The Decentralized Finance (DeFi) category covers everything from stablecoin projects like Frax Finance to concepts like Yield Farming to the oracles which power DeFi like Chainlink.

Decentralized Finance

**yEarn** (launched July 2020) is a set of products in DeFi (Decentralized Finance) that at its core provides lending aggregation, yield generation, and insurance on the Ethereum blockchain.  
Yearn Finance and Pickle Finance MERGE - More Pickles, a little DILL and Cornichon Evil Jar Victims  
In November 2020, yEarn was merged with Pickle Finance, a yield farming protocol; Cream Finance, a lending protocol; COVER Protocol, Akropolis, and with Uniswap fork SushiSwap. as was announced by the Founder Andre Cronje.  
  
## Background  
  
This was previously known as iEarn, yEarn Finance was created by a single developer, Andre Cronje. After suffering an exploit in February 2020, Andre announced he was stepping away from the project after facing backlash from the community. He later returned and the project re-branded to yEarn Finance introducing a suite of new tools such as Earn, Vaults, yInsure, and StableCredit.  
The project rose to prominence after introducing its native YFI token. Prior to its launch, the protocol had around $8 million in assets under management which rose to over $400 million within the first week. Anyone who deposited liquidity on Curve yPool and YFI Balancer pool within the first week of the launch was qualified to claim YFI.  
On September 17, 2020, Cronje introduced SyntheticRebaseDollar, a rebase index that allows the user to deposit collateral, and withdrawal their desired token that is on the list of this particular index. There are currently no plans for this product.

yEarn is a DeFi product providing lending aggregate, yield generation & insurance on the Ethereum blockchain. Originating as iEarn in 2020, yEarn was merged wit...

yEarn

**Synthetic assets,** also known as crypto synths, are essentially tokenized derivatives. In traditional finance, derivative value is derived from an underlying asset, such as a stock or bond. These derivatives allowed traders to speculate the price movements of an asset without actually owning it. But crypto synths or tokenized derivatives take the concept of derivatives a step further by allowing them to be recorded on the blockchain and creating a cryptocurrency token for it.  
In the crypto world, crypto synthetic assets are becoming more popular since they allow investors to benefit from the fluctuation of various tokens without possessing any of them themselves. These digital assets are largely preferred for investment nowadays. This is because of two main reasons: security and traceability. Trades are recorded on a distributed ledger, guaranteeing traders anonymity and security.  
$$widget0 [YOUTUBE@VID](SzRrbZiqFmM)$$

Synthetic assets, also known as crypto synths, are essentially tokenized derivatives. In traditional finance, derivative value is derived from an underlying ass...

Synthetic Asset

Sperax is a [stablecoin](https://iq.wiki/wiki/stablecoin) protocol behind USDs (SperaxUSD), a fully backed, auto-yielding, layer 2 algorithmic stablecoin on [Arbitrum](https://iq.wiki/wiki/arbitrum). [\[1\]](#cite-id-c5r6r1oz6e8)  
  
# Overview  
  
Sperax launched in 2020 and later transitioned into creating a auto-yielding stablecoin USDs, which was released in December 2021. USDs is a stablecoin that aims to address the limitations of existing stablecoins in the decentralized finance (DeFi) space. It combines the benefits of different stablecoin designs by featuring a 100% backed model like CDP stablecoins, while also adding scalability benefits like those of fiat-backed stablecoins. This is achieved through an on-chain, redemption-based design aiming to make USDs highly scalable, trustless, and decentralized. [\[2\]](#cite-id-xme606giu9k)[\[3\]](#cite-id-tzfu5p9efm)  
  
$$widget0 [YOUTUBE@VID](7YTTTQTkbIk)$$  
  
# SPA Token  
  
The Sperax ecosystem utilizes a governance and value accrual token known as SPA. Individuals who hold SPA can stake their tokens to receive veSPA (Vote-Escrowed SPA), which grants them the ability to earn [staking](https://iq.wiki/wiki/staking) rewards and manage the protocol's revenue through voting power in Sperax governance. Currently, off-chain governance is active and the community, represented by veSPA holders, can control various aspects of the USDs protocol such as yield strategies, eligible collateral, and new product features. [\[2\]](#cite-id-xme606giu9k)  
  
# Auto-Yield  
  
Auto-yield is a feature of the USDs stablecoin that allows users to earn rewards and grow their wallet balance without having to take any action. This feature uses the collateral received for minting USDs to generate yield by deploying it in other, audited DeFi projects. The yield, in the form of reward tokens and swapping fees from pools, is shared between USDs holders and SPA stakers. 50% of the yield is used to mint new USDs and distribute it to anyone who holds USDs in their wallet, making it a gas-free way to earn returns. The target yield rate is 11% APY and any additional yield generated above that is stored to help fund the APY during market downturns. Staked USDs are not eligible for auto-yield distribution and only USDs holders on non-contract addresses or externally owned account (EOA) wallets will receive regular auto-yields every 7 days. [\[4\]](#cite-id-g2m2oek60oh)  
  
### Yield strategies  
  
Different methods for generating yield are proposed by the community and evaluated for their potential and level of risk. The community then votes on which pools or farms to deploy the collateral in. The current strategies used for yield generation include: [\[4\]](#cite-id-g2m2oek60oh)  
  
1. Saddle - where [FRAX](https://iq.wiki/wiki/frax-finance) and [USDC](https://iq.wiki/wiki/usdc) from vault-core are deposited into the Saddle FRAX-USDC-BP pool and the LP tokens are staked in the Saddle gauge. This strategy generates revenue through fees in FRAX and USDC and farm rewards in SDL.  
2. [Frax](https://iq.wiki/wiki/frax-finance) \- where FRAX and VST from vault\-core are deposited into the Curve FRAX\-VST pool and the LP tokens are staked in the Frax gauge\. Revenue is generated through fees in FRAX and VST and farm rewards in [FXS](https://iq.wiki/wiki/frax-share) and VSTA.  
3. Stargate - where USDC from vault-core is deposited into the Stargate USDC pool and the LP tokens are staked in the Stargate farm. Revenue is generated through fees in USDC and farm rewards in STG.  
4. [Aave](https://iq.wiki/wiki/aave) \- where [DAI](https://iq.wiki/wiki/dai) from the vault-core is lent to the Aave DAI market. Revenue is generated through fees in DAI and rewards in Aave.  
  
# Staking  
  
Holders of SPA tokens can participate in staking by locking up their tokens on either the Arbitrum or [Ethereum](https://iq.wiki/wiki/ethereum) network in exchange for non-transferable veSPA tokens. The amount of veSPA received is proportional to the duration of the lockup period, with longer lockups resulting in greater rewards. Staking rewards are distributed based on the user's veSPA balance and include yield share rewards, fee rewards, and incentive rewards which are originally generated in USDs and are then swapped for SPA tokens before distribution. [\[5\]](#cite-id-huukqug4i45)  
  
* **Yield share rewards:** 25% of the yield generated by the USDs protocol  
* **Fee rewards:** 100% of the fee income from USDs mints and redemptions  
* **Incentive rewards:** sponsored by the treasury to boost the staking protocol  
  
When the governance protocol is launched, voting power will also be determined by the user's veSPA balance, with those who have locked up for longer periods having more voting power. However, it's important to note that veSPA balance will decrease over time and therefore, stakers can increase their veSPA balance and rewards by extending the locking period, locking up more SPA or by re-staking SPA rewards. [\[5\]](#cite-id-huukqug4i45)  
  
$$widget0 [YOUTUBE@VID](JuQmvG1jfKE)$$  
  
# Liquidity Mining  
  
The Demeter protocol allows users to launch and manage decentralized exchange liquidity pools for their DAO's native token. The protocol provides engineering, marketing, and financial support to launch and manage the pool, including whitelisting on the Demeter active farms dashboard, fixed SPA emissions from the SPA gauge, and discounted launch fees for farms paired against USDs or SPA. Users can provide liquidity to the UNI-V3 SPA-USDs pool via the Sperax UI to create LP tokens, which can then be staked on the farm contracts for rewards. Users can choose to lock their LP tokens for additional rewards and a guaranteed minimum APR but must initiate a 21-day cooldown period before exiting the farm. [\[6\]](#cite-id-7g3ojrlpur7)  
  
$$widget0 [YOUTUBE@VID](pJVq2wxQTPg)$$  
  
# Governance  
  
The Sperax off-chain governance process involves a three-phase process for submitting, discussing, and voting on proposals for the protocol. The first phase is casual ideation, where ideas are shared and discussed on the Sperax Discord channel. The second phase is the governance proposal, where formal proposals are submitted on the Sperax Governance Forum and discussed for a minimum of 48 hours. The third phase is the Snapshot vote, where a poll is created for community members with veSPA tokens to vote on the proposal. The proposal must receive more than 50% in "Yes" votes, and have a minimum quorum of 20 million veSPA votes to pass. If it passes, it moves on to the Sperax Improvement Plan (SIP) phase, where it is implemented. If it does not pass, it enters a cooldown period before it can be resubmitted. [\[7\]](#cite-id-yjy8n8z1ge)  
  
$$widget0 [YOUTUBE@VID](eOS12xByBRc)$$  
  
# Buybacks  
  
The Sperax buyback contract is designed to decentralize the process of buying back SPA tokens while also increasing the Total Value Locked (TVL) of USDs with protocol revenue. Users can purchase USDs directly with SPA through the contract. The USDs available for purchase come from two sources: mint/redeem fees and yield. 50% of the SPA bought back is distributed to veSPA holders as a reward, while the rest is burned. The protocol yield is collected in multiple tokens, converted to USDs, and a portion is sent to the buyback contract, while the rest is transferred to the auto-yield reserve. Protocol fees are also collected in USDs and deposited in the buyback contract. Any user or external wallet can sell their SPA for USDs, and 50% of the SPA received is burned and the remaining 50% is sent to the veSPA rewarder. The percentages for yield share and burn can be changed through governance. [\[8\]](#cite-id-cvluzfl4ozv)  
  
