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<ul class="summary-list"><li><keyword id="12324570" type="UNKNOWN" weightage="60" keywordseo="wallstreetbets-founder-jaime-rogozinski" source="Orion">WallStreetBets founder Jaime Rogozinski</keyword> talks to Insider about his blockchain-based trading platform <keyword id="12324565" type="UNKNOWN" weightage="60" keywordseo="wsb-dapp" source="Orion">WSB DApp</keyword>. </li><li>"This is very much a way for me to say crypto and Wall Street are definitely going to merge," says Rogozinski. </li></ul><keyword id="12324564" type="UNKNOWN" weightage="60" keywordseo="jaime-rogozinski" source="Orion">Jaime Rogozinski</keyword>, the founder of<a href="https://www.reddit.com/r/wallstreetbets/"> WallStreetBets</a>, believes there's potential for a new investment product tracking the stock bets made by US House Speaker Nancy Pelosi's husband, whose trading has sparked outrage and fascination in equal measures among amateur traders.In an interview, he suggested a Pelosi-themed exchange-traded portfolio could emerge on the latest iteration of his campaign to empower retail investors - a platform called <a href="https://www.wsbdapp.com/">WallStreetBets DApp</a>."I got this idea, somewhat of a joke, but I can't shake it so I'm probably going to start pushing for it, which is this '<keyword id="12324568" type="UNKNOWN" weightage="60" keywordseo="nancy-etp" source="Orion">Nancy ETP</keyword>,'" Rogozinski told Insider.But his vision for <keyword id="12324566" type="UNKNOWN" weightage="60" keywordseo="wallstreetbets-dapp" source="Orion">WallStreetBets DApp</keyword>, a blockchain-based shop for stocks and other assets, extends far beyond one potentially trendy ETP. A strategic partner in the project, Rogozinski wants ordinary investors to build their wealth with the same kind of community-powered energy that the <keyword id="12055566" type="UNKNOWN" weightage="60" keywordseo="wallstreetbets" source="Orion">WallStreetBets</keyword> forum on Reddit used to<a href="https://businessinsider.mx/how-reddit-day-traders-are-using-the-platform-to-upend-the-stock-market-and-make-money-in-the-process/"> upend the trading world this year</a>. WallStreetBets was thrust into the spotlight in January after retail investors active on the site banded together to drive a massive upsurge in video-game retailer <a href="https://markets.businessinsider.com/stocks/gme-stock">GameStop's</a> stock price, squeezing hedge funds shorting the so-called meme stock. The WSB DApp is an expression of what Rogozinski sees as the next big thing in the financial world. "This is very much a way for me to say crypto and Wall Street are definitely going to merge and they're starting to spill into each other already," he told Insider during a video interview from Mexico City, where he lives with his family."For far too long, I made the mistake of assuming blockchain technology and cryptocurrencies were one in the same thing - and they're not," Rogozinski said. "This whole DeFi (decentralized finance) infrastructure that's able to create a parallel ecosystem in finances is astoundingly powerful, more than I could have imagined." 'Nancy ETP'Rogozinski's idea for an automated "Nancy ETP" would highlight a key feature on WSB DApp. The platform allows community members to propose the creation and makeup of ETPs, which can hold a mix of assets such as domestic and international equities, cryptocurrencies, and metals.The WSB DApp platform has a native token, the $WSB governance token, that people can buy and then use to vote on the type of assets and weightings that should go into an ETP. In an<a href="https://markets.businessinsider.com/news/currencies/wall-street-bets-founder-creating-blockchain-app-to-fight-corruption-2021-5"> example given in May</a>, token holders who think<a href="https://markets.businessinsider.com/stocks/tsla-stock?utm_source=markets&amp;utm_medium=ingestgest"> Tesla</a> should make up 90% of a particular ETP instead of 10% can vote on it by signing a transaction using their $WSB tokens during voting cycles.At the same time, a Pelosi-centered ETP would apply the "if you can't beat them, join them" notion to investing while also drawing attention to outrage and debate over<a href="https://www.businessinsider.com/congress-stock-act-violations-senate-house-trading-2021-9"> stock trading by members of Congress</a> and their families, Rogozinski said. In the case of Paul Pelosi, one trade in particular stood out. It involved shares of Google parent<a href="https://markets.businessinsider.com/stocks/googl-stock?utm_source=markets&amp;utm_medium=ingestgest"> Alphabet</a> that made $5.3 million for him prior to a House Judiciary Committee vote on tech antitrust regulation. Spokespeople for Speaker Pelosi told media outlets she owns no stock herself and had no knowledge of her husband's equity purchases. Meanwhile, as the uproar continues, "people are able to make money," with a product like the "Nancy ETP", said Rogozinski. "Nothing's sure but past performance is definitely impressive," he said broadly of Paul Pelosi's stock picks.The strong performance of his stock picks over the last two years has prompted many retail investors to<a href="https://markets.businessinsider.com/news/stocks/nancy-pelosi-husband-stock-trades-retail-traders-mirror-2021-10"> mirror Paul Pelosi's investments</a>. Meanwhile, memes about Nancy Pelosi have popped up, suggesting she's a skilled investor that can make money off of insider information.Life after moderating WallStreetBetsThe Pelosi controversy has the right mix of ingredients to thrive in discussions on the WallStreetBets forum, which Rogozinski created in 2012 in a quest to find a place for ideas about aggressive, money-making trades. But in<a href="https://www.insider.com/wallstreetbets-reddit-history-gme-gamestop-stock-dow-futures-yolo-2021-1"> April of 2020</a>, he was removed as a moderator on WallStreetBets after being accused by other moderators of trying to profit from the subreddit.He sold the rights to his life story to RatPac Entertainment in exchange for a payment in the low six figures, according to a<a href="https://www.businessinsider.com/reviews/out?u=https%3A%2F%2Fwww.wsj.com%2Farticles%2Freddits-wallstreetbets-founder-sells-life-story-to-movie-producer-ratpac-entertainment-11612440001%3Fmod%3Dpls_whats_news_us_business_f"> Wall Street Journal report</a> in May. More about the dispute will be revealed through projects the entertainment company plans to produce, which could include movies, podcasts, TV shows, and other vehicles, he said. "The documentary is well underway and will be out next year," Rogozinski said. And while he's no longer a WallStreetBets moderator, his WSB DApp platform looks to continue its mission of democratizing <keyword id="11893875" type="UNKNOWN" weightage="100" keywordseo="markets" source="Orion">markets</keyword>. Using the $WSB token, retail investors will rebalance ETPs, not by "opaque and politically connected" banks and hedge funds, WallStreetBets said in May.

