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How Will The AMZN Stock Split Affect DeFiChain Users

Early in March, AMZN announced a 20-for-1 stock split. Though it will ultimately take place on 3 June 2022, it has already sent the stock on a rally not seen in recent months. In theory this should not happen, because a split doesn’t affect a company’s business fundamentals. Yet such splits often cause day traders to pile in, fueling rallies like these.

However, there is no change in the fundamentals that would justify such an increase, rather, the only thing that will happen is that each shareholder of AMZN in the traditional stock market will receive 20 shares for every 1 share of AMZN they currently own.

The distribution from the stock split will take place at the close of business on Friday, 3 June 2022, and trading will begin on the split-adjusted basis on Monday, 6 June 2022, at 9.30 am ET (1.30 pm UTC).

How does this affect dAMZN on DeFiChain?

Since the minting of dAMZN is dependent on the price oracles of AMZN, a split without an adjustment on DeFiChain’s side would cause severe issues causing dAMZN tokens that were previously minted at a different price to be evaluated at a new price as a result of the updated oracles. As such, it would be sensible to also have dAMZN split in accordance with AMZN.

These are the key changes DeFiChain users will observe as a result of the stock split:

  • dAMZN token owners will have 20 tokens for every 1 token they own before the split
  • Updated price from oracles
  • Updated dAMZN Token ID: A new token ID will be assigned to the post-split dAMZN token. (If you are not familiar with this attribute, it likely will not affect you)

These changes are primarily implemented on the consensus layer, and little needs to be done by users of DeFiChain.

How will the stock split be executed on DeFiChain?

In order to implement this adjustment as smoothly as possible, DeFiChain will take the following steps: DEX, vaults and systems interacting with dAMZN will undergo a process called the lock, which is a mechanism meant to serve as protection from any unstable prices from the oracles during the transition period. The lock will last 3 hours before the split and 3 hours after the split. After the lock is lifted, vaults will be halted for 1 hour before they become operational again. This halt is in accordance with our protocol and serves as a safety mechanism for DeFiChain users.

As this is the first stock split event encountered on DeFiChain, the 6-hour lock period serves as a conservative buffer. Once the community gains a better understanding of how oracles would behave in such events, the lock period can be shortened in the future. 

To understand the technical design behind the stock split, you may also watch the May 2022 Tech Talk episode:

Summary

Due to the upcoming AMZN stock split, DeFiChain’s dAMZN token has to be adjusted and such as split as well. As a result, DEX users will experience a 6-hour lock, 3 hours before and after the stock split. During this time, it will not be possible to interact with dAMZN at all.

Please be also aware of the fact that dAMZN vault owners will experience an additional 1-hour halt on top of the 6 hour lock period.

However, there are no actions required on the users’ part, except to take note of the 3-hour lock window before and after the stock split (6 hours in total, and an additional hour for dAMZN vault owners).

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News

The Differences Between UST on Terra And DUSD on DeFiChain

After the recent turbulence surrounding the Luna ecosystem, we would like to have a closer look into what has happened there and explain the differences between the DeFiChain ecosystem and its different approach when it comes to the utility of the DeFiChain stablecoin DUSD.

What has happened to the Luna ecosystem

Over the last couple of days, Luna, one of the leading EVM blockchains, experienced a sharp decrease in the $LUNA price. As a result, its algorithmically pegged stablecoin called $UST lost its peg to the US dollar. Let us quickly have a look at what exactly has happened there:

$UST stabilizes its peg by allowing anyone to redeem 1 $UST for $1 worth of $LUNA or 1 $LUNA for its equivalent value in $UST. To incentivise arbitrageurs, $UST must possess true utility. The main utility in the Luna ecosystem is derived from the Anchor protocol, which guarantees a 19.5% yield and is currently responsible for more than 50% of $UST’s circulating supply. However, Anchor’s dominance over $UST is also an issue, as it has lost more than half of its total TVL this week. If $UST leaves Anchor and is swapped for other assets, then this creates sell pressure on $UST.

