Why Anchor Protocol is the new ‘high yield savings account’

Anchor Protocol

How much interest are you earning on your fiat dollars in a traditional bank ‘high yield savings account’? It can’t be more than 2%, max? Which means in real terms, your money is going backwards. That’s not financial freedom peeps. But what if i said you could get 10 times that interest rate with a cryptocurrency Stablecoin pegged to the US dollar? Well, you can with Anchor Protocol and a Stablecoin called US Terra.

In this post we explain: how Anchor Protocol will pay you 20% interest on your money, the 4 steps to getting this interest rate, and how to manage risks. We also reveal why Anchor Protocol is set to become the new high yield savings account for millions.

Are you ready to make some passive income?

Article insights

  1. What is Anchor Protocol?
  2. How do you make passive income using Anchor Protocol?
  3. 4 steps to earning 20% interest on your money
  4. The risks of using Anchor Protocol and how to manage them
  5. Why Anchor Protocol will be the new high yield savings account for millions

What is Anchor Protocol?

Anchor Protocol is a smart contract built on the Terra Blockchain.

What is a smart contract?

As we describe in this post The 2021 DeFi Lowdown:

DeFi loan transactions are executed through what’s called ‘lending protocols’… These protocols use ‘smart contracts’ – code on the blockchain – to execute a financial agreement between two parties when predetermined conditions are met. ‘.. put simply, they’re computer code (program) to execute financial transactions on an immutable public accounting ledger (blockchain), so you no longer need a ‘trusted third party’ like a bank.

In the case of Anchor, its smart contract automatically executes direct borrowing and lending agreements between protocol users. The smart contract allows automated and direct peer to peer lending and borrowing of certain cryptocurrencies.

The Anchor Protocol smart contract has a $5 billion total value locked. That means there is $5 billion dollars (US pegged) worth of crypto locked in the smart contract as either loans or collateral.

Anchor Protocol
Anchor Protocol TVL (Total Value Locked)

Anchor Protocol aims to pay a steady 20% interest rate to lenders. It uses the yield reserve pool ($73M) to maintain as close to this as possible when tokenomics fluctuate. Given failed tokenomics is a risk inherent to DeFI protocols (more on risks below), this features reduces the tokenomics risks of lending via Anchor.

What is US Terra Stablecoin?

US Terra is an algorithmic stablecoin that is pegged to the US dollar but NOT backed by US dollars (i.e. the Stablecoin issuer does not hold $1 USD for every $1US Terra issued). Instead, UST is backed by LUNA, which is the native token of the Terra Blockchain. You can read more about Terra Blockchain and LUNA is our article on investing in Layer 1 crypto assets here.

Terra uses an algorithm to ensure that US Terra stablecoin maintains its 1:1 peg with USD. Essentially, the algorithm controls the supply of LUNA token and UST on the market to stablise the peg.

There is more than $7 billion worth of UST circulating, representing a doubling of the UST market cap in the month of November alone. This UST is backed by a LUNA market cap of $16.5 billion.

How do you make passive income using Anchor Protocol?

You make passive income by directly lending your money via a smart contract on the Terra blockchain. Here’s how it works:

  • You lend your Terra stablecoins into a money market pool governed by the Anchor smart contract (protocol).
  • Borrowers can take a loan from the pool, in effect borrowing your stablecoins.
  • Borrowers must provide collateral in cryptocurrency – at a ratio of say 1:1.5 – to borrow your stablecoins.
  • These borrowers pay you a healthy interest rate to borrow your coins.

4 steps to earning 20% interest on your money

There are a few things you need to set up before you start:

  1. Terra Station Chrome browser – you’ll need to download Terra Station Chrome browser on your computer. Terra Station allows you to access decentralized applications (DApps) powered by smart contracts on the Terra blockchain.
  2. A Kucoin or Binance crypto account – Kucoin is one of a few places to buy US Terra, which is the Stablecoin you’ll be lending into the Anchor Protocol. With Binance, you can buy LUNA (native coin of Terra blockchain), send it to Terra Station and then Swap the LUNA for UST inside Terra Station Money.
  3. Anchor Protocol – have open on your computer the Anchor Protocol smart contract platform where you will lend your US Terra.
  4. Terra Station Money – the Terra Station desktop client.

Once you have all of these downloaded or opened on your computer, we can get to the juicy bit of making moolah…

Step 1 – Set up Terra Station Wallet

Set up a new Terra Station wallet inside the Terra Station Chrome browser extension you downloaded above. You will use this wallet to hold your US Terra stablecoins and lend them into the Anchor Smart Contract Platform.

Open the Terra Station Browser and click ‘new wallet’. You will need to enter in a wallet name and confirm a new wallet password. The wallet will generate a 24 word seed phrase – you MUST record this somewhere offline. If you don’t and something happens to your wallet, you will not be able to recover your crypto on the Terra blockchain.

Anchor Protocol
Terra Station Chrome browser

Step 2 – Buy US Terra or LUNA

Next you’ll want to buy some US Terra from your Kucoin crypto account or some LUNA from your Binance account.

If you already have USDT (US dollar Tether) in your Kucoin account you can do a USDT -> UST trade. If not, you will first want to deposit some fiat currency into Kucoin and use that to buy USDT. You can then trade from USDT -> UST.

In Binance you can simply trade BTC or USDT for LUNA.