WallStreetBets founder Jaime Rogozinski breaks down the Nancy Pelosi stock controversy, and details his next project for retail investors

<ul class="summary-list"><li><keyword id="11892696" type="UNKNOWN" weightage="60" keywordseo="ethereum" source="Orion">Ethereum</keyword> is a general-purpose decentralized computing platform that uses blockchain technology.</li><li>Ether (ETH) is Ethereum's native currency, and it is currently the second-largest <keyword id="11892695" type="UNKNOWN" weightage="60" keywordseo="cryptocurrency" source="Orion">cryptocurrency</keyword> by volume.</li><li>Despite its popularity and wide applications, Ethereum remains a highly speculative investment. </li></ul>Ethereum and Bitcoin have nearly become household names. However, while they're often mentioned in tandem, they're far from the same. Bitcoin was created as an alternative, decentralized currency. Ethereum draws inspiration from Bitcoin, but has bigger aspirations: To create a software platform that not only supports cryptocurrencies, but any kind of decentralized application that can run without the need of a third party, thus giving people more control over their data. <h2>What is Ethereum? </h2>Ethereum is an open-source, decentralized computing platform network. The Ethereum network works like the <a href="https://www.businessinsider.com/what-is-bitcoin">Bitcoin network</a> in that it's built on blockchain technology, essentially a digital public ledger where financial agreements can be verified and stored entirely by software - without intervention of a third party. The easiest way to think of the Ethereum network is as a secure database that's accessible to anyone. When new "blocks" of data get added, they're cryptographically "chained" to a parent block, effectively making an uneditable record of the previous changes. Ethereum is considered one of the largest <a href="https://www.businessinsider.com/what-is-cryptocurrency">cryptocurrencies</a> (next to Bitcoin), because ether is the second largest crypto next to bitcoin by market capitalization. Note: The process of mining cryptocurrency is known as proof of work. However, Ethereum developers have plans to adopt an alternative method, <a href="https://www.coindesk.com/proof-of-stake">called proof of stake</a>, which requires less energy and makes mining more accessible.But what makes Ethereum so exciting to users and enthusiasts is the network's potential to do more than just handle financial transactions. Ethereum takes the Bitcoin blockchain further by allowing developers to run programs (known as "smart contracts") that can host any kind of decentralized application (known as "dApps"). "Bitcoin was the pioneer of blockchain technology, used to create a peer-to-peer payment system," says Jacob Wade, a financial coach and president of <a href="http://iheartbudgets.net.">iHeartBudgets</a>. "Ethereum uses similar blockchain technology, but added the ability to create decentralized applications on top of its platform." People have already created and launched a variety of dApps on Ethereum, including games, marketplaces for digital art, and decentralized <keyword id="11895316" type="UNKNOWN" weightage="100" keywordseo="finance" source="Orion">finance</keyword> (DeFi) apps.<h2>How does Ethereum work? </h2>Ethereum works by using computing power to power the network. In practice, this means people and organizations are using their computers to run specific software, or nodes. Anyone can set up their computer to run a node. "Ethereum relies on node operators to process transactions on the Ethereum network," says Wade. "These operators collect a fee for running the hardware and software necessary to facilitate these transactions." The fees are called gas fees because they keep the network running. And they're paid in <a href="https://markets.businessinsider.com/currencies/eth-usd">ether</a> (ETH). Consider the many ways that you could use a large network of computers. Similar to Bitcoin, Ethereum uses it to power peer-to-peer transactions and track who owns the ether cryptocurrency. Additionally, developers can create and run dApps on the network. The dApps connect to the Ethereum blockchain with "smart contracts," which are more like computer programs than contracts in the traditional sense of the word. "Smart contracts are small programs stored on the Ethereum blockchain that can self-execute when certain conditions are met," says Robert Farrington, founder of <a href="https://thecollegeinvestor.com/">The College Investor</a>. "A good way to think about it is that the dapp is the front-end of the program, and the smart contract is the backend of the program."Also, dApps rely on the decentralized and open-source Ethereum network and can't be controlled by a single entity. In fact, once a dApp is added to the Ethereum platform, it can't be taken down - even if the original creator wants to remove it or disbands entirely. The decentralized system can lead to more anonymity for users, who may be able to pseudonymously use dApps. And it can also result in less control and censorship from third parties, including corporations and governments.<h3>Is ether the same as Ethereum?</h3>Ethereum and ether work in tandem, but they're not the same. "Ethereum is the technology, and ether is the actual cryptocurrency," explains Farrington. "You can think of ether as the actual 'cash' or fuel that powers the Ethereum network." If you want to invest in Ethereum, you can buy ether on a cryptocurrency exchange. You may also be able to use ether to buy other products or services, similar to how you can use bitcoins and other currencies. Ether could also potentially act as a "<a href="https://markets.businessinsider.com/news/currencies/ethereum-ether-network-upgrades-store-of-value-saxo-bank-2021-7">store of value,</a>" similar to how you may want to <a href="https://www.businessinsider.com/how-to-buy-gold">buy and hold gold</a>.<h2>A brief history of Ethereum </h2>Ethereum was originally conceived of by <a href="https://www.businessinsider.com/vitalik-buterin-created-ethereum-one-of-the-worlds-three-largest-cryptocurrencies-2019-1">Vitalik Buterin</a>, who published an introductory white paper on the idea in 2013. The basic idea was to build on the blockchain technology that Bitcoin uses to create a decentralized and programmable platform. Here are a few key moments in Ethereum's history beyond its original inception:<ul><li>2014: Ether goes on sale for the first time and people could initially buy 2,000 ether for one bitcoin. The Ethereum blockchain publicly launched the next year. </li><li>2016: The <a href="https://www.insider.com/dao-hacked-ethereum-crashing-in-value-tens-of-millions-allegedly-stolen-2016-6" target="_blank" rel="noopener">decentralized autonomous organization (DAO) hack</a> leads to a disagreement about whether people should get back the money they lost. The resulting DAO fork leads to the creation of Ethereum Classic - a continuation of the original blockchain - and Ethereum. </li><li>2017: Popular dApps launch, including the CryptoKitties game. The price of ETH increased from around $8 to over $700 during 2017. </li><li>2021: The London hard fork makes several important changes, including EIP-1559, which makes network fees more predictable and reduces the supply of ether.</li></ul><h2>Forks of Ethereum</h2>Ethereum has also changed since it was first launched. "When blockchain technology changes (or upgrades), a fork can occur - just like a fork in the road," says Farrington. "When this happens, it can be a soft fork or hard fork." In general, there are what's known as soft forks and hard forks in ethereum:<ul><li>Soft forks can be minor changes that are backward compatible. Node operators can stay connected to the blockchain, but they're incentives to upgrade to the latest version if they want to continue earning ether. </li><li>Hard forks are major upgrades that can significantly change the system and aren't backward compatible. Node operators need to switch to the latest version to keep the blockchain going. Or, if there's a disagreement, a split could result in two competing blockchains.