# Demeter Protocol  
  
The Demeter protocol is a tool that allows decentralized autonomous organizations (DAOs) to easily launch and manage decentralized exchange liquidity pools. It is designed to be user-friendly and eliminates the need for coding knowledge. The first version, Demeter V1, enables users to launch incentivized liquidity pools on [Uniswap V3](https://iq.wiki/wiki/uniswap), and future versions will support custom liquidity shapes on other major decentralized exchanges. Demeter is currently available on Arbitrum and will soon be expanded to other blockchains like Optimism, Polygon, and Ethereum. It offers engineering, marketing, and financial support for DAOs launching farms, including a discounted fee for launching farms against USDs or SPA, and a whitelisted farms dashboard for increased visibility. The fee paid for launching farms is used to burn SPA tokens, which helps reduce the SPA supply and increase its value. [\[9\]](#cite-id-y945xmhk2km)[\[10\]](#cite-id-okvcetm2gf)  
  
# ![demeter pro.PNG](https://ipfs.everipedia.org/ipfs/QmfUgaHVLRfjqqU53DqDkWNqdjaoxrUM9zgz1NdGcDERL4)Team  
  
* **Engineer:** Joe Yu  
* **Engineer:** David Zhao  
* **Product:** Atreyee Bhaumik  
* **Marketing and Business Development:** Alex Shaw  
* **Business Development:** Elliot  
  
[\[11\]](#cite-id-bmrayminxqe)  
  
# Advisors  
  
* **Economic Advisor:** Marco Di Maggio  
* **Product Advisor:** Subhajit  
* **Economic Advisor:** Nicolas Andreoulis  
* **Co-Founder at Amber Group:** Late Tiantian Kullander  
  
[\[11\]](#cite-id-bmrayminxqe)

Sperax is a stablecoin protocol behind USDs (Sperax USD), a fully backed auto-yielding layer 2 algorithmic stablecoin on Arbitrum.

Sperax

This is a list of Consensus Mechanisms found in the space. If you add something new make sure to give an example of a project that uses it.  
  
* [Proof Of Work (POW)](https://iq.wiki/wiki/proof-of-work-pow): Used by [Bitcoin](https://iq.wiki/wiki/bitcoin)  
* [Proof Of Stake (POS)](https://iq.wiki/wiki/proof-of-stake): Used by [Ethereum](https://iq.wiki/wiki/ethereum)  
* Proof Of Capacity (POC) AKA Proof Of State: Used by Burstcoin  
* Proof Of Elapsed Time (POET): Used by Hyperledger Sawtooth  
* Transaction As Proof Of Stake (TAPOS): Used by  
* Delegated Byzantine Fault Tolerance (dBFT): Used by  
* Proof Of users Activity (POA): Used by  
* Proof Of Burn (POB): Used by SlimCoin  
* Proof of Stake Anonymous (PoSA): Used by  
* Proof of Importance (POI): Used by  
* Proof of Storage: Used by STORJ  
* Proof of Stake Time (PoST): Used by Vericoin  
* Proof of Stake Velocity (PoSV): Used by  
* Proof of Checkpoint (PoC):  
* Leased Proof of Stake (LPoS): Used by  
* Practical Byzantine Fault Tolerance (PBFT): Used by Persistent  
* Proof of Authority (PoA):  
* Proof of Identity (PoI):  
* Proof Of Bribe: Morty Token  
* POW/POS Hybrid: Used by IOTA  
* Federated Byzantine Agreement: Used by Ripple  
* Proof Of Asset: Used by Digixdao  
* Proof Of Intelligence: Used by Aion  
* Proof Of Believability: Used by IOSToken  
* Proof Of Devotion: Used by  
* Proof Of Retrievability: Used by Stori  
* Proof Of Weight (PoWeight): Used by  
* Simplified Byzantine Fault Tolerance: Used by Chain  
* Proof Of Audit (POA): Used by DAPS  
* Matrix Proof Of Work (MPOW): Seele  
* Randomized Proof Of Stake (RPOS): Ultrain  
* Proof Of Engine (POE): Used by LTO Network  
* Secure Proof Of Stake (SPOS): Elrond  
* Proof-of-Immutable-State (POIS): Commerce block  
* Proof Of Chain (POC): Clams  
* SPECTRE: HYCON  
* Tendermint: IRISnet  
* Hierarchical Delegated Proof of Stake (HDPoS): VITE  
* Proof Of Agreement: Credits  
* Proof Of Coverage: Helium.com  
  
## 

List of consensus mechanisms to agree up on transaction blocks on blockchains

List Of Consensus Mechanisms In Blockchain

**prePo** is a decentralized trading platform that enables individuals to access re-public assets. Their mission is to democratize pre-public equity, thus transforming a world of financial exclusion into a world of permissionless access. [\[1\]](#cite-id-14x7ymfydvh)  
  
# Overview  
  
Some of the key features of the protocol include: [\[1\]](#cite-id-14x7ymfydvh)  
  
* **Go Long or Short or Any Pre-Public Asset**: Traders can take synthetic positions on pre-IPO companies and pre-token projects  
* **Neutral Liquidity Provision**: Liquidity Providers are not required to hold a long or short position and are not at risk of liquidation  
* **No Intermediaries**: The protocol operates on decentralized code, which allows users to have full control of their assets  
* **High Composability**: prePO's synthetic assets and LP positions are represented as standard ERC20 and ERC721 tokens, which allows for the integration of these assets with the DeFi ecosystem and the unlocking of new utility  
* **Community Driven**: prePO is governed a DAO, the prePO Decentralized Autonomous Organization, driven by a global community of PPO token stakers, also known as ‘pregens’  
  
## Collateral Tokens (preCT)  
  
All prePO positions are backed by preCT (prePO Collateral Tokens), which are tokens backed by a collection of yield producing USD stablecoins. The operation of preCT is transparent and does not affect the user experience. All amounts on the platform are denoted in USD, and preCT earnings are displayed as "Interest Earned (USD)". [\[2\]](#cite-id-8h0xyyg410e)  
  
# Tokenomics (PPO Token)  
  
The token’s presale took place on September 20th, 2022, where a total of 6,504,061 PPO tokens were sold, and the total USDC contributed amount was of $390,244. [\[3\]](#cite-id-oz69g17i6vq)  
![1*WQ94qV0QGn34H2yGe8Y0zA.webp](https://ipfs.everipedia.org/ipfs/QmZVTwmL2kHSUFeyBUqxtYXk7L87g2h7UqjzHcdcXrPFuZ)PPO tokens can be earned by participating actively and contributing value to the prePO protocol. Traders can earn PPO tokens through various means such as trading fee reimbursements, ranking high in leaderboard contests, performing well for their copy traders, participating in each market's comment section, and staking PPO for future distributions. Pregens, on the other hand, earn PPO through "governance mining" by participating in governance and contributing to the prePO DAO, and receive retroactive rewards for their contributions.[\[4\]](#cite-id-1okl1vwzk2t)  
  
## Staking  
  
When staked, users can receive PPO Power (a non-transferable ERC-20 token). PPO Power can be increased by staking for a longer period (time multiplier), unlocking achievements (achievements multiplier), or using power boosts (boosts multiplier). A Pregen's influence in governance and their share of future PPO reward distributions is determined by their share of overall PPO Power, which is calculated algorithmically. However, it's important to note that only Pregens who remain active, either through governance or through using the platform, will receive staking rewards. If a Pregen becomes inactive for an extended period, their rewards will be suspended and redistributed to other stakers. This way, high multipliers accrue to active long-term stakers and PPO - and the future of the protocol - ultimately ends up in the hands of Pregens with long-term conviction rather than short-term speculators. [\[4\]](#cite-id-1okl1vwzk2t)  
  
# Governance  
  
The governance process is as follows: [\[5\]](#cite-id-etiz5ihw3l)  
  
1. **Propose**: a member of the DAO makes a proposal/poll through the creation of a Topic on the Governance Forum. These posts are reviewed by a moderator, who check they are following the designated template and lock them after being approved  
2. **Discuss**: The proposal discussion takes place within Discord Governance Channels  
3. **Vote**: Proposal voting can proceed to a Snapshot vote if it receives support from at least one member of the Precog Council. For a PREP (proposal) vote to be valid, a minimum quorum of 5% of PPO Power is required and the vote must be open for consideration for at least 4 days before it is closed. Temperature Checks (polls), on the other hand, require a minimum of 3 days of consideration before closing  
4. **Enact**: Proposals that successfully pass a vote will be executed  
  
# Partnerships  
  
* [Arbitrum](https://iq.wiki/wiki/arbitrum)  
* [Bond Protocol](https://iq.wiki/wiki/bond-protocol)  
* Guild  
* Galxe  
* 101  
* tip.cc  
* Smoothie  
* Cryptocurrency Jobs  
* CryptoTesters  
* Snapshot  
* [Uniswap](https://iq.wiki/wiki/uniswap)  
* Safe

prePo is a decentralized trading platform that enables individuals to access re-public assets.

prePO

Double spending problem is a phenomenon in which a single unit of currency is spent simultaneously more than once. This creates a disparity between the spending record and the amount of that currency available.  
Double spending is most commonly associated with [Bitcoin ](https://iq.wiki/wiki/bitcoin)because digital information can be manipulated or reproduced more easily by skilled programmers familiar with how the blockchain protocol works. Bitcoin is also a target for thieves to double spend because Bitcoin is a peer-to-peer medium of exchange that doesn’t pass through any intermediaries or institutions.[\[1\]](#cite-id-ho6bfzijcvs)  
  
$$widget0 [YOUTUBE@VID](phLSjZdDc5A)$$  
  
# Overview  
  
For example, if someone walks into a clothing store with only $10 and buys a $10 shirt, then buys another $10 shirt with the same $10 already paid to the cashier. While this is difficult to do with physical money, in part because recent transactions and current owners can be easily verified in real-time, there’s more opportunity to do it with digital currency.  
Bitcoin’s completely digital currency network is decentralized which means it has no central authority, regulators, or governing bodies to police thieves and hackers. Though traditional security entities don’t monitor the Bitcoin network for double spending, other network defenses have been implemented to combat attacks that would otherwise threaten the network’s consensus mechanism and ledger of transactions, providing confidence to those who invest in Bitcoin.  
  