Step 3 – Send your UST or LUNA to your Terra Station wallet

In this step, you’ll want to open up your Terra Station wallet and copy the public wallet address. You’ll use your wallet address in Kucoin or Binance to send your UST or LUNA over to your Terra Station wallet.

Terra Station Wallet
Grab your Terra Station Wallet address by clicking the box inside the red rectangle.

Sending UST from Kucoin

If you’re using Kucoin, jump back into your Kucoin account, click ‘Assets’ in the top right of screen, then click ‘Withdraw’. Select the coin you want to withdraw (UST). Paste in your Terra Station Wallet address, and input the amount of UST you want to send to your Terra Station Wallet. Make sure all of the information is correct and double check your Terra Station wallet address. Click Withdraw.

Sending LUNA from Binance

You can only buy LUNA on Binance you can’t buy UST. To send LUNA from Binance to your Terra Station wallet, go through the normal Withdraw process.

Once the LUNA arrives in your Terra Station Wallet, you’ll then need to Swap LUNA for UST using Terra station money.

Terra Station Money is the Terra station desktop client.

Connect your Terra Station wallet to Terra Station Money in the top left of screen. Then go to the ‘Swap’ menu in Terra Station Money on the left hand side. Select ‘from’ as ‘LUNA’ and ‘to’ as ‘UST’. Enter the amount you want to swap and click ‘Next’. Confirm the transactions and check your wallet – you’ll see you now have UST.

LUNA
Use Terra Station Money – Swap LUNA to UST

Step 4 – connect to Anchor Protocol and deposit UST

This step happens from the Anchor protocol page. Go to the top right of the screen and hit ‘connect wallet’. Choose the Terra Station Extension selection. You will need to confirm the connection in a pop up from Terra Station wallet. Once you have connected, you’ll see your wallet address appear in the top right of the Anchor Protocol platform.

Select the ‘Earn’ menu from the top of screen within the Anchor Protocol. Here, you’ll see a deposit button and the interest rate you’ll earn when depositing your UST. There’s also a calculator at the bottom that shows you your expected interest / passive income in UST, once you have deposited.

Hit the ‘deposit’ button and confirm the deposit of your UST using the Terra Station Wallet (follow the pop-up prompts).

That’s it! Now you have deposited UST into the Anchor Protocol ready for borrowers to borrow.

Heeeelllooo passive income! 🙂

Keep in mind that you can withdraw your UST at any time by hitting the ‘withdraw’ button. There is no lock up period. Reverse the process we’ve step you through here to exchange that UST into USDT or LUNA, and then into Fiat currency (if you plan on living off the income this provides).

The risks of using Anchor Protocol and how to manage them

There are two main risks with using the Anchor Protocol to make passive income:

  1. USD peg risk – UST is not backed 1:1 by physical dollars like USDC stablecoin. This increases the risk of the investment. There is a risk that the balancing algorithm may fail and UST may lose its USD peg (and lose value).
  2. Smart contract risk – this a risk present with all DeFi protocols: the protocol may be hacked and pools drained of their (your) coins.

Some of the other risks such as failure in the smart contract code or governance attacks, are laid out below.

Managing risk

One of the coolest things with Anchor Protocol if thought of using it keeps you up at night is that you can buy insurance to protect your invest. With insurance providers like Nexus Mutual you can buy insurance to cover both the USD peg and smart contract risks of using Anchor Protocol. Here are the risks Nexus Mutual will cover:

As a comparison, the current cost of a combined policy with Nexus Mutual competitor Unslashed.Finance is 5.199%/year. So even with insurance, you’ll still receive roughly 14% interest on your UST.

HUZZAH!

3 reasons Anchor Protocol will be the new high yield savings account for millions

1. A stablecoin APY that crushes your bank

Banks aren’t going to be increasing their savings rates by any meaningful amount let alone to double digits, anytime soon. At 20% or even at 15%, the Anchor savings rate crushes anything a bank can offer you in fiat. Not to mention, that APY is on a STABLE coin pegged to the USD. Holding UST doesn’t expose you to the same price volatility of holding other crypto, which means its a lower risk investment within the crypto ecosystem. You have less risk of your passive income being swallowed up (off set) by a drop in the UST coin price because it’s USD pegged…

2. Zero sign up requirements (no bank accounts or documents required)

Anchor savings has no minimum deposits, no account freezes, and no signup requirements – the smart contract can be used by anyone in the world with access to the internet and some crypto.

This is profound if you think about the world’s 2 billion unbanked population. That’s 2 billion people without access to bank accounts and the associated savings and investing vehicles of traditional finance. 2 billion people without the opportunity of basic financial services to get ahead.

Let’s look at how crypto uptake has been playing out in El Salvador, the first nation on earth to adopt Bitcoin as legal currency. 30% of El Salvadoran adults are unbanked. But 60% of all adults use the internet.

Now that means 60% of adults in El Salvador, many of them without traditional bank accounts, have access to DeFi services like Anchor Protocol that give them 10 times the interest rate that a bank account will offer.

Those lucky El Salvadorans now also have crypto. Following recent laws making Bitcoin legal tender, 49% of El Salvadorans have downloaded a Bitcoin wallet to their mobile phone. More adults in El Salvador now have a Bitcoin wallet on their phone than hold a traditional bank account.

