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A crash course to DeFi on Smart Bitcoin Cash

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Avatar for francis105d1
Written by   291
5 months ago

I believe the Bitcoin Cash community needs to know what I am about to write as soon as yesterday because now that SmartBCH is live, users must learn the concepts and ideas behind DeFi and the risk that DeFi brings. Users can prepare accordingly and weed out the projects that don't deserve attention. I must add that even when SmartBCH is live, I don't recommend depositing money you are not willing to lose entirely. Don't invest without having a truly decentralized bridge or a bridge with multisign access to prevent a CoinFlex incident from happening again.

Let me be obvious this article is written so that you, the reader, have a better understanding and can make better decisions. As always, I am not giving financial advice, just my opinion.

Watch the video because it explains my article, or I would like the video expresses my message better.

Liquidity providers.

LP is short for liquidity providers, so that I will refer as such from now on. They are the users that make trading on DEXs possible; regular centralized exchanges are required to order books. In the case of DEXs, you need LP, but providing liquidity is a hazardous business because if the price of your token comes down, you end up with a bunch of worthless tokens and very little of the asset that matters. That being either stablecoins, sBCH, or another investment with more excellent value. This attack is well known as a rug pull which only means a large token holder dumps on the LP taking their valuable tokens and leaving them with just worthless tokens. It is essential to only provide liquidity to tokens with a certain amount of trust, that being a stablecoin and your preferred token, for this example Bitcoin Cash.

Some DEXs use oracles to establish the fair price of an asset in the case of Bitcoin Cash and stablecoin in USD or any other fiat currency equivalent. An Oracle can be implemented because there are other exchanges outside your preferred dex, but oracles can be attacked, So be careful to what token you provide your money.

In the future, you may not need LP to trade on decentralized exchanges and instead implement an order book-like mechanism, almost like any other centralized exchange order book utilizing Smart contracts. It would be best if you chose a dex that is a fully featured toolbox instead of one that will take years to have any decent trading capabilities.

DEXs, Yield Farming, and LP.

BenSwap and MistSwap are very young decentralized exchanges. We don't know if the smart contracts they have written are acceptable and without errors or bugs. Hence, as such, it is essential that you only set a small amount of your total portfolio to LP and farms as well. It is true that being an LP. A Yield Farmer user is like fomenting adoption. Just remember that contracts can have bugs. Hence, you should use only a tiny amount of your total portfolio. You use your Bitcoin Cash to buy goods and services you are helping adopt any projects will try to get you to invest all you have by promising a lot of yields, don't do it because you don't know if their contracts are being written correctly or without backdoors.

Others will try to get your money by trapping you in a Yield Farm that prints worthless tokens while your liquidity is trapped and the creators dump on you, or while your tokens are stake, they sell, and that will happen a lot with pre-sale tokens too, so always ask questions before investing.

Many tokens will come out.

Many tokens will appear. Some will give a free airdrop, and nothing wrong with getting some free tokens, but many will offer pre-sales that will be catalogized as a security in the US. If you are from the US, you should do your homework. Any tokens will provide you with a lot but deliver very little, and it is an ICO thing all over again, don't be fooled, and don't buy every snake oil you see because pretty soon, you will be out of your hard earn Bitcoin Cash.

Borrowing and lending.

I am waiting for it because I want to do what I can with Nexo and others, borrow against my BCH, get a loan and buy more BCH am looking forward to doing that on Smart Bitcoin Cash. Don't be fooled into giving away my Bitcoin Cash for some worthless token if I borrow it because I will get a recognized stablecoin and put my BCH as collateral. Suppose you are going to borrow against your BCH. In that case, you must ensure the Smart contract has protection against market manipulation data so that your loans don't get liquidated just because the smart contract reported a fake price decline.

Conclusion

Smart Bitcoin Cash has a lot of risks but also many rewards. It will just be a matter of being constantly on top of the news and never risking your hold portfolio, not even on a pool or farming yield contract with stable USD and BCH. The safest LP and YF will be stable USD/BCH, and the DEX tokens against BCH and StableUSD may be utterly wrong, so do your research. You don't want to hold a stable coin from a centralized exchange going bankrupt; by that, I mean FlexUSD or any other that may appear down the line.

And before DeFi is genuinely implemented in SmartBCH, try to research the dexs that will give you the most features out of the box without having to wait years for them, and try to hold tokens with limited supply. After all, ponzinomic ends in dumps, and retail investors with full bags of worthless tokens.

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5 months ago
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Comments

Those scammers have ruined the credibility of smartBCH. Now, I feel like it's too risky to invest. Btw, I have a question. I noticed that MistSwap doesn't have its Bridge now. What happened? And do you know any other bridge I could use to send my sBCH to my Bitcoin.com wallet? If so, please, let me know.

$ 0.02
5 months ago

The Coinflex bridge is down because they are insolvent. Coinflex has the same issue as Celsius. Right now all bridges to SmartBCH are centralized and as such you could lose your money. But the Sha-gate bridge is under construction I wouldn't recommend putting one cent into SmartBCH at the moment because of the bridge issues.

Once Sha-gate comes online I will write about it.

$ 0.00
5 months ago

Thank you. I hope they will have it done the soonest so I could send it right away.

$ 0.01
5 months ago