# How does Bitcoin Double-Spending work?  
  
Fundamentally, a double spend consists of a bad actor sending a copy of one transaction to make the copy appear legitimate while retaining the original, or erasing the first transaction altogether. This is possible and dangerous for Bitcoin or any digital currency because digital information is more easily duplicated. There are a few different situations where criminals attempt to double-spend [Bitcoin](https://iq.wiki/wiki/bitcoin).  
  
## Simultaneously sending the same Bitcoin amount twice or more  
  
An attacker will simultaneously send the same bitcoin to two (or more) different addresses. This type of attack attempts to exploit the [Bitcoin](https://iq.wiki/wiki/bitcoin) network’s slow 10-minute block time, in which transactions are sent to the network and queued to be confirmed and verified by miners to be added to the blockchain. In sneaking an extra transaction onto the [blockchain](https://iq.wiki/wiki/blockchain), thieves can give the illusion that the original bitcoin amount hasn’t been spent already, or manipulate the existing blockchain and laboriously re-mine blocks with fake transaction histories to support the desired future double spend.  
  
## Reverse an already-sent transaction  
  
The attacker sends multiple packets (units of data) to the network to reverse the transactions, to give the illusion they never happened. With this way, the attacker attempts a Bitcoin double spend by reversing a transaction after receiving the counterparty’s assets or services, thus keeping both the received goods and the sent bitcoin.  
  
## 51% Attack  
  
When a group of miners controls over 50% of the network’s hash rate, they launch a 51% attack against a [cryptocurrency ](https://iq.wiki/wiki/cryptocurrency)[blockchain](https://iq.wiki/wiki/blockchain). Having control of 51% of the network’s nodes provides the governing parties with the ability to change the blockchain.  
Payments between a few or all users might be stopped if the attackers were able to stop fresh transactions from receiving confirmations. The ability to undo decisions taken when they were in charge would likewise be available to them. One of the problems that consensus systems like proof-of-work were designed to avoid is that by reversing transactions, users might double spend coins.  
On a coin with a high participation rate, a 51% assault is an extremely demanding and difficult undertaking. The majority of the time, the group of attackers would have to be able to command the required 51% and have a backup [blockchain ](https://iq.wiki/wiki/blockchain)ready to be injected when the opportunity arises.  
The main network would then have to be out-hashed. One of the biggest obstacles against a 51% attack is the expense of doing so. For instance, the Bitmain S19 XP Hydro is the most sophisticated Application Specific Integrated Circuit (ASIC) miner. It boasts 255 TH/s (tera hashes per second) of hash rate and costs more than $19,800.  
FoundryUSA, with 54.42 EH/s (exahashes per second), accounts for 23.75% of the entire Bitcoin network hash rate, followed by AntPool at 41.49 EH/s, 18.12%, and [Binance ](https://iq.wiki/wiki/binance)Pool at 34.48 EH/s, 15.06%.[\[2\]](#cite-id-p77hfp6pbfj)  
  
## Finney Attack  
  
The Finney attack is named after Hal Finney, who happened to be the first recipient of a Bitcoin transaction, and the first person to comment on the release of the Bitcoin source code. It is a double spending attack with the following features:  
  
* It only works if the merchant accepts unconfirmed transactions.  
* It still works, however, if the merchant waits a few seconds to verify that everyone in the network agrees he was paid.  
* It requires the attacker to be mining and controlling the content of his blocks; however, he can in theory do this with any hashrate, in particular significantly less than 50% of the network hashrate.  
  
It proceeds as follows:  
  
* The attacker mines blocks normally. In the block he/she is trying to find, he includes a transaction which sends some of his/her coins back to himself/herself, without broadcasting this transaction.  
* When he/she finds a block, he/she does not broadcast it; instead, he/she sends the same coins to a merchant for some goods or service.  
* After the merchant accepts the payment and irreversibly provides the service, the attacker broadcasts his/her block. The transaction that sends the coins to himself/herself which is included in this block, will override the unconfirmed payment to the merchant.  
  
If the time from finding the block until the attacker sends payment and the merchant accepts it is '**t'**, and the average time to find a block is '**T**', there is a probability of t/T that another block will be found on the network in this time. In this case the attack will fail, *and* the attacker will lose the block reward of B.  
This means that the average cost of attempting the attack is about (t/T) \* B. As a rule of thumb, the merchant should wait at least t=V\*T/B (V is the value of the transaction) to make sure that trying to carry out this attack against him isn't profitable. This may not be sufficient though, as a nimble attacker can use the same block for multiple attacks, potentially gaining the total of their value.  
The lower the attacker's hashrate, the less opportunities he/she has to carry out the attack. If the attack is for obtaining some illiquid good, it is difficult to make the need for this good coincide with finding a block. If the attack is for obtaining something liquid (e.g. exchanging bitcoins for other money), an opportunity is ever-present but the merchant is likely to require a few confirmations. This makes the attack difficult to use in practice.[\[4\]](#cite-id-ntm3apywq8)  
  
## Race Attack  
  
The Race Attack is a particular kind of a Double-Spending attempt which is a malicious activity when two transactions are created at the same time using the same funds to spend them twice. It requires the recipient to accept payment for unconfirmed transactions. The attacker sends the victim an unconfirmed transaction. Meanwhile, they broadcast to the network a conflicting transaction. Since the victim observed their own transaction first, they believe they will be paid. However, since the rest of the network saw the double-spend first, it’s likely that the victim will not get the money.  
Such an attack is significantly easier to carry out when the attacker has a direct connection to the victim's node and deposits the conflicting transaction directly to the miners.[\[6\]](#cite-id-nazl3npuw2p)  
  
# How Double Spending Problem prevented  
  
A timestamp server was suggested as a solution to the double spending issue in [Satoshi Nakamoto](https://iq.wiki/wiki/satoshi-nakamoto)'s white paper. A block of transactions is hashed by this server, which then broadcasts the hash to every node in the bitcoin network. This timestamp demonstrates that none of the information in the hash could have been produced following the publication of the hash. This creates an immutable (unchangeable) log of the sequence in which transactions occurred since each timestamp contains the preceding timestamp in its hash. Each timestamp builds on the ones that came before it.  
In conclusion, the [blockchain ](https://iq.wiki/wiki/blockchain)stops double spending by broadcasting groups of transactions to all nodes in the [bitcoin ](https://iq.wiki/wiki/bitcoin)network and timestamping them. Transactions are irreversible and hard to tamper with since they are timestamped on the blockchain and quantitatively tied to earlier ones.[\[2\]](#cite-id-p77hfp6pbfj)  
  
## Bitcoin  
  
Since the first bitcoin client was delivered in 2009, the [blockchain ](https://iq.wiki/wiki/blockchain)of [bitcoin ](https://iq.wiki/wiki/bitcoin)has preserved an exhaustive record of all transactions ever done in order to properly comprehend how the blockchain avoids double spending. No one can alter the record since every transaction is cryptographically hashed to the preceding blocks. This database is referred to as a blockchain because a fresh batch of transactions, known as a block, is added to it every ten minutes.  
  
## Ethereum  
  
Avoiding double spending means to stop using the same amount twice. If the nonce is set to the same only one of the transactions will be mined and most of the time that can be the one with higher gas price, but however no double spend will happen as only one transaction will take place at the end in either case.[\[3\]](#cite-id-0f3pxatmcew)  
There are two types of nonce used in [Ethereum](https://iq.wiki/wiki/ethereum).  
  
* **Account nonce**  
    It's simply the transaction count of an account. This prevents replay attacks where a transaction sending, for example, 20 coins from A to B can be replayed by B over and over to continually drain A's balance.  
* **Proof of work nonce**  
    The random value in a block that was used get the proof of work satisfied (depending on the difficulty at the time). Proof of work nonce is a meaningless value in a block which can be adjusted in order to try to satisfy the proof of work condition.  
  
# Cases  
  
In December of 2019, a viral video showcased bitcoin being double-spent at locations that accept bitcoin. These attacks were made possible using Replace-By-Fee (RBF), a somewhat controversial upgrade to the [Bitcoin ](https://iq.wiki/wiki/bitcoin)protocol. The first transaction was sent to the merchant, followed by a second transaction with a higher fee attached. This RBF transaction overrode the first transaction as the higher fee meant it would be processed preferentially, allowing it to be double-spent. These attacks worked because the merchants accepted unconfirmed transactions.  
  
In a similar incident earlier in the same year, some Canadian bitcoin holders were able to “cash in” their bitcoin without actually cashing it in. It appeared they sent bitcoin to Bitcoin ATMs, where they were able to withdraw cash. After receiving the cash, they cancelled the transactions, since they had yet to be “confirmed.” [\[5\]](#cite-id-pkypi77zcbd)

Double spending problem is a phenomenon in which a single unit of currency is spent simultaneously more than once. This creates a disparity between the spending...

