Cryp2Gem ALT Report — Part 1
2020: A Year in Review, Finance & InsurTech
Building crypto thirsty Cryp2Gem community. Searching and researching for blockchain future disruptive innovators.
Cryp2Gem is a community-based research group. We are constantly researching and searching for future blockchain disruptive innovators.
Our Cryp2Gem Telegram Community group is open for everybody, who are interested in learning and sharing knowledge about blockchain technology, cryptocurrencies and trading. This article is part of our research which is intended for the community. All the feedbacks and critiques are highly appreciated.
The author of this research is looking to invest or is invested in some of the included projects but tends to stay unbiased while researching and writing. This research is not intended as a promotion and is not part of any paid promotion. Cryp2Gem strongly believes in unbiased researching, sharing knowledge and transparency even when possibly invested, which will always be stated.
This is not financial advice, anything you read should not be perceived or conveyed as financial advice. The author takes no responsibility if you choose to invest in any project that we produce a research piece for. Cryp2Gem solely produces research to assist the cryptocurrency community as a whole and will state when invested or looking to invest. It is significant for all to do their own due diligence when considering an investment.
The author of this article is invested in some of the mentioned projects in the following content. The investments are with THORChain, Ethereum, Injective Protocol and Frontier. Looking to invest in Tidal in the future.
This time we won’t be writing a project research article — we will have a retrospective look at what was going on in 2020 for Cryp2Gem but also share some views on what we love the most — gems!
Our journey started not so long ago in June 2020, although it seems a lot longer than half a year to us due to all the work put into C2G and all the internal team milestones reached.
Cryp2Gem Telegram group is built on top of the great community of enthusiasts, investors, researchers and traders all seeking great fundamentally strong early investment opportunities. We are a research community and we favour fundamental deep-dive research and technical analysis of historical, current and upcoming exciting crypto projects.
We are not your typical community, we actively encourage members to contribute to the community in the form of educated discussion, individual research and project insight. Aggregation of knowledge is what we seek and promote.
A collection of our fundamental analysis of historical and current cryptocurrency projects can be found here, on our Medium channel. You can find 20+ published research articles and a couple of open forum summaries that we had with the project’s core team members. There is so much short research content scattered in our Telegram group as well. We are very proud of having such competent posts published in our community chat in Telegram.
Cryp2Gem is offering our members also a trading group led by a professional trader who has been active in the markets since 2014 and has traded cryptocurrencies since 2017. Our professional trader boasts a very impressive track record, which spans years not months.
We pride ourselves in real, live trading on Binance and FTX. All trading calls are made in due time, with clear entries, take profit levels and stop losses.
Combined gains made in the first 6 months of the trading group since the inception are 2198,54%!
The trading record is available for a review in our Telegram channels.
Our team’s greatest passion is very clearly stated in our name Cryp2Gem. We are seeking for new unicorns — called gems in crypto space. Rare and hard to find early investment opportunities for a startup with great potential to grow and get its products adopted. Finding gems in the real world is tough work — going through rough terrain, working in a harsh climate, dealing with sneaky competitors — all the same just digital. People often follow the hype, trends, influencers but as we see it, you just need to think ahead, read a lot, look deeper and anticipate the long term potential and development.
The year 2020 was in the name of Decentralised Finance (DeFi). The uptrend started after the Bitmax liquidation domino effect and the great crash of BTC and the whole crypto market as the consequence of that event. We have seen BTC as low as $3600. The previous weeks, before the crash, were accompanied by the uncertainty of the future consequences due to the still ongoing global COVID-19 pandemics. All the markets, traditional as well as crypto, were affected.