And yes you can buy crypto without a bank account

The meeting of ‘the worlds unbanked; with DeFI is already playing out amongst large unbanked populations like El Salvador. And that’s huge for DeFi and for protocols like Anchor.

3. Alice wallet will make using Anchor Protocol a breeze

We’re not going to lie to you. It’s more complicated to use DeFi right now than it is to use your bank. User interface is THE biggest hurdle to crypto and DeFi mainstreaming today. Just look at this article as an example. For many people, taking 4 steps to make 20% on their money is a step too far up a steep a learning curve.

But that’s where the new Alice.Finance wallet comes in.

Alice wallet will solve the User Interface hurdles of interacting with Anchor Protocol, allowing anyone to lend their Terra on the Anchor Protocol in just a few easy clicks within the Alice mobile App.

Alice wallet will open the flood gates and help bring Anchor protocol mainstream. It will also catalyze the use of Terra blockchain and its stablecoins, which is good for the price of LUNA.

You can check out our article on investing in Layer 1 blockchains with potential for network effect here. Terra Blockchain is one of our picks.

Remember, none of this is Financial Advice peeps. Until next time, the Fat Stacks are out there. Let’s go get some!

The best cryptocurrency for exponential growth

best cryptocurrency

If you’re baffled by the exponential growth of certain cryptocurrencies and wondering how you might get in on the action, then this post is for you. The truth is, you won’t find the best cryptocurrency investments using conventional company and stock valuation methods. Crypto is different. You need to take a different approach to find those projects that will reward you with potential exponential growth over the longer term.

One approach to identify potential top gainers in crypto is to pinpoint those projects with strong ‘network effects’ that drive value to users and push token prices to seemingly parabolic levels. But what are ‘network effects’, where do you find them in crypto, and how do you invest? Let’s take a look…

What are network effects?

Network effects put simply are when a product, service or platform increases in value the more people use it.

Direct network effects happen in a reinforcing loop as users join a network and in doing so bring more value to existing and future users. The value of the product grows as more users join, and more users join because of this growing value. Hence the reinforcing loop. Think a telecommunications network, or a transport network.

Users also decide to participate in a network based on the level of benefits or value from ‘add on’ or complementary products or services. This describes the indirect network effects that can come into play in platform businesses that attract complementary products and services that add on to the platform and grow it indirectly. Like with Facebook. You don’t just use it to see your friends posting. There’s messenger, marketplace, advertising, FB groups and so on…

Most importantly, for investors looking for growth assets there is a point – a reaching of critical mass – when user adoption (on multiple sides) goes exponential due to the reinforcing value loops of direct and indirect network effects.

Why do network effects lead to exponential growth?

1. It’s numbers game

The number of possible connections in a network like Airbnb equals the number of users on one side (the hosts) multiplied by the number of users on the other side (the guests). Its the same for all two sided networks that produce network effects.. Every user that joins the network makes it more valuable for the next user. If you have a network with 2,000 hosts and 10,000 guests, that equals a network of 20 million possible connections between users.

The number of connections in a network represents the growth of the network and its utility to other users, as well as its value.

2. Network effects are hard to displace

A network effect, once created, is hard to displace. Why doesn’t Facebook have any real competition? Its network effects have established its incumbency – by virtue of its sheer size, reach, reinforcing value loops and sometimes built-in infrastructure. This incumbency means Facebook as a competitor is very difficult to overcome.

Another important point for investors is that incumbents with network effects enjoy large, entrenched advantages due to their existing customer base. Why is that though? According to this Harvard Business Review paper on why some networks thrive over others, an Airbnb competitor would have to enter the market on an international scale—building its brand around the world to attract travellers and hosts. To achieve that, the competitor can’t just be a little bit better, or even twice as good as Airbnb; it has to be a quantum leap better to convince a critical mass of guests and hosts to move to it.

This is why when platforms or businesses with network effects establish incumbency they’re very tough to disrupt.

So what does this mean for your crypto investments?

Firstly, projects that enjoy network effects (with incumbency) are around for a long time because they are hard to disrupt.

Secondly, if you get in early, the gains are exponential due to the effect itself.

Lastly, because of their levels of growth and incumbency, their stock continues to outperform over the longer term.

Identifying network effects in crypto

The implications for investing in crypto are straightforward: find the projects with the greatest network effects and (potential) incumbency.

The second one – incumbency – is important and hard to nail down. Crypto is new and very few projects have achieved sufficient size or growth to establish true and authoritative incumbency over the competition.

How to identify crypto projects with network effects?

So what factors might determine whether the a particular project has the potential for network effects? What metrics will tell you that a project is being actively used, rapidly built-out and adopted at a rate of knots? Lets take a look at 5 such indicators:

  1. Network users & nodes – the first sign network effects may be at play is the number of project users or nodes growing quickly. Nodes are found on blockchains. Their main purpose is to verify each batch of network transactions, or blocks. They’re necessary for the blockchain to both function and expand.
  2. Unique addresses – the number of wallet or payment addresses for the platform token that have more than a zero balance. For example, the number of individual ETH wallet addresses. It can be used as a proxy for the number of network users. When the network is popular and people are using it, there are more unique addresses. But that’s not completely accurate as one user can have multiple addresses.
  3. Total value locked – or ‘TVL’ shows how much is ‘locked up’ in decentralised finance products on the network (or in the Smart Contract platform). It’s an indicator of DeFi use on the platform.
  4. Daily transaction volume – this is the number of transactions associated with the crypto each day. Transactions volume shows the level of user engagement with the product or platform. For network effects, the trend should be sharply upwards.
  5. Developer activity – if new layers, applications and protocols being built on top of it or alongside and integrating with it this demonstrates indirect network effects that in turn bring more users and more developers. Developer activity indicates confidence in the ecosystem, roadmap and underlying technology.

