A review of the De-Fi scene in April 2021.
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Introduction to CyberTrade
Comprehensive Family of DeFi Trading Services
Decentralised Finance (DeFi) is re-inventing the financial world, especially when it comes to generating yield and accelerating capital growth.
CyberTrade is developing a range of decentralised financial instruments, each having its own business case and governance facilities.
CyberTrade is positioned at the 'cutting edge' of DeFi developments and is able to re-implement traditional financial instruments as well as implementing new DeFi financial instruments, as they are invented.
CyberTrade is is also positioned to be able to trade seamlessly, across all crypto asset classes, as well as trading Crypto Forex, Crypto Stocks and Crypto Commodities.
In general, a DeFi recipe (aka Lego blocks) is a set of instructions that when followed, produces a certain financial result.
The DeFi industry is hard at work combining decentralised exchanges (DEX), crypto lending features and crypto derivatives, to produce financially productive recipes.
Given the increasing number of DeFi platforms and financial instruments, there is considerable potential for creating new recipes.
The graphic illustrates a simple recipe which allocates 1,000 (non yield producing) DAI ($1,000) across three yield bearing assets (aDAI, SNX, WBTC). The crypto investor can then gain two-fold:-
1. Token Price Appreciation
2. Interest on each amount staked.
DeFi projects using 'Proof-of-Stake' as a consensus mechanism, support 'Staking'.
Staking usually involves allocating a 'stake' which is used to validate transactions in a 'Proof of Stake' (PoS) network.
Part of the network transaction fee is then provided as a reward for the network validation work done. From the customer point of view, this is the equivalent of earning interest on a principal amount.
Different Projects offer different schemes, involving different APY and 'lock-up' duration terms. The dynamic nature of the reward schemes requires 'active management' if yield is to be maximised.
Using staking, Crypto investors can gain by means of both token price appreciation and by collecting staking rewards.
By default staking gains are compounded, over time.
An index is a mechanism that enables a crypto investor to invest in a 'basket' currencies, to reduce risk associated with any one currency.
Most indexes have a means of dynamically dropping low performing currencies and adding high performing currencies.
The CyberTrade development plan includes delivery of an 'Index farming' service that can intelligently swap in and out of different crypto indexes to maintain a consistently good level of yield.
The index farming service will balance yield and risk, using predictive AI to help predict when changes need to be made.
DeFi Yield Farming.
Yield Farming mainly involves depositing funds into projects that produce 'reward' tokens. (e.g. Maker, Compound, Curve, Swerve, Balancer, Uniswap etc.) in order to benefit from the rewards.
Yield Farming took off, in 2020, when the Compound project offered rewards for both lending and borrowing in the form of a new 'governance' token (COMP). The attractions of participating in democratic governance plus the existence of COMP rewards caused crypto investors to lend and/or borrow. to be rewarded using the COMP reward token. The price of COMP then rose strongly, causing investors to lend/borrow over and over.
Other crypto projects quickly followed the COMP example and rewarded Crypto investors for supporting their projects (e.g. for providing liquidity), by democratising governance and sharing profits by providing valuable rewards.
The CyberTrade Yield Farming service tracks the rewards available and enables the crypto investor to generate yield, without having to study the complexities of multi-stage, multi-contract Yield Farming.
The Decemtralised networks/exchanges enable Arbitrage financial instruments to be created in two ways:-
a) Triangular Arbitrage which takes advantage of differences between currency pairs, on a single exchange.
b) Cross-Exchange Arbitrage: Designed to take advantage of differences between currency pairs on different exchanges.
Also, Arbitrage can be performed on Decentralised Exchanges (DEX) regardless of whether the exchange uses Automated Market Making (AMM) or Order Book Market Making (OBMM).
DeFi Flash-Loan Arbitrage.
Decentralised exchanges also enable Flash-Loan Arbitrage. This is a novel form of Arbitrage, only possible in the cryptocurrency DeFi world.
A typical process is shown in the graphic.
Flash-Loan arbitrage requires no up-front capital, as the first step is to loan (borrow) a large amount of a particular token, on a 'flash loan' basis.
All the steps are executed simultaneously (atomically).
If no profit will be produced, the Arbitrage steps are simply cancelled.
If a profit wiill be produced, the steps are executed, the loan is repaid and the profit is collected.
CyberTrade will use this 'no-collatera'l arbitrage method to perform arbitrage trades, between exchanges.
In general, Arbitraging performs a valuable financial market function by narrowing price differences across different exchanges.
Market Making on DEX / protocols can work in two ways, depending on whether the DEX is powered by 'Order Book Market Making' (OBMM) or 'Automated Market Making' (AMM).
On OBMM powered DEXs, Market Makers trade on the difference between the 'bid' and 'ask' prices on 'Order Book' exchanges and by providing liquidity.
On AMM powered DEXs, Market Makers invest in one or more liquidity pools to earn rewards.
Market making is unusual territory for most people, but territory that it is possible to enter with using a financial instrument, developed by CyberTrade.
Front-Running on Decentralised exchanges.
Decentralised exchanges have many virtues, including anonymity / no KYC, fair trading, good price discovery, transaction transparency and protection from an exchange company compromising funds.
On the other hand, because DEX trades are handled on-chain they are comparatively slow. The slowness provides time for 'front runners' to interrogate regular orders to seek opportunities for profit.
For example, a front runner service may detect a large buy order, which is likely to raise the future buy price on a DEX. The front runner service can create an 'exploit' buy order, then provide a higher gas fee, to position the exploit order just before the original order, in the transaction ordering queue. The frontrunner then creates a sell order which sells at a higher price and executes just after the original buy order. The frontrunner thereby buys low and sells high, within a short interval of time, to make a profit.
Scalping, Day and Swing trading.
CyberTrade is planning to implement an 'algorthmic' trading engine which makes (currency pair) trading decisions based upon the following:-
6. Artificial Intelligence
Such trading algorithms can be applied across numerous decentralised exchanges (DEX).
Such trading algorithms can be applied on different timescales to support Scalping, Day and Swing trading.
Interfacing to Exchanges.
To achieve trading scale (thousands of customers), and to minimise exposure to any particular exchange, CyberTrade needs to implement trading services across multiple blockchain networks (e.g. Ethereum, Polygon, Binance Smart Chain etc), and across multiple decentralised exchanges (DEX), for example (Uniswap, Serum, Pancake Swap, DoDo etc).
This means that CyberTrade Trading instruments must interface with DEX Application Programming Interfaces (API's) to access the following exchange functions :-
- Understand each exchange's trading fee structure
- Understand aggregate trade metrics (e.g. 24 hrs)
- Listen for events (e.g. New liquidy pool events. Trade events etc).
- Discover Markets (Currency pairs)
- Interrogate order books (Bids/Asks)
- Monitor liquidity pools
- Monitor price and volume information
- Swap currencies
- Detect new tolkens
- Create Limit Orders (Long/Short + Leverage)
- Create Market Orders
- Set Stop/Trailing Stop limits
- Manage Orders
The majority of new crypto Investors are people / organisations who lack formal Trading education and experience. This results in 75% of them losing substantial amounts of money in the first year of trading.
Enable investors to receive Yield generated by algorithmic trading services. Also, enable other DeFi application developers to incorporate sophisticated trading functionality to create a new yield stream.
The existence of a real problem and a genuine solution, creates an opportunity to invest in a trading service project. Tokens bought for cents can be expected to be worth dollars as CyberTrade grows..