Double Spending Problem

**Arbitrum** is a suite of [Ethereum](https://iq.wiki/wiki/ethereum) scaling solutions that enable high-throughput, low-cost [smart contracts](https://iq.wiki/wiki/smart-contract) while remaining fast and secure. The platform is designed to allow developers to easily run unmodified Ethereum Virtual Machine (EVM) contracts and [Ethereum](https://iq.wiki/wiki/ethereum) transactions on a second layer, while still benefiting from Ethereum's excellent layer 1 security.[\[1\]](#cite-id-ot2ldz7hzw9)[\[2\]](#cite-id-561s71k316i)  
In January 2019, Arbitrum raised $3.8 million through seed funding and also $20 million series A. In 2021, they raised $120 million through a Series B, which was led by the Lightspeed Venture Partners fund.[\[3\]](#cite-id-l3mssmdu1t)  
  
In May 2021, Off-chain Labs launched the mainnet beta of Arbitrum One, but only to developers, with over 300+ dApps deployed & over $1 billion in TVL.  
  
In June 2022, Arbitrum Odyssey, an 8-week program, was launched to popularize and attract users to the L2-network Arbitrum One. It is divided into eight stages, each of which is dedicated to a different aspect of the Arbitrum ecosystem.[\[7\]](#cite-id-kpwgvy5opzr)  
$$widget0 [YOUTUBE@VID](jQGd_KMdFfs)$$  
  
# Overview  
  
Arbitrum is a trustless layer 2 protocol for cheap, fast transactions with full Ethereum smart contract functionality. It utilizes the transaction roll-up technique to record batches of submitted transactions on the Ethereum main chain and execute them on low-cost, scalable layer 2 sidechains while leveraging Ethereum to ensure correct results. This process eradicates much of Ethereum's current computational and storage burden while enabling new classes of powerful layer 2-based [DApps](https://iq.wiki/wiki/decentralized-application).  
  
Arbitrum's goal is to provide developers with an easy-to-use platform for launching highly efficient and scalable Ethereum-compatible smart contracts. In the Arbitrum network, ETH is used to pay transaction fees. Transferring to the Arbitrum network is typically 90–95% less expensive than transferring to Ethereum, and there is significant room for further commission reduction.[\[9\]](#cite-id-zhmw0lo0lqg)  
  
Arbitrum also has its Virtual Machine, the platform's custom virtual machine (AVM). The Arbitrum Virtual Machine (AVM) is the execution area for Arbitrum [smart contracts](https://iq.wiki/wiki/smart-contract) and is built on top of EthBridge, a smart contract collection that interacts with the Arbitrum chain. Smart contracts compatible with [Ethereum](https://iq.wiki/wiki/ethereum) are automatically translated to run on the AVM.[\[8\]](#cite-id-uye83rz5wus)  
  
# $$widget0 [YOUTUBE@VID](Bv2oKuOg86g)$$  
  
# How it works  
  
For any users to interact with an Arbitrum chain, a set of Nodes will forward their transactions to the Arbitrum Sequencer (a specially designated Arbitrum full node that, under normal conditions, is responsible for submitting users’ transactions onto L2), which will report transaction results just as an Ethereum node would but in a much faster way. The transactions are then recorded on the [Ethereum](https://iq.wiki/wiki/ethereum) [blockchain](https://iq.wiki/wiki/blockchain), ensuring that all underlying data is accessible to users. On Ethereum, once a transaction has reached finality, it is considered final and cannot be replaced or re-reordered. The transaction's outcome is complete at this point.  
  
Following the posting of transaction data to the Ethereum [blockchain](https://iq.wiki/wiki/blockchain), transaction execution is moved off-chain and performed by Arbitrum validators. Arbitrum validators recover their off-chain processing results in the form of an assertion (sometimes called a rollup block). The assertion is optimistically posted on the Ethereum chain, proof is only attached if the assertion is challenged. Validators place a bet that they will forfeit if they are caught trying to cheat. This ensures that validators have an incentive not to engage in dishonest behavior.  
  
Whenever an assertion is posted, a challenge window opens in which any validator can challenge it. Other validators verify the assertion and prove fraud if it is incorrect. Validators who successfully prove fraud will be rewarded handsomely. If the challenge window expires without a successful challenge the correct assertion is confirmed and accepted by Ethereum. This makes Arbitrum reliable in preventing fraud as long as anyone validating the chain is honest.[\[12\]](#cite-id-au5dw32gzjd)[\[13\]](#cite-id-344zkpd38ig)$$widget0 [YOUTUBE@VID](YBXFpgQQ754)$$  
  
# Features  
  
### High EVM Compatibility  
  
Being compatible with [Ethereum](https://iq.wiki/wiki/ethereum), Arbitrum can run unmodified EVM contracts and unmodified Ethereum transactions. This allows Ethereum DeFi developers to integrate their [decentralized applications (dapps)](https://iq.wiki/wiki/decentralized-application) with Arbitrum without having to make any modifications.[\[10\]](#cite-id-9fwn8ulcnq)  
  
### Low fees  
  
Arbitrum is designed and engineered to minimize the system's L1 gas footprint, lowering each transaction cost. Arbitrum's efficient roll-up technology allows it to reduce fees to a fraction of what they are on Ethereum while still providing sufficient incentives for validators.[\[5\]](#cite-id-k6x76pisj2)  
  
### Scalability  
  
Artbitrum scales through Ethereum by moving contracts computation and storage off of the main Ethereum chain, allowing much higher throughput.  
  
### Trustless Security  
  
Arbitrum has its security rooted in Ethereum, with permissionless validation, the Arbitrum protocol is trustless. The safety of the chain relies on there being at least 1 honest validator.  
  
# Product  
  
There are currently two chains live on Arbitrum mainnet:  
  
### Arbitrum One  
  
Arbitrum One is an optimistic rollup L2 scaling solution for Ethereum, offering fast & cheap transactions tailored for Defi and NFTs.  
Users can now use Alchemy, Infura, QuickNode, Moralis, Ankr, BlockVision, and GetBlock to interact with the Arbitrum One.  
  
### Arbitrum Nova  
  
Arbitrum Nova utilizes the Anytrust scaling model offering even lower transactions tailored more for gaming/social applications. Nova is an EVM-compatible chain built on Arbitrum AnyTrust technology that is optimized for ultra-low-cost transactions while providing strong security guarantees. Nova was made available to the public in August 2022. Nova is ideal for gaming projects, social layers, or any application that requires high throughput while maintaining low transaction costs.  
  
Nova is powered by the most trusted organizations across web2 and web3, including Offchain Labs, Reddit, Google Cloud, Consensys, and [FTX](https://iq.wiki/wiki/ftx).[\[15\]](#cite-id-esql9iph13)[\[16\]](#cite-id-0f73ap16nkvp)  
$$widget0 [YOUTUBE@VID](DGpXMEgiz4g)$$  
  
# Tech  
  
Arbitrium uses the Optimistic Rollups concept, which allows developers to quickly launch smart contracts and decentralized Ethereum applications with lower transfer fees and increased bandwidth while making no changes. An optimistic rollup is a specific technique for rolling up transactions. To speed things up, optimistic rollups assume that the transactions contained within the rollup are valid. They are *optimistic* in the sense that when they post the updated state to Ethereum they do this without posting any proof at all.[\[14\]](#cite-id-kz078pg9d0j)  
  
Arbitrum's optimistic rollups are settled on a private sidechain. Arbitrum gathers transactions in batches, settles them on its sidechain, and then feeds the transaction data back to the Ethereum blockchain ledger.  
  
The team built Arbitrum as an Optimistic Rollup (OR) because they believe that OR is the best way to meet users’ realistic needs for a secure, trustless, EVM-compatible L2.  
$$widget0 [YOUTUBE@VID](7pWxCklcNsU)$$  
  
# AnyTrust  
  
AnyTrust is a variant of Arbitrum Nitro technology that lowers costs by accepting a mild trust assumption.  
  
Arbitrum AnyTrust introduces a trust assumption in exchange for lower fees, data availability is managed by a Data Availability Committee (DAC), a fixed, permissioned set of entities which includes :  
  
* Consensys  
* FTX  
* Google Cloud  
* Offchain Labs  
* P2P  
* Quicknode  
* Reddit  
  
# Partners  
  
* [Chainlink Labs](https://iq.wiki/wiki/chainlink)  
* [Dopex](https://iq.wiki/wiki/dopex)  
* GMX  
* Hop Protocol  
* Lido Finance  
* [Livepeer](https://iq.wiki/wiki/livepeer)  
* Quick Node  
* Synapse Protocol  
* Treasure DAO  
* [Uniswap Foundation](https://iq.wiki/wiki/uniswap)  
* Unlock Protocol  
* Vesta Finance  
* Coinbase Ventures  
* Pantera  
* Compound  
* Blocknation.  
  
# Team  
  
Arbitrum is built by Off-chain Labs, a world-class team of researchers, engineers, and Ethereum enthusiasts. The team includes a global community of developers, academics, and operators, with deep experience in cryptography, decentralized systems, and game theory.![1_j10QD9Og9JOC2Ps3HXU66A.png](https://ipfs.everipedia.org/ipfs/QmZQeCoVyunamTqEunJ9sDBVe1pxr1TSLH1FLY3EeSRsSx)  
  
* Ed Felten - Co-Founder + Chief Scientist  
* Steven Goldfeder - Co-Founder + CEO  
* Harry Kalodner - Co-Founder + CTO  
* Lee Bousfield - Senior Software Engineer  
* Rachel Franks - Senior Software Engineer  
* Daniel Goldman - Senior Software Engineer  
* Fred Lacs - Senior Software Engineer  
* Mahsa Moosavi - Software Engineer  
* Daniel Silverberg - Operations Manager  
* A.J. Warner - Director of Partnerships and Strategy  
* Hunter Brea - Community Manager  
* Nina Rong - Community Manager China  
* Peter Haymond - Partnerships Manager  
* Size Chad - NFTs & Gaming[\[6\]](#cite-id-a61zwdmh18w)

Arbitrum is a layer 2 solution that aims to scale Ethereum while lowering the cost of the chain.

