General Notes

Table of Contents

Miscellaneous notes that have nowhere else to be categorised under.

Birthday of crypto industry

On October 31, 2008, Satoshi shared the Bitcoin Whitepaper title ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, setting the symbolic birthdate for the entire industry.

Bitcoin ETFs

ETF stands for exchange-traded funds. ETFs are publicly traded and track the performance of an underlying index or asset.

With a Bitcoin ETF, you buy shares of the ETF via a brokerage. The process is almost the same as buying stocks. Behind the scenes, the firm that issues the ETF buys and holds Bitcoin. Note that investors will have to pay the management and custody fees to the firm.

Possible reasons to want to buy Bitcoin ETFs rather than Bitcoin itself:

  • concerns about the lack of regulation in crypto industry vs stock market
  • concerns about security of assets. E.g. how to protect private key of crypto wallet.
  • easier tax reporting

Drawbacks:

  • can’t use Bitcoin for making purchases
  • fees are payable to the ETF manager for management and custodianship.
  • Bitcoin offers 24/7 trading, while Bitcoin ETFs don’t.
  • ETFs typically have some price tracking delays.

ProShares Bitcoin Strategy ETF (BITO)

ProShares is the first U.S. ETF for Bitcoin futures. It invests in cash-settled, front-month futures contracts, meaning the futures contracts that have the shortest maturity time. Every invested future contract is regulated by the CFTC.

Valkyrie Bitcoin Strategy ETF (BTF)

BTF launched just three days after the ProShares ETF. It also uses short-maturity futures.

Bitcoin Futures

Bitcoin futures are another way of investing in BTC without owning it. This is a contract between two investors that is essentially a bet on the future price. Importantly, there are also Bitcoin future ETFs. These give you exposure to the price movements in Bitcoin future contracts.

Decentralized Exchanges vs. Centralized Exchanges

The processes on a decentralised exchange (DEX) are different from those on a classic centralised exchange. One of the most important differences between these two types of exchanges is that decentralised exchanges do not have middlemen who can bring buyers and sellers together. Thus, decentralised exchanges need a different solution. A solution that allows transactions to take place peer-to-peer, i.e. purely between two people.

Order book replaced by liquidity pool

In order to be able to carry out swaps on a DEX, the classic order book used on centralised exchanges must be replaced by a so-called liquidity pool. This liquidity pool is what makes the exchange (the “swap”) from one coin to another coin possible in the first place (for example, from BTC to DFI).

A liquidity pool is nothing more than a pooling together of a specific coin pair (for example, DFI and BTC in a liquidity pool). Liquidity can now be added to this pool in the form of two coins, which are added to the liquidity pool in equal shares (50:50) based on the current prices on DEX.

How are the rewards generated?

For adding coins to the liquidity pool (and thus providing liquidity) - also called liquidity mining - rewards (block rewards) are distributed directly from the blockchain in return. In addition, the transaction costs incurred are distributed proportionately to all participants in a liquidity pool.

These rewards and proportional transaction costs make the provision of liquidity attractive, as this is often accompanied by high returns.

Liquidity Mining risks

Hacks

Many blockchains are based on a Turing-complete blockchain, which requires a lot of code. The more code that is written, the more opportunities there are for programming errors.

However, DeFiChain (the blockchain used by Cake DeFi for liquidity mining) is non-Turing complete and needs up to 99% less code compared to Turing complete blockchains. Therefore, Liquidity Pools on DeFiChain are less vulnerable to programming errors and hacks.

Impermanent Loss

Impermanent loss always takes place when the ratio between the coin pairs of a liquidity pool changes. If the coin pairs have moved in opposite directions since the liquidity was provided - one coin has outperformed the other in value - and you then decide to withdraw the liquidity again, you will receive less from one coin than you originally put in. This is called an impermanent loss. However, this does not apply to the other coin, because you now get out more of it.

In general, however, the impermanent loss is low and does not usually exceed the amount of rewards received, unless there are particularly strong price fluctuations within a coin pair.

Money laundering

Cybercriminals laundered cryptocurrency worth $8.6 billion in 2021, according to figures from Chainalysis released on 26 January 2022. The blockchain intelligence firm’s data shows this is a 30% rise compared with the year before, but markedly below the all-time high of $10.9 billion that was recorded in 2019.

By comparison, estimates from the UN Office of Drugs and Crime suggest anywhere between $800 billion and $2 trillion in fiat currency is laundered every single year.

Overall, cybercriminals have laundered more than US$33 billion worth of crypto since 2017, Chainalysis estimated, with most of the total over time moving to centralized exchanges.

Top 10 highest paid programming languages

According to DevJobsScanner.com:

  1. Solidity
    • language invented for the former team behind Ethereum
    • Solidity is a high-level object-oriented programming language.
    • It is used to write the logic behind the smart contracts that runs in most of the blockchains nowadays.
  2. Rust
    • Solana contracts are made in Rust.
  3. Scala
  4. Ruby
  5. Go
  6. Python
  7. Swift
  8. C/C++
  9. Java
  10. Javascript

US dominates crypto trade

[Jan 2022] Arcane Research published a report showing US trading hours (3pm to 9pm UTC+1:) account for 43% of the 24 volume of crypto trading on average. “Trading activity tends to immediately pick up as the U.S. stock market opens.