Unfortunately this is a major issue for $LUNA, because whenever $UST is minted, the equivalent dollar value of $LUNA is burnt. This is great for $LUNA as it reduces the total supply. But it also works the other way: Whenever $UST supply reduces, $LUNA is minted. If more $LUNA is minted, then this increases the total supply, resulting in more tokens entering the market and driving down the price of $LUNA. This is exactly how the death spiral started in the last 24 hours and kicked off  a whole cascade of events including FUD and people panicking out.

Why DUSD and the DeFiChain ecosystem work differently

he DeFiChain ecosystem and here in particular $DUSD has by design much broader utility applications, and thus real value. But before we jump into that, we should have a look into how value is created –– value is a function of three variables: value = “utility” x “scarcity” x “the number of people using it”.

So when utility drops, the value drops. We have already learned that $UST only had one single utility – its promise to yield you 19.5% in APR. DUSD on DeFiChain on the other hand has three distinctive utility applications:

  • The first one is similar to the Luna ecosystem and revolves around the possibility to generate APRs.
  • The second use case is that all dTokens are traded against DUSD and
  • The third application is that DUSD can be used as collateral for setting up Vaults.

When it comes to scarcity, then there is also a clear distinction between the $LUNA and the DeFiChain ecosystem. There is simply no way how you can create DFI with DUSD. This is a design feature and was implemented on purpose, preventing a hypothetical scenario where the stablecoin is dragging down the price of $DFI. Even in times where dTokens decreased by high percentages, the inherent DUSD mechanism reduces the DUSD supply and increases the scarcity.

Summary

Our engineers put utmost importance into designing a thought-through system, built on solid game theory principles. Thus, the wider DeFiChain community should not be worried about any similar occurrences that happened in the Luna ecosystem. The DeFiChain system by design is resilient enough to withstand similar events. In case you have any questions, please feel free to ask them on our social media channels, first and foremost Twitter.

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News

Cake DeFi in Germany – Current status of the BaFin investigations

According to the official press release , BaFin has been investigating since January 7th, 2022  pursuant to Section 37 (4) of the German Banking Act (KWG) against Singapore-based Cake Pte. Ltd. The reason for this is that under German law it does not have a license to conduct banking business or provide financial services. BaFin assumes that Cake DeFi is conducting unauthorized banking transactions in Germany on the website www.cakedefi.com, for which a license is required in Germany. Except for a warning message for users, no far-reaching restrictions have arisen at this point in time. Lending and liquidity mining services can be used as before. However, since 14.04. No more referral rewards for German users in 2022. A “ban” on Cake DeFi would likely have far-reaching consequences for the DeFiChain ecosystem, as Cake DeFi is a central gateway to the DeFiChain for many users.

Meldung zur BaFin-Ermittlung gegen CakeDeFi
Report on BaFin’s investigation into Cake Pte. ltd

How does Cake DeFi react?

As a first reaction, the CEO and founder Dr. Julian Hosp a short statement on Youtube and another long live stream to make it clear that all services are available as usual and there are no risks for investments. Furthermore, the German language was removed from the website on February 9th, 2022, as was the case with Binance, Crypto.com or Kraken, for example, and reference was made to the company’s headquarters in Singapore via Twitter.

It should also be mentioned that Cake DeFi could only report to the investigation after the announcement by BaFin, as Cake DeFi had not received any official communication from BaFin in advance. Instead, only an anonymous support ticket was received by Cake DeFi, where one could not directly assume an official communication on the part of BaFin.

Twitter message from Cake DeFi on BaFin communications

In the next step, Hosp also announced in a mailing list on March 7th, 2022 that Cake DeFi is in the process of applying for a crypto license for the EU area. This license is similar to the Payment Services Act already in use in Singapore, which allows cryptocurrencies to be offered as a means of payment. The current EU decrees of the Markets in Crypto Assets (MiCA), which are expected to come into effect in summer 2024, will make it possible to use this license throughout the EU. Furthermore, Hosp claims to proactively take care of such a crypto license in order to continue to give German and European customers security and transparency of the platform.

Twitter-Meldung von CakeDeFi
Cake DeFi Twitter message on the BaFin investigation

Will Cake DeFi be banned in Germany?

Nobody can anticipate the exact test results, but we can draw conclusions about this procedure from known procedures (cf. e.g. Binance & Kraken).