The best cryptocurrency for exponential growth

So, if a network effects occur in platforms or networks where each user brings additional value and more users in a reinforcing loop, where in the crypto ecosystem might this occur?

The answer: Layer 1 blockchains.

What are Layer 1 blockchains?

‘Layer 1s’ are the blockchain ‘networks’ that form the ‘base layer’ of the crypto ecosystem. They are the networks on which everything else in crypto is built!

The digital asset ecosystem requires robust, secure and distributed blockchain networks to operate on and to ensure asset immutability. Layer 1s meet this need. They are the foundational tech of that digital asset ecosystem.

Blockchain-based digital assets, such as NFTs and stablecoins, are all built and issued on top of Layer 1 platforms.

How to invest in Layer 1 cryptocurrencies

Tokens native to these Layer 1 networks (such as ETH to the Ethereum network) play a role in securing the networks. Holders that stake their native tokens to support the network operating are rewarded for doing so. Tokens are also used to pay transaction fees on the network (with fees going towards rewards). In some cases, tokens also give holders a say in network decision making.

Buying these tokens are how investors gain exposure to the Layer 1 project and any network effects that may drive its growth.

Layer 1 projects have been the best performing crypto category since the May 2021 market correction. But this doesn’t mean their run is done. With crypto still in the early adopter stage and just a few hundred million users world wide, some argue the exponential growth curve for successful layer 1 blockchains has not yet even begun.

There are over 100 Layer 1 blockchains in the crypto ecosystem so next we sort the wheat from the chaff in our list of the top Layer 1 blockchains for potential network effects and exponential growth. Let’s look at ‘The Leaders”, “The Contenders” and “The Challengers.

How do you benefit as an investor in Layer 1 crypto with network effects?

When you own the native token of a Layer 1 blockchain, you own a share of the future value of transactions on that blockchain. As network effects grow demand for the blockchain and expand the on-chain economy, your share of future value grows too.

Layer 1 cryptocurrencies to watch

“The Leaders”

Bitcoin

Bitcoin is the grandaddy of cryptocurrencies. Lyn Alden gives a great synopsis of the network effects of Bitcoin. We’re not going to go over the arguments here, but as a store of value, border-less medium of exchange, and an instantaneous and low cost worldwide payment system (think about the avoided remittance fees globally) the network effects globally are potentially huge.

Bitcoin is also the OG incumbent. Its total market cap makes up anywhere between 40% and 60% of the total crypto market cap these days. Nothing else comes close in terms leading the crypto market or influencing crypto price trends.

Network effects – tick

Incumbency – tick.

For these reasons, we hold Bitcoin in our crypto portfolio. We believe its network effects will continue to play out as more countries like El Salvador recognise the potential value to local economies and to raising their citizens out of poverty. We also see regulators in more countries (like Australia and eventually the US) normalising Bitcoin investment vehicles, which will help on-ramp more users into the network.

Ethereum (ETH)

Ethereum is like a super computer base layer for smart contracts. Critically, Ethereum also has first mover advantage when it comes to Layer 1 projects in crypto, which has given it serious incumbency over the competition. Ethereum is the Top Layer 1 smart contract blockchain by market cap, with daylight second.

Fun facts for ETH investors:
  • Ethereum dominates the DeFi (decentralised finance) and NFT (non-fungible token) space. It has the most protocols and decentralised apps built upon it of any Layer 1 blockchain network.
  • TVL in the Ethereum network is $172 billion. The next largest Layer 1 by Total Value Locked sits at $20 billion. That’s daylight in between peeps.
  • The Ethereum ecosystem is gigantic. The biggest there is in crypto. Indirect network effects – tick.
  • Daily transaction volume on the ETH network has recently surpassed the Bitcoin network, which some suggest means that ETH will ‘flippen’ (overtake) BTC on the Layer 1 leaderboard sometime in the near future.
  • Other Layer 1 platforms are uniformly bridging into ETH. This cements Ethereum’s incumbency.
  • A recent protocol change introduced token burning so that ETH will become a deflationary asset (more tokens burned than new tokens issued). When supply tightens and demand grows, what happens to price?
  • Developer activity on platforms Github and Discord shows Ethereum development at almost double its nearest Layer 1 competitor.
  • ETH has executed and planned significant network upgrades (ETH 2.0), showing strong protocol consensus which is positive for its longevity.
ETH developer activity
best cryptocurrency
Ethereum developer activity reflects the size of its ecosystem and its growth
Eth 2.0 upgrades

Despite the hype, Ethereum suffers from one flaw that threatens its incumbency. The cost of using its network. This cost has driven hoards of users over to much cheaper Layer 1 competitors, like Solana.