Arbitrum

Redacted is a product suite of [smart contracts](https://iq.wiki/wiki/smart-contract) designed to provide on-chain liquidity, governance, and cash flow for [DeFi](https://iq.wiki/wiki/defi) protocols. Redacted built two products in line with this mission - Hidden Hand and Pirex. The Redacted Cartel DAO builds the Redacted ecosystem. The Redacted protocol is powered by the BTRFLY token, which allows users to stake, earn incentives, and interact with governance proposals. [\[1\]](#cite-id-z3x9mwao2q)[\[3\]](#cite-id-p77tgae3p9)[\[4\]](#cite-id-6ou90pttrdd)[\[21\]](#cite-id-qam8tejwywj)$$widget0 [YOUTUBE@VID](V2VCyAefbLo)$$  
  
# Overview  
  
REDACTED incentivizes bonding tokens from the [Curve](https://iq.wiki/wiki/curve-finance) ecosystem into their treasury in exchange for the BTRFLY token. Each BTRFLY token is backed by value from the Curve ecosystem locked in the DAO treasury. BTRFLY is an [ERC20](https://iq.wiki/wiki/erc-20) token but it bridges the core components and token to whatever chains Curve scales to.[\[2\]](#cite-id-x02b39auq3)  
The strategies employed through bonding allow REDACTED to accumulate voting power in the Curve gauge and utilize that power to vote on the behalf of minters ensuring their interests are best represented in the Curve gauge.[\[2\]](#cite-id-x02b39auq3)  
  
In addition to an aggregation of voting power, when utilizing Curve LP tokens to mint BTRFLY, users receive a maximized yield and possess a liquid token that is securely backed by stable assets. BTRFLY is primarily backed by the [stablecoin](https://iq.wiki/wiki/stablecoin) LP tokens, remaining relatively stable regardless of the market dynamics.[\[2\]](#cite-id-x02b39auq3)  
$$widget0 [YOUTUBE@VID](6iXhqKx9aIA)$$  
  
# Products  
  
## Hidden Hand  
  
Hidden Hand is a marketplace for governance incentives, also known as "bribes." Protocols can use Hidden Hand to improve governance processes and engage voters. When using Hidden Hand, [DeFi](https://iq.wiki/wiki/defi) protocols will need to deposit a bribe into the Hidden Hand smart contract, these bribes are then sent back to users as a reward for their voting power.[\[3\]](#cite-id-p77tgae3p9)  
Hidden Hand will automatically choose the vote distribution with the highest bribe value. Otherwise, users will be rewarded in proportion to the size of their vote for a given bribe. Bribe rewards are distributed at the end of each voting period to users who have locked their veTokens.[\[4\]](#cite-id-6ou90pttrdd)  
  
### Hidden Hand Fee Structure  
  
Hidden Hand charges its users zero fees for interacting with the Marketplace. Instead, Hidden Hand takes a 4% fee on all bribes added to the protocol, this way it generates its revenue and sends half to its treasury, and half is sent to lockers of $BTRFLY for locking their tokens in the protocol.[\[5\]](#cite-id-kepdh2x2gxh)[\[6\]](#cite-id-3oqvuu3p2lm)  
For example, Vesta Finance uploads a $1M bribe in VSTA to the Frax Hidden Hand market. Hidden Hand will take a 4% fee on the $1M, a $40,000 turnover. The fee is then split in half between the treasury and lockers of rlBTRFLY, which will be claimable every 2 weeks. After the bribe is added, veFXS holders could then vote for the Vesta gauge on Hidden Hand and split a $960,000 pool of VSTA rewards.[\[7\]](#cite-id-vtx1ipo8sd)  
  
$$widget0 [YOUTUBE@VID](6KxwDGKlgmc)$$  
  
## Pirex  
  
Pirex creates liquid wrappers that allow for auto-compounding and the tokenization of future yield/vote events. The Pirex ecosystem includes applications built on top of Pirex liquid wrappers that increase the utility of governance tokens for users, enable novel utility, and provide yield opportunities that are only available to Pirex wrappers users. pxCVX (Pirex vlCVX) was the first Pirex liquid wrapper, with more to follow.  
The Pirex team plans to launch several applications built on top of the Pirex protocol by the end of 2022, which will showcase the broad utility and flexibility of the protocol and the wide range of applications that can be built on top of it.  
Pirex also offers developers incentives (in the form of referral fees and grants) to those wishing to build applications on the Pirex protocol. This will provide builders with a straightforward sustainable path toward building in the Pirex ecosystem.  
Pirex is considered a Redacted incubated product. 75% of fees received by Pirex are paid to Redacted, of which 42.5% are distributed to rlBTRFLY Holders, 42.5% to the Redacted Treasury, and 15% to the DAO Reserves.  
$$widget0 [YOUTUBE@VID](Zs3znj56pXk)$$  
  
## Convex  
  
Convex is Pirex liquid wrapper for vote-locked Convex (CVX). It is a platform built to boost rewards for CRV stakers and liquidity providers. Convex boosts rewards thanks to the large amounts of veCRV that are under its control and the distribution of its CVX token as additional rewards.[\[8\]](#cite-id-1kjov7xkfrm)  
pxCVX is a pure liquid wrapper, with each pxCVX backed by 1 vlCVX, and all of the value from that vlCVX is passed onto the pxCVX holder. Its gauge votes will focus on maximizing returns to pxCVX holders and not bootstrap other Pirex or Redacted products. It is a vlCVX liquid wrapper that has the goal of increasing liquidity, yield, and utility for CVX holders.  
pxCVX allows CVX holders to have a liquid, tradeable version of vlCVX which is 1:1 backed by vlCVX and allows for auto compounding of yield and tokenization of future yield/vote events.  
There are three modes to deposit in Pirex for **pxCVX**, which are Standard Mode, Easy Mode, and Expert Mode. There are also two ways to exit pxCVX positions, which are:  
  
* Redacted will seed and maintain a pxCVX/CVX LP on Curve  
* pxCVX can be unlocked for CVX.  
  
### vlCVX  
  
vICVX is vote-locked CVX, the is the governance token of Convex. CVX can be locked for 16 to 17 weeks for vote-locked CVX (vlCVX) which cannot be traded or transferred. vlCVX holders can claim a portion of Convex platform fees and can vote for Curve governance proposals, including bi-weekly Curve gauge weight votes. vlCVX holders vote on Convex governance proposals to decide how Convex’s aggregate veCRV voting power will vote on Curve governance proposals.[\[9\]](#cite-id-5k6b10ovrqw)  
  
Pirex vlCVX is currently only on Ethereum mainnet but plans to go multi-chain shortly.[\[10\]](#cite-id-hxgsu60fzy4)  
  
## BTRFLY  
  
### BTRFLY Token  
  
BTRFLY is the governance token of the Redacted ecosystem. It can be used to vote on Redacted governance proposals and locked for rlBTRFLY to earn BTRFLY inflation and protocol revenue. BTRFLY has a free-floating value that is partially based on the intrinsic value within the treasury and the revenues generated by the treasury, and as such cannot be redeemable for the governance tokens in the treasury.  
The token can be minted in 4 ways which include Minting, Bonding, Dao Fees, and pBTRFL.  
  
#### Token Allocation  
  
![pasted image 0.png](https://ipfs.everipedia.org/ipfs/QmQzsRwFEFcK9PHWJA7aLsB7ZqLpH7vhKS4877W2769Dd1)BTRFLY had an initial supply of 100,000 which was distributed through a triple Dutch Auction where OHM, CRV, and CVX were raised. At launch, BTRFLY was a rebasing token whose total token supply was consistently increasing due to staking rebase emissions, bond emissions, and DAO fee emissions.[\[11\]](#cite-id-uuxvasep6ap)[\[12\]](#cite-id-i976u3xz5ek)  
$$widget0 [YOUTUBE@VID](fNMrzndsibA)$$  
  
### rlBTRFLY  
  
rlBTRFLY are revenue-locked BTRFLY. rlBTRFLY enables BTRFLY holders to lock their tokens for a 16 to17 week period to earn revenue from Redacted's treasury and product ecosystem. Users can also lock BTRFLY v2 tokens for rlBTRFLY to earn revenue and inflationary BTRFLY pulse emissions. After locking for rlBTRFLY, users are rewarded in [ETH](https://iq.wiki/wiki/ethereum) which is gotten from Redacted’s treasury and ecosystem of products.[\[8\]](#cite-id-1kjov7xkfrm)  
  
### BTRFLY v2 Migration  
  
Redacted transitioned from rebasing tokenomics towards a fixed supply cap more commensurate with its focus on products such as Hidden Hand and Pirex. Both of which generate organic revenue for the protocol. This shift towards more sustainable tokenomics revolves around rlBTRFLY’s distribution of real yield from treasury farming and revenue from Redacted's products.  
  
The BTRFLY has gone from having an infinite supply to have a limited supply. At migration, the new supply was calculated as BTRFLY v2 Total Supply = (BTRFLY v1 Total Supply / 22.5%) / BTRFLY v1 Index, rounded up to the nearest 50k. [\[13\]](#cite-id-dxoum4m7n5b)  
$$widget0 [YOUTUBE@VID](bPXobpnK8qA)$$  
  
## DAO  
  
Redacted is governed by its community, which is the BTRFLY holders. The community decides the direction of Redacted, and there is also an established governance process that allows the ecosystem to evolve. This process comes in stages starting with, Drafting a Proposal, Requesting Feedback, Creating RIP based on RFF, RIP Snapshot Submission, and Linking Snapshot to a revised Commonwealth proposal.[\[15\]](#cite-id-7wt8jqjqhs)  
  
### Treasury  
  
The treasury is where all of Redacted's revenue and governance power is stored. Most revenue gotten by Redacted is generated through various forms such as bonds, bribes, and yield farming strategies.[\[16\]](#cite-id-x6pfx1ip46)  
  
# Tokenomics  
  
## At launch   
  
BTRFLY had an initial supply of 100,000 which was distributed through a triple Dutch Auction where [OHM](https://iq.wiki/wiki/ohm), CRV and CVX were raised. BTRFLY was a rebasing token whose total token supply was consistently increasing due to [staking](https://iq.wiki/wiki/staking) rebase emissions, bond emissions and DAO fee emissions.  
  