Looking back, much wiser and smarter, the day of the BTC crash on the 12th March 2020 was the best day to invest. In BTC, ETH and all the other ALTs. From that day on, there was an ongoing crypto market uptrend. Total Value Locked (TVL) in DeFi on that day was $550M which was the lowest amount in the whole year. Since then TVL grew and was as high as almost $15B at the end of December and mindblowing $23,1B on the 10th January. Total Market Cap of cryptocurrencies grew from $135B to $740B at the end of December 2020. That is x5,5 more money locked in crypto. On December 20th we saw BTC at a new all-time high price at $28335. All the info is taken from Coingecko. The BTC seemed to be unstoppable and it reached a new all-time high price on the 3rd January at $34778. BTC dominance was at almost 73% and the Total Cryptocurrency Market Cap grew for another $140 billion and was at $880 billion which was the highest by far. For comparison previous, the all-time high was on the 1st December at $545 billion. On the 8th January BTC was at an absolute all-time-high price at $41,940.09 and cryptocurrencies total market cap above $1,1 trillion all based on the info on Coingecko.
Much has happened in crypto space in the strange year of 2020. We have seen so many new projects popping out of the blue. Currently, there are 6134 tokens in existence — the ones that are listed on Coingecko. Crypto community discovered the Polkadot Ecosystem and its potential as well as the DeFi. We have witnessed so many new projects building the next best-decentralised finance products which become even more interesting that came from Polkadot Environment and were built on Parity Substrate. There are currently 330+ projects coming from the Polkadot environment. Soon we got a new term “PolkDeFi”. Some projects and their tokens have seen amazing growth overnight due to the craze and hype. It will be interesting to see how the ecosystem changes when Polkadot launches its expensive Parachain side-chains.
So many other things happened in 2020, summer might have been the craziest. We have witnessed the adopting of new DEX for Ethereum’s ERC-20 standard tokens. Uniswap became the hottest new kid on the block. Most of the DEX liquidity was there and still is. Uniswap has 39,5% DEX liquidity domination and just above $1 billion daily volume. Unfortunately, we have seen tokens listed with 0 prices that got interested in the quick profit searchers. You could see amazing price pumps and dumps within a day. Most of those projects had anonymous teams and no documentation. No one really cared, they had Uniswap gems.
Uniswap made a lot of noise with their native UNI token that was airdropped to the users. UNI was in the top 50. But unfortunately, not all was as fair as it seemed, many well positioned and connected crypto personas were informed about that airdrop before it happened and got a chance to earn a lot of money.
The year 2020 was also a year of Proof-of-Stake consensus mechanism and yield farming. There were a lot of farming projects launched, many solely for quick profit-making. We have seen a lot of rug pulls as well.
What is a rug pull?
“In the context of crypto and Decentralized Finance (DeFi), having been rug pulled means to have buy support or Decentralized Exchange (DEX) liquidity pool taken away from a market. This results in a sell death spiral as other liquidity providers, holders and traders sell to salvage their holdings. Typically, it is a new form of exit scamming where someone will drain the pool at DEX, leaving the token holders unable to trade.” (source)
Within the context, there is one person that made a huge impact in 2020. Andre Cronje. A developer, code reviewer and analyst. A DeFi builder, influencer, trend maker. He shocked the crypto scene with his project Yearn Finance. He announced that his project will have a token YFI and when it launched it launched with fireworks. YFI was launched on the 18th July and reached $43k+ at an all-time high price. Currently, YFI is within the top 50 cryptocurrencies based on valuation. That changed everything. Forks were made, scams followed the same token launch approach and we have witnessed a market flooded with yield farming projects. Some of them last merely for a few days. If one was well informed, fast and lucky there could be unimaginable profits made within a couple of hours. But one could also lose everything.
The Cryp2Gem team didn’t participate much in yield farming and chasing the DeFi hype. We were very aware of the ongoing trend but have been rather following our own strategy and risk management. To not chase and get burned and rather look past the current hype and trend.
While thinking about potential investments and risk management one needs to make a portfolio-building strategy. Dividing the portfolio to the essential sections is a very effective way. While doing market research you spot sections that you are interested in and would like to invest in the projects building products in those subdivisions. The potential disruptors in the field of interest and blockchain technology in general. With a chance to get adopted in the real world.