</li></ul>Often, changes are proposed and discussed in an attempt to form consensus before making a change. For example, there's a multiple-step upgrade to <a href="https://markets.businessinsider.com/news/currencies/ethereum-upgrades-boost-ether-price-eip1559-prrof-of-stake-2021-5">Ethereum 2.0</a>, which may be completed in late 2021 or early 2022. The update will make significant changes to how Ethereum works, and may help make it more scalable and ecologically sustainable.<h2>Ethereum vs. Bitcoin</h2>Ether and bitcoin are both popular cryptocurrencies that rely on blockchain technology, but they're far from identical. "Ethereum is also a technology platform that enables smart contracts - which is very different from Bitcoin, which is essentially just a store of value," says Farrington. "This aspect of smart contracts on Ethereum unlocks a lot of potential use cases that you can't do with Bitcoin."<table style="border-collapse: collapse; width: 100%;" border="1"><tbody><tr><td style="width: 50%;">Ethereum</td><td style="width: 50%;">Bitcoin</td></tr><tr><td style="width: 50%;"><ul><li>It's an open-source platform built with blockchain technology that uses the ether cryptocurrency. </li><li>Developers can create and run dApps on the Ethereum network. </li><li>The total number of potential ether isn't predetermined.</li></ul></td><td style="width: 50%;"><ul><li>It's a cryptocurrency built using blockchain technology.</li><li>It's primarily used to store value or purchase goods and services. </li><li>There's a finite number of bitcoins that can be created.</li></ul></td></tr></tbody></table><h2>Is Ethereum a good investment? </h2>It depends. There's no one right answer for anyone looking to invest in Ethereum. The major thing to know that like any investment - it's risky and should be considered as such before adding it to any portfolio.Ether is becoming more widely available and there's a lot of noise in the news about it's rising value - but it's always important not to get sucked into the <a href="https://www.businessinsider.com/what-is-speculation" target="_blank" rel="noopener">speculation</a> too much."It may serve some purpose in a portfolio, but it should be a very small amount and be viewed as highly speculative," says Farrington. "It's also important to note that it's still very early - so while the technology is promising, it's unknown which technology may win in the long run."In the news: <a href="https://markets.businessinsider.com/news/stocks/ethereum-upgrades-crypto-staing-industry-boom-jpmorgan-ether-2021-7" target="_blank" rel="noopener">Ethereum network changes</a> could make cryptocurrency staking a $40 billion industry within a few years. <h2>The financial takeaway</h2>Ethereum uses blockchain technology to create a decentralized platform. The ether cryptocurrency is the "fuel" that powers the network, and you can invest in the Ethereum network by buying ether. "As with any cryptocurrency, buying Ether is a speculative investment," warns Wade. "Always do your research before investing into any digital currency, and don't risk more than you are willing to lose."If you're interested in cryptocurrencies more broadly, you could also look for ways to <a href="https://www.businessinsider.com/how-to-invest-in-blockchain-technology" target="_blank" rel="noopener">invest in companies</a> that participate in the space rather than buying a single cryptocurrency.<a data-type="5fdc12cc3617355d27686ece">How to invest in bitcoin: The major ways to buy, their pros and cons, and the strategies to consider</a><a data-type="5fd1032bbca41b06e2352e87">Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return</a><a data-type="5fc82cf036173566ec233b96">Alternative investments are exotic assets that can diversify your portfolio - here are the five major kinds and everything you should know about them</a><a data-type="5fac1720bf96b9125f748159">How to diversify your portfolio to limit losses and guard against risk</a>

What is Ethereum? What to know before investing

<ul class="summary-list"><li>Altcoin is short for "alternative coin" and - as the name suggests - is an alternative <keyword id="11892695" type="UNKNOWN" weightage="60" keywordseo="cryptocurrency" source="Orion">cryptocurrency</keyword> to Bitcoin.</li><li>Altcoins have become a major segment of the cryptocurrency markets, with projects like Ethereum (ETH), Stellar Lumens (XLM), and Uniswap (UNI) distinguishing themselves as platforms with innovative capabilities.</li><li>The altcoin markets are characterized for their volatility and are highly speculative investments subject to speculation.</li></ul>Since the emergence of Bitcoin, the concept of a decentralized, trustless peer-to-peer (P2P) payment network has inspired an entire class of digital assets. The crypto markets are a product of Bitcoin's success, and the fast-growing space consists of more than 9,000 altcoins.Now we have altcoins, which began to emerge in 2011 in an attempt to reinvent Bitcoin, with their own rules and improvements on different features.<h2>What is an altcoin? </h2>Altcoin is a <a href="https://www.businessinsider.com/what-is-cryptocurrency" target="_blank" rel="noopener">cryptocurrency</a> alternative to <a href="https://www.businessinsider.com/what-is-bitcoin" target="_blank" rel="noopener">Bitcoin</a> - its name is a portmanteau of "alternative" and "coin." Since Bitcoin is widely regarded as the first of its kind, new cryptocurrencies developed after are viewed as alternative coins - or altcoins. The emergence of altcoins began around 2011, with the first generation formed using the same blockchain engine as Bitcoin.The first altcoin was Namecoin, which is based on Bitcoin's code and was released in April 2011. Namecoin is integral to the history of altcoins in that it showed that there's enough room in the crypto markets for more than one kind of coin.Blockchains today can run several hundreds of "altcoins," fueling similar currency projects with unique rules and mechanisms. Altcoins like <a href="https://www.businessinsider.com/what-is-ethereum" target="_blank" rel="noopener">Ethereum</a> can provide developers with a toolkit and programming language to build decentralized applications into the blockchain.<h2>Understanding how altcoins work </h2>To understand how altcoins work, it's good to first understand how blockchain technology works - which is where all cryptocurrencies operate. The blockchain network is a distributed ledger that stores data like cryptocurrency transactions, NFT ownership, and decentralized <keyword id="11895316" type="UNKNOWN" weightage="100" keywordseo="finance" source="Orion">finance</keyword> (DeFi) smart contracts. This ledger is often referred to as a "chain" comprising "blocks" of data, which are used to verify new data before additional blocks can be added to the ledger.This network, on which Bitcoin operates, is groundbreaking because it's a decentralized, trustless, P2P payment network that functions without a central authority or entity facilitating transactions. And altcoins function on the exact same premise as Bitcoin: to operate using this blockchain technology. However, there have been some altcoins that have emerged to instead improve on the flaws of Bitcoin or to achieve some other goal. For example, Litecoin was designed by former Google engineer Charlie Lee as a "lite version of Bitcoin."