Facebook Stands Up to Ad Boycotts
(Image Courtesy of Search Engine Journal)
Facebook has experienced a wave of bad press, resulting in advertisers like Starbucks and PepsiCo pulling ads from the platform. The negative publicity came as backlash from Facebook’s perceived tolerance of hate speech and misinformation.
In response, the social media company has changed its posting policies as the US presidential campaign begins to ramp up. In a Facebook post, CEO Mark Zuckerberg highlighted the following initiatives it would be enforcing.
- Providing Authoritative Information on Voting During the Pandemic
- Additional Steps to Fight Voter Suppression
- Creating a Higher Standard for Hateful Content in Ads
- Labeling Newsworthy Content
In late June, as the first step in its new oversight, Facebook banned hundreds of groups associated with white supremacy groups, including the boogaloo movement. It is citing that the pages and groups constituted a “credible threat” to public safety. Other media companies, including Youtube, Twitch, and Reddit, have made similar bans on groups and users who violate posting requirements.
From a price perspective, the ad ban appears to have done little to Facebook’s stock. It has recovered significantly from the COVID-19 low of $137 in March and closed at $233 going into the 4th of July weekend. Despite its recent PR hurdles, Facebook continues to host over 2 billion active monthly users and is used as a significant source of communication worldwide.
What Can Decentralized Finance Do For Me?
(Image Courtesy of Stably)
What is DeFi?
The cryptocurrency space is constantly changing based on trends and technology. Bitcoin began as an alternative to fiat currency, and the blockchain field has made considerable progress. With the creation of stablecoins and smart contracts, crypto projects have started to encroach on the realm of traditional banking. Decentralized Financed, or DeFi, is the newest bright shiny object to capture attention in the decentralized technology space. But what is DeFi? What does it do? And why is “Yield Farming” suddenly so popular? Let’s take a look at these topics and see if we can gain insight as to why they are important.
What Does It Do?
First, we need to take a quick look at the systems DeFi is trying to replace: Banks. In the banking system, customers earn a very small percentage of interest on their deposits—a summary of the top bank interest rates for savings in 2020 tops out at 1.21%.
This means a balance of $10,000 would increase by $121 at the end of the year. Banks can provide this return by making loans and other investments with your $10,000 deposit. If a bank has millions of customers, this purchasing power gives them a massive influence on the financial markets. In return, the bank passes a tiny portion of those profits to their clients.
This return on savings is sub-par when considering that the rate of inflation in the US for 2019 was 2.3%. Now there are other financial products from banks, which include brokerage services or Certificates of Deposit (CD’s) that match or beat the inflation rate.
(Image Courtesy of US Inflation Calculator)
DeFi takes this model and spreads it out in a decentralized manner. There is a multitude of cryptocurrency services offering a similar business model as a bank but with much better returns. For example, Binance Savings provides a 5.14% return on Tether; each Tether is worth $1.00. So if we took the same $10,000 deposit from the bank and put it with Binance Savings, it would return $514 at the end of the year. Not bad!
Binance is not the only game in town when it comes to earning money on crypto deposits. Other options provide much higher rates, according to Defi Prime. As evidenced below, the Aave exchange offers an astounding 47.90% rate on DAI, which is also pegged to the dollar. Now that same $10,000 deposit would grow by $4,790 if the rate stayed the same for an entire year (which it will not). A closer look at Aave’s exchange rate shows that the interest rate varies greatly.
So What’s the Catch?
If these rates are real and the funds are verified, why isn’t everyone taking advantage of this opportunity? There are a number of factors keeping people out of this space. First off, crypto has a high barrier to entry and requires a fair amount of technical knowledge, including wallets, addresses, exchange rates, etc. Secondly, crypto is a very speculative asset class, with the potential to drop to zero over time. And finally, with these kinds of returns, there is a risk of losing your investment or getting liquidated. Liquidation occurs when the value of the collateral drops too close to your debt value.
