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Binance Smart Chain – the Solution to Eth Gas Fees?

February 24, 2021 By cryptoxray Leave a Comment

What is Binance Smart Chain?

Binance Smart Chain is a blockchain that became live in September 2020, and is designed to enable smart contracts and staking mechanisms, similar to Ethereum’s blockchain.

Towards the end of 2020, gas fees on the Ethereum blockchain had become extortionate and simply unusable.

Imagine going to a supermarket, doing your shopping and when you reach the till to check out, you are asked for $150 just to process your transaction. Well, this is how the Ethereum blockchain was as of February 2021. For small transactions under $100, the gas fees were often higher than the actual transaction amount.

Enter into the blockchain arena BSC or Binance Smart Chain, which is fast, has much cheaper transaction fees and supports smart contract development. Binance has faced a lot of criticism over their BSC network mainly because some claim it is not really decentralised. It is possible for anybody to apply to create a validator node and participate in the network. Currently however, only Binance operate the existing nodes.

Binance Smart Chain transactions are validated by PoSA – Proof of Staked Authority, where participants stake the native token BNB, to support the network. Think of BNB to the Binance Smart Chain as Eth is to the Ethereum blockchain. BNB is the native token of Binance Smart Chain and is used to fund transaction gas fees.

In contrast, Ethereum is currently transitioning from Proof of Work to Proof of Stake validation – Proof of Work being the reason for the extremely high transaction fees.

It is common knowledge that Binance is the largest crypto exchange in the world by a long mile. However, Binance has created an entire crypto eco-system as well, including a native token BNB, a pegged dollar token BUSD, two blockchains that work in parallel and a DEX (Decentralised Exchange)

Binance has two blockchains – Binance Smart Chain(BSC) and Binance Chain. The two chains work in parallel, but only BSC supports smart contracts and is compliant with the Ethereum Virtual Machine (EVM). The two chains run independently of each other.

Because BSC is EVM compatible, developers of Ethereum based Apps and Dapps may easily deploy their projects on the Binance Smart Chain as well as the Ethereum blockchain.

Currently the biggest benefit of the BSC is that it enables smart contracts to operate at considerably lower costs than the Ethereum network at much faster speeds. Smart contracts are necessary for DeFi (Decentralised finance)

What is DeFi?

Smart contracts enable participants to stake or deposit crypto tokens into a contract for a reward – similar to earning interest at a bank.

The most common ways to earn rewards in DeFi are by providing liquidity on DEXs and staking.

Providing liquidity requires depositing two tokens ie BNB & CAKE onto a DEX for buyers to buy. Without liquidity on a DEX, there would be no tokens to buy. The incentive for providing liquidity is rewards, usually measured in APY.

For example in the image shown below, taken from Pancakeswap.finance, we can see that the rewards for providing liquidity to the CAKE-BNB liquidity pool are 139.82% – much higher than the current interest available at most banks! However, be aware that pairs of tokens similar to these may fluctuate in price, so your rewards ie Cake in this instance could also fluctuate.

To see a list of DeFi projects, head over to https://www.defistation.io

Here you can see a list of active projects in DeFi on the Binance blockchain.

Be aware when providing liquidity in DeFi projects, because if one of the tokens swings massively in favour of the other, this will affect profits and losses – this is referred to as impermanent loss. Impermanent, because the loss is only fully realised when the pair of liquidity tokens are taken out of the pool.

Probably the easiest way to interact with the Binance Smart Chain and participate in the various DeFi offerings is by installing Metamask into Chrome or other compatible browser, and adding the BSC Mainnet.

Some instructions for configuring Metamask are available here https://docs.binance.org/smart-chain/wallet/metamask.html

Ethereum – Where is it heading?

January 19, 2021 By cryptoxray Leave a Comment

Ethereum – Where is it heading?

Ethereum has the second highest market cap of all the cryptocurrencies after Bitcoin, and has been around since 2015.

Ethereum is decentralised, open source and was founded by Vitalik Buterin. It is the world’s most actively used blockchain.

Unlike Bitcoin, which is mainly used as a store of value, the Ethereum blockchain benefits from a scripting language which may be developed for applications to run on the top of it.

The primary scripting language currently used with Ethereum is called Solidity.

This is useful for creating smart contracts and attaching real world assets such as stocks and property to the blockchain.

One of the issues with Ethereum is that it has an infinite supply, which is not attractive to asset holders. Another major issue with Ethereum is the gas price for sending or completing transactions, which as of 2021 has become extremely expensive.

The future of Ethereum

Currently in 2021, Ethereum is in a transition period from transactions being validated by a system called proof of work (POW) to being validated by a proof of stake mechanism (PoS).

However, proof of stake presents some technical challenges that first need to be resolved and hasn’t been thoroughly tested in the real world. Verification of transactions on a proof of stake blockchain require holders to stake their tokens for which they receive a reward.