<h2>Understanding forks</h2>A fork refers to an update in network protocol (the open source software blockchains run on). There are two kinds of forks: a hard fork and soft fork. A soft fork is a minor upgrade to the software, and typically means nothing for users. A hard fork is a major change to the network, and requires users/miners to update to the latest software in order to continue mining. If developers decide they do not like the direction a blockchain network is going in, they can do a hard fork and create a new coin. Since 2009, Bitcoin has seen over <a href="https://mapofcoins.com/bitcoin" target="_blank" rel="noopener">400 hard forks</a>. In the news: In the past year, crypto and celebrity influencers have come under fire for promoting cryptocurrencies. Even social media platforms like TikTok have <a href="https://markets.businessinsider.com/news/currencies/tiktok-crypto-bitcoin-investing-trading-ban-sponsored-ad-content-branded-2021-7" target="_blank" rel="noopener">banned crypto promoters</a> from the platform. Here are the two key things to know about altcoins.Altcoins are a highly speculative and volatile investment. <a href="https://www.businessinsider.com/what-is-speculation" target="_blank" rel="noopener">Speculation</a> is a powerful driver of the crypto markets so it's important to do your research before investing in any altcoin. Half-baked whims and trading based on rumors are exactly what the experts advise against."An emerging technology like crypto is going to attract people of ill-repute who are looking to make a quick buck off of the new investor," says Ben Armstrong, founder of <a href="https://bitboycrypto.com/" target="_blank" rel="noopener">BitBoy Crypto</a>. "So it's important to be cautious and not fall for the hype of a slick new project, or get FOMO when you see a crypto asset making new all-time highs." The decentralized, intangible, and often misunderstood nature of cryptocurrencies in general makes predicting the long-term, steady success of an altcoin project difficult to predict. Some altcoins, like Ethereum, have maintained their position in the market through constant innovation and the strength of their community. Speculation has a more dramatic effect on newer altcoins. External factors like public perception, Bitcoin price fluctuation, or a meme on Reddit can oftentimes cause drastic price fluctuations.While the crypto community stands united on its long-term bullish outlook for Bitcoin, the temptation of selling coins for short-term profits is built into the crypto zeitgeist. The crypto community created the term "hodl" in an effort to encourage people to hold on to their crypto assets for the long-term. "Hodl" means "hold on for dear life," and to resist the impulse of selling when the value of their crypto drops or rises.Quick tip: Smart contracts are programs that are stored on blockchain that execute when certain conditions are met.Cryptocurrency takes a toll on the environment. Bitcoin's energy consumption is a well-known flaw. As of August 2021, Bitcoin's energy consumption is 151.57 TWh according to Digiconomist's Bitcoin Energy Consumption Index - that's comparable to what the entirety of Malaysia uses in energy. The culprit for the tremendous costs of energy lies with the "proof of work" (PoW) consensus algorithm, which is how transactions are verified. And as Bitcoin mining has become more competitive, the computing power required to profitably mine new bitcoins is represented in factories loaded with servers all working toward solving the network's algorithms.The PoW consensus mechanism is responsible for driving the competition for faster and more powerful computational processing power. The faster a miner's computer can complete the formula, the higher their odds of winning a block reward. Over time, miners have developed computer hardware with the sole function of processing the PoW consensus algorithm. This has evolved from a miner running a program in the background of their PC to entire mining farms. Miners (or a pool of miners) will buy factories in countries where electricity is cheap and fill them with thousands of mining rigs. The energy required to keep the rigs running 24/7, combined with the fans and coolant systems to prevent overheating and fires, has made crypto mining an environmental disaster.<h3>The emergence of "green coins"</h3>Bitcoin's carbon footprint has provided an opportunity for altcoins with greener consensus mechanisms to market themselves as "green coins." While proof of work is the main culprit for the Bitcoin energy crisis, blockchains like Ethereum and <a href="https://cardano.org/" target="_blank" rel="noopener">Cardano</a> (ADA) operate on proof of stake consensus mechanisms. Compared to the energy-hungry PoW, staking requires no mining in order to participate and earn coins. The success of Ethereum and Cardano prove that people can participate in crypto while being environmentally friendly.Quick tip: Proof of work is the consensus mechanism used by Bitcoin and many other altcoins to audit transactions on the blockchain and "mine" new crypto. Crypto mining is solving computational formulas to audit transactions on the blockchain. Completing the formula means a chance at receiving a newly minted BTC reward. <h3>Types of altcoins</h3>Over time, there have been many altcoins that have come along. And now, there are the main types:<ul><li>Mining-based: Altcoins that are mining-based are created through the process of mining, like Bitcoin. One example of a mining-based coin is Litecoin.</li><li>Stable coins: These types of altcoins are a new subset to the crypto market that's meant to reduce volatility. By design, they're digital assets with their value pegged to fiat and physical assets (off-chain) and crypto collateral (on-chain). Algorithmic stablecoins are not backed by on-chain or off-chain assets, but governed by a smart contract at its core.</li><li>Security tokens: These types of altcoins are a digital or liquid asset that represents an ownership stake in a tangible asset. Stored on a distributed ledger, security tokens are the blockchain-equivalent to shares, but can represent a stake in IP, a car, or property, etc.</li><li>Utility tokens: Once very popular in the 2017 initial coin offering (ICO) boom, utility tokens are not pegged to any currency or tangible value. In exchange for capital in the early stages of an ICO, investors would receive a quantity of utility tokens in exchange for their investment determined by the company or project owner. The utility tokens will serve as a coupon or voucher after funding to purchase goods and services from the issuer.</li></ul>Quick tip: One of the main benefits of blockchain technology is transparency. If something is on the blockchain, it means it is visible, permanent, and accessible to the public. On-chain typically refers to a transaction that is performed and recorded on the blockchain. Off-chain is a transaction not directly recorded on the blockchain.<h2>Staking an altcoin</h2>Staking is the <a href="https://www.businessinsider.com/passive-investing" target="_blank" rel="noopener">passive-investing strategy</a> where an investor holds funds in a cryptocurrency wallet in order to earn rewards over time. When an investor chooses to stake their holdings, the network can use it to forge new blocks on the blockchain. The process of staking supports the process of PoS work because it requires participants to support it. And so stakers are essentially helping to make this happen.Also, staking is incredibly energy-efficient - unlike mining. According to the Ethereum Foundation, the latest switch to a PoS system <a href="https://blog.ethereum.org/2021/05/18/country-power-no-more/" target="_blank" rel="noopener">will reduce energy costs by 99.95%</a>.