Thinking about diversification of the portfolio, sections or fields of interest need to be determined. Following the research of specific fields and finding the most innovative leaders with exceptional fundamentals, technology but also healthy and transparent token economy. This is when the deep-dive research, fundamental and technical analysis, as well as other criteria such as token metrics, partnerships and team qualities research begins. One should never forget to look into the networking and collaboration behind the scene. This includes promoters and influencers, venture capitalists and other partners and collaborators. There are plenty of other metrics from development to public sentiment but we shall not dive into those in this overview article.
Research is something we love to do. Our team is enjoying neverending daily research and discussions about fundamental analysis findings and potential of the possible investment. One of the most important segments of Cryp2Gem for us is our community and the discussions we have. Sharing the knowledge and the insights amongst each other. We breathe like one big mind, like one strong investor. The Cryp2Gem team has reviewed more than 250 projects in the last 6 months. This has given us a lot of knowledge and a good perspective on the whole crypto space.
Cryp2Gem had lots of discussions about many projects in the group and within the team as part of the research. We would like to share some of our regularly discussed projects and potential game-changers. Some of them are covered with a research article published on our Medium blog while others might be part of ongoing research.
The following breakdown consists of the essential sections of blockchain products and crypto use cases. The selection and specific mentions are meant to be presented as valuable solutions to existing problems and potential groundbreaking startups developing innovative products within the crypto space or for the outside world. We are very interested in cross-chain products, all-in-one solutions, aggregators, desktop+mobile apps, easy to use or integrate products and off & on-chain bridges. Products that help with adopting the new technology, combining existing distributed ledger technology and actual working products with good use cases that are needed and solve problems.
The Cryp2Gem team has some favourites — those are highlighted under each section. Some of them need extensive research and are mentioned only by name to give a reader a head start while researching a specific field of expertise.
The writer of this article is invested in some of the project’s tokens mentioned in the following content. You can find those mentioned in the introduction paragraph of this article.
As mentioned DeFi had a well-deserved breakthrough this year. Some of the best performing projects were building their protocols and products for years while others launched just recently. DeFi is a huge sector within crypto space. Personally, I would have trouble pinpointing a single DeFi project or protocol. There are so many of them and so many different fields of interest and subcategories.
Cryp2Gem and its community are following THORChain since it’s a time prior to Binance DEX IEO. THORChain is a scalable DEX and liquidity protocol with cross-chain bridges and support for a layer 2 payment network providing staking and swapping for users. THORChain already solves so many DeFi issues and still has so much potential for growth. They have also introduced the Continuous Liquidity Pools (CLP) which allows constant liquidity of all pairs and assets, on-chain price feeds and immunity on impermanent loss amongst other features. THORchain is building something amazing and might become an actual solution to greatest DeFi issues. Cross-chain and liquidity hurdles. Connecting Bitcoin, Ethereum, Polkadot, Cosmos and other networks into one scalable, decentralised platform with no problems with liquidity. The holy grail in the making. Thorchain is on Binance BEP-2 but also working on Cosmos and Ethereum.
Liquidity is one of the greatest issues of decentralised finance. So liquidity protocols and auto market makers (AMM) DEX protocols and essential for the DeFi. Projects like THORChain and Orion Protocol with its Orion Terminal liquidity aggregator (DEX & CEX) platform will make trading and swapping of cryptocurrencies much more effective.
Important DeFi field is derivatives. Currencies, commodities, leverage, insurance, speculation on the growth of the underlying asset, etc. Crypto synthetics enable holders to trade traditional assets and their derivatives while remaining inside a digital ecosystem. When it comes to synthetics there is probably one that comes to our minds instantly — Synthetix. A synthetic asset minting platform enabling using collaterals and trading of synthetic assets.