From my individual point of view, it is rather unlikely that the BaFin investigations will have far-reaching consequences. The existing precedents (cf. Binance, Crypto.com) only led to changes in the offer but not to a ban on use for German users. I also like the proactive communication of the Cake DeFi team around Julian Hosp. Questions about the status of the investigation are (as far as possible) open and in different formats, e.g. on Twitter Spaces, discussed intensively. Even with provocative questions, the Cake DeFi team remains calm and communicates clearly. Furthermore, the application for the crypto license for the EU should be positively emphasized. The team is thus signaling that it is proactively approaching the supervisory authorities and state institutions. The aim is constructive communication and support and not destructive behavior. But enough of my assessment

How does the market react?

As a convinced market economist, you know that the free market usually prices information in very quickly and, in particular, that risks are taken into account in pricing. After the BaFin report became known, the DFI price fell by a few percentage points and was quoted at a low of around USD 2.44 or around 0.00006 BTC per DFI. Despite the report, the price rose sharply in the three months that followed. The current price (as of April 30th, 2022) is around 4.34 US dollars or around 0.0011 BTC per DFI. In my view, this is another indication that the market and investors are relaxed about the BaFin review. Whats your opinion? Write to us in the comments or on Telegram!

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News

CFPs & DFIPs – March 2022

The CFP and DFIP voting round in March is open

Masternodes, to the consoles! Once again DeFiChain goes into the voting round on CFPs and DFIPs. New projects, improvements to existing projects, correction of markups on dTokens, are on the agenda for the March round.

The decentralization of DeFiChain is measured by several criteria, including governance. In this regard, the process, well described in the Pink Paper, is that decisions about the development of the project are confirmed by the vote of the masternodes. Anyone can request project funding in a CFP or propose a modification to the blockchain in a DFIP. The presentation of CFPs/DFIPs is accessible through the official GitHub repository. The proposals are usually combined with a Reddit post to open a discussion between the author and the community. Confirmation of a CFP/DFIP is by an absolute majority of votes cast, similar to a certain election, the first round of which will take place in three weeks.

“hmm, maybe we should take inspiration from this system…”

One thing to keep in mind about DFIPs is that it is primarily a vote of confidence. Even if the majority votes yes, it does not mean that developers are committed to implementation.

For the March round, 11 CFPs and 2 DFIPs were released. Let’s start with the latter.

A DFIP to control them all

And for DeFiChain, to link them. I’m talking about dTokens, don’t panic.

The DFIP that Daniel Zirkel puts forward is the result of a discussion started on Reddit and at Twitter Space in early March, which you can listen to again here (we’re not holding up progress on this blog).

In it, it is proposed to introduce a mechanism whose goal is to lower the surcharge for dTokens. What is the surcharge specifically about? Today, there is a price difference between the DEX and the price oracles for dTokens. The oracles pay attention to external sources for price formation (NASDAQ, etc.) and set the price of dTokens when borrowing, while the buying and selling price is determined solely by supply and demand on the DEX. As a result, the DEX price has tended to be 10-40% higher than the Oracle price, a fact that some influential voices in DeFiChain, including Julian Hosp and Daniel Zirkel, view as a problem.

dtoken premium
View of dTokens’ price premium over the past two months (Source: DeFiChain Analytics).

Therefore, at the end of the discussions, it was concluded that a mechanism with weekly futures contracts on dTokens would be the best solution to force the price difference between DEX and oracles between 5% (premium) and -5% (discount). DZ describes the mechanism in the DFIP as follows:

  • Introduce futures contracts to match the prices of dTokens once a week (7*2880 blocks).
  • Establish 2 different futures contracts – one for the case of price premium and one for the case of discount.
  • The spread should be +/-5% so that when the market is closed (constant oracle price) the next price can be anticipated.
  • The markup future (premium future) should trade 5% above the oracle price (you can buy dTokens with a 5% commission).
  • The discount future would trade 5% below the oracle price ( one could sell dTokens at a discount of 5%).
  • Futures will be a weak link between DEX price and Oracle price: Higher or lower deviations are possible between settlement times.
  • Introduce an additional exchange fee of 0.1% for each dToken pool to burn dTokens. This fee should be charged in both directions of exchange.
  • Strengthen dUSD by counting them in the same way as the mandatory 50% DFI in the Vaults with a fixed price of $0.99.