<h2>7 notable altcoins 2021</h2>While no altcoin has managed to "dethrone" Bitcoin in value, many projects have proved themselves worthy enough to a global community of investors and developers:<h3>1. Ethereum (ETH)</h3><div type="image" title="Ethereum altcoin on green background 2x1" height="835" width="1668" msid="85848268" hostid="261"></div>The second-largest blockchain in crypto, <a href="https://www.businessinsider.com/what-is-ethereum" target="_blank" rel="noopener">Ethereum's</a> evolution has taken it from an asset to an application. Founded by Vitalik Buterin in 2013, Ethereum is a distributed blockchain platform for smart contracts and dApps (decentralized applications). With its native token, ether (ETH), users can interact with the Ethereum platform. Ether can be traded on most crypto exchanges, used to pay transaction fees, or as collateral for ERC-20 tokens, which have DeFi utility. Ethereum's integration with smart contracts via the Solidity programming language has distinguished the project from Bitcoin. A smart contract is a self-executing code that can run on the blockchain.<h3>2. Chainlink (LINK)</h3><div type="image" title="Chainlink altcoin on green background 2x1" height="835" width="1668" msid="85848271" hostid="261"></div>Launched officially in 2019 on the Ethereum blockchain, Chainlink is a decentralized oracle network that's meant to expand on smart contracts. In a nutshell, it connects smart contracts with "off-chain" data and services. The network is built around the LINK network and token and has two parts: on-chain and off-chain.The on-chain component comprises oracle contracts on the Ethereum blockchain, which oversee and process data requests that come in from users. The off-chain component is made up of off-chain oracle nodes that connect to the Ethereum network, which are responsible for processing external requests that are later converted to contracts.<h3>3. Aave (AAVE)</h3><div type="image" title="AAVE altcoin on green background 2x1" height="835" width="1668" msid="85848274" hostid="261"></div>The AAVE is an open-source DeFi lending protocol that allows anyone to loan or borrow crypto without an intermediary. As a lender, you can deposit funds - which are allocated into a smart contract - where you can earn interest based on how Aave is performing in the market. Making a deposit means you can also borrow by using your deposit as collateral.Rebranded from ETHLend following a successful ICO in 2017, Aave switched from a decentralized P2P lending platform into a liquidity pool model. This means loans are acquired from a pool instead of an individual lender. Since 2020, the Aave Protocol has been an open-source and non-custodial liquidity DeFi protocol for earning interest on deposits and borrowing assets. Holders of AAVE can decide on the direction of the project by voting on and discussing proposals.<h3>4. Stellar Lumens (XLM)</h3><div type="image" title="Stellar Lumens altcoin on green background 2x1" height="835" width="1668" msid="85848277" hostid="261"></div>Stellar is an open-source payment network that doubles as a distributed intermediary blockchain for global financial systems, designed so all the world's financial systems can work together on a single network. Stellar began in 2014 when Ripple co-founder Jed McCaleb disagreed with the direction of the Ripple project. The ethos behind Stellar's development is to make international money transfers possible for the everyday person. While Stellar is an open-source network for currencies and payments, Stellar Lumens (XLM) is the circulating native asset on the network. Stellar keeps its ledger in sync using its <a href="https://www.stellar.org/papers/stellar-consensus-protocol" target="_blank" rel="noopener">Stellar Consensus Protocol (SCP)</a>. Instead of relying on a miner network, SCP uses the Federated Byzantine Agreement algorithm, enabling faster transactions.<h3>5. Uniswap (UNI)</h3><div type="image" title="Uniswap altcoin on green background 2x1" height="835" width="1668" msid="85848283" hostid="261"></div>Uniswap is a decentralized exchange ecosystem built on the Ethereum blockchain. Launched in 2018, Uniswap uses an on-chain automated market maker. One of Uniswap's unique features is that anyone can be a market maker by depositing their assets into a pool and earning fees based on trading activity.Uniswap uses an automated market maker protocol that executes trades according to a series of smart contracts. The smart contracts automate price discovery, allowing users to swap one token for another without an intermediary. In traditional finance, market makers are usually brokerage houses with incentives that can cause a conflict of interest.<h3>6. PotCoin ($POT)</h3><div type="image" title="Potcoin altcoin on green background 2x1" height="835" width="1668" msid="85848284" hostid="261"></div>PotCoin is a Canadian-based digital currency that was launched in 2014 to allow consumers to buy and sell legal cannabis products. PotCoin was introduced as a solution for cannabis enthusiasts and the industry looking to legally transact at a time where banks were unable to do so.PotCoin is an open source cryptocurrency forked from the Litecoin core. There are subtle changes to the PotCoin protocol including a shorter block generation time and the increased 420 million max supply of PotCoins. Potcoin switched from a Proof of Work mechanism to Proof of Stake in 2016 to make supporting the network more accessible and less harmful to the environment.<h3>7. Litecoin (LTC)</h3><div type="image" title="Litecoin altcoin on green background 2x1" height="835" width="1668" msid="85848288" hostid="261"></div>One of the first-generation of altcoins made in 2011, Litecoin is a cryptocurrency based off of Bitcoin. Key things that distinguish Litecoin from Bitcoin include blocktime (four times faster block times than Bitcoin), supply (Litecoin has a max supply of 84 million while Bitcoin max supply of 21 million), its hashing algorithm, and distribution.Dubbed the "digital silver" to Bitcoin's "digital gold," Litecoin's goal was to optimize the Litecoin asset while preserving the best parts of Bitcoin.Quick tip: <a href="https://ethereum.org/en/developers/docs/standards/tokens/erc-20/" target="_blank" rel="noopener">The ERC-20 standard</a> is a set of rules applied to smart-contract tokens on the Ethereum blockchain. The flexibility and fungibility of the ERC-20 token allows dApp developers to create utility tokens, security tokens, or stablecoins.<h2>The financial takeaway</h2>Altcoins have come a long way since 2011, and continue to prove themselves as more than just an "alternative to Bitcoin." The crypto space is a fast-moving and increasingly popular point of interest for investors. Thanks to the innovation and integration of crypto into mainstream business, people can safely and legally buy altcoins on their phone or computer.Easy access to the crypto markets doesn't mean it isn't risky. Before investing in an altcoin, ask yourself: have you researched and performed enough due diligence? Would you be able to explain the project to your family or friends at the dinner table? Whether you want to trade altcoins full-time or just "hodl" onto your Bitcoin, the choice is yours. Listening to the experts, evaluating the risks, and assessing your financial goals are keys to investing responsibly.<a data-type="600f72e1fdb68e08982d5365">A bitcoin IRA lets you profit from the cryptocurrency's potential gains in a tax-advantaged way</a><a data-type="5fac1720bf96b9125f748159">How to diversify your portfolio to limit losses and guard against risk</a><a data-type="5fdc12cc3617355d27686ece">How to invest in bitcoin: The major ways to buy, their pros and cons, and the strategies to consider</a><a data-type="5fd1032bbca41b06e2352e87">Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return</a>

Altcoins are the alternative digital currencies to bitcoin - here's what they are and how they work