As we believe in THORChain’s as a cross-chain solution solving issues with liquidity and scalability of DEXs, we also see great potential in cross-chain derivatives trading solutions. Injective Protocol is a universal DeFi protocol for cross-chain derivatives trading across a variety of financial products such as perpetual swaps, futures, and spot trading. DAO governed Injective is implemented as a Cosmos SDK module, built with Ethermint (EVM on Tendermint) combining two vast ecosystems — Cosmos and Ethereum as well as other protocols — and cross-chain derivatives trading with zero gas fees and yield farming.
Aave with its non-custodial loaning protocol and a bit controversial uncollateralized flash loans which might be one of the main reasons for thor impressive success. Aave has about 13% of TVL in DeFi. Maker has about 20%, Uniswap 12%, Compound 12% and Synthetix 9%.
Loopring payment protocol and a zkRollup based scaling layer 2 that runs on top of the Ethereum to improve scalability. Loopring open-sourced and non-custodial protocol enables high-throughput, scalability and low cost. Throughput is increased by 1000x, and cost reduced to just 0.1% compared to the Ethereum layer 1. The sky-high gas fees on Ethereum are significantly lower with Loopring. The project team claims that with zkRollup, Loopring 3.0 can settle up to 2k+ trades per second while guaranteeing the same level of security as the underlying Ethereum blockchain. They have also developed a Loopring DEX. It is an Ethereum Smart Wallet with zkRollup-based trading, transfers and AMMs. Loopring isn’t a DEX by itself but instead, it uses order matching and ring-sharing technologies — aggregating and pooling orders from as many exchanges as possible. Loopring’s LRC token was listed on Coinbase and introduced liquidity mining campaigns.
DeFi also consists of asset management DeFi solutions, many different loan platforms but even more interesting interoperable loan platforms as Kava built on Tendermint, insurance, margin protocols, payment solutions, wallets, stablecoins and stablecoin platforms.
As mentioned, cross-chain and interoperable solutions are needed in DeFi and crypto/blockchain space in general. Kava is on to mention in this context. Kava was built with Cosmos SDK and launched in May 2020 powered by two main tokens — governance token KAVA and USDX stablecoin. By default Kava is a cross-chain platform for DeFI for stablecoins and lending against all major cryptocurrencies like BTC, ETH, ATOM, BNB, and USDT, which act as a collateral debt position (CDP), in exchange of the platform’s stable coin, USDX, which is algorithmically maintained. Collateralized Debt Position (CDP) is a smart contract based on the Ethereum blockchain. It is a variation of financial market derivations created by MakerDAO back in 2014. CDP can simply be defined as a representation of a debt position that is backed by an underlying pool of assets. For Kava and all the protocols built with Cosmos SDK/Tendermint the Inter-Blockchain Communication (IBC) protocol standard, Stargate upgrade has to be deployed for them to be interoperable and actually have inter blockchain communication. Once the IBC Stargate gets deployed, all the individual chains build with Cosmos SDK/Tendermint interoperable and more secure as connected to Cosmos. It all depends on the decentralisation level and the number of network validators.
There are some really cool DeFi projects out there. It seems that some of the biggest DeFi all-in-one solutions and aggregators like Argent, imToken and InstaDapp exist in complementary symbiosis with the Frontier App but there might be a great advantage of Frontier with cross-chain staking and protocols access on Tendermint and Polkadot. The future lies in Mobile Apps. Frontier offers all-in-one easy solution to access your scattered funds, lending/borrowing defi protocols and staking. Frontier is chain-agnostic DeFi aggregation non-custodial, all-in-one solution which gives them a great advantage to other competitive alternatives, especially by offering a Mobile App covering both cross-chain DeFi Protocol as well as wallet aggregation. We shall see how they integrate the FRONT token into the upcoming Frontier Network. Frontier is also a Non-Fungible Tokens (NFT) wallet provider with several bridges integrated. Solana and Serum are the most recent ones.