So this mechanism is apparently not a fixed price regulator, but provides a window for traders to trade at +/- 5% of oracle prices, which could prove more functional if the dTokens become tradable across chains, for example.

Will Ethereum be enabled as a collateral?

The other DFIP in this round, proposed by Kevin Soell, suggests adding dETH to the list of tokens that may act as collateral in vaults. dETH could then stand alongside DFI, dBTC, dUSDC, dUSDT, and dUSD. The benefits put forward in the DFIP are as follows:

  • Extension of use cases
  • Use of rewards from the ETH/DFI LM pool.
  • Expansion of collateral diversification.
  • More potential rewards due to a larger Vault.
  • Preparation for potential “flipping” in the future.

Ability to earn rewards with dETH without the risk of impermanent loss.
Admittedly, ETH is so popular in the crypto world (it remains firmly in its #2 spot) that it seems only natural to give it this feature, adding value to generating profits on DeFiChain.

And the CFPs ?

Personally, I always get a bit excited when I discover the CFPs. You sometimes find very original things, and that can lead to extraordinary projects. For example, the company DFX was born from a CFP.

In this round, a CFP submitted by the company Azum proposes to encourage athletes by rewarding them for achieving their goals with DFI (Reddit thread here). Will it be confirmed? Other CFPs are looking at creating tools for developers: the Rest API to retrieve the history of DFI’s DEX awards, or a Python package to interact with the Ocean API.

Finally, there is a CFP to reward authors of articles on the defichain-blog.com blog with some DFI. In this context, I am starting a collaboration with this blog! Some articles from defichain.de (not all) will be shared on defichain-blog.com and translated into several languages, which will increase readership. If the CFP goes through, I might get a coffee or two for my participation – and I would be very happy about that! If you’d like to support me too, for the coffees, for the accommodation costs, it’s this way.

By the way: Who can vote?

Owners of masternodes, with one vote per masternode,
owners of at least 20,000 DFI on CakeDefi,
DFX stakers, where their vote is counted in proportion to their share of the staking pool, and the majority of the pool then constitutes the vote share represented by DFX. I’m in that category (unfortunately not the other two… at the moment!).

When will the results be available?

Voting will close on March 28, 2022 at 23:59:59 UTC. The results will be officially published on March 30, 2022.

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News

Four new tokens on the DeFiChain

Following the community vote on March 2, 2022, four new decentralized tokens will be added to DeFiChain. The lucky winners are the stocks of Facebook, Microsoft, Netflix and the Vanguard 500 Index.

Another vote on adding tokens to DeFiChain took place. Following January’s stocks of Coinbase (COIN), NVIDIA (NVDA) and Amazon (AMZN) and Emerging Markets ETF (EEM), stocks of Facebook (FB), Microsoft (MSFT) and Netflix (NFLX) have now been added to DeFiChain in addition to the Vanguard 500 (VOO) index, bringing the number of tokens offered on the blockchain to 23. These tokens have outperformed titles such as Twitter, Nestlé or Disney in the voting.

FM3lax7WQAQYMZT.jpg
Result of the public vote on adding new tokens on DeFiChain

The arrival of these new values on the DEX was effective from March 3rd. Liquidity mining rewards will start on March 7th when block 1,685,500 is discovered to be exact. A new reward scheme will then be introduced.

FNAjECHXEAEwqNi.jpg
Distribution of current and future liquidity mining rewards after the integration of the new tokens in March 2022

For the avoidance of any possible misunderstanding, it should be noted that the percentages shown do not correspond to the returns (APR) of the dToken/dUSD liquidity pools. This is the share of the rewards given to the different pools by the masternodes. If 100 DFI are allocated to the pools, then 4.5% of that 100 DFI, i.e. H. 4.5 DFI, are allocated to the pool of USD/dTSLA. This 4.5 FDI is then shared among all participants in the US Dollar/USD/dTSLA pool in proportion to their share of the pool. If I own 1% of this pool, then I get 0.045 DFI on confirming a block.

While this new addition will lower some APRs for liquidity mining, it will diversify the supply of decentralized tokens on DeFiChain and ultimately increase the value of the DeFi project.