## Redacted v2  
  
Redacted has transitioned from rebase tokenomics towards a fixed supply cap (5,000,000 BTRFLY) more commensurate with its focus on products such as Hidden Hand and Pirex. Both of which generate organic revenue for the protocol. This shift towards more sustainable tokenomics is revolves around rlBTRFLY’s distribution of real yield from treasury farming and revenue from Redacted's products.   
Redacted V2 plans to burn all pBTRFLY distributed to the founding team, investors, and Olympus in Redacted V1 and distribute an equal allocation of the V2 BTRFLY supply. Allocations for the founding team and Olympus will be back weighted with a 6-month cliff and a 3-year vest schedule. Investors will receive no cliff and a 3-year vest schedule.  
The Pulse emissions token supply will be allocated to strategic treasury initiatives, including current and future Redacted products (rlBTRFLY, Hidden Hand, Pirex), liquidity programs, bonds, seed rounds, DAO treasury swaps, and other protocol-owned value mechanisms.   
The DAO Reserves will be paired with protocol revenue to fund Redacted DAO operations. Operational costs include team compensation, audits, bug bounties, marketing materials, conferences, subscriptions, services, etc.  
rlBTRFLY will allow users to lock their BTRFLY for 16-week intervals and receive a portion of Redacted's revenue. Redacted will calculate the revenue split from its three primary revenue sources: Hidden Hand, Pirex, and Farming.[\[22\]](#cite-id-2wyh8hkoko7)  
  
* Hidden Hand Fee Revenue Split:  
    * rlBTRFLY: 50%.  
    * Redacted Treasury: 35%.  
    * DAO Reserves: 15%.  
* Pirex Revenue Split:  
    * rlBTRFLY: 42.5%.  
    * Redacted Treasury: 42.5%.  
    * DAO Reserves: 15%.  
* Treasury Yield Split: The treasury yield split to rlBTRFLY holders will increase (from 15% to 42.5%) as the Redacted treasury size increases. The size of the treasury will be evaluated at the beginning of each quarter to determine each upcoming quarter's revenue-sharing split.  
  
# Partners  
  
Protocols that integrate Redated products include Abacus, [Alchemix](https://iq.wiki/wiki/alchemix), Aura, [Balancer](https://iq.wiki/wiki/balancer), Berachain, Biba, [Chainlink](https://iq.wiki/wiki/chainlink), Citadel Dao, [Curve Finance](https://iq.wiki/wiki/curve-finance), Commonwealth, Convex, dAMM Finance, Debt Dao, [Dopex](https://iq.wiki/wiki/dopex), Drops Dao, [JPEG'd](https://iq.wiki/wiki/jpegd), Fiat Dao, Floor, [Frax Finance](https://iq.wiki/wiki/frax-finance), [Lido](https://iq.wiki/wiki/lido-dao), Mover Dao, New Order, [Olympus](https://iq.wiki/wiki/olympus-dao), [Perpetual Protocol](https://iq.wiki/wiki/perpetual-protocol), Ribbon, [Stake Dao](https://iq.wiki/wiki/stake-dao), Stargate, Tokemak, Tribe, Umami, Utopia Labs, Velodrome, and Vesta.[\[20\]](#cite-id-q34h6qdmr8)

Redacted is a product suite of smart contracts empowering on-chain liquidity, governance, and cash flow for DeFi protocols.

REDACTED

**Lido DAO (LDO)** is a liquid staking solution for ETH 2.0 backed by industry-leading staking providers. Lido lets users stake their ETH - without locking assets or maintaining infrastructure - whilst participating in on-chain activities, e.g. lending.  
  
Lido attempts to solve the problems associated with initial Ethereum 2.0 staking - illiquidity, immovability and accessibility - making staked ETH liquid and allowing for participation with any amount of ETH to improve security of the Ethereum network. [\[1\]](#cite-id-oczp9v04vnn)[\[2\]](#cite-id-qusfq3sg4qi)[\[3\]](#cite-id-bg16qd4fcz8)  
  
# Overview  
  
Lido DAO is a community that builds liquid staking service for Ethereum. Lido allows users to earn staking rewards without locking assets or maintaining staking infrastructure. Staking with Lido is primed to start along with Phase 0 of Ethereum 2.0.  
  
Upon depositing ether into Lido's Smart contract, a user receives stETH (staked ETH) ERC20 tokens that represent the user’s staked ETH balance of beacon chain along with staking rewards accrued or penalties inflicted on validators in the beacon chain. When transactions are enabled on the beacon chain - which does not yet have a target date but is estimated to be over 18 months away - users will be able to redeem stETH for unstaked ether together with accumulated rewards directly. Until then, stETH can be transferred or traded, unlike beacon chain ether. [\[4\]](#cite-id-ul4cky236o8)  
  
# Meaning of Ethereum 2.0  
  
Ethereum 2.0, also known as Eth2 or “Serenity”, is an upgrade to the Ethereum Blockchain. The upgrade aims to enhance the speed, efficiency, and scalability of the Ethereum network so that it can process more transactions and ease bottlenecks. [\[5\]](#cite-id-1ynb666yfhk)  
  
Ethereum 2.0 is an update to the Ethereum Blockchain platform which launched on July 30, 2015. The platform intends to redesign and improve Decentralization, resilience, security, simplicity, and longevity. Within the Cryptocurrency world, this is the first time a network the size of Ethereum's will be attempting to transition all its users and assets to a new Decentralized network, while simultaneously trying to maintain its current network active and functioning.  
  
## How does Lido work:  
  
When staking with Lido, users receive stETH tokens on a 1:1 basis representing their staked ETH. stETH balances can be used like regular ETH to earn yields and lending rewards, and are updated on a daily basis to reflect your ETH staking rewards, minus any penalties. Note that there are no lock-ups or minimum deposits when staking with Lido.  
  
When using Lido, users receive secure staking rewards in real-time, allowing for participation in the securing of Ethereum with fewer associated risks and less downside potential.  [\[6\]](#cite-id-9rb8srwr91t)  
  
# Design goals and constraints  
  
Staking during the first stages of Ethereum 2.0 means accepting the risk that a users ETH will be frozen until transfers are available in Ethereum 2.0, which is expected to happen next year at the earliest. Until that time, no one will be able to withdraw staked ether or staking rewards and, for example, sell them on an exchange.  
  
To validate the beacon chain, a staker needs to deposit 32 ethers, specify a validating public key, and specify a withdrawal address where the staker’s assets and rewards will stay frozen until transfers are enabled. Until then, the only two activities you can do on the beacon chain are to validate and to stop validating. During this time, stakers must run the validation infrastructure, facing the risk of having their stake reduced in the case of misconfiguration.  
  
There is a risk of loss or loss of rewards, which occurs if the validator is slashed for misbehaving. This can happen, for example, due to a bug in the validator's node code or due to connectivity issues. This risk makes Ethereum staking especially unattractive in Phases 0 and 1, when the staker has, for a middling reward, to bear market risk while being unable to unstake.  
  
Lido aims to allow users to stake ether without losing the ability to trade or otherwise use their tokens. Lido will be a decentralized infrastructure for issuing a liquid token that has a degree of flexibility compared to self-staking. [\[7\]](#cite-id-esrhdrqj8dg)  
  
## The primary goals of Lido are:  
  
* To allow users to earn staking rewards without fully locking their capital  
* To offer flexibility to users to earn rewards on deposits smaller than 32 ether, and without restriction on deposits different than a multiple of 32 ether  
* To reduce the risks of losing a staked deposit due to software failures or malicious third-parties  
* To provide the stETH token as a building block for other applications and protocols (e.g., as collateral in lending or other trading DeFi solutions)  
* To provide an alternative to exchange staking, self-staking, and other semi-custodial and decentralized protocols.  
  
Lido is designed as a simple-to-use protocol with community governance. The protocol has to follow the changes in the underlying Blockchain mechanisms.  
  
# Stake with Lido  
  
### Stake ETH and keep tokens liquid:  
  
Users can Deposit Ether to the Smart contract and get stETH tokens in return. They earn staking rewards for every day of holding these tokens in their wallet. They are fully liquid, so they can use them for their needs at any time — trade, sell, exchange, invest in DeFi projects, etc.  
  
### Stake any amount of ETH:  
  
The Ethereum 2.0 protocol allows staking amounts divisible by 32 ETH only. Lido is a more flexible and more friendly solution than self-staking or exchange staking. With Lido, users can stake any number of tokens they possess and earn rewards even on small deposits.  
  
### Support DeFi projects with stETH:  
  
stETH tokens, the Ethereum liquid staking token on Lido, serves as a building block for new and existing Ethereum apps and protocols. For example, they can use it as collateral for lending services or other trading Defi solutions. [\[8\]](#cite-id-7gupt5yybu)  
  
# Tokenomics  
  
Lido has two tokens: liquid stETH token a tokenized version of staked Ethereum and LDO a token granting governance rights in the Lido DAO.  
  