If that last sentence makes no sense to you, don’t worry. Loan valuations are an entirely different article. Understanding that when the value of collateral, returns, and interest rates are all variable, calculating risk becomes very difficult.
Something else to remember is that for every deposit into DeFi, someone on the other end receives those funds as a loan and is paying interest. These loans can be for anything: paying rent, buying groceries, or buying more crypto. For the high-interest returns, there are equally high-interest loans. The rates on Aave are comparable to loan sharks or payday lenders. Volatility is the name of the game, as 24 hours after the below rates were posted, the Deposit APY dropped to 7.14%.
Other points of failure are the smart contracts that run the protocols. This week the DeFi liquidity provider Balancer lost $500k to a hacking attack. The platform was tricked into releasing the funds through a loophole in the code. The company has publicly analyzed the attack, which is on their blog. “The person behind this attack was very sophisticated smart contract engineer with extensive knowledge and understanding of the leading DeFi protocols.
Having briefly touched on the risks, there are gains to be made as well. “Yield Farmers” are individuals who take advantage of interest rates, loans, and reward tokens to maximize their gains over short periods. Due to varying interest rates and the current high cost of Ethereum transactions, yield farming seems to be profitable only for transactions in the thousands of dollars.
The introduction of the COMP token allows for these returns. COMP is given to users of specific DeFi platforms, similar to reward points for using a credit card. Transacting large amounts increases the COMP rewards, which can then be sold for a profit. As long as COMP stays above a specific price threshold, these yield farmers will continue to be profitable.
This is just the beginning of Yield Farming, but things get increasingly more complicated. For the sake of simplicity, we will skip the more involved strategies, but the meme below should give you an idea of what is involved.
(Image courtesy of Twitter)
Wrap It Up For Me
DeFi is a new and exciting sector of the cryptocurrency sector. Those with a high-risk tolerance may be attracted by the variables and challenges of yield farming, but most will likely be satisfied by the steady returns over time. For the more conservative investor, locking in a 4% return over the 1% return from the traditional bank may be enough to move some crypto over to one of the many DeFi portals.
While traditional Stocks & Bonds dominate financial markets today, new technologies such as Cryptocurrencies, Defi, and Yield Farming are fastly growing burgeoning industries.
FomoHunt, with the help of ModernMarkets, is analyzing new contemporary finance data every day on these markets. Our team does this through written analysis, community forums, and portfolio tools, that will let you track important metrics such as Marketcaps, ROI, Trading Volume, DeFi yield, Returns on the Underlying Defi Collaterals, COMP, etc.
(Image Courtesy of ABC Action News)
The controversy of mask-wearing continues. The number of businesses requiring masks continues to rise, as does the number of states requiring them in public spaces. States like Michigan, Nevada, and New York all require masks in public areas. Meanwhile, states like Florida and Arizona have lagged.
Companies are struggling to find a balance between maximizing revenue and halting the spread of the virus. Alaska Airlines is banning passengers who refuse to wear a mask. After receiving a “yellow card,” passengers may be removed from the flight and possibly the airline.
Alaska Airlines is also one of the few companies reducing the number of available seats for passengers in an attempt to reduce viral transmission.
Meanwhile, American Airlines has announced it would be allowing its flights to run at full capacity. Chief Communications Officer for United Airlines, Josh Earnest, explained that seat-blocking and limited capacity flights are a marketing strategy. “Blocking middle seats is a PR strategy, not a safety strategy,’’ he said in a call with reporters.
Flights in the US fall under federal regulations but have been forced to issue their own guidelines concerning the coronavirus. This has created a patchwork of policies for the aviation industry. The federal government has not issued any national requirements or laws concerning the spread of COVID-19.
This newsletter, analysis, research, and commentary provided by Modern Markets, lead analyst Kaltoro, with contributions from TytanInc and Digital Lawrence. The publication incorporates data from numerous sources including, but not limited to, CoinMarketCap, Bloomberg, CNBC, Lunar Crush, and the team at FomoHunt.
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