Mark Cuban breaks down the DeFi ecosystem and how he profits from ‘yield farming’ in a new blog. Here are the 8 best quotes.

mark cuban

Mark Cuban made the majority of his fortune selling Broadcast.com to Yahoo! for $5.7 billion in stock near the height of the dot com bubble. Now, the billionaire owner of the Dallas Mavericks says he is earning money another way – through yield farming.

Cuban has become a liquidity provider on DeFi (Decentralized Finance) exchanges, where he earns rewards for enabling users to swap between tokens. The “Shark Tank” star said he is seeing annualized returns of over 200% from the tactic in some cases.

DeFi is an umbrella term that refers to blockchain-run, decentralized financial applications that are seeking looking to muscle into territory held by traditional financial intermediaries like banks.

Cuban broke down his entrance into DeFi in a new blog, highlighting the advantages of what he calls “a model for future technology businesses and possibly all businesses.”

Here are the billionaire’s eight best quotes from the blog, lightly edited and condensed for clarity.

  1. “In a money exchange business, or even a banking business, you have to have the financial depth to be able to offer the range of needed currencies and services. You need to be able to afford to hedge the risk of pricing volatility between currencies. If you want to do this business with scale, across the world, it can be very expensive and risky. Not for DeFi Exchanges. What makes running a DeFi exchange so much better than a traditional centralized financial business of this and ANY kind is that rather than the owners of the business, investors, and their creditors putting up capital for all the transactions to take place, Liquidity Providers (LPs) do it for them.”
  2. “I’m a small LP [liquidity provider] for QuickSwap. I provide 2 different tokens (DAI/TITAN) that enable QuikSwap to offer swaps between these two tokens. As you can see here, this pair is one of many, and you can also see that based on the .25 pct of volume in this swap that Quickswap pays, my return on my initial $75k investment(based on fees only) as of this writing, is an annualized return of about 206%.”
  3. “So in exchange for providing the Liquidity both TITAN and Quickswap need for their businesses, I get .25 of the transaction volume for swaps between these two tokens. As long as I keep making a good return, I will keep my money invested (Volatility can create mark to market losses). If not, I can immediately withdraw it (some platforms have a hold period or penalties). Have enough LPs, and the exchange is far more capital efficient than a similar traditional exchange business, and I get to make some money!”
  4. “Consider Dave & Buster’s tokens. When you buy their tokens, you can only use them in their arcades. You can’t use them at others. One of the foundational businesses of DeFi is the ability to exchange the tokens of one project for those of another. That is why they call them Exchanges. And if the exchange is Decentralized, they call it a…DEX.”
  5. “Every business or financial software service or application business has cloud computing and operating costs that very often grow faster than their revenues. This is not a surprise, it is exactly why software companies raise significant amounts of capital in order for their “software to eat the world.” Companies like Polygon’s capital needs are very different. Why? Because rather than building their business exclusively on a cloud computing platform like AWS, their businesses are decentralized. The foundation of decentralization is built upon an independent party…putting up their own capital to provide computing resources in order to support the network platform.”
  6. “Any other business you have to raise a s–t load of money in order to host your own servers, or more likely pay for cloud computing costs which can be insanely expensive for compute-intensive applications and just as expensive for scaling heavy use applications. Plus, you have to hire all the people, have the CapEx to support them, etc. In the decentralized crypto world, these 3rd parties (minors, validators, etc.) provide the computing power that effectively runs the platform in exchange for rewards in the token of that network.”
  7. “If Polygon, or any of their competitors, took a traditional, centralized business path where they controlled and owned everything, they would have had to raise not just millions but potentially much, much more. Instead, they create a near-zero cost token that they distribute in accordance with the tokenomics they defined to their community.”
  8. “That is not to say that every crypto blockchain or DeFi project will work. They won’t. These facts are not a secret in the crypto world. There is an incredible amount of competition. So much, in fact, many, if not most, will not work. They will not get enough users or generate enough fees to succeed. Crypto is brutally competitive. But in crypto vs. traditional, centralized businesses, all other things being equal, I’m taking crypto every time.”
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Cryptocurrencies have had a wild few weeks. Here’s how the volatile price swings have affected investors, traders, miners, and DeFi companies.