Some interesting projects are building within the Polkadot Ecosystem. Upcoming Acala Network is a DeFi consortium delivering a set of protocols such as stablecoin protocol to serve as Polkadot’s DeFi building block. It is actually a cross-blockchain stablecoin network with aUSD, a multi-collateral-backed cryptocurrency, with value stable relative to the US Dollar (1 aUSD ≈ 1 $US). It is completely decentralized, that it can be created using assets from blockchains connected to the Polkadot network including Bitcoin (BTC) and Ether (ETH) as collaterals. It can be used by any blockchains (or digital jurisdictions) on the Polkadot network as well as applications on those chains. Anyone who owns the type of crypto assets supported by the Acala network can leverage them to generate aUSD tokens by creating a Collateralized Debt Position (CDP) through the Honzon protocol. Anyone may also choose to acquire the aUSD tokens by buying them from brokers or exchanges.
ChainX works very closely with the Acala network. You will be able to put ChainX’s token PCX or X-BTC on Acala Network as collateral to mint aUSD their stable coin. On the other hand, aUSD will be used as a bridge and a trading medium of ChainX. ChainX’s main goal is to bring BTC into the Polkadot ecosystem and be the largest BTC layer2 financial platform. ChainX will run as the second-layer network to Polkadot at a later stage of development so it might have its own auction IPO slots and parallel chains which will demand to lock of PCX token. Users deposit and collateralize bitcoins for X-BTC which is used in transactions with synthetic assets of other cryptocurrencies, so that all sorts of cryptos can be exchanged and traded on the same chain. X-BTC might become a very important BTC cross-chain asset in the Polkadot ecosystem and the BTC layer 2 financial application platform. There is an interesting breakdown of ChainX’s new whitepaper that might help to understand the value and potential of ChainX.
In the following version of ChainX 2.0, there will be additional options for asset custody. The asset custodian system may become the first choice for the frequent flow of small assets, the threshold signature system may be more popular with large BTC holders and the decentralized autonomous control system can carry super large asset custody.
Already mentioned liquidation incident that happened on Bitmex and the CFTC charges that followed a few months later meant a huge opportunity for FTX to step into the shoes of former futures and derivatives trading exchange giant with no real competition. But the situation changed and FTX CEO Sam Bankman Fried made some impressive moves. Serum, a DEX from FTX derivatives exchange was built on Solana blockchain and FTX has launched a novel way to trade the world’s most popular stocks like Amazon, Tesla and Apple.
C2G picks: Thorchain, Frontier, Injective, Loopring
Far from ignoring: Aave, Synthetix, Orion, FTX, Serum, ChainX, Kava
Thorchain — A Very Short Tech Abstract
THORChain vs Cryp2Gem: Community brainstorming with Kai Ansaari
THORChain — A Short Overview by Cryp2Gem
Frontier — Research by Cryp2Gem
Cryp2Gem vs Frontier: Open Interview
Based on the DeFi Pulse there is currently more than $23 billion total value locked in DeFi. That is almost 5 times more than 6 months ago and constantly growing. Currently, $235 million active smart contracts are covered by Nexus Mutual insurance which is the biggest insurance startup in the DeFi space. That represents not even 3% insured DeFi smart contracts value. Meaning the majority of value locked in smart contracts on the Ethereum Network is uninsured.
This is only the Ethereum Network we are talking about, while the Tidal Finance will be cross-operable and will offer Parity and Substrate based parachains from Polkadot environment insurance as well. If they enable the currently third-largest Tendermint/Cosmos ecosystem, Tidal will be the most versatile insurance tokenized blockchain solution.
The Tidal insurance marketplace will be based on assets and protocols of insurance pools for Ethereum or Polkadot ecosystems. Insurance pools, consisting of a sole or several assets or protocols, will be determined by specific settings such as coverage duration, the leverage ratio as well as risks. Each pool will be presented with an Insurance Coverage Token (ICT) which can be freely traded on the open marketplace. As for pool liquidity, the automated market model (AMM) algorithm will be integrated.
C2G Picks: Tidal Finance
Next time we shall write about blockchain platforms and the solutions that make them faster, connected and more useful.