cubdefi.com & CUB Token | Easy Explained (No Hype Analysis)

in LeoFinance9 months ago

I have read a dozen of posts around the new cubdefi.com, yet none of them really address core questions of why it is needed and where the value actually comes from or what it is actually about in a way I easily can understand. This is my attempt to explain everything in a human language without any hype...

All this is in how I personally understand it and I might be totally wrong on some of the aspects. So please let me know in the comments if anything is factually incorrect so I can adjust my view.

1. Automated Market Makers

In the traditional finance markets, buying or selling stocks, currencies,... happens in a way where people are putting orders to sell at a certain price and buy at a certain price, when they meet a trade is made and a new price is established on the exchange they are using. Smart Contracts that run on Blockchain Technology allowed a new model to do this in a decentralized way. Instead of having order books at both sides, 2 pools are created that include a certain currency let's say Ethereum which is worth 1800$ and USDT which is worth 1$ and these are directly traded against each other.

Example:
So if one pool has 100 ETH in it and the other pool has 180000 USDT in it, a price of 1800$ is established for ETH/USDT trading pair. In order to buy ETH, you deposit USDT into the USDT pool and will get some ETH from the ETH pool which will adjust the price since there are now less ETH and more USDT in the pools. This adjustment is done by an automated market maker algorithm.

Making these trades comes with a liquidity provider fee which gets added to the pool making them go to people that have both ETH and USDT provided in both pools as a way to compensate for the risk they are taking when one asset goes up in value causing them to have less of it when they exit their funds from the pools. There is also a Gas fee that has to be paid to use the network. Providing liquidity is a way for people to put their crypto holdings to work and get a passive return on them. This model was introduced by Bancor and popuralized on Uniswap. Previously projects that had a token needed to pay big money begging to be listed on exchanges like binance in order to have a way for investors to buy their token. With this new automated market maker model, any project is pretty much able to list their token making it possible for investors to buy them in a decentralized way.

2. Yield Farming

In order to give people a bigger incentive to provide liquidity or use a platform, most projects created their own coin that was being rewarded on top of the liquidity provider fee giving better returns since those tokens could be sold on the market. The idea behind them from what I understand is that they are 'governance tokens' and give a vote in the decisions and the direction a platform is going. Part of the revenue being paid out to token holders potentially giving them a passive income stream if one day it becomes widely adopted. This mechanism caused the DeFi craze in 2020 as people started to deposit coins, take loans against them, use those to deposit on another platform, and so on in order to get as many of these coins that were being given out as incentives to use all the different platforms to get a very high yield (Yield Farming)

3. Copycats

Similar to the ICO craze in 2017 where money was thrown blindly at anyone with a whitepaper and a plan of a project, everyone now was jumping the DeFi bandwagon and a lot of copies were made with their own twist while most smart contract chains also started implementing DeFi since it was hot. There first was Sushiswap which is a copy of Uniswap who gave out tokens to their users draining a lot of the liquidity from Uniswap who later also introduced their own token. Countless others both on Ethereum and different chains followed and all of them tend to get this initial liquidity spike because yields at the start are very high. Many of these can be found on defipulse.com

4. Ethereum Gas Fees & Binance Chain

Since Ethereum has yet to scale while demand for many of these DeFi platforms spiked, the gas fees started to increase to a level where only whales can comfortably use the network pricing out all the mid & small stake users. Layer 2 on Ethereum is not ready yet which gave the perfect opportunity to Binance and their Binance Chain to step in as an alternative to Ethereum. Getting a network effect is one of the most difficult things in crypto since people don't want to install yet another wallet and projects can't just move to another chain easily.

Binance Chain is a copy of Ethereum that can be used in Metamask which is the wallet all Ethereum users already have installed. Everyone is also using Binance as a centralized exchange which allows to withdraw ERC-20 tokens directly to the Binance Chain. The main difference between both chains is that Binance Chain runs on just 21 node validators which makes it way more centralized with the advantage of having much lower gas fees. Nobody really knows how many BNB Binance owns, but knowing that Changpeng Zhao, the CEO from binance suggested a rollback of the Bitcoin chain after they got hacked (Read Article) along what happened with them using customer funds in the hostile takeover of Steem in 2020, it's hard not to see some major red flags.

They also are pushing their own chain having it as the primary withdraw option for ERC-20 tokens showing much lower fees which is causing a lot of confusion for new people in crypto who often make the wrong choice. This is creating a lot of hassle for projects that receive deposits to the wrong chain See Tweet. They also at some time halted Withdrawals to the Ethereum network trying to push their own chain claiming 'Ethereum was congested' which backfired as they got a lot of criticism for it. See Tweet. Pancakeswap also took everyone by surprise getting a lot of volume out of nowhere which helped to drive adoption. There are inidcations that a lot of the initial volume was fake (read Tweet) and it kind of worked as more people actually started to adopt it.


5. Leofinance

So Leofinance.io started as a blogging platform where users get rewarded on the Hive Blockchain with its own LEO token. The idea (from what understand) was to build a better token and blogging model with a focus on content around Finance and crypto. This was done by implementing advertisements which brings in some revenue that is used to give the LEO tokens actual value as it is used to buy them back and burn them. More products were built that support the LEO token in the form of leodex.io, hivestats.io and leopedia.io who all help to burn some LEO. Becoming the frontpage of crypto on the internet is one of the goals of the project. More products are being made which all support the LEO token with cubdefi.com being the latest. Exactly the same seems to be happening now with all projects want their token to be traded on the binance chain.