Ethereum is fighting back with network upgrades (ETH 2.0) that claim to combat the gas price issues. Along with these critical upgrades, ETH also maintains its Layer 1 dominance the more it works with add on Layer 2 projects like Polygon network to extend its ecosystem reach and offer cheaper network solutions.

best cryptocurrency
Fees on leading Layer 1 blockchains. Source Coin Metrics

We are bullish on ETH as a blue chip digital asset in the making and one of the best cryptocurrency to invest in for exponential growth. ETH is is a core holding in our cryptocurrency portfolio. This is not financial advice peeps – DYOR always!

Now that we’ve taken a brief look at the leader board, lets move on and look at some other top contenders for the best cryptocurrency for exponential growth:

“The Contenders”

‘The contenders’ are, we think, the most promising Layer 1 blockchains in crypto, ex-Bitcoin and Ethereum. The two Layer 1 projects below are growing at pace and starting to jockey for shot at blockchain supremacy, alongside BTC and ETH.

Solana (SOL)

Solana markets itself as the fastest and cheapest blockchain in the world. These two factors have catapulted its token SOL into the crypto stratosphere since January this year. Solana’s high speed and low cost features have solved the problems of the Ethereum blockchain for both crypto enthusiasts and software developers. As with all network effects, the SOL price has shot up this year as more and more users and developers are attracted to the blockchain.

Solana is building out a rich ecosystem including NFT marketplaces, DeFI protocols, as well as gaming, metaverse and Web 3 decentralised apps. Some of the most popular dApps built on Solana include Aurory and Star Atlas (gaming), Raydium and Serum (DeFi), and Solarnart and Audius (NFTs).

Fun facts for potential Solana investors:
  • Solana is highly scalable and can already process 700,000 transactions per second.
  • Solana developer activity comes in second to Ethereum on Discord and third behind Polkdot on Github.
  • TVL is over $13 billion which is third highest Layer 1 TVL and represents just over 5% of Total Value Locked across all blockchains.
  • Solana already has around 400 decentralised apps built on its blockchain despite only being launched in April 2020.
  • Solana has a thriving NFT marketplace that is growing in popularity due to the cheaper transactions costs of using the network compared to Ethereum.
  • The price of SOL is already up over 13,000% this year. That’s an exponential growth rate indicating network effects may already be in play.
Solana blockchain outperforms on number and growth of active user addresses. Source Coinbase Analytics

The biggest criticism of Solana is its lack of decentralisation. In crypto, decentralisation is often seen as an indicator a project is a safe bet over the longer term. Decentralisation is gauged by the number of validators on a network. Layer 1 incumbent Ethereum is highly decentralised with over 200,000 validators globally. Solana has just 1200 validators, showing its more centralised structure.

It’s worth knowing that the Solana network recently suffered a DDoS attack when bots targeted the network with 400,000 transactions causing it to reach max throughput and taking the network down for 17 hours. While it was a set back, the attack was of insufficient threat to affect the long term growth of this Layer 1 protocl, or our investment in it..

Polkadot (DOT)

Polkadot is different to the other Layer 1s featured in this post. It’s more than a Smart Contract Platform. Its aim is to ‘enable a completely decentralized web (3) where users are in control’. Here’s how Polkadot bills itself:

Polkadot is built to connect private and consortium chains, public and permissionless networks, oracles, and future technologies that are yet to be created. Polkadot facilitates an internet where independent blockchains can exchange information and transactions in a trustless way via the Polkadot relay chain.

In a sense, Polkadot is a Layer 0 network because it provides a framework for other Layer 1s to build on and connect to each other. Polkadot’s niche in blockchain technology is ‘interoperability’. Its aim is to build the trustless network layer that links Layer 1s together, making it seamless to move through the crypto ecosystem.

Because its vision is so large, Polkadot is probably the hardest of all of the Layer 1 networks to get your head around. It is also difficult to value using the metrics we talk about above. But the enormous vision, and the calibre of its tech founders, make Polkadot an incredibly interesting digital asset play.

Fun facts for Polkadot investors:
  • The founder of Polkadot is Ethereum Co-Founder and former Chief Technology Officer, Gavin Wood.
  • Polkadot has a $50 billion dollar market cap and is the 8th largest crypto by market value.
  • There are 142 project building inside the Polkadot ecosystem. The list includes DeFi, NFTs, DAOs, Layer 1s, Layer 2s, Metaverse projects, blockchain gaming, Oracles and so on.
  • Polkadot holders have locked over $1B in the first Polkadot ‘parachain’ auctions which will determine which bespoke blockchains get to use the Polkadot network. ‘Parachains’ are the name of the blockchains that get to built on Polkadot. The Polkadot network can support 100 of them. ACALA DeFi platform won the first Parachain auction for a slot on Polkadot.
  • Once it’s fully functional, Polkdot is expected to be able to handle 1,000,000 transactions per second. That’s faster than the fastest Layer 1 in today’s crypto ecosystem – Solana.
  • Polkadot’s token supply is inflationary, growing by 10% a year which is not great for the DOT price longer term.

Polkadot, by its very design, is the ultimate network effect platform. It’s the blockchain of all blockchains. However, DOT has not experienced the same level of ripping growth this year that competitor Layer 1s like Solana and Avax. Investors may still have a chance to jump in before face melting gains occur.. We’re excited for Polkdot’s future and hold DOT in our crypto portfolio, but this ‘blockchain of blockchains’ is going to take some pulling off. Treat the investment risks accordingly.