<a href="https://www.businessinsider.com/master-your-money"></a><div type="image" title="A hand placing coins into a crypto wallet, surrounded by cryptocurrency symbols including Bitcoin and Dogecoin" height="834" width="1668" msid="87341472" hostid="261"></div><ul class="summary-list"><li>A crypto wallet is a device or program that allows you to transfer and store <keyword id="11892695" type="UNKNOWN" weightage="60" keywordseo="cryptocurrency" source="Orion">cryptocurrency</keyword>.</li><li>There are different types of crypto wallets, such as paper wallets, hardware wallets, and software wallets.</li><li>A crypto wallet's security depends on how the private key is stored.</li></ul>You can't fold up a bitcoin and put it in your wallet. Yet you can hold the keys to your crypto by using a crypto wallet of your own. A crypto wallet is a software program or physical device that allows you to store your crypto and allow for the sending and receiving of crypto transactions. A crypto wallet consists of two key pairs: private keys and public keys. A public key is derived from the private key and serves as the address used to send crypto to the wallet.Quick tip: Wallets have many public keys. This means that you can give out multiple different public addresses and use them to receive crypto to the same wallet.The important part of a wallet - and the part where new users often find themselves getting into trouble - is the private key. A private key is like the key to a safe deposit box. Anyone who has access to the private key of a wallet can take control of the balance held there.But unlike a safe deposit box, crypto users who hold their own private keys and make transactions using non-custodial wallets (i.e., a wallet not hosted by an exchange or other third-party) become their own bank. "It is similar to a bank account but the main difference is it is controlled by a key that only you control. You use this [private] key to initiate transactions, which is called 'signing,'" says Joel Dietz, founder of <a href="https://artwallet.co/" target="_blank" rel="noopener">Art Wallet</a> and contributing developer to <a href="https://metamask.io/" target="_blank" rel="noopener">MetaMask</a>.While the idea of crypto itself is still new to many people, crypto wallets themselves are designed to be user-friendly. Web wallets like MetaMask and desktop wallets like Electrum come with a graphical user interface (GUI) that is made to be as simple as possible.<h2>Understanding how crypto wallets work </h2><a href="https://www.businessinsider.com/what-is-blockchain" target="_blank" rel="noopener">Blockchain</a> is a public ledger that stores data in what's known as "blocks." These are records of all transactions, the balances held at any given address, and who holds the key to those balances. Crypto isn't stored "in" a wallet, per se. The coins exist on a blockchain and the wallet software allows you to interact with the balances held on that blockchain. The wallet itself stores addresses and allows their owners to move coins elsewhere while also letting others see the balance held at any given address.Quick tip: When sending a crypto transaction, always make sure you're sending to an address for a wallet of the same type of cryptocurrency. If you send Bitcoin (BTC) to a Bitcoin Cash (BCH) address, for example, those funds will be lost forever."Most Crypto wallets allow users to send, receive, and store crypto. Some have a feature to buy and spend cryptocurrencies," says <a href="https://www.linkedin.com/in/utsavdar/" target="_blank" rel="noopener">Utsav Dar</a>, co-founder of <a href="https://incubate.finance/" target="_blank" rel="noopener">Incub8 Finance</a>. "Certain crypto wallets have additional features like swapping between tokens, staking tokens for a fixed return paid out to users, as well as access to dApps (decentralized applications) built on various networks."While each wallet has its own specific nuances, here are the general steps involved in sending or receiving funds using a crypto wallet:<ul><li>To receive funds, you need to retrieve an address (also known as a public key) from your wallet. Locate the "generate address" feature in your wallet, click it, then copy the alphanumeric address or QR code and share it with the person who wants to send you crypto.</li><li>To send funds, you need the address of the receiving wallet. Locate the "send" feature in your wallet and enter an address of the wallet you intend to send coins to. Select the amount of crypto you'd like to send, and click "confirm." Consider sending a small test transaction before sending large amounts of crypto. Note that sending coins requires a fee that will be paid to miners in exchange for processing the transaction.</li></ul>Sending money via QR codes or long strings of numbers and letters may seem strange at first. But after doing it a few times, the process becomes quite simple.<h2>Types of crypto wallets </h2>Crypto wallets fall under two general categories: software wallets and hardware wallets.Software wallets are simply desktop programs or browser extensions that make it easy for people to send, receive, and store crypto. Hardware wallets serve a similar purpose but are physical devices that can be plugged into a computer.Software wallets are sometimes called "hot" wallets because the funds are kept online. Hardware wallets keep private keys held offline or in "cold" storage. <h3>Hardware wallets</h3>A hardware wallet is a small device that can store crypto offline. "A hardware wallet keeps your keys off of your phone or computer," saya Dietz. "Usually, you plug in the hardware wallet from a USB port. This is much more secure because all of the signing happens off of your computer." The typical hardware wallet costs around $100, give or take. These tend to be slightly more complicated to use than software wallets.Most hardware wallets interact with a computer in one of three ways:<ul><li>A web-based interface</li><li>A company-created app</li><li>A separate software wallet</li></ul><h3>Software wallets</h3>Related Article Module: The best Bitcoin wallets for storing and securing your cryptocurrencyA software wallet is a computer program or mobile app that holds private keys online. Software wallets are unique to each cryptocurrency while hardware wallets often support multiple currencies (more on these differences later)."[Software wallets] can either be used on the web, in which case they are custody wallets, which aren't completely secure. Or they [can come] in the form of apps that can be installed on a phone/laptop, in which case the private keys are stored on the local device," says Dar. "These may be connected to the internet, again making them less secure."​​Quick tip: When using software wallets, be sure to create backups on a regular basis. If a problem occurs with your web browser or hard drive, you could lose the private keys to your wallet, resulting in permanent loss of funds.The three main types of software wallets are:<ul><li>Web-based wallets, like MetaMask, which work as a browser extension and can send ETH transactions, making it easy for users to interact with things like decentralized applications and decentralized finance (DeFi) protocols </li><li>Desktop wallets, such as the Electrum wallet, that can be used on a desktop or laptop computer</li><li>Mobile wallets, such as the Blockchain.com wallet, that allow users to store crypto, send/receive transactions, and "sweep" the private keys of an existing wallet into the app by scanning a QR code on their smartphones</li></ul>Each type of crypto wallet has its own use case depending on the goals of the user, although they all accomplish the same things. Quick tip: Paper wallets are another way to store your private keys. But the creation and use of paper wallets comes with a high risk of user error, and is too dangerous for storing any significant amount of crypto. It's generally advised to use other kinds of crypto wallets. <h2>Pros and cons of crypto wallets </h2>Some pros of using non-custodial crypto wallets include:<ul><li>Self-ownership of money. If you hold your own private keys, then that crypto belongs to you and only you. By comparison, money in a bank is technically property of the bank.</li><li>The ability to send transactions to whomever you like, whenever you like. Decentralized cryptocurrencies are censorship-resistant because no one controls the network, making it hard for anyone to stop transactions. </li></ul>Some cons of using crypto wallets include:<ul><li>User responsibility. Becoming your own bank means you have to assume 100% liability for anything that goes wrong.