6. Uniswap & Pancakeswap Craze

A while back, there was a craze around every project wanting to have a trading pair running on Uniwap. Not so much because it has all too much function for tokens to be traded since there are crazy high transaction fees, but more as a way to stay relevant and get some eyes on the project. Having a trading pair against Ethereum also indirectly helps to keep up the price since it's measured against ETH and it takes coins off the market into the liquidity pool. Splinterlands created wrapped DEC giving a lot of rewards, LEO did the same thing with Wrapped LEO a while back. The same craze now seems to be happening for Pancakeswap with every project wanting to have a trading pair on the Binance Chain which has lower gas costs.

7. Cubfinance

So cubdefi.com is another project by the leofinance team creating their own swap platform with liquidity pools as a way to get their LEO token traded on the Binance chain accessible. This both draws more eyes on leofinance.io and gives another options for people who are priced out by Ethereum to buy LEO or other tokens. A 'governance coin' called CUB was created to reward liquidity providers which has a similar burning mechanism to the LEO token.

Basically, you can provide liquidity to farms with most of them requiring a deposit fee of 4% which gets used to buy and burn CUB (80%) & LEO (20%) tokens. The same thing can be done in dens that don't have the risk of impermanent loss but also pay out less. There is an inflation of CUB tokens which gets paid out to those liquidity providers and those staking in the dens. There are crazy high returns very early on which gives an incentive for more people to join which so far has gotten over 7 Million of funds to be locked into the platform.

Value CUB token
The value of CUB still has to be discovered and it goes up and down a lot now selling for 3.8$ currently at this time of writing . It is now being mined and there also has been an airdrop to LEO token holders. I guess a lot will depend on how popular the product actually gets and if more people start using it over time to buy and sell coins on the cubdefi.com website along with providing liquidity which will result in more CUB being burned. A combination of supply/demand/token burn will form the price and it's nearly impossible to put an exact number on it.


Personal Thoughts & Plans

When it comes down the Leofinance and the LEO token, I really like how the team continues to build and expand finding more ways to burn LEO tokens which will support the price to a certain extend. Looking at the total supply and the inflation, it can be seen that many coins have already been burned. Off course if the price goes up, more money needs to come in in order to keep this up which has gotten more difficult as of late (see chart below or posts from @leo.stats)

I'm personally not a fan of the Binance chain even though I do see how they solve a problem at the moment and think it will do well. CUB is not something I would be willing to literally bet the farm on but I'm happy to keep the CUB tokens I have gotten airdropped and will stake them on cubdefi.com similar to what I have gladly done with the LEO tokens. I have never been into yield farming providing liquidity just to get my hands on tokens that are being given as incentives before and I'm not about to right now. It is nice to see many people making some good gains these past days and I will take the opportunity to finally test out the Binance Chain myself in the coming days. This is about as far as my view goes on all this.


That's how I understand all of it at the moment, please make sure to let me know in the comments if I'm wrong or incomplete on anything so I can adjust my view and make adjustments. Thanks!


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Yes it is not about yield farming only
There are many options there
It is really so interesting

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This is the best Cubfinance analysis I've read so far. By quite a distance. Thanks a lot!
I did provide some liquidity, but will think again whether or not to keep doing that.

Thanks @erikklok!

It's so hard to find things explained when it comes down to blockchain in a way easy to grasp and quite frustrating nobody really cuts to the core of what problem something solves and where the money/value comes from.

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Learn how to earn FREE BEER each day by staking your BEER.

Clean and clean explanations of all the things. Nice job!

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Thanks @scaredycatguide, I actually used your guide to stake my airdrop today. Thanks for the quick and easy explanation!

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I'd been wanting to get on Pancake Swap for a while but just hadn't had a chance to research it. A buddy over on Steemit made me aware of CubDefi and I'm loving it so far. Took a couple days to get the hang of things. I'm comfortable staking in the Den, probably going to checkout the Farms but still have to figure that out

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I'm also now very comfortable having my airdrop staked in the den and I intend to just keep it there at least until there are serious signs that the current bull market has peaked.

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really sharp analysis. I appreciate this post because you lay out the concepts in ways I can begin to understand them. As of now I see cub as some race I don't know how to jump into. I am in the den since day 1 but that is my risk tolerence.

I'm glad you touched on how cub brings value to leo because even though Ive read it before, it made sense when you said. Beyond getting my airdrop for project blank, I wasn't sure the real value of staking and earning leo.

Keep fiddling around with posts like this. we all want to read them. Trust me. We need them. I'm going to share this on noise.cash in the leo chamber if you don't mind

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Thanks @tulwave, I actually enjoy getting explanations to a point where I can properly grasp them myself. Feel free to join this link anywhere you want. I have been hearing more and more about read.cash and noise.cash and plan to test those platforms out myself to see what they are about. If they work with affiliate links and you have one, feel free to drop it here and I'll use it to sign up.

cheers,

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great read for my level. I wasnt getting so much of this but you slowed it down and simplified it form me. I see it differently now. I'm no anxious to get in and don't feel as anxious to get out of the den either.

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Thanks, @cflclosers, it does feel like most are just jumping the hype bandwagon with limited actual understanding and many hype posts are being made as those tend to get good rewards creating a fomo loop. Understanding really does a lot, sometimes it takes away fomo, other times it enhances it like crazy :)

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Great comprehensive DeFi walkthrough, a lot of information to digest and learn from it.

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