“The Challengers”

“The Challengers are the up and coming Layer 1 blockchains. The smaller cap projects with small but growing ecosystems of platforms, tools and dApps building on top of them.

Avalanche (AVAX)

Avalanche is the new blockchain on block this year and its concept is a lot like the Polkadot project. It bills itself as a network of blockchains with blazing fast speeds, better decentralisation (more validators) than Solana, and better scalability than Polkadot. If Avalanche becomes all of these things, our view is it looks considerably undervalued at its current price, despite AVAX’s recent run up.

Fun facts for Avalanche investors:
  • Avalanche’s TVL has hit parabolic levels since August 2021, growing from a bit over $300M to $11B! 24% of that is locked in the AAVE lending protocol.
  • Avalanche’s market cap is up 85% in the last 30 days, hitting $23 billion. The price of AVAX reached all time highs this week is now in price discovery.
  • Avalanche has a fast growing ecosystem with loads of DeFi protocols and dApps, tonnes of exchanges and swaps, as well as a growing NFT dApp presence. Gaming is not as big on Avalanche as it is on Solana.
  • Avalanche recently announced $600 million in incentives to encourage development on its network. It aims to coax developers over from Ethereum.
  • AVAX token is used for network fees, capped at 720 million, and burned (on creation of blockchains, assets, subnets and payment of transaction fees). If the tokens burned exceed rewards (to validators) the tokenomics are deflationary. This is generally positive for the AVAX token price longer term.

Terra (LUNA)

Terra blockchain is all about creating programmable (private) money for the internet. It is a growing stablecoin payment system Layer 1 ecosystem. Terra is primarily a DeFi play, making it less versatile than other Layer 1s here like Solana and Polkadot. But it also has a clear niche and need. The Terra token used to pay network transaction fees is called LUNA. Terra’s most popular product by far is the Anchor lending protocol.

Fun facts for Terra investors:
  • Terra holders can stake their LUNA and earn rewards for supporting the Terra network.
  • Terra users can lend their UST (the USD pegged Terra stablecoin) on Anchor Protocol for a 20% APY with little exposure to price volatility. This one product has massively increased the popularity of Terra blockchain.
  • Terra has introduced a token burning mechanism, making it a deflationary asset.
  • TVL is just shy of $10 billion, with around 40% of that locked in Anchor protocol.
  • Terra issues stablecoins pegged to loads of different world fiat currencies – like the EURO or Korean Won. This makes it a cheap and fast global payment system. Terra stablecoins are currently widely used for retail and commerce in Korea and use in other countries is growing. Terra claims to have 2 million users of its stablecoins worldwide.
best cryptocurrency

3 December update: Since publishing our LUNA pick on 19 November the price of LUNA has rallied 70%. Just an example of the kind of exponential growth that can occur with rapid network adoption.

If you want to learn more about LUNA and the Terra blockchain and ecosystem, check out our article “Why Anchor Protocol is the new high yield savings account”. Anchor is a DeFi lending protocol in the Terra ecosystem with a $7B TVL. Well worth looking at.

Constructing your digital asset portfolio

Whether you believe in a multichain digital asset ecosystem future, or you believe in ‘one chain to rule them all’, you would be amiss not to include at least one Layer 1 blockchain in your digital asset portfolio.

If you’re interested in investing in these or other Layer 1 crypto projects you can do so on Binance or Coinspot (Australia), or on Coinbase and Kucoin (US).

By virtue of their role in the crypto ecosystem, Layer 1 blockchains are in our view the most likely to demonstrate the kind of network effects that can lead to exponential growth.

Some, like “The Leaders” and “The Contenders” introduced in this post, are already showing the signs of network effects. If they continue their growth, “The Contenders” have a strong chance of establishing incumbency and cementing their role as a base layer of the future global digital asset system.

As we’ve already argued, network effects + incumbency form a potent mix for future price growth.

And then there are the “The Challengers”, where nothing is certain but there’s still a chance for investors to get in early.

Not financial advice peeps – just sharing our opinion about the best cryptocurrency for exponential growth with y’all. As always, DYOR!

What is the best NFT token for long term growth?

best NFT token

The holy grail of crypto investing is trying to work out which are the ‘shitcoins’ (coins that have no value or purpose) and which coins and tokens are going to be around and grow in value for years to come. The latter are digital assets we prefer to invest in. So in this post, we look at three top contenders for best NFT token if you’re looking for long term growth.

Warning: You’re going to have to open your mind as you read through this post if you are new to digital assets. Especially if you’re a boomer or at least not a millenial. The digital asset ecosystem is like a parallel universe built by aliens using mind bending technology. That’s exactly how we felt when we first fell into the crypto rabbit hole. There’s a learning curve to crypto investing that is both financial and technical. Get comfortable with it.

Also..this is not financial advice peeps! If you’re making crypto investments based on an article on the internet (even from us haha!), it’s time to take a long hard look at yourself. 🙂 DYOR stands for Do Your Own Research – we do recommend this! The coins and tokens that we cover here are ones that we’ve invested in. Let’s go over them so you can find out why we took the plunge.

best NFT token

Theta (THETA)

Theta Network is a decentralized video streaming blockchain network that offers crypto rewards to users in exchange for their unused bandwidth. Theta uses this bandwidth to provide video streaming services to partner companies. The company is attempting to establish itself as the leading media and entertainment blockchain. Here are some runs already on the board:

Partners – Google, Samsung, MGM Grand, Katy Perry, Decentraland. Lionsgate, Cinedigm, World Poker Tour, One (MaiTai fighting league).

