DISCLAIMER: This is not an investment advice or strategy; only an introductory material. If interested in using CDP, you should read more detailed materials involving more detailed descriptions of the liquidation process, fees, etc. Also, always do the math yourself and check your results. Do not trust the provided formulas if you have not checked they apply to your situation. Make sure you understand what you are doing. Be cautious and stay safe.

What is a CDP?

CDP is a Collateralized Debt Position, a smart contract where you store your ETH funds as collateral in order to take out a loan. Maker’s CDP allows you to take out a decentralized loan denominated in DAI stable coin.

As an ETH hodler, why should I care?

Suppose, as a true believer in Ethereum, you have invested all your available fiat into ETH already. Suddenly, there is a market situation such that you would like to “buy the dip” or simply increase your stack of ETH but you cannot since you have no fiat left. Nevertheless, thanks to CDP you can lock your already owned ETH as a collateral, take out a loan in DAI (~USD), and buy more ETH with it. This is called leverage and the principle is the same as margin trading.

What is the catch you are not telling me?

Well, the catch is that you have to repay your money otherwise your CDP gets liquidated and/or you lose your collateral. Please, never let your CDP liquidate! It is way more expensive than repaying.

Can you give an example of a bad loan setup?

Suppose you lock 150 ETH in CDP, Ether price is currently 900 USD. The max collateral/loan ratio of Maker CDP is currently set to 150%. Therefore, you can take out 90 000 DAI (100ETH*price) as a loan. Remember the loan is always in DAI. However, since you borrowed the maximum amount allowed (two-thirds of collateral), your liquidation price is exactly 900. If the price drops to 899.9, your CDP will be liquidated because its collateral is insufficient. Always make sure the liquidation price is sufficiently low.

OK, I see I shouldn’t go too much into debt here. Is that all?

No, there is another case that may arise. Suppose the previous situation, however, you take out only 30k Dai instead of 90k. Since your collateral/loan ratio is now higher, you are protected from liquidation as long as the price of ETH is above the liquidation price of around 300 USD (sounds sufficient). Remember again that the loan is denominated in DAI. If the ETH price goes to 500 USD, nothing changes and you still owe 30k DAI. This may cause issues when investing the borrowed funds. Suppose you invested the whole loan in ETH at the initial price of 900 but now one is worth 500 and you have no other money available. The CDP does not go into liquidation this time. However, you cannot repay the debt and free your collateral (you can partially but it’s still quite bad).

What do you suggest to avoid this?

If you plan to invest the borrowed DAI, never collateralize your entire bag of ETH. Always save an appropriate amount of money (form irrelevant) to be able to pay off the CDP at liquidation prices.

How do I find out how much is “appropriate”?

You need to do the math. I derived some formulas that may be helpful. They apply to the case of leveraging ETH only, i.e. using your bag of ETH to get a loan and invest in ETH again. As have been mentioned, you should have enough ETH left elsewhere to be prepared to repay the debt if the price begins to approach the liquidation price. I assume the purchase of ETH is at the same price as at the time the CDP is opened.

Notation: S = all ETH holdings you have prior to CDP, P = the current price of ETH in USD, LP = your desired liquidation price (yes, this is a parameter you must choose – please be cautious and set it at a safe low level that you consider unlikely to be reached)

Calculating the amount of ETH to deposit as collateral (deposit): D = S/[1-(2LP-2P)/3P]

Calculating the amount of DAI to “draw” from the CDP (loan): L = (2/3) *D *LP

Remember, you must always have S-D amount of ETH available to step in and avoid liquidation of your CDP. That should guarantee you are safe from the liquidation or the need to use additional funds. Nevertheless, it is still possible your investments will not be profitable and you end up losing money.

I am only waiting for the next paycheck and need the funds only temporarily to buy the dip right now. Can I collateralize my whole stack of ETH?

Yes, you can since you know you will get additional funds to repay the debt. However, remember not to go too much into debt to avoid liquidation.