Bitcoin mine
view of the Kizelovskaya State District Power Plant at the Gubakhinsky Coke and Chemical Works. Russian businessman Alexei Kolesnik has bought the Kizelovskaya State District Power Plant to create a data center and a bitcoin mining farm

  • Bitcoin, ethereum, and other cryptocurrencies have experienced a wild few weeks.
  • The price swings are nothing new for crypto, but with newfound mainstream acceptance, volatility presents issues.
  • Insider spoke with cryptocurrency experts to see how the recent “stress test” has affected the community.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

On April 11, 2021, the price of bitcoin rose as high as $63,729.50 as enthusiasm surrounding the crypto market swelled.

Coinbase, one of the largest cryptocurrency exchanges, was set to go public in just three days, and Tesla had said it would begin accepting bitcoin as a form of payment for its vehicles.

A month and a half later, bitcoin is trading below $40,000 per coin, Tesla is no longer accepting bitcoin, and Coinbase stock is down roughly 30% from its all-time highs.

For new entrants to the crypto world, this kind of volatility can be disturbing, but for old hands, it’s nothing new.

In fact, bitcoin experienced six pullbacks of more than 30% in 2017 alone, despite the price rising more than 1,000% that year.

Still, considering the rapid growth of new cryptocurrency holders and an increasing institutional interest in the space, swelling volatility can be an issue.

Below, Insider breaks down how cryptocurrencies’ wild few weeks have affected the industry.

From miners to the DeFi companies, the crypto community has been forced, once again, to navigate price swings. Here’s a look at how they made out according to the experts.

Traders and Investors

Some short-term traders and long-term investors were greatly impacted by bitcoin’s recent price swing, but for others, it was business as usual.

The majority of the pain dished out by falling prices in cryptocurrencies was felt by new entrants to the space looking to make a quick buck by trading but ended up sellig coins at a loss.

According to data from Glassnode, “there is no question that a large portion of the recent spending activity was driven by short-term holders, those owning coins purchased within the last 6-months.”

Insider spoke with Todd Jones, the chief investment officer of the wealth management firm Gratus Capital, to confirm Glassnode’s findings.

Jones said that none of his long-term focused clients have been selling their cryptocurrency and noted that much of the sell-off in bitcoin’s price was a result of traders’ “leverage unwinding.”

On-chain margin traders raced to exit their leveraged positions when cryptocurrencies faced their most recent bout of volatility, according to a May 19 Daily Gwei newsletter.

Ethereum gas fees (the fee required to successfully conduct a transaction on ethereum) surged to record highs as a result driving “gas wars amongst liquidators and arbitrageurs,” according to Delphi Digital.

“The price was falling so fast that people were getting scared for their on-chain leveraged positions and were willing to pay anything to get their transaction included in the next Ethereum block (presumably to close their positions),” ethereum developer Anthony Sassano speculated, per Coin Telegraph.

Bitcoin traders using up to 100-to-1 leverage also rushed to sell, furthering volatility in the asset.

This leverage unwinding added to cryptocurrencies’ woes. However, for long-term holders of ether and bitcoin, the price drop and rising gas fees weren’t relevant.

Essentially, the most recent bout of volatility hurt traders far more than long-term investors, who still believe their holdings will appreciate moving forward.

“Recent price volatility should not be very impactful to a long-term holder of BTC. It comes with the territory. Any asset that can go up 800% in a year also has the potential to collapse 90% (similar to the early days of AMZN). Price volatility goes hand in hand with speculative assets,” Todd Jones of Gratus Capital said.

In Jones’ view, now is a “good time to add” to cryptocurrency holdings as a part of a diversified portfolio.

Miners

Cryptocurrency mining, and in particular bitcoin mining, has become a multi-billion dollar business. Publicly traded miners like Riot Blockchain, Marathon Digital Holdings, and Hive Blockchain have expanded their operations amid a meteoric run for the crypto space.

However, like all mining operations, the value of the end product is a critical component to securing profitability.