</li><li>Learning curve. Using a crypto wallet requires a basic level of computer knowledge in addition to getting familiar with a new kind of financial ecosystem.</li></ul><table style="border-collapse: collapse; width: 100%;" border="1"><tbody><tr><td style="width: 50%;">Pros</td><td style="width: 50%;">Cons</td></tr><tr><td style="width: 50%;"><ul><li>Self-ownership of money</li><li>Censorship-resistant transactions</li><li>Quick and easy access</li></ul></td><td style="width: 50%;"><ul><li>User responsibility</li><li>Learning curve</li><li>Chance of making mistakes</li></ul></td></tr></tbody></table><h2>The financial takeaway</h2>The answer to the question "what is a crypto wallet" is that it's like a crypto bank account that only you control. Software wallets are built for convenience while hardware wallets are built for security. To get started, you should research what wallet types work best for you. Research the options available to you, including cost and security.Those interested in going a step further can invest in a hardware wallet since doing so is one of the best ways to take ownership of your own private keys. Learning to use these might take a little longer for beginners, but doing so could be worth it for the added security. For those holding large sums of money in the form of cryptocurrency, most experts agree that using a hardware wallet is a must.<a data-type="610ae71ab0b35f330c4d0734">Altcoins are the alternative digital currencies to bitcoin - here's what they are and how they work</a><a data-type="61143d4737043a45f7070cd8">Digital assets are becoming the new normal - here's how to buy cryptocurrency</a><a data-type="613fc21a37043a76c60803d3">Ready to invest in Bitcoin? Here are 4 steps to get started</a><a data-type="611446ec37043a480114bb24">What to know about non-fungible tokens (NFTs) - unique digital assets built on blockchain technology</a>

What is a crypto wallet? Understanding the software that allows you to store and transfer crypto securely

<ul class="summary-list"><li>Last year was brutal for crypto markets, with the fallout of FTX, Celsius, and Three Arrows Capital.</li><li>"Centralized lending and earn products are going the way of the dodo," one exec said. </li></ul>Cryptocurrency markets took a major beating in 2022, with the downfall of industry giants like digital asset exchange FTX, algorithmic stablecoin TerraUSD, and now-defunct fund hedge fund Three Arrows Capital.The industry's market cap is off more than 65% from record highs in November of 2021, according to data from <a href="https://messari.io/" target="_blank" rel="noopener">Messari</a>, with bitcoin and ethereum down over 60% year-to-date. Many are asking themselves: Can it get any worse?For context, the sector saw an <a href="https://coinmarketcap.com/alexandria/article/a-comparison-of-the-2018-bear-market-and-2022-crypto-market-drawdown" target="_blank" rel="noopener">18-month long bear market</a>, dubbed "crypto winter," from 2018 through 2019. "Contagion takes a long time to fully play out and we expect that there are still some dominoes to fall in 2023. With that said, we are already seeing a renewed commitment to building better, more trustworthy solutions in the space and expect that trend to be a core theme of 2023," Phil Wirtjes, Head of Strategy at digital asset trading platform Enclave Markets, told Insider.<h3>What's the next shoe to drop this year?</h3>All eyes are on Digital Currency Group, the conglomerate that oversees heavyweights like asset manager Grayscale and crypto brokerage Genesis.Genesis is under fire after its lending arm halted withdrawals in November. The firm had exposure to Sam Bankman-Fried's collapsed exchange, with <a href="https://twitter.com/GenesisTrading/status/1590836594382032896?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1590836594382032896%7Ctwgr%5E03ae02094105e847cf14386e900558e65a8cd298%7Ctwcon%5Es1_c10&amp;ref_url=https%3A%2F%2Fcointelegraph.com%2Fnews%2Fgenesis-trading-reveals-175m-of-funds-are-locked-in-ftx" target="_blank" rel="noopener">$175 million</a> stuck on an FTX trading platform. Genesis says customers rushed to withdraw funds after FTX filed bankruptcy, which led to a severe liquidity crunch."The impending downfall of Genesis has been a topic of concern for some time, as the majority of its assets are owned by US hedge funds and the market has already adjusted for this news," Andrei Grachev, the Managing Partner at digital asset market maker DWF Labs, told Insider.He added: "While the collapse may not have a major impact on the industry as a whole, it marks the end of an era as DCG, long feared to be the final domino to fall, will finally succumb."<a href="https://www.wsj.com/articles/crypto-lender-genesis-lays-off-30-of-staff-11672939434" target="_blank" rel="noopener">Genesis slashed</a> 30% of its staff on Thursday, a company spokesperson told Insider, with the sales and business- development teams being most impacted by the cuts. Gemini, the cryptocurrency exchange that lent Genesis funds for its interest-bearing product, is trying to recoup $900 million of customer money from the embattled firm. There could be majors losses and liquidations throughout the industry if a large firm like Genesis or its parent company DCG were to file for bankruptcy."Lawsuits and bankruptcies will continue for many years. Even today, the coins from the bankruptcy of Mt.Gox from 2014 are awaiting distribution," Tegan Kline, CBO and co-founder of software developer Edge &amp; Node, told Insider. "The biggest unresolved situation right now is the situation with DCG, Genesis, and Grayscale and we are waiting to see what happens there."FTX contagion could lead to more bankruptcies and lawsuits this year as well.Fedor Muegge, partner at blockchain venture firm 369 Capital, told Insider that the industry hasn't seen the FTX or Terra and Luna implosions fully play out yet."We haven't even started to really unravel FTX and its network of companies. Further work on this and investigations in other recent events such as the Terra-Case, could lead to more lawsuits," Muegge said.He added: "In addition to that, a lot of smaller players will run out of liquidity during this prolonged bear market which will eventually lead to more bankruptcies. ""It's possible with major market shock(s), crypto can go even lower than Luna/UST/3AC and FTX times, to $12-13K Bitcoin and $8-900 Ether," Youwei Yang, Chief Economist at crypto mining company BTCM, told Insider, citing a potential harsh macro condition, restrictive regulatory environment, or DCG bankruptcy.Expect a pullback on double-digit interest yield offerings from centralized firms, because if there's anything that we've learned from crypto in 2022, it's that if it sounds too good to be true, then it probably is.Centralized lender Celsius offered customers nearly 20% annual percentage yields for deposits. The firm later <a href="https://dfr.vermont.gov/consumer-alert/celsius-network-files-chapter-11-bankruptcy#:~:text=On%20July%2013%2C%202022%2C%20Celsius,Southern%20District%20of%20New%20York." target="_blank" rel="noopener">filed</a> for bankruptcy after a liquidity crisis in July. "Centralized lending and earn products are going the way of the dodo," Tegan Kline, CBO and cofounder of software developer Edge &amp; Node, told Insider. "You can still earn attractive yields using web3 protocols and dapps, specifically in DeFi."As a result, investors may turn towards decentralized finance, or DeFi protocols like Aave and Compound, or decentralized exchanges like Uniswap."There are many protocols that offer yield from staking to securing the network as with ethereum or DeFi protocols that have come out of the crisis in crypto lending with flying colors," Kline added.

