Hello fans and friends of xDai-chain/Poa,
my name is affe tasse and i have been community admin of poa network since January 2018. I have been following the Poa team for almost 2 years and not without reason: The poa team has created some great things with limited resources (token-bridge, Blockscout, POSDAO, xDai-chain), which sustainably enrich the Ethereum ecosystem. As an active member of the community, I would now like to contribute to the long-term success of the xDai-chain ecosystem. I cordially invite everyone to post suggestions, ideas and suggestions under this article. Alternatively, discussions via Telegram are welcomed.
Let’s take a step back, to the time of the ICO boom 2017/early 2018 when numerous projects fundraised large sums and made big promises to revolutionize the traditional business world with blockchain technology. ICO investments were very profitable at the time and it seemed that this boom would last forever. But it was during the subsequent bear market that it became clear that investors had probably hoped too much for new projects. Total losses of more than 95% were not the exception, but much more the rule. Many investors wondered why the projects, which had been so hyped until recently, suddenly lost so much in value. The answer is actually relatively simple, as long as you know some of the basic mechanics of the market. Price rises are usually the result of an active cash flow into the corresponding asset. During the ICO boom, many private investors invested huge sums in new currencies with the intention of selling them at a good profit. The money flow was almost exclusively speculative. However, when the entire crypto market began to fall and the investment mood of investors turned negative, speculative investments in ICO projects became increasingly unprofitable. As a result, the speculative-active cash flow that had caused the high price gains was eliminated. Investors began to sell, the price of many ICO projects fell into the bottomless and the projects fell into oblivion.
In order to cause price rises like in the ICO boom, money must actively flow into the network, as already explained by user Ivan from the xDai-chain telegram group. A successful project must therefore generate constant streams of income with the help of which R&D and business operations can be financed and at the same time the long-term positive value development of the underlying cryptocurrency can be secured. The crypto currency in 2019 will no longer be covered by gold or other assets, but by a functioning business model. Since a dividend distribution is currently still a very complex process (negative attitude of cryptoexchanges, legal approvals), a weekly/monthly buyback with subsequent token-burn is an attractive way to fuel the appreciation of a crypto currency.
Now the question arises how to generate these streams of income. The answer is, with the help of organic business models for which a real market exists. If you look at the current use cases of crypto currencies, you quickly realize that there is predominantly a profitable use case: Speculation. Investors and traders trade speculatively motivated. The crypto exchange Binance impressively demonstrates how successful it can be to provide customers with a user-friendly platform. You can currently see how a new use case of cryptocurrencies is slowly emerging on the horizon, which xDai-chain is also about: DeFi (decentralized finance). Compound finance and MakerDao (Dai) show us a piece of the decentralized, bankless future. Here we can only guess how valuable DeFi companies will be in the future if they replace traditional financial companies in the long run. Decentralised payment systems such as xDai-chain will revolutionise the payment services sector in the future. Providers like MoneyGram or Westernunion simply can’t keep up with almost free money transfers. Only a fraction of the business models made possible by DeFi have been explored so far. In the following I would like to present some business models that can be built on top of the xdai chain ecosystem to ensure the development of the platform as well as the increase in value of the dPos token.
The xDai Chain project opens a whole new world of possibilities to improve several aspects of Blockchain use cases we know today. The approach to make a stablecoin the network’s native coin is for sure a game changer in terms of mainstream adoption and blockchain experience.
xDai as a financial platform
Blockchain projects currently have little use cases. To be honest, there is only one use case that has proven its worth: finance. Crypto currency exchanges made impressive profits despite the long bear market in 2018, as the majority of investors are involved in crypto currencies in order to make profits. That is why financial services are the most obvious use case for blockchain and also offer the xDai
chain ecosystem a good opportunity for a constant income.
xDai chain: the hub of blockchain-based finance
It is important to understand xDai-chain not as a simple side-chain of the ethereal ecosystem, but much more as a financial hub of decentralized finance. Through a large user base and active use of xDai-chain, Dapp-Developer are incentivized to deploy their DeFi Dapps on xDai-chain. A wide range of useful Dapps will further increase the awareness and use of xDai-chain. Each Dapp deployed on xDai-chain increases the value of the ecosystem and attracts more users, who ultimately make the network valuable through their active use.
creating value by bridging value
The proven token-bridges of the Poa project offer an immediate possibility to transfer ETH, ETC and major Erc-20 based tokens to xDai chain and to represent them there. The bridged value will hereby automatically increase the value of the network and hence the token, as dPos token secures the bridged value directly. By an active flow of value into the xDai-chain network, the whole ecosystem profits instantly. Revenues can be generated by a token-bridge fee.