Insider spoke with Phil McPherson, Riot Blockchain’s vice president of capital markets, to delve into how cryptocurrency price swings can affect miners.

McPherson said that when bitcoin’s price falls, miners could be forced to sell coins in order to continue their operations. The key is the mining cost per coin, which varies greatly depending on the company.

“Smaller miners with higher fixed costs and costs of goods would probably be hurt more,” McPherson said.

The VP added that his company is in a “unique position” due to its strong balance sheet. Riot ended the first quarter with $241 million of cash on hand and an average cost per coin mined of around $15,000, enabling them to keep all the bitcoin they mine and continue operations even in a down market for the digital asset.

“On a daily basis, we’re mining call it six or seven bitcoin a day, sometimes it’s higher, sometimes it’s lower, but we’re not selling that bitcoin, we’re stacking it,” McPherson said. “So the fact that we’re bullish long term, the price volatility hasn’t affected our business from a financial standpoint because we’re not selling it into this depressed market.”

McPherson noted that when bitcoin’s price falls, the global hash rate (the difficulty of mining the currency) falls as well, which is actually a benefit for miners who can remain in operation.

“From our perspective, the volatility in some ways has been good for market leaders like us,” McPherson added.

DeFi

Decentralized Finance, or DeFi, is a system that allows users access to financial products on a public, decentralized blockchain network.

Most DeFi companies use the ethereum blockchain to run their operations, and the total value locked on the DeFi network is now over $62 billion, according to data from Defipulse.com.

DeFi applications include stablecoins, lending platforms, prediction markets, and much more, and the industry allows traders to profit from tactics like yield farming and liquidity mining.

Jeff Dorman, CFA, the chief investment officer of the digital asset management firm Arca, told Insider the recent volatility in cryptocurrencies was a “real stress test” for the DeFi space.

According to the CIO, DeFi companies passed this latest test without issue, but in the past, that wasn’t always the case.

Dorman pointed to differences in the DeFi system amid recent price swings compared to volatile periods from the past.

The CIO gave an example of MakerDao, a popular DeFi lending and borrowing platform, that “basically broke” in March of last year when the crypto market saw a steep drop in pricing and was forced to take $4.5 million in socialized losses from the event.

“There was price feed issues with regard to their API connectivity, and as a result, borrowers were being liquidated even though they shouldn’t have been because of a price issue. MakerDao had to socialize those losses and raise new money and pay back all the victims over time,” Dorman said.

This time was very different, however, according to the CIO.

“This time around, it was the exact opposite. I can’t give you an example because nothing happened. Every price oracle worked, every decentralized exchange worked, every decentralized lending and borrowing platform worked, every decentralized insurance company worked. I mean, it was unbelievable to see,” Dorman said.

The CIO pointed out that centralized entities in the crypto world like Coinbase and Binance “were all having problems” with price volatility this time around. DeFi companies, on the other hand, were able to navigate the price swings without issue.

DeFi liquidations did rise 14-fold during the broad crypto sell-off, Debank data shows, as traders in the space looked to protect themselves from losses.

However, at the end of the day, the crypto community was able to whether recent price drops and volatility fairly impressively.

Some traders, especially those using excessive leverage, were hurt, but overall, the industry kept on trucking in what will likely be thought of as a positive sign for the future of the space.

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An executive behind the $120 million Ethereum bond says banks must adapt to DeFi to survive

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DeFi uses blockchain technology, like cryptocurrencies.

  • Banks must adapt to decentralized finance to survive, a banker behind an Ethereum bond launch said.
  • Jean-Marc Stenger, head of SocGen’s blockchain unit, said banks risk losing out, like Kodak with the advent of digital imaging.
  • DeFi advocates argue it will revolutionize finance by removing middlemen and slashing fees.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Banks must adapt to the new world of decentralized finance in which contracts will be created through crypto technology or risk becoming irrelevant, according to the Société Générale banker who was a driving force behind a recent high-profile digital bond launch.

Jean-Marc Stenger, the head of SocGen’s blockchain technology unit Forge, told Insider that banks face a “Kodak moment” if they do not adapt to decentralized finance or DeFi, referring to the failure of the famous camera company to transition to the digital era.