I used the loan to buy ETH. Can I collateralize these funds as well?

Yes, you can but be VERY careful. You’d better do the math right! I would not recommend this since things may get messy and you may lose track of your debt easily.

I want to learn more and maybe get a CDP. What should I do next?

You should check the Maker CDP dashboard (https://dai.makerdao.com/) out and watch their introductory video and terminology guide. There is a couple of advanced things that I omitted and you should look into them (e.g. WETH, PETH). Further, visit the maker subreddit r/makerdao (please read the sad stories of liquidated CDPs) or other of their communities. Make sure you understand what you are doing before creating a CDP. It may be worth it to test the process on the Kovan testnet.

Why did you write this tutorial?

There was no complex material for beginners around that would highlight CDP’s possibilities as well as risks. I hope I introduced the instrument properly and it will get more traction eventually. Also, I am a big fan of the DAI stable coin.

I think there is something wrong in this text or something important is missing.

That is, of course, possible. In such a case, please, comment or pm me. I will be updating this text continuously.

DISCLAIMER: This is not an investment advice or strategy; only an introductory material. If interested in using CDP, you should read more detailed materials involving more detailed descriptions of the liquidation process, fees, etc. Also, always do the math yourself and check your results. Do not trust the provided formulas if you have not checked they apply to your situation. Make sure you understand what you are doing. Be cautious and stay safe.

Source: https://reddit.com

An Intro to TrueBit: A Scalable, Decentralized Computational Court.

or: “An Intro to Panopticomputers: Code Execution Courts for Scalable, Decentralized Computation”.

The Ethereum community never ceases to amaze me. So many smart people working at the fringes of what’s possible. We haven’t really scratched the surface of what’s possible in the current iteration and we are already seeing amazing new opportunities come to the fore.

For the unenlightened, Ethereum can be described as a distributed “world computer” using blockchain technology. It allows developers the ability to upload code to a blockchain, upon which it executes the code when activated to change some information on a shared ledger. In other words, you can apply arbitrarily complex state changes to a shared, public (relatively) immutable ledger. Every node in the p2p network runs these state changes, whilst specific computers (the miners) make sure these state changes are difficult to reverse (by being rewarded the subsidy & fees). In order to execute state changes & computations one pays proportionally with the cryptocurrency of the platform, ether. The more computations you want to do, the more you will pay for it. The amount of computations are measured in a separate unit, called “gas”.

Source: An Intro to TrueBit: A Scalable, Decentralized Computational Court.

Blockchain 2.0

Cryptocurrencies are only the beginning

Launching the Credit Suisse Blockchain Revolution Series: In this in-depth report, we analyse the market implications of blockchain technology in light of the bitcoin boom since our initial cross-sector and cross-border publication, Blockchain: The Trust Disrupter, roughly a year ago. While we make no comment on the valuation of particular cryptocurrencies, we believe the rise of bitcoin and Initial Coin Offerings highlights how transformative the underpinning blockchain technology will be across sectors, with financial services and capital markets at the front of the queue.

Various blockchain projects we discussed in our previous report are arriving at preliminary conclusions, transitioning from Proof of Concept to Pilot and even Production phases of development. To contextualise these over the medium to long term, we once again deliver a collaborative analysis of the following:

Cryptocurrencies and ICOs: Crucially, we see these providing momentum for further blockchain development, even if bitcoin and Initial Coin Offerings continue to encounter challenges to widespread adoption.

Blockchain’s utility: We examine the key advances and diversification of the applications that sit atop blockchain platforms – as well as the theoretical risks to blockchain itself. We also show project timelines to illustrate current and future positioning on the blockchain landscape.

Market implications: Contributions from 23 analysts across three geographies provide us with a cross-sector blockchain window through which we examine the Payments, Security, Banks, Exchanges, Business Services, Leisure, and Real Estate sectors.

Featured stocks include Sophos (Outperform; CS European SMID Focus List), Square (Neutral), LSE (Outperform; CS European Focus List), ASX (Underperform), Equiniti (Underperform), Experian (Outperform; CS European Focus List) and Playtech (Outperform).