Benefits of proof of stake

It is a lot easier to set up a node and doesn’t require vast sums of money.
Staking requires 32 ETH, but you can join a pool if you don’t have that much ETH.
Staking is more decentralized
It requires much less energy

Proof of work (PoW)

The proof of work mechanism is currently adopted by the Ethereum blockchain, for reaching a consensus or agreement of account balances. It is used to prevent double spending and secures the integrity of the blockchain.

PoW requires dedicated mining machines, which consume a lot of energy to validate transactions by finding a hash which meets the set difficulty level, and thus create a valid block.

The difficulty is set by adjusting the Nonce – number only used once.

Future Ethereum Developments

Due to the high gas fees currently on the Ethereum network (Jan 2021), a temporary improvement proposal has been set in motion according to Eric Conner, a core Ethereum developer. The proposal is EIP 1559 – Ethereum Improvement Proposal

EIP 1559 addresses two important issues:

Establishes the market rate for block inclusion
Burns the majority of the ETH in the transaction fee

A deflationary mechanism is introduced by burning most of the ETH in the transaction fee, which benefits ETH holders by creating more scarcity. This benefits all ETH holders, not just the miners.

The EIP 1559 BASEFEE mechanism will assess the congestion on the Ethereum network and automatically adjust the gas price across the network for all users. The BASEFEE is then burnt or removed from the network. Nobody will receive the BASEFEE as payment.

The gas adjustment options currently available in wallets will be replaced with an option to tip if a user desires, to jump the queue and send through a faster payment. This “tip” will be paid to validators under the proof of stake system.

By burning the BASEFEE, the transaction fee ETH is removed from the network, which has a deflationary effect for the ETH in circulation ie creates scarcity.

Summary

Ethereum is transitioning to a Proof of Stake validation system from a Proof of Work system, but a temporary fix to address the high fees would be the implementation of EIP 1559.

Ethereum2 (Proof of Stake) has already been launched on a blockchain called Beacon Chain, which is effectively a test net.

Ethereum2, which will simply be known as Ethereum may be a year or two away, but in the meantime the implementation of EIP 1559 would address the high gas fees.

Bitcoin the Crypto King – An Overview

January 2, 2021 By cryptoxray Leave a Comment

Bitcoin the Crypto King

Bitcoin was launched in 2008 by an anonymous person or group called Satoshi Nakamoto.

It was the first cryptocurrency to become popular on the internet, and for that reason, Bitcoin is often referred to as the King of Cryptocurrencies or the original cryptocurrency.

There is a maximum supply of 21 million bitcoin, which will never be increased, however each bitcoin may be split into 100 million Satoshis.

On 22^nd May 2010, a man called Laszlo Hanyecz agreed to pay 10,000 bitcoin, worth a total of $41 at the time, for two pizzas. Currently in 2021, that same 10,000 bitcoin would be worth a staggering $298.2 million!

What is a Bitcoin?

Bitcoin, as all other cryptocurrencies do not exist as objects, the bitcoin network is simply a shared public ledger.

These ledgers record all the transactions ever made within the blockchain network, and are verified throughout the network nodes to form a consensus. Cryptography is employed to secure the network, which follow strict rules, and prevents previous blocks from being modified.

The blocks form a chain hence ‘blockchain’, and each block refers to the previous block via a cryptographic hash. If a previous hash is altered, it would corrupt the whole chain and flag an error in the consensus.

The Bitcoin Network

To maintain the Bitcoin network, it is necessary for computers (nodes), to process the transactions. These nodes are rewarded in bitcoin for their work and are known as miners. Miners have to use electricity for their computing devices or nodes, which can be very expensive.

This is why many mining pools are located in areas of the world where the cost of electricity is cheap.

Due to the expensive costs of acquiring mining hardware and paying electricity bills, bitcoin miners have come together to form mining pools.

Most of these mining pools are currently located in China, Czech Republic, Iceland, Japan, Georgia and Russia. However, at the time of writing there are some miners moving from China to countries like Norway, Sweden and the US, due to the cheaper electricity prices.

Bitcoin mining pool distribution — Bitcoin Mining Pool Distribution 2020

What is proof of work?

Bitcoin employs a proof of work system (POW) called HashCash. The bitcoin miners run some computer code, which pools together unconfirmed transactions and combined with other data forms a block, resulting in a reward.

However, the block can only be accepted if it meets certain criteria, which takes some additional computational processing. The block is accepted when a miner discovers by trial and error something called a Nonce number – number only used once.

The Nonce is used to set a difficulty level on the network, and requires a block hash to be preceded by a certain quantity of leading zeros. The difficulty level is periodically adjusted in the bitcoin network to maintain an average creation of six blocks per hour.

At the beginning of 2020, the hash difficulty requirement was hardened, as a response to faster hashing mining equipment. The new requirement was for the first 74 of 256 hash bits to be zero.

There have been many concerns over the amount of energy the bitcoin network consumes, however as global energy suppliers shift to cleaner alternatives, like wind and solar, then these concerns should become less of a concern.

You can view the original Bitcoin White Paper here

How to buy Bitcoin

Head over to our guide here

How to Send or Receive ERC-20 Tokens with Ledger Nano

December 12, 2020 By cryptoxray Leave a Comment

How To Send Or Receive ERC20 Tokens With Ledger Nano

Is the Token ERC-20?

