Schlagwortarchiv für: Ether

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Leveraging your long ETH position with Maker’s CDP: A brief introduction/tutorial for hodlers

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

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Top Cryptos exactly one year ago…

If invested 1k USD in the top five:

BTC: 10875 USD (not considering BCash)

ETH: 38900 USD

RIPPLE: 30959 USD

LTC: 18035 USD

DASH: 68439 USD

Total: 167.208 USD

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Ether Purchase Troubleshooting

Although we hope that the ether purchasing experience goes smoothly for everyone, we recognize that there will always be situations where things do not quite go as planned. Perhaps your internet connection dies in the middle of your purchase. Perhaps you accidentally click a back button or some link or simply hit refresh while the purchase is in progress. Perhaps you forgot to download your wallet. Perhaps you think you may have forgotten your password, and you want to make sure you have it down correctly. For all of these situations, the user experience is unfortunately going to be a bit more tricky than simply downloading a web app; a bit of command line action with a Python script will be required.

First of all, let’s go over downloading the Python script. To get the script installed, download the zip archive from here, and unpack it. Then, navigate to the directory, and you should see a number of files, including pyethsaletool.py. At this point, open up a command line in this directory. Run python pyethsaletool.py, and you should see a list of help instructions.

Now, let’s go over the most common potential issues one by one.

1) I forgot to download my wallet before closing the browser tab.

You should receive a backup of your wallet in your email. If you entered a fake email address, and at the same time forgot to download your wallet, then unfortunately you have no recourse.

2) I want to make sure that my ether was actually purchased.

Run python pyethsaletool.py list -w /path/to/your/wallet.json, substituting the path with the path where you downloaded your wallet to. You should see a record of your purchase. If not, then run python pyethsaletool.py getbtcaddress -w /path/to/your/wallet.json and look up the address on blockchain.info. If there is a nonzero balance, you are in situation #4.

3) I want to make sure that I remember my password.

Run python pyethsaletool.py getbtcprivkey -w /path/to/your/wallet.json, substituting the path. When it prompts you for the password enter it, and see whether you get an error. If you get an error to do with PKCS7 padding, you entered the wrong password; if you get a BTC private key out (ie. a sequence of 51 characters starting with a 5), then you’re fine.

4) I sent my BTC into the intermediate address, but it never made it to the exodus.

Run python pyethsaletool.py getbtcprivkey -w /path/to/your/wallet.json, substituting the path appropriately. Then, import this private key into the blockchain.info wallet or Kryptokit. Alternatively, you may also run python pyethsaletool.py finalize -w /path/to/your/wallet.json to finish the purchasing process through Python.

5) I want to make sure I will be able to access my ether later.

Run python pyethsaletool.py getethprivkey -w /path/to/your/wallet.json, substituting the path. Then, download pyethereum, install it, and use pyethtool privtoaddr c85ef7d79691fe79573b1a7064c19c1a9819ebdbd1faaab1a8ec92344438aaf4, substituting in the Ethereum privkey that you got from the first step. If the address that you get matches the address that you saw when you were purchasing ether, then you know that you have your Ethereum private key.

6) I sent more BTC into the intermediate address after the web app finalized.

This situation is identical to #4. You can recover the BTC or finalize it at your leisure.

If you have any other issues, please ask them in the comments and they will be added to this article.

The post Ether Purchase Troubleshooting appeared first on ethereum blog.

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