## stETH token  
  
stETH is a token that represents staked ether in Lido, combining the value of initial deposit + staking rewards - penalties. stETH tokens are minted upon deposit and burned when redeemed. stETH token balances are pegged 1:1 to the ETH that is staked using Lido. stETH token balances are updated when the oracle reports changes in total stake every day.  
  
stETH tokens can be used as one would use ETH, allowing users to earn ETH 2.0 staking rewards whilst benefiting from, among other things, yields across decentralized finance products.[\[9\]](#cite-id-sd1kt03hyw)  
  
The stETH token is a tokenized version of staked ether. When a user sends ether into the Lido liquid staking smart contract, the user receives the corresponding amount of stETH tokens. The stETH token represents Lido user’s deposits and the corresponding staking rewards and slashing penalties. The stETH token is a liquid alternative for the staked ether: it could be transferred, traded, or used in DeFi applications. Lido makes the stETH token balance track a balance of corresponding balance of beacon chain ether. A user’s balance of stETH tokens corresponds 1 to 1 to an amount of ether a user could receive if withdrawals were enabled and instant. [\[10\]](#cite-id-uwjnvd0inok)  
  
## LDO token  
  
LDO is an Ethereum token granting governance rights in the Lido DAO. The Lido DAO governs a set of liquid staking protocols, decides on key parameters (e.g., fees) and executes protocol upgrades to ensure efficiency and stability. By holding the LDO token, one is granted voting rights within the Lido DAO. The more LDO locked in a user’s voting contract, the greater the decision-making power the voter gets.[\[11\]](#cite-id-abmvwgkgttl)  
  
# How is Lido secure?  
  
Lido is a secure liquid staking solution for a number of reasons:  
  
* Open-sourcing & continuous review of all code  
* Committee of elected, best-in-class validators to minimise staking risk  
* Use of non-custodial staking service to eliminate Counterparty risk  
* Use of DAO for governance decisions & to manage risk factors.  
  
Usually when staking ETH users choose only one Validator. In the case of Lido they stake across many validators, minimising their staking risk. [\[12\]](#cite-id-8go2h8v05tc)  
  
# Risk of Staking with Lido  
  
There exist a number of potential risks when staking ETH using liquid staking protocols.  
  
1. **Smart contract security:** There is an inherent risk that Lido could contain a smart contract vulnerability or bug. The Lido code is open-sourced, audited and covered by an extensive bug bounty program to minimise this risk.  
2. **ETH 2.0 - Technical risk:** Lido is built atop experimental technology under active development, and there is no guarantee that ETH 2.0 has been developed error-free. Any vulnerabilities inherent to @ETH 2.0 brings with it slashing risk, as well as stETH fluctuation risk.  
3. **ETH 2.0 - Adoption risk:** The value of stETH is built around the staking rewards associated with the Ethereum beacon chain. If ETH 2.0 fails to reach required levels of adoption significant fluctuations in the value of ETH and stETH could occur.  
4. **DAO key management risk:** Ether staked via the Lido DAO is held across multiple accounts backed by a multi-signature threshold scheme to minimise custody risk. If signatories across a certain threshold lose their key shares, get hacked or go rogue, funds risk becoming locked.  
5. **Slashing risk:** ETH 2.0 validators risk staking penalties, with up to 100% of staked funds at risk if validators fail to validate transactions. To minimise this risk, Lido stakes across multiple professional and reputable node operators with heterogeneous setups, with additional mitigation in the form of insurance that is paid from Lido fees.  
6. **stETH price risk:** Users risk an exchange price of stETH, which may be lower than its inherent value due to withdrawal restrictions on Lido, making arbitrage and risk-free market-making impossible.  
  
The Lido DAO is driven to mitigate the above risks and eliminate them entirely to the extent possible. Despite this, they may still exist.[\[13\]](#cite-id-2pj51lox8d5)[\[14\]](#cite-id-e922t4hl39d)

Lido DAO (LDO) is a liquid staking solution for ETH 2.0 backed by industry-leading staking providers.

Lido DAO

**Liquidity Mining** refers to a type of token distribution program in which a user provides liquidity to a protocol in return for that protocol’s native token.  
  
One popular type of liquidity mining program is distributing governance tokens to users who bring liquidity to a DeFi protocol. The governance tokens give holders the right to vote on changes to these networks as well as ownership. [\[1\]](#cite-id-lygubzlbocb)[\[2\]](#cite-id-tai1j2l68m)  
  
# Trivia  
  
* [IDEX](https://iq.wiki/wiki/idex), an [Ethereum](https://iq.wiki/wiki/ethereum)-based decentralized exchange, introduced the concept of liquidity mining in October 2017.  
* [Synthetix](https://iq.wiki/wiki/synthetix) refined the concept launching their liquidity mining program in March 2019.  
* Compound, Balancer, [yEarn](https://iq.wiki/wiki/yearn), Uniswap, and [SushiSwap](https://iq.wiki/wiki/sushiswap) popularized the concept of liquidity mining in 2020.  
* Liquidity mining is the act of providing liquidity via cryptocurrencies to decentralized exchanges Decentralized Exchange (DEXs). Since the primary goal of an exchange is to be liquid, DEXs seek to reward users willing to bring capital to their platform.  
* A "[yield farmer](https://iq.wiki/wiki/yield-farming)" provides liquidity but gets not just the return, but also a new token.  
  
# Introduction  
  
Liquidity mining is a type of yield farming. It is an incentive program created by a DeFi protocol to attract liquidity. The process involves DeFi users receiving tokens as a bonus beyond typical fees from contributing to liquidity pools. Liquidity mining programs launched by DeFi protocols can be put into three categories: fair launches, programmatic decentralization, and marketing-oriented (growth marketing). [\[3\]](#cite-id-6dm7ihhqi03)[\[4\]](#cite-id-tq4jgx6dmal)  
  
Liquidity mining is when a yield farmer gets a new token as well as the usual return (that’s the “mining” part) in exchange for the farmer’s liquidity. [\[5\]](#cite-id-he79uaqu3l9)  
  
Governance tokens play an essential role in liquidity mining, as they are often given to [liquidity providers](https://iq.wiki/wiki/liquidity-providers). In 2020, a number of DeFi protocols decided to reward Liquidity Providers (LPs) with the traditional yield rates as well as governance tokens. This incentivized liquidity mining even further, as LPs earn an additional stream of income. Moreover, they receive a stake in the protocol by being able to participate in governance. By doing so, they can change the protocol, how it works, and even add more liquidity pools.  [\[6\]](#cite-id-a4oz248qls6)[\[7\]](#cite-id-p11v70ijmf)  
  
## Fair Launches  
  
The primary goal of a fair launch is to distribute the majority of tokens via some objective criteria other than a direct sale and ensure that everybody has equal access to that distribution. Think of this as Uber being owned by its drivers and riders from day one. [\[8\]](#cite-id-5hgn0dc04z)  
  
## Programmatic decentralization  
  
The goal of programmatic decentralization is to gradually community ownership and minimizing treasury management. Think of this as Uber signing a legally binding agreement to distribute the majority of its stock to drivers and riders over the next few years. [\[9\]](#cite-id-lr83vea9pyh)  
  
## Growth Marketing  
  
The primary goal is to incentivize specific user behavior over a pre-defined period. Think of this as Uber rebating a portion of their customers’ rides in Uber stock. [\[10\]](#cite-id-r412zlna4rq)  
  
# Popularity  
  
## June 2020  
  
[Compound](https://iq.wiki/wiki/compound) is an algorithmic money market that allows users to lend and borrow assets. Anyone with an Ethereum wallet can supply assets to Compound’s liquidity pool and earn rewards that immediately begin compounding. The rates are adjusted algorithmically based on supply and demand. [\[11\]](#cite-id-oaev5ahqv7d)  
  
In June 2020, Compound announced that the protocol would give out COMP tokens to users over a four-year period, a fixed amount every day until all of the tokens have been distributed. These COMP tokens control the protocol, just as shareholders ultimately control publicly traded companies. [\[14\]](#cite-id-0fyxfr6ebv6j)  
  
Any user holding a supported cryptocurrency can deposit it into a Compound smart contract where it joins a liquidity pool and starts generating interest. The interest comes from other users that borrow funds and pay interest for the loans. [\[15\]](#cite-id-t0m2snz7z3a)  
  
Balancer was the next protocol to start distributing a governance token, BAL, to liquidity providers. [Ren](https://iq.wiki/wiki/renvm), Curve Finance, and Synthetix also collaborated together to promote a liquidity pool on [Curve](https://iq.wiki/wiki/curve-finance). [\[12\]](#cite-id-0wk8a2dtpgc)  
  
## Frax Finance  
  
At the end of 2020, [Frax Finance](https://iq.wiki/wiki/frax-finance), an algorithmic stablecoin project founded by [Everipedia](https://iq.wiki/wiki/everipedia)'s [Sam Kazemian](https://iq.wiki/wiki/sam-kazemian) launched a liquidity mining campaign centered around its FXS governance token. This incentivizes newcomers to support the project by distributing FXS rewards across Frax’s key Uniswap liquidity pools. [\[16\]](#cite-id-yf4nprkvudj)  
  
## Overview  
  
Liquidity mining allows users to earn cryptocurrencies passively and receive income higher than the interest on deposits. However, this method has its own risks, which are not found in other types of mining, so users of these DeFi protocols should always be careful while providing tokens to the protocol's liquidity pool, especially if the project promises high returns. [\[13\]](#cite-id-jmqlzu3saz9)  
  
<br>  
# Pros and Cons  
  
### Pros  
  
Liquidity mining on the decentralized exchanges offers many benefits compared to just holding cryptocurrencies or tokens in the wallet or holding them on the centralized exchanges. These benefits are -[\[17\]](#cite-id-785q9hlt16i)[\[18\]](#cite-id-srlz63jsiif)  
  
1. **High Yields** \- It gives much better rewards compared to centralized exchanges and gives rewards in proportion to the investments\. Rewards are generally based on trading activity\, and if there are more traders\, there are chances of higher yields for liquidity providers\. Since the LP's share of the liquidity pool dictates what the LP's yields are\, the LPs can essentially estimate rewards before investing it in the pool\.  
2. **Minimum capital needed for Entry** : As rewards are proportionate to investments and total investment in the pool , anyone can take part in the liquidity mining and, generally, pools have low barriers for entry, which gives anyone a chance to take part in the decentralized ecosystem.  
3. **Builds a trusting and loyal community** : Since investors are fully responsible for their investment, they become active participants in the mining programs, which helps to build an active and loyal community for a longer period of time. It also helps LPs receive additional benefits by continuing to engage with the protocol.  
4. **Distribution of governance and native tokens** : Prior to the existence of DEX and cryptocurrency liquidity mining, developers favored institutional investors over small investors, which hampered projects' ability to achieve full decentralization. DeFi liquidity mining offers all an equal opportunity to obtain native tokens. These Native tokens give additional powers to participate in the governance and vote on the development and fee distribution proposals. implementing changes in the UI etc.  
  