ORIGINAL PUBLICATION ON DEFICHAIN.FR

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General Information News

Fort Canning – All Information

Fort Canning Go-Live: 15. November 2021

Fort Canning: An Overview

It is confirmed – on November 15th the long awaited Fort Canning update will find its way to the DeFiChain mainnet. With this next big update after Eunos Paya in August, many new features will find their way into DeFiChain and especially into the wallets of the end users. While Eunos Paya introduced many background improvements and features such as 5y and 10y masternode freezers, Fort Canning now includes exciting DeFi features for end users of the DeFiChain ecosystem in particular.

The following features are implemented with Fort Canning:

  • Oracles
    Even though price oracles were already possible before Fort Canning, they find a real application for the first time with Fort Canning. With the help of price oracles, current prices for various assets (shares, ETFs, precious metals, FIAT exchange rates, etc.) are written natively to the DeFiChain blockchain every hour. These prices are then used to create and verify decentralized loans. Without the price oracles, no “values” could be calculated to be deposited as collateral for loans.
  • Loans
    With Fort Canning, it will be possible to take out loans that are secured with cryptocurrencies / tokens. For this purpose, individual tokens (e.g. DFI, dBTC, dETH) must be placed in a vault and cannot be used or sent for other functions for the time being. Afterwards, the value of all tokens in the Vault can be calculated and used as collateral for a credit. The flexible credit amount can then be paid out in various tokens. When the loan amount is paid back, the user finally regains access to the tokens in the Vault. For the time being, loans will only be available in the Mobile Wallet (iOS, Android). More information can be found under “What are decentralized loans?
  • Stock Tokens
    Also with the Fort Canning update, decentralized share tokens (dShares) will find their way onto the DeFiChain. The dShares will not be backed by real shares, but will be generated and traded natively via the blockchain. The generation of new dShares takes place exclusively through the use of loans. Accordingly, tokens are deposited as collateral and new dAktien are disbursed as a loan amount. Subsequently, these shares can either be held, sold or used for liquidity mining (liquidity pools of DEX). For the liquidity pools, only pools in the pattern dShare <> dUSD are traded. For the end user there are two possibilities to buy dShares: 1. by taking out a loan or 2. by buying the dShares with dUSD via DEX. For more info, see “What are decentralized shares (stock tokens)”.
  • Composite Swap
    Another new feature for DeFiChain is the “Composite Swap”. With this, it will finally be possible to perform an exchange of tokens directly across multiple liquidity pools. This allows e.g. a direct swap from dBTC to dETH without having to take a detour via DFI. This cumbersome detour is now performed automatically in the background.
  • Technical Improvements
    In addition to the core updates described above, Fort Canning will again include many technical improvements, especially for easier and safer operation of masternodes. For example, it will now be possible to change the operator address of a masternode after the masternode has been created.

Some of these features will be introduced with Fort Canning on November 15, but will be unlocked a bit later or will only be available on specific wallet types. The term dUSD can also be represented as dDUSD or DUSD and means the tokenized version of the US dollar currency. There are more details in the next sections.

What are decentralized Loans?

As already described in the overview, decentralized loans involve the generation of new tokens for which other tokens have previously been deposited as collateral. Collateral is deposited by moving certain tokens (initially only DFI, dBTC, dETH and dUSD) into a virtual vault. For each vault, a total value of all deposited collateral can be calculated in US dollars using the price oracles (the current prices can also be viewed here: https://defiscan.live/prices).

As soon as the collateral has been deposited in the Vault, the owner of the Vault can have a flexible credit amount paid out. The credit amount can be paid out in any token (DFI, dUSD, dBTC or even share tokens). The maximum credit amount is only a fraction of the stored collateral and depends on the selected credit interest rate. The selected annual interest rate is calculated pro rata for the duration of the loan and is due at the end of the loan together with the repayment of the loan amount. The loan interest rate, the loan amount and the deposited collateral can be flexibly adjusted at any time.