Can crypto markets really get any worse? Industry experts say yes &ndash; and break down 3 worst-case scenarios for 2023

<ul class="summary-list"><li><keyword id="11899102" type="UNKNOWN" weightage="60" keywordseo="decentralized-finance" source="Orion">Decentralized finance</keyword> or <keyword id="11899100" type="UNKNOWN" weightage="60" keywordseo="defi" source="Orion">DeFi</keyword> is a financial system that reimagines financial transactions by removing intermediaries and is based on blockchain technology, typically Ethereum.</li><li>Various financial transactions are possible with DeFi's 'smart contracts' that execute financial transactions under certain conditions.</li><li>There are many different decentralized applications, or dApps, and uses within DeFi that open accessibility but come with risk.</li></ul>Decentralized finance or DeFi is a global financial system that's available on blockchains that are public — most often <a href="https://www.businessinsider.com/what-is-ethereum" target="_blank" rel="noopener">Ethereum</a>. "DeFi stands for decentralized finance. In simple words it stands for self-custody finance. Unlike traditional finance where a company, bank, fund is responsible for your money, in DeFi no one but you has access to it," explains Anton Mozgovoy, co-founder of <a href="https://viamover.com/" target="_blank" rel="noopener">Mover</a>, a DeFi Savings platform.Through this new emerging technology, DeFi expands what's possible with cryptocurrency and moves beyond just currency and creates sophisticated systems with an abundance of uses with the creation of applications, typically referred to as decentralized apps, or dApps, which we'll get into later. DeFi was coined in 2018 by a group of entrepreneurs and Ethereum developers who wanted to open up finance applications from traditional systems. The abbreviation sounds like defy, which is intentional.<h2>How DeFi works </h2>DeFi, previously referred to as "open finance," takes out the middleman in financial transactions. So instead of having your bank or credit card issuer be the intermediary between you and a merchant when you make a purchase, you use the digital currency and have ownership of it to use directly. DeFi is primarily based on Ethereum, the top cryptocurrency next to <a href="https://www.businessinsider.com/what-is-bitcoin" target="_blank" rel="noopener">Bitcoin</a>.Here are the main tenets of DeFi: <ul><li>There are no intermediaries, so no banks or institutions overseeing your money </li><li>There's a level of transparency, as the code is available for anyone's review </li><li>There are open networks that transcend geographic borders </li><li>There are many applications for users, primarily based on Ethereum</li></ul>Though DeFi is usually a main player in the cryptocurrency conversation, it goes beyond creating an alternative digital currency or value. DeFi works to replace the role of traditional financial systems through its smart contracts. "DeFi is all about code. With the help of things called smart contracts, your money is programmed to perform various [functions]. It creates a unique opportunity for anyone with a computer and internet connection to participate in the global economy," notes Mozgovoy.One of the most attractive parts of DeFi for people is that it eliminates the barrier to entry for many of these financial transactions. You no longer have a government or corporation manage your money or need to qualify for certain financial products. Using traditional financial systems, you apply for a loan and may be rejected based on your credit. You have a bank account or investment brokerage with a company that oversees your money. With DeFi's smart contracts, certain financial transactions are executed after specific conditions are met. The smart contracts allow for borrowing, lending, and more and the terms of the transaction are literally written in the code. While that makes these transactions easy-to-use and more efficient, it can also make them more susceptible to errors that can't be fixed. Because of these smart contracts and the ability for Ethereum to create applications, DeFi can be used:<ul><li>As a lending network, which offers peer-to-peer borrowing and lending </li><li>Through decentralized exchanges, where users can exchange one type of currency for another. For example, trading ether for US dollars </li><li>For betting, where users bet on potential outcomes of certain events </li><li>As <a href="https://www.businessinsider.com/stablecoin" target="_blank" rel="noopener">stablecoins</a>, which connect a type of cryptocurrency to a more traditional type of currency like the US dollar, in order to lower price volatility and add more stability </li></ul><h2>What are the main elements of DeFi?</h2>There are certain DeFi "building blocks" that create a software stack, with every layer building upon another. These layers work together to create DeFi and its related applications that serve users in a variety of different ways. If one layer is off, so are the other layers. The five layers that make up DeFi include:<ol><li>The settlement layer, which is the foundational layer of the blockchain and its specific native asset. For example, Ethereum is the network on the blockchain and ether is the native currency on that blockchain. This layer provides security and a set of rules to follow. </li><li>The asset layer, which refers to all the tokens and digital assets that are native to the particular blockchain.</li><li>The protocol layer, which sets the protocols or guidelines for smart contracts. </li><li> The application layer, which brings the protocols to life with a user interface that is consumer-facing. </li><li>The aggregation layer, which consists of aggregators that connect the various dApps and protocols which make up the foundation for borrowing, lending on and other financial services. </li></ol><h2>Pros and cons of DeFi</h2>The rising popularity of DeFi and other cryptocurrency make it seem like an attractive investment. But it's important to understand what you're getting into before taking the plunge, and understand the benefits and drawbacks. "In DeFi you hold your money, you control where your money goes and how it's spent. DeFi is efficient, since everything is programmable, in a click of a button you can perform complex transactions," explains Mozgovoy.The accessibility factor can remove some barriers, but there are a number of cons to be aware of. "DeFi is new and experimental. Since everything is code, it can have bugs. Bugs lead to money loss or hacks. DeFi is new and complicated," says Mozgovoy. "User experience can still be rough. Learning curve is still steep, but it will change." <table><tbody><tr><td>Pros</td><td>Cons </td></tr><tr><td>There is no intermediary between transactions </td><td>If you forget your password, you can lose your assets since there is no governing body</td></tr><tr><td>May offer more accessibility for loans and insurance without a credit score </td><td>Lack of consumer protections </td></tr><tr><td>May offer higher interest rates</td><td>High volatility and risk </td></tr></tbody></table>All investing comes with some level of risk and DeFi is no different. But any cryptocurrency or DeFi application may have a higher level of risk due to difficulties with regulation (<a href="https://www.sec.gov/news/statement/crenshaw-defi-20211109" target="_blank" rel="noopener">though the SEC is looking to fix that</a>) and potential scams. A good rule of thumb is to not invest any money you can't afford to lose.<h2>How to invest in DeFi</h2>If you're interested in investing in DeFi, there are a number of ways to do it. "To start in DeFi you need native currencies — like ETH, AVAX, BNB, FTM, MATIC and others — as every transaction will require gas. You can purchase those through various exchanges, wallets, and crypto services," explains Mozgovoy.You can start with a decentralized exchange (DEX) such as Uniswap. According to <a href="https://uniswap.org/" target="_blank" rel="nofollow noopener sponsored">their site</a>, you can "Swap, earn, and build on the leading decentralized crypto trading protocol."It's important to keep in mind that since everything is relatively new with DeFi and there is no governing body, be careful about what you invest in. "In DeFi anyone can launch their own project, token, contract — that is why you should be aware of scams and low quality projects," notes Mozgovoy. Aside from being aware of scams, in practicality, Mozgovoy states that with DeFi users can save, lend, or take part in <a href="https://www.businessinsider.com/derivative" target="_blank" rel="noopener">derivatives</a> and exchanges.Quick tip: Read about <a href="https://www.businessinsider.com/proof-of-stake" target="_blank" rel="noopener">Proof of Stake</a>, which is used as a way to confirm crypto transactions, and what it means here.<h2>The financial takeaway</h2>DeFi is an expansive financial ecosystem that strives to take out the middleman and allow for financial transactions between users. Currently, there is a lot of hype around DeFi and crypto. If you want to take part, be sure to understand not only the rewards but also the risks before getting started.

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You Searched For "what are dapps" and got 6 results

WallStreetBets founder Jaime Rogozinski breaks down the Nancy Pelosi stock controversy, and details his next project for retail investors

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Can crypto markets really get any worse? Industry experts say yes – and break down 3 worst-case scenarios for 2023