### Cons  
  
There are projects that have suffered exploits and rug-pulls, and an LP has to do extensive research before dealing with these types of risks.  
  
1. **Impermanent Loss** : The LP needs to take into account all the factors before investing in the liquidity program. [Impermanent loss](https://iq.wiki/wiki/impermanent-loss) can make their capital look very bad if they do not time their entries well. Impermanent loss occurs when the price of the tokens changes in comparison with the initial price at the time of investment . A substantial price change makes it very likely to encounter an impermanent loss. If the invested tokens have a lower price at the time of withdrawal, there are chances that LP will lose money. One way to deal with this is to offset this particular risk with the gains that are obtained from trading fees.  
2. **Project Risks** : There will always be risks associated with the projects since they are open source and run on complex code. The projects can suffer from exploits, and it results in draining large amounts of funds from the pools. The LPs need to be aware of this and should perform an in-depth audit of the code or DYOR and take help to check the reliability scores of projects by security firms such as [Certik](https://iq.wiki/wiki/certik).  
3. **Potential Rug Pulls** : Despite the many advantages that come with decentralized investing, the nature of the system does have some loopholes. [Rug pulls](https://iq.wiki/wiki/rug-pull) are types of fraud committed when liquidity pool developers and protocol developers decide to shut the protocol down and run away with all of the money by withdrawing liquidity that’s been invested in the project.  
  
### 

Liquidity Mining refers to a type of token distribution program in which a user provides liquidity to a protocol in return.

Liquidity Mining

An Automated Market Maker (AMM) is a decentralized asset trading pool that enables market participants to buy or sell cryptocurrencies. AMMs are non-custodial and permissionless in nature. Most AMMs utilize either a constant product, constant mean, or constant sum market-making formula; however, the most common is a constant product market maker, most notably Uniswap[\[1\]](#cite-id-im2cvaz5xll)[\[2\]](#cite-id-73djdif5dsg).  
  
# Introduction  
  
Automated market makers are smart contracts that create a liquidity pool of ERC20 tokens, which are automatically traded by an algorithm rather than an order book. This effectively replaces a traditional limit order book with a system where assets can be automatically swapped against the pool’s latest price[\[3\]](#cite-id-1ilhjx65sgph).  
  
There are two main types of automated market makers (AMMs). While one may be governed and set up by professional market makers, the other is fully automated by a set algorithm, allowing any user in the market to participate by depositing liquidity into the smart contract.  
  
## How Automated Market Makers Work  
  
Automated Market Makers (AMMs) work similarly to an order book exchange in that there are trading pairs. For example, ETH/DAI. However, users don’t need to have a counterparty (another trader) on the other side to make a trade. Instead, they interact with a smart contract that makes the market for them.  
  
Users are able to trade trustlessly using an AMM and become the house by providing liquidity to a liquidity pool. This allows essentially anyone to become a market maker on an exchange and earn fees for providing liquidity.  
  
# Popular AMMs  
  
## Kyber Network  
  
In early 2018, the Kyber Network was one of the first AMMs to introduce automated liquidity pools to the crypto ecosystem[\[8\]](#cite-id-x9g4g9bfak).  
  
Kyber Network’s liquidity pools are deployed by either professional market makers or by the project’s team. The pools are not open for anyone to provide liquidity.  
  
The price of the tokens in the liquidity pool can be set by external oracles or automatically determined by the smart contract parameters during setup. Both of these setups allow for market makers to have greater control of the pool in times of high volatility.  
  
## Uniswap  
  
Uniswap was the first true decentralized AMM to enter the market in November 2019. It was developed by Hayden Adams after reading a Reddit post from Vitalik Buterin. The protocol allows for anyone to deploy a liquidity pool on the network, and enables any other trader in the ecosystem to contribute liquidity[\[7\]](#cite-id-1hgbl0e654x).  
  
The price in the Uniswap smart contract cannot be configured or controlled. The price of the tokens in the pool is fully determined by the balance ratio between the two tokens in the pool.  
  
## Balancer  
  
[Balancer](https://beta.everipedia.org/wiki/balancer) functions similarly to Uniswap but also offers new, dynamic features that allow it to have more than one use case outside of a simple liquidity pool[\[5\]](#cite-id-cmhv271tktf).  
  
## Curve  
  
[Curve Finance](https://beta.everipedia.org/wiki/curve-finance) has admin-only generated liquidity pools where everyone can contribute to these pools. Curve’s liquidity pools only support stablecoins.  
  
Curve’s decision to focus on only stablecoins is a feature and not a limitation. By offering stablecoin only liquidity pools, the exchange is able to complete large trades with low slippage due to its concentration of deposits in its limited amount of pools.  
  
# Uses of AMMs  
  
Automated market makers serve dual purposes. For traders, AMMs allow for an instant trade experience bought at market price; for liquidity providers, market participants can earn trading fees from each trade[\[6\]](#cite-id-f8eterxdng9)[\[9\]](#cite-id-ieekxnugtb).  
  
Professional market makers might be more comfortable with a system like Kyber Network, while regular crypto users are becoming more comfortable with Uniswap and Balancer. Users that are looking for steady interest rates on their stablecoin holdings can use Curve.  
  
In either case, it is advised for users of AMMs to monitor their pools and verify that market conditions are in their favor. Inexperienced users can quickly learn that impermanent loss can end up taking away all of the profits that they’ve accumulated from trading fees.  
  
# MindSwap  
  
In November 2020, PredIQt launched MindSwap an AMM on the EOS blockchain. MindSwap brings liquidity pools to PredIQt by allowing anyone to easily wrap the PredIQt market shares they’ve bought into tradable EOS tokens. These PredIQt tokens are then deposited into liquidity pools along with an equal amount of another asset like the IQ token. From there they’ll earn a 0.7% transaction fee anytime someone uses the pool to trade between IQ and the PredIQt tokens.  
  
This can all be done in a few minutes through the MindSwap user interface. Liquidity Providers (LPs) can withdraw their tokens from the pool at any time and convert their PredIQt tokens back into PredIQt shares. One issue that MindSwap solves better than existing AMMs is impermanent loss of divergent assets like prediction market shares. Typically, assets that tend toward 1 or 0 in price have high degrees of impermanent loss due to the natural movement of the share token against the trading token.  
  
MindSwap smoothes out this issue with a higher fee to liquidity providers. This is why the current 0.7% fee is used as compared to the standard.6%. As the team building MindSwap implements more sophisticated bonding curves and AMM features, MindSwap will be able to tackle impermanent loss in a more efficient way and lower fees to encourage more traders.  
  
### See also  
  
* List of DeFi terms  
* Liquidity Mining  
* Whale (cryptocurrency term)

Automated Market Maker is a decentralized asset trading pool that enables market participants to buy or sell cryptocurrencies.

Automated Market Maker

In the cryptocurrency industry a rug pull refers to when a project disappears or "exit scams" with all users' funds invested into that project[\[1\]](#cite-id-wac6ltlfl3)[\[2\]](#cite-id-xrn1vx5q2im)[\[3\]](#cite-id-e0rtqe6nl7u).  
  
Decrypt Media has called a "rug pull" when a developer releases a new cryptocurrency, gets people to buy it, then exploits the source code they themselves created to take off with users' funds. Rug pulls along with market manipulation is considered the scourge of the industry. And the scam is so effective because retail investors often have no idea who they’re dealing with and do not remember to DYOR[\[4\]](#cite-id-ccsem52hgsl)[\[5\]](#cite-id-1dzrnd7n7b2).  
  
## Trivia  
  
* In September 2020, CoinDesk released an article titled, "First Mover: SushiSwap’s Billion-Dollar ‘Rug Pull’ Is Thriller to Crypto Geeks"[\[6\]](#cite-id-a5u793b89d).  
  
# Origins  
  
On Crypto Twitter many users see popular accounts talking about new coins regularly.  
  
### ICO (2017 -2018)  
  
### Uniswap  
  
In late 2020 during the height of the DeFi boom, Uniswap was plagued with projects performing rug pulls. The bad actors operated by minting new tokens, creating Telegram groups to raise awareness of the project, followed by a Uniswap listing and injecting liquidity[\[7\]](#cite-id-xirffryot5q).  
  
At this point, the original malicious liquidity provider would wait for people to swap their ETH for the newly minted coin, after which the token’s creators would drain the liquidity pool, leaving holders with nothing but a worthless coin.  
  
# Examples  
  
Below is an example of a Crypto Twitter user (@boxmining) on August 26, 2020 warning other retail investors about potential rug pulls.  
  
on Twitter warning of a rug pull.  
  
> Someone was shilling “TRUAMPLE” yesterday, and 3 hours later the developers pulled the rug, stealing 1800 ETH.  
  
> Be careful guys. Rug pulls are getting more and more frequent.  
  
### DeFi Examples  
  
In October 2020, News.bitcoin.com exposed rug pull actors in DeFi (Decentralized Finance). The bad actors had performed a rug pull on users' deposited funds.  
  
The bad actors exposed by the Bitcoin publication included:  
  
### Overview  
  
A public team is always preferred over anonymous developer projects[\[8\]](#cite-id-roo5501hnki)[\[9\]](#cite-id-2janakpkxzv)[\[10\]](#cite-id-1goodu30ksg).  
  
### See also  
  
* Liquidity Mining  
* Web 3  
* List of DeFi terms

In the cryptocurrency industry a rug pull refers to when a project disappears or "exit scams" with all users' funds...

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