Investors – Sony Innovation Fund and CAA to name a few.

Media Advisors – Steve Chen Co-founder of Youtube and Justin Kan co-founder of Twitch.

Theta’s revenue streams include decentralised streaming and video delivery, as well as a new, complementary revenue stream of NFT digital collectibles. Let’s look at each of these.

Decentralised streaming and video delivery

Theta blockchain leverages underused devices in homes across the globe to distribute video more efficiently using the decentralised Theta Network. Products include Theta.tv, which is like a decentralised version of Youtube but with really great streaming quality. The biggest difference is that Theta doesn’t monopolise the value created by its creators (Youtube keeps 45% of ad revenue peeps!).

Users of Theta.tv can watch streamed video content and get rewarded at the same time for sharing their unused bandwidth to relay video. Rewards are in Theta Fuel (TFUEL) tokens. There is no special equipment required to contribute to the video streaming network – you just connect via a standard PC or Smart TV.

Theta’s decentralised streaming model results in lower cost streaming for its partners and more reliable quality of service for Theta.tv content creators and end users.

Creators on Theta.tv can monetise their content through subscription and donations. They also get 25% of all TFUEL earned by their viewers.

You can also earn TFUEL just by staking THETA and supporting their blockchain network.

Both THETA and TFUEL can be swapped into stablecoins like USDT. Stablecoins can then be exchanged into Fiat (dollars), so earning money on Theta.tv equals money IRL (in real life).

You swap coins on ThetaSwap.

Theta Edgecast is Theta’s decentralized video streaming DApp product that is 100% built on Theta’s native blockchain. Theta Edgecast can capture video, transcode it in real-time, and cache and relay it to users globally all through Theta’s peer-to-peer edge network. That network comprises over 100,000 edge nodes today.

NFT digital collectibles

Theta expanded into the NFT arena this year with the launch of ThetaDrop NFTs.

Theta intends on incorporating exclusive NFT drops as part of the live user experience for movies and shows. ThetaDrop NFTs incentivize viewers with TFUEL and introduce a fan reward and engagement program to improve the fan experience.

ThetaDrop NFTs launched in 2021 with the first live streamed World Poker Tour, which has a world wide audience of 140 million. Other leading global brands to join include Katy Perry and many top crypto streamers and influencers.

The ThetaDrop Marketplace, which went live in June 2021, provides a secondary market for users to trade their ThetaDrop NFTs and has generated significant volume and value for both creators and collectors. More than 100,000 ThetaDrop NFTs were sold in the six weeks after launch, generating over $2 million for content creators.

Future NFT plans

In the future, Theta will support decentralized NFT storage. NFT users will own and take custody of their content IP, without relying on any centralized platform for media data storage. An upcoming cross-chain bridge between Theta Network, Ethereum and others will enable NFT transfer and transactions across networks, so users can take their NFTs with them wherever they want to.

Theta has also recently been awarded a US patent for ‘virtual ticket’ NFTs. Think of event and concert tickets on the blockchain. Not only would your NFT ticket provide provable ticket ownership and access to the event, it also doubles as a digital collectible and can provide users in future with fan incentives and rewards like Airdrops.

Theta envisions an ecosystem that operates like a ‘fan lifecycle management system’ – monetising all touch-points of a fan’s engagement with their media or entertainment of choice.

The Theta ecosystem includes a web wallet that you can use to store and stake your THETA, earn and store TFUEL and eventually store your NFTs.

Why we like Theta

1.Theta is poised to take advantage of two very strong growth trends over the next 5 years – online streaming and online entertainment and media.

2. The project has real use cases, Tier one partnerships, strong tokenomics, a clear roadmap and has invested in patented tech. All indicators the project will be around for some time to come.

3. Technicals look bullish (not financial advice – just in our opinion).

  • Theta retested support at around $5 on the daily chart on 20 July and has since printed higher lowers in a sign of a price uptrend. The price action may also be printing a possible ‘adam and eve’ bullish reversal pattern on the daily. The measured move of this pattern is to all time high levels (if the pattern ends up playing out). As a larger cap coin, Theta is at the mercy of Bitcoin price movements. As always DYOR and invest at your own risk.

Chilliz (CHZ)

Chilliz hosts scaleable tokenized fan engagement ecosystems ready for the worlds biggest sporting clubs to better monetise fan engagement through unique and exclusive engagement experiences and superfan rewards.

It achieves this through a tokenised sports and entertainment exchange. Ticker CHZ is the native digital currency for the Chilliz exchange.

Fan token economy

The Chilliz concept is based around a fan token economy. For sports clubs and associations, fan tokens offer a way of connecting clubs with fans and unlocking new revenue streams and fan value.

Fan tokens are purchased on the Chilliz exchange. You use CHZ on the exchange to buy your favourite fan token. Fan tokens are floated on the market and the token price of each moves with the market.

CHZ holders get access to various fan tokens and literally have a stake in their club.

Socios platform

In addition to its token exchange, the company behind Chilliz also operates the blockchain-based sports platform Socios.

Socios is a platform where ‘super fans’ can congregate and support their favourite team by buying fan tokens. In return, these tokens allow fans to participate in the governance of their favourite sports brands and provide access to superfan rewards and bonuses.

