thus, the more posts the better! Then we could use our coupon idea and say to advertisers to advertise on our forum you need to pay us in forum coin to advertise! Thus, the price increases. However, it is extremely important to remember we must have a tethered dividend value of $0.20 cents per forum coin. Simply put, dividends should be paid immediately, so we only make $0.80. However, users may want to post more, advertisers will buy our coin, and we can issue some for fat and fun. The more our system is used the more we make, thus our consensus method is Proof-of-Truth, where money comes from real people for doing real things. If money was paid out not to investors but to our forum participants we could super charge our forum! It could be quite interesting and a good way to upgrade crypto in general.
In summary the future of tokens should be in everyone’s hands. It is not owned by some genius coder, or some banking cartel or a business tycoon. The reality is in fact much more down to earth. Are there dangers with useless NFTs and Ponzi Schemes. Yes. Should we let these limits stop us from our enlightenment, no. We can teach a whole new generation, starting from the ground up that the bank doesn’t own your house, it could all be tokens. The reality is you would have to do that math, but after that to each their own. This is not plural relativism it’s a custom design and the movement is for the people by the people!
A tokens’ value is not based on price or its cost, it is based on transparency and utility. Ultimately you have to consider there are clever coders out there who can peer over your tokens smart contract and bring you to justice. The internet and the media are becoming less centralized so the Pulitzer Prize could belong to your neighbor. Thus, tread lightly. We know opacity leads to distrust, so invest in the future and in math. We have AMMs that are working for the people by the people. Tokens can track where you have been by dolling out LP tokens and investment tokens, but they can also help you get where you’re going by providing for all sorts of platforms who choose to utilize them, and the sky is the limit.
We can trust doctors but now the doctor is you. You are the careful watchdog looking out for the next Unicorn stock. You are also watching the institution watching out for that! You have two eyes so use them. Issuing tokens should not be a problem it should be for longevity. Imagine what CAKE does for the PancakeSwap protocol; it only rewards you after you do the work, so people are driven in the right direction. Every person has the right to issue their own token and every person has the right to plug into a larger system and play! It is your job to shake up the system and it is your job to be the system. It is not hypocritical to say that, it is in fact authentic. Thus, it is not about being careful about stepping on eggshells or bugs it is about getting out the bug spray. Monks do not step on bugs in the rain season not because it makes them sad and they are weak, but because they recognize even bugs are linked together through our energy. They still dance in the rain and if you were wondering, they don’t indulge in makeup, they indulge in Karma. We seek to get beyond and behind the makeup.
So, if you disagree with this manifesto, fine, we know there will always be A and B, and the devil’s advocate is my best friend. Still, what happens when the next peddler comes to your door? You have to have a proper response. One crew believes A the other B, so we use technology. Team B will say what they will say because they were told to say it or were paid. We claim the creativity and we claim the responsibility. The A team will say what they say because they have the responsibility to fact check and say it. It truly is a new world, and we can use cryptocurrency to support it.
And that is exactly what tokens can do for you. You can put them to work and into an AMM protocol, you can get CAKE and LP tokens representing your share. You can own new forms of art and travel the world to earn your keep and provide new forms of income. We can use forums to share our knowledge person to person without greedy intermediaries, and return power to the people. The question is will this last? Our personal opinion is probably!