To close a loan, there are two options:

  1. Repayment
    The first option is to repay the loan amount in full. To do this, the same tokens and the same number of tokens that were previously generated for the loan must be “burned” again. Afterwards, the owner of the vault can access the deposited tokens again, which served as collateral for the loan.
  2. Auction/Liquidation
    The second option is the auction of the loan. This occurs if the deposited collateral no longer provides sufficient security for the loan. For example, if 100 DFIs are deposited at a price of 2.50 USD per DFI (total value: 250 USD) and a loan amount of 120 USD has been disbursed (loan to collateral ratio: 250/120 = 2.083), the loan is well secured for the time being (the necessary “loan to collateral” ratio depends on the selected loan interest rate).

    However, if the price of DFI falls to e.g. 1 USD, then the value of all deposited collateral (in this example 100 DFI) is only 100 USD and thus below the disbursed loan amount. Because the loan is now no longer sufficiently collateralized, it is liquidated by releasing it for auction among all other DeFiChain users. The highest bidder then becomes the owner of the vault and can withdraw the assets. The borrower and former owner of the Vault loses that Vault and thus access to his deposited collateral. Instead, he keeps the disbursed loan amount.

    For illustration purposes, a reduction in the value of the collateral below the value of the loan amount was assumed. In reality, however, loans are already put up for auction at the latest when they fall below a collateralization level of 150% of the loan amount. This collateral limit (here of 150%) depends on the selected loan interest rate. The lower the interest rate, the higher the minimum collateralization.

By creating loans, you can also take short positions (betting on a price drop instead of a price increase) and leveraged trades, among other things. You can find more information about this here in the linked videos.

Procedure of a loan:

  1. Creation of a new Vault incl. choice of loan interest rate (also called loan scheme).
  2. Moving tokens (DFI, dBTC, dETH, dUSD) to the Vault as security
  3. Taking the loan by means of creating new tokens (any tokens including DFI, dUSD and stock tokens).
  4. Closing the loan
    • Repayment
    • Auction / Liquidation
  5. Withdrawal of the tokens used as security
  6. Deletion of the vault

What are decentralized Stock Token?

Also as already introduced in the overview, decentralized share tokens (dShares) will find their way onto the DeFiChain with Fort Canning Update. The dShares are not backed by real shares, but are generated and traded natively via the blockchain. The generation of new shares takes place by means of loans based on price oracles as explained above. This means that no real shares are deposited for share tokens traded on the DeFiChain. The collateralization of the dShares takes place exclusively via other tokens/cryptocurrencies on the DeFiChain. This has the enormous advantage that dShares are only considered as tokens and do not have to be considered as shares.

This bypasses some regulations, is treated differently for tax purposes and could become a central part of the DeFi ecosystem of the future. In Germany, for example, it would currently (in 2021) be possible to hold a dShare beyond one year, which would make it possible to sell the dShares tax-free after the holding period. On the other hand, of course, the investor has no voting rights as well as no access to a dividend, since he does not own a real share. In addition, dShares are always associated with the risk that the price of the dShares, e.g. on DeFiChain, does not reflect the price of real shares on stock exchanges.

dShares can be obtained in two ways:

  1. Creation of new dShares via a loan
    As described above, loan amounts can be disbursed in any token, including stock tokens.
  2. Purchase of dShares via the decentralized exchange (DEX)
    All dShares will receive their own liquidity pool with dUSD as exchange currency. Each user can therefore buy a dAshare via the DEX.

The creation as well as the purchase of dAktien is possible thereby also in smallest fractions.

In order to be able to use the DEX liquidity pools, many users must of course provide their liquidity (in the form of dShares and dUSD). For this – as also for existing pools e.g. DFI-BTC – high rewards (so-called block rewards) are given to the providers of liquidity. Especially in the first weeks and months, very high returns are expected for liquidity providers.

Which wallet gets which functions?

Currently, not all wallet types support all features introduced with Fort Canning. You can find an overview of the function availability in the following table:

Wallet

Kredite -
Erstellen / Schließen

Kredite - 
Auktionen

Aktien Token -
Kaufen / Verkaufen

Aktien Token -
Liquidity Mining

Desktop Wallet

Kommandozeile (DeFiCain CLI)

Mobile Wallet (iOS, Android)

(End of Dec 21)

Saiive.live Mobile Wallet
(iOS, Android)

More information & instructions