If bridges are buildt to the most important crypto currencies like Bitcoin, Monero or Litecoin, they can also be represented on xDai chain. Thus, a user can store his different coins centrally in his xDai chain wallet. I envision xDai chain as a hub of the blockchain-based parallel economy. A central storage of all coins of different chains in one wallet would save the newcomer a lot of complexity, which he currently has with the management of different coins on different blockchains. In addition, the user can manage his portfolio centrally directly from the wallet. The xDai chain Wallet is the centre for financial on-chain activities. The xDai Wallet hereby is not just a common wallet but much more a tool to manage and store the user’s total portfolio.
The idea behind a Dex is actually very exciting: Smart-Contract based P2P trading generates a constant almost passive income. Unfortunately, Dexs still have big liquidity problems at the moment. Idex, the largest Dex makes only up a fraction of the volume of Binance. Since the user now stores his coins centrally in his xDai chain wallet, he must be given the opportunity to exchange major cryptocurrencies as bitcoin or ether with each other. I wouldn’t do this via a dex, but via a wallet built-in token converter. This allows the user to react immediately to price fluctuations from his wallet and to buy/sell coins if necessary. The exchange rate contains a fee (0.7% in our example), which creates a
steady stream of income while beeing frequently used.
Furthermore, the token converter should have a “convert everything into xDai” function. So, the user can convert all coins into xDai in a market crash without losing valuable time during the transaction on
The token converter should only offer established, large coins with a constantly high trading volume for conversion. The functionality of the token converter is as follows: The user (Ben) transfers his coins (1 BTC), which he wants to sell (for xDai) into the converter smart contract. As soon as the coins have been deposited there, the user’s coins are sold (1 BTC for 10k Dai) after confirmation on an account of a large and liquid exchange (Binance, for example). From another Smart-Contract (Liquidity Smart-Contract) 10k xDai are now transferred to the user’s wallet.
Through the Token Converter, constant revenue can be generated through a trading fee. The liquidity problem is solved by using liquid, large exchanges such as Binance. The user can immediately sell in his wallet at his desired price and receives his coins nearly instantly. In addition, the token converter ensures active use of the token bridges and the xDai chain network through the transfer to Binance and back again, whereby dPos token holders are benefitting. Now the question arises how liquidity is created on the Binance account and in the Liquidity Smart-Contract.
Users can lend their coins from their wallet in the liquidity protocol to generate passive income through interest. The winnings can be paid out in a currency of their choice (dPos Token, Btc, Eth). The liquidity protocol provides the token converter with the necessary liquidity both in the liquidity smart contract and on the Binance account in order to execute also orders with a higher volume. If the token converter is used frequently, users can expect interest of up to 10% APR (borrower will receive a share of the trading fee the converter charges). The lack of volume p2p dexs suffer would be solved by decentralized p2p loans! The possibility to stake Bitcoin, Litecoin, Ether and other PoW currencies (and generating passive income as a result) will attract the attention of many people to xDai chain. Imagine how many people would send their Eth over to xDai chain to hold and “stake” it there!
Collateralized decentralized loans
The liquidity protocol can also be used to grant collateralized loans. This will strengthen the profit opportunities for borrowers further. Lending is next to trading one of the most profitable businesses in crypto due to its present use case. By the implementation of payment options, lending becomes very attractive for the user as he gets instant liquidity of his assets without missing a potential market rise. A user now, can pay his bills while maintaining his crypto-stack. A high liquidation fee (8-10%) should be implemented to incentivize the user to pay back his debts. This is a great opportunity to establish a steady stream of income.
The most obvious use case of xDai chain is of course payment services. Another source of income in this case would be to create a tool to redeem xDai and pay it out to a bank account. An xDai to US Dollar Converter offers merchants and shops the possibility to make quick and uncomplicated payouts and at the same time ensures a constant use of the token-bridges as well as an uncomplicated, secure source of income for the xDai project. A wallet section would be conceivable, where you can enter your IBAN (reference bank account) and make withdrawals at any time after a successful KyC-check. A minting and burning Smart-Contract charges a fee, that is given instantly to validators/delegators. Especially for beginners from the traditional business, this would mean an enormous relief and simplification of the usual payout procedure. If businesses don’t neeed their money on xDai immediatly, they can stake it in the liquidity protocol to earn some passive income.
In this example, Ben sends 3000 USD from his reference bank account to the xDai-chain bank account. Subsequently, 3000 xDai minus the minting fee are sent to his Wallet. If Sarah now wants to redeem her xDai, which she got from Ben, her xDai is burned while she receives the corresponding amount of money minus burning fee in her reference bank account.
Digital Payments are gaining more and more traction. In the western world, we aren’t really used to non-cash-based payments but for example in China, you can pay nearly everywhere digitally. The xDai chain could completely replace services like Western Union or MoneyGram. The question is just how to get money in and out easily, userfriendly and cheap. I think, the key to success is comprehensibility and a minimalistic approach as one can see at the example of burner Wallet. It’s so easy to understand even for beginners that it is not an obstacle but a learning tool for starters.