DeFi is the use of blockchain technology – the same tech that underlies cryptocurrencies – to create financial products.

It replaces the usual middlemen like banks and brokerages and instead lets pieces of digital code called “smart contracts” automatically execute, or control, financial products, taking care of things like interest payments, for example.

The European Investment Bank generated excitement in the cryptocurrency community at the end of April when it used the Ethereum blockchain network to issue a €100 million ($121 million) two-year bond. Stenger’s Forge unit at SocGen was the platform manager and settlement agent.

Stenger told Insider that SocGen – Europe’s sixth-biggest bank – sees DeFi as a big opportunity for the sector that brings the ability to do things “quicker, cheaper, [and] with more security or transparency for the regulators.”

Although some are skeptical the technology can truly disrupt the giant industry, DeFi’s advocates argue that it will revolutionize finance. DeFi’s fans say it will eliminate the need for intermediaries and central overseers such as clearing houses, and the fees they charge. Instead, a decentralized computer network would keep the contracts and transactions secure.

Stenger acknowledged the DeFi model might pose a threat to some of the ways banks traditionally make money. But he said: “When there is a shift like this in an industry, the financial industry as we speak, obviously it also means that you have to adapt and to change.

“Decentralized finance is certainly a threat to these financial institutions, which will not adapt and embrace this change, that’s for sure. There might be kind of a ‘Kodak effect’, if I may use that term, for some banks or financial institutions which again will not adapt quickly.”

He said banks would still generate returns from providing customers the services they want, which he argues will increasingly be DeFi contracts. “In today’s world, clients are paying for services where they see value-added.”

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Internet Computer is already one of the top 10 cryptocurrencies with a market cap of $45 billion – just two days after launching

Dominic Williams at Hashed
Dominic Williams, founder of Dfinity’s ‘Internet Computer.’

  • Swiss nonprofit Dfinity’s digital asset “Internet Computer” launched on Monday.
  • It is already among the 10 largest cryptocurrencies with a market cap of $45 billion.
  • The decentralized token seeks to break Big Tech’s shackles on entrepreneurship.
  • See more stories on Insider’s business page.

Internet Computer, a cryptocurrency launched Monday by blockchain non-profit Dfinity, is already the eight-largest digital asset with a market capitalization of $45 billion, data from CoinMarketCap showed on Wednesday.

The project, developed by founder Dominic Williams, is a result of five years of research. The token’s promoters claim it can provide the core basis of a new, decentralized internet.

The first day of trading saw its price swing wildly as it hit an intraday high of $700 before declining to around $250. It is currently trading around the $340-range.

“The Internet Computer is an open platform that frees the world from a dependence on centralized server farms, making it possible to host software and data directly in cyberspace without the need for legacy IT such as proprietary cloud services, server machines, software stacks, databases, and firewalls,” Dfinity said in a statement.

DFINITY Logo 02

Dfinity’s token has already listed on a number of major crypto exchanges, including Binance and Coinbase. Its underlying network competes with Ethereum’s ether token in terms of use cases.

A research report from crypto-insight platform Messari details the idea behind IC and what it aims to overcome. IC’s founder Williams has said the internet has become more monopolistic by controlling tech monoliths like Facebook or Amazon, whose users get affected by any changes made to its platform parameters, the report said.

He recently told Insider mainstream venture capital firms are sitting on “billions and billions of dollars” that they’re ready to invest in crypto and so-called “open internet” startups.

To that end, the digital token’s objective is to offer “a public compute platform so that developers, enterprises, and government agencies can deploy software and services directly to the public internet.”

Another development by Dfinity allows the Internet Computer protocol to securely manage user identities on certain apps without usernames, passwords, or cryptographic keys.

“I want you to imagine a world where you can securely authenticate yourself to online services without ever touching a username and password, or touching cryptographic key material, using just your devices,” Williams said.

“I want you to imagine a world where you can log into internet services without ever being tracked across internet services. And I want you to imagine a world where this is happening at a far greater degree of convenience than any kind of authentication service that you use today.”

The total market value of cryptocurrencies currently stands at about $2.5 trillion, up from around $1 trillion at the start of the year.

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