The Socios platform is just the first example and use case of the Chilliz fan token model.

Socios is backed by partnerships with some of the soccer (football) clubs in the world: FC BarcelonaManchester CityJuventus Turin, and Paris Saint-Germain. Chilliz also boasts partnerships with the UFC and gaming organizations.

Gamefication & play to earn

Chilliz has also gamefied their ecosystem. Soccer fans for example are able to ‘hunt for tokens’ (get them for free) by playing games and participating in activities inside the Socios app. You need to hold CHZ in your Socios App to participate and buy fan tokens but you only need one token to start. Users can rack up rewards and use them to unlock exclusive fan offerings like merch, experiences and VIP access.

Chilliz NFT collectibles

Chilliz recently launched it’s first digital collectible NFT with soccer giant AC Milan. NFT drops have eligibility criteria and are designed to incentivise holders of the AC Milan fan token. The NFT itself is collectible and tradable between AC Milan fans, with ownership authenticated on the blockchain. But what’s really bangin’ about these NFTs is that they have built in loyalty rewards functions. Holders will be able to use them to unlock experiences and rewards from the club that fiat money just can’t buy.

AC Milan is just the start. Think sports trading cards on steroids with all sorts of built in bonuses….

Why we like Chilliz

Great concept and clever launch.

  • Soccer fans are C.R.A.Z.Y passionate. Superfan tokens with exclusive access, club experiences and a chance to participate in club governance sounds like a soccer superfan’s wet dream. The two just work together, if you feel us. What a great proof of concept and demo by Chilliz. We’re not even soccer fans and we want some socios NFTs!

It’s massively scaleable.

  • We see no reason the concept and business model can’t work with fan engagement across other major sports, and even other industries like music and movies. Imagine superfans of the TV show Yellowstone buying a show token giving them the ability to access early episode drops and vote on storyline and character developments, for example. The Chilliz model could be as big as your imagination. Esports brands like OG are already on board with the Chilliz concept. Who’s next?
best NFT token

Enjin (ENJ & EFI)

Get your head around this financial freedom seekers. Enjin is a large cap crypto company with a mission to build..

…a product ecosystem that will help humanity create advanced virtual economies through the power of blockchain technology.

The Enjin product ecosystem comprises a developer platform, product market place, and crypto wallet.

But what products are they focussed on exactly?

  • Gaming assets – NFT gaming assets that unlock in-game experiences, new levels of play and play to earn opportunities.
  • Digital art – users can create digital art and monetise it on Enjin, without knowing any code
  • Sports collectibles – Enjin allows developers and companies to create tradable, programmable, validated and scarce digital sports collectibles to bring more value to fans and more revenue, and
  • Music tracks – music as own-able and programmable tokens. Simple as that.

Enjin offers users and developers a native platform to build websites and integrate gaming features. You can also create and and run forum boards, NFT shops and gaming guilds using Enjin’s platform.

The Enjin network is built on the Ethereum blockchain. Its gaming and NFT based ecosystem is powered by dual tokens – Enjin Coin (ENJ) and Efinity Token (EFI). Lets look at each.

ENJ

ENJ is the ecosystem currency for the Enjin Ethereum blockchain. You need ENJ to create and buy ecosystem products. ENJ will also have utility in the Efinity network. ENJ is used to mint NFTs on the Efinity network, where the ‘ENJ-infused’ NFT will be automatically staked and generate passive income in the form of EFI tokens.

ENJ will be transferable between both Enjin and Efinity networks via a cross chain bridge.

Efinity network (EFI)

Efinity Network refers to Enjin’s new Efinity parachain built on Polkadot (instead of Ethereum). Crypto users and NFT holders will use Efinity Network to cheaply and quickly move cryptocurrencies and NFTs between blockchains.

Efinity is trying to resolve some of the transactions costs and other issues of transacting NFTs on the expensive and clogged Ethereum network.

EFI is the native token of Efinity network. Users of Efinity will pay EFI for transaction fees, marketplace commissions, bridging tolls, and smart contract charges. It’s kind of like Ethereum gas fees. EFI is used to automatically reward ENJ stakers for supporting the Efinity network. EFI is what Enjin calls a ‘paratoken’. This means it is compatible with all parachains built on Polkadot and sister network Kusama.

Holders can swap ENJ and EFI for stablecoins and then swap these stablecoins (via a crypto exchange like Binance) into fiat currency (money IRL).

Why we like Enjin

Multiple use cases

  • Enjin already integrates with a heap of games with millions of players – like Minecraft and World of Warcraft. But’s its utility is far beyond gaming. With a digital product marketplace and developer platform covering music, art and sports collectibles, the uses cases are mindblowing.

Incumbency, token expansion and user base

  • Enjin has been around since 2009 and has built Enjin Network (the Enjin blockchain) to a community of 19 million gamers globally. That’s a nice customer base to launch a token ecosystem, an NFT marketplace and NFT developer platform. They’re also expanding their token economy and utility with the Efinity network plans, which is great for ENJ holders.

Where to buy NFT tokens THETA, CHZ and ENJ

LocationTHETACHZENJ
Australia – buy with AUD (AUD bank transfer first)CoinspotCoinspotCoinspot
The US – buy with USDT (US dollar bank transfer first)KucoinKucoinKucoin
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