Cryptocurrencies have proven to be one of the most lucrative asset classes of the last decade, but the potential downside risk and the number of scams have seen many investors avoid adding cryptocurrencies to their portfolio. To address this situation, a number of platforms have emerged that seek to reduce purchase risks and break down barriers to entry, by making crypto investments safer than ever before. Here, we examine three of the platforms and solutions doing the most to eliminate the risks involved with cryptocurrency investments.
Guaranteed Decentralized Swaps: Poolz
Poolz is a simple platform that enables both project owners and liquidity providers to safely participate in a new investment mechanism known as a decentralized swap.
Through Poolz, promising projects can simultaneously raise capital and secure liquidity for their token in a single step. This is achieved through a simple pool mechanism, whereby projects create a swap pool on the Poolz platform to sell their tokens to liquidity providers (LPs), who are able to purchase these tokens before they are listed anywhere else — and at the best available prices.
Pool operators are able to set the swapping ratio at the outset and can choose to launch either a direct sale pool (DSP) or a time-locked pool (TLP). If selecting a time-locked pool, pool operators can set the distribution schedule and vesting period for the token — this will be automatically carried out by the Poolz smart contract as per the specification. Purchases from a direct sale pool, on the other hand, are distributed to LPs immediately.
Because projects need to deposit their tokens to a smart contract operated by Poolz, there is zero chance that investors will not receive their allotted tokens after making their contribution — a common issue in the recent spate of “rug pull” scams plaguing the DeFi token sale industry at present.
Poolz also offers its own native utility token, known as POZ. Holders of POZ tokens will gain early access to pools, get better swap ratios, can stake their tokens for rewards, and will be able to participate in the governance of the platform. Taken together, the Poolz platform and POZ token allow liquidity providers to safely find and contribute to promising projects at the best available prices, with zero risks of being scammed.
Refundable Investments: Dynamic Coin Offerings (DYCO)
Typically, when investing in new project tokens, investors have essentially unrestricted upside and downside — since their investment could potentially achieve meteoric gains or crash to as low as zero in certain conditions.
Though this arrangement is tolerable for those with an appetite for high-risk, high-reward investments, it is not easily tolerated by inexperienced investors and those with a low-risk tolerance, due to the possibility of total losses.
To overcome this issue, DAO Maker released the Dynamic Coin Offering (DYCO) framework, which allows projects to offer their tokens to early investors to secure financing while limiting downside risk for contributors. This, because projects do not receive the full investment allocation immediately, ensuring they deliver on their roadmap.
If investors aren’t happy with the performance of the project or its token, they can choose to send in 100% of their tokens and receive a large refund. As a result, if the token price falls lower than the refund price, investors can simply purchase these on the open market and send them in for a refund to make a profit.
Orion Protocol (ORN) was the first token to launch under the DYCO model, and achieved a peak of almost 70x returns over the DYCO price, and is still more than 10x the price — making it unlikely that anybody would want to refund their tokens.
Introducing the DYCO v2.
The Dynamic Coin Offering was designed to build confidence in a token's primary #crypto market. It achieved this with incredible success.
The #DYCO now comes with an associated feature: a Toll Bridge.
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https://t.co/BGgiHC96KP pic.twitter.com/EUi9o4NRaq
— DAO Maker (@TheDaoMaker) October 28, 2020
With the release of V2 of the DYCO, DAO Maker introduced the “Toll Bridge” which allows users to unlock their tokens whenever they want, rather than be subject to a vesting schedule. This ensures that buyers on the secondary market can be confident that the token price will not be adversely affected by sudden, periodic token releases, which can drive the market price down.
Cryptocurrency Indices: No More Guesswork
Selecting which cryptocurrencies to invest in is one of the biggest obstacles to many budding cryptocurrency investors — since it can be difficult to isolate the promising options from the duds.
This is a particular problem for those first dipping their feet into cryptocurrency investments, since a large proportion of retail investors have little to no trading experience, and can end up buying into overhyped assets with no long-term prospects, rather than those with genuine potential.
To help overcome this issue, a number of cryptocurrency indices have appeared. These are simple financial instruments that can be used to give investors exposure to multiple cryptocurrencies at once — essentially taking the guesswork out of the asset selection process.
For example, the DeFi Pulse Index (DPI) includes ten of the most popular Ethereum DeFi tokens weighted based on their market cap, whereas the Crypto20 index is formed of the top 20 cryptocurrencies weighted by market cap, and is rebalanced every month based on their market performance.
By investing in these or other indices, users gain exposure to several different assets at once, helping to control risk and produce a simple diversified investment portfolio.
Disclaimer: The information presented here does not constitute investment advice or an offer to invest. The statements, views, and opinions expressed in this article are solely those of the author/company and do not represent those of Bitcoinist. We strongly advise our readers to DYOR before investing in any cryptocurrency, blockchain project, or ICO, particularly those that guarantee profits. Furthermore, Bitcoinist does not guarantee or imply that the cryptocurrencies or projects published are legal in any specific reader’s location. It is the reader’s responsibility to know the laws regarding cryptocurrencies and ICOs in his or her country.