First establish if the token is ERC-20 or not by visiting Coingecko.com or Coinmarketcap.com.

If you search for the token on Coingecko.com, you will see information for Market Cap, Explorers, Contract, Community, Source Code, Tags etc. If the Explorer is Etherscan, then the token is most likely ERC-20 – click on the Etherscan link, which should take you to the token information on Etherscan. Here on the token page, you should ERC-20 next to Overview.

For this example we used a token called API3

Etherscan is the leading blockchain explorer for the Ethereum network.

How to receive ERC20 Tokens on Ledger Nano

Having established that the token is ERC-20, you can send all ERC-20 tokens to your Ethereum address. To find out your Ethereum address on your Ledger Nano device

Activate your Ledger Nano and open the Ethereum app

Open up the Ledger Live app on your phone or computer, enter your password > Transfer > Receive > Ethereum >

Select your Ledger Nano device in Ledger Live

Verify the address on the Ledger Nano device > approve

On Ledger Live > share or copy the address – this is the address to send your ERC-20 tokens to.

Why can’t I see my tokens?

Unless the token is well established, once you have sent your ERC-20 token to your Ethereum address, you probably won’t see them in Ledger Live.

To see your ERC-20 tokens at your Ethereum address, you can head over to etherscan.io and create a free account. Once your account is set up, you can create a watch list – just simply enter your Ethereum address to view your tokens.

How can I send my ERC20 Tokens to another address?

Some high market cap ERC20 tokens are supported by Ledger, so you can send them directly from Ledger Live. Here is a link to the Ledger supported crypto assets https://www.ledger.com/supported-crypto-assets.

Follow these instructions if your token is not on the list of supported Ledger Tokens.

If you want to send the ERC-20 tokens from your Ledger device Ethereum wallet to another address ie exchange etc, you will need to head over to www.myetherwallet.com > Access My Wallet > Hardware > Ledger > Select the Ledger device from the drop menu.

If your ERC20 token is not supported by Ledger, then connect and open your Ledger device > open the Ethereum app

In MEW (myetherwallet), select the address to interact with – it’s probably the first option showing a balance > Accept the terms > Access my wallet

Here you will have to add your new token details under “Custom tokens” > Add custom tokens

How to add a custom token to MEW

You will need three pieces of information to add a custom token in MEW, which you can find at https://ethplorer.io/

The safest way to find your token here is to copy and paste the contract address from Coingecko.com or Coinmarketcap.com into the search field.

The three pieces of information you will need to add a custom token on MEW are:

Token contract address:

Token symbol:

Decimals:

Enter the details > Save

You should see the balance of your tokens on the right side of the MEW screen.

To send a transaction > Send > Select token from drop menu > Enter the recipients address >

Select amount or Entire balance > Send transaction

Approve on the Ledger Nano device

If the “Send Transaction” button is greyed out and is not active. Go to the Ethereum app on Ledger device > Settings > Settings contract data. Allow contract data in transactions – this usually fixes this issue.

You can purchase a ledger device from our link here

Could API3 Become The New Chainlink?

December 5, 2020 By cryptoxray Leave a Comment

Could API3 Become The New Chainlink?

What is an API?

API stands for Application Programming Interface. APIs may be utilised by online companies, such as eBay, Google, Facebook and millions of other online companies to openly provide tools for developers who need to create applications based on their technologies. APIs may also be used for sharing or embedding content from other internet sources, such as data feeds. Developers and software engineers can easily insert APIs into their code to greatly increase the time it takes to develop complex applications.

So, what is the problem?

Most existing APIs at the time of writing however, are not compatible with the blockchain and decentralised applications and herein lies the problem. This problem has been referred to as “The Oracle Problem”.

The oracle solution

Enter a company called API3, the oracle solution provider. API3 design oracle protocol and oracle nodes specifically for each API provider directly, without the need for a third-party operator.

API3 have come up with a solution to this oracle problem, with an API gateway to the blockchain called Airnode. Airnode, once set up for the API provider, will continue to run without further configuration or maintenance – “It will sustain itself until it is taken down”, says Burak Benligiray on the official API3 medium website.

Taking out the middlemen from the supplied data chain, eliminates possible tampering or denials of service, also making the supplied data less vulnerable to attacks.

Team

The guys behind API3 used to run some of the top oracle feeds and nodes with Chainlink, so are well experienced in the oracle space. During their time supporting oracles feeds at Chainlink, they noticed some short comings with the third party oracle solution and aim to improve upon that with API3.

API3 Tokens

API3 launched their tokens at the end of November. There is a maximum supply of 100,000,000 and the current market cap is $45,679,210. Just for comparison, Chainlink’s market cap, who are also in the oracle space, is currently $5.2 billion. It is unlikely that API3 will take Chainlink’s crown in the oracle space, but there is significant room for growth. API3 has some signifiant partners with deep pockets, such as Pantera and Digital Currency Group. The tokens are currently trading at $2.40