Full Report >>>

Download CreditSuisse-Blockchain-Report

https://etherscan.io/address/0xab5801a7d398351b8be11c439e05c5b3259aec9b

Metaphorical cheers and laud claps were heard across eth spaces as cats were once again seen roaming freely on the blockchain following a raising of the gas limit by ethereum miners.

Ethereum’s capacity has now risen to 7.6 million computations per block, up from around 6.7 million, and seems to continue rising at the time of writing.

As can be seen above, blocks are still full because thousands of transactions are waiting to move, but the queue has been dropping from 25,000 to 20,000.

Fees are also coming down. They were at 57 cent yesterday, now they stand at 28 cent and might drop further in the coming hours/days.

It is unclear at this stage whether miners have raised the gas limit following some simple protocol improvements, or whether they have opted to give the network some breathing room while we wait for these improvements

Read the full article: http://www.trustnodes.com/2017/12/10/ethereum-miners-save-kitties-capacity-raised

Source: cuvialabs.com

Joel Monegro wrote an insightful piece on crypto-economics called “The Fat Protocol” .  In it,  he concludes that unlike the Internet which is monetized at the application level,  the Blockchain is monetized at the protocol level.    This is analogous to owning a piece of TCP/IP and deriving an economic benefit every time it is utilized.   We created the Monegro Index as a homage to Joel and to clearly illustrate and track this crypto-economic principle.

The economic implication of “The Fat Protocol” are many.   As an investor in a Blockchain application or sub-token,  you are giving up protocol token for app tokens,  which are arguably much less valuable.  As a blockchain app developer,  you are giving up app tokens in exchange for protocol tokens.   Unlike the Internet,  there is an economic disincentive to standardize.   Interesting to see how this all shakes out.

Weiterlesen

Nick Johnson gave a glimpse of what is upcoming for ENS. Here are the highlights for those who can’t wait:

DNS Integration via DNSSEC

Soon, you will be able to go to your favorite wallet/client, type in “amazon.com”, send ethers, and magically amazon will receive their payment. No need to first look for the ens name of the business. This is enabled though a mechanism called DNSSEC (Domain Name System Security Extensions)

More about DNSSEC here:

This is worked for .xyz domain first, more will roll out after that I guess.

Makes us wonder, why bother buying an ENS name at all?

But if you take a long view, this is a bold yet very good first step, to bridge block chain to traditional internet, even at the expense of losing exclusivity. All of a sudden, hoarding ENS names isn’t attractive anymore, freeing up the platform to meet its true goals of name resolution. This should also make adoption much easier, now any .com website can start accepting ether payments with just one setup in their DNS Registry.

New Name Registration Process

Current registration process requires you to first start bidding, then reveal, then finalize. Once you start bidding, people can potentially snipe. They will definitely snipe if you are bidding on a dictionary word (or one of the top 1 million famous .com domain names). Sniping is made even more easier when you bid through MEW (since MEW default UI does start auction and bid together always, without any decoy bid) I personally have lost several good names I was bidding due to sniping (as well as sniped others, you just can’t resist).

This is changing with the new permanent registrar. There will be a rolling 48 hour window, you can just bid on a name instead of starting an auction first. And you reveal in the next window. If a person bids later, they will get full refund.

Note: A tip if you are bidding right now for a dictionary name. Go check if ensbot tweeted your bid. If it did, submit another bid for the max ether you can afford for that name, but using a different wallet (different wallet is the key). So why not bid initially with max ethers? That gives options for others to outbid you. Why making two bids work often? Say you made your first bid with 0.011 ETH, and then made a second bid using different wallet for 0.08 ETH, the sniper has no way to know that the second bid is for the same name, so, she will try to counterbid you by posting a bid for 0.012 ETH (or higher based on their cryptowealth). You are at-least making her think harder, and even if you lose, atleast you made her pay 0.08 not 0.011.

Weiterlesen