Delving into Blockchain (1)
Tags: blockchain, concept
Published: 2024-05-23 01:48:39

## What is staking

Staking cryptocurrencies is a process that involves buying and setting aside a certain amount of tokens to become an active validating node for the network. By simply holding these coins, the buyer becomes an important piece in the network’s security infrastructure and is compensated accordingly.

Staking income is offered in the form of interest paid to the holder, while rates vary from one network to the other depending on several factors including supply and demand dynamics.

As the number of PoS-based networks continues to grow, new alternatives to stake crypto have emerged including the launch of `group staking`, also known as `staking pools`, `staking providers`, and `cold staking`.

These initiatives aim to democratize access to opportunities in the staking space to retail investors who hold a small number of tokens of a certain blockchain.


## AMM

Automated market makers (AMMs) are part of the decentralized finance (DeFi) ecosystem. They allow digital assets to be traded in a permissionless and automatic way by using liquidity pools rather than a traditional market of buyers and sellers. AMM users supply liquidity pools with crypto tokens, whose prices are determined by a constant mathematical formula. Liquidity pools can be optimized for different purposes, and are proving to be an important instrument in the DeFi ecosystem.


## Liquidity Pools and Liquidity Providers

Liquidity refers to how easily one asset can be converted into another asset, often a fiat currency, without affecting its market price. Before AMMs came into play, liquidity was a challenge for decentralized exchanges (DEXs) on Ethereum. 
As a new technology with a complicated interface, the number of buyers and sellers was small, which meant it was difficult to find enough people willing to trade on a regular basis. AMMs fix this problem of limited liquidity by creating liquidity pools and offering liquidity providers the incentive to supply these pools with assets. The more assets in a pool and the more liquidity the pool has, the easier trading becomes on decentralized exchanges.

On AMM platforms, instead of trading between buyers and sellers, users trade against a pool of tokens — a liquidity pool. At its core, a liquidity pool is a shared pot of tokens. Users supply liquidity pools with tokens and the price of the tokens in the pool is determined by a mathematical formula. By tweaking the formula, liquidity pools can be optimized for different purposes.

Anyone with an internet connection and in possession of any type of ERC-20 tokens can become a liquidity provider by supplying tokens to an AMM’s liquidity pool. Liquidity providers normally earn a fee for providing tokens to the pool. This fee is paid by traders who interact with the liquidity pool. Recently, liquidity providers have also been able to earn yield in the form of project tokens through what is known as “yield farming.”


## Vaults
Sometimes your money belongs in different places. This is why we keep some cash on hand, in a checking account, and in a savings account. Similarly, users have the ability to organize funds into different wallets or store their crypto in a vault.

### What is a vault?
A vault can receive cryptocurrency like a normal wallet, but can also prevent stored crypto from being immediately withdrawn by adding optional security steps.

- Users can also choose to split ownership between multiple users and email accounts, requiring these users to approve of a transaction before it can be completed.

- Vaults also go through a secure approval withdrawal process after creation. Unapproved vault withdrawals will be canceled in 24 hours


## DAO
A decentralized autonomous organization (DAO) is an entity with no central leadership. Decisions get made from the bottom-up, governed by a community organized around a specific set of rules enforced on a blockchain.

DAOs are internet-native organizations collectively owned and managed by their members. They have built-in treasuries that are only accessible with the approval of their members. Decisions are made via proposals the group votes on during a specified period.

A DAO works without hierarchical management and can have a large number of purposes. Freelancer networks where contracts pool their funds to pay for software subscriptions, charitable organizations where members approve donations and venture capital firms owned by a group are all possible with these organizations.


## Reference
- https://capital.com/what-is-staking-in-crypto-a-closer-look-at-the-rise-of-pos

- https://www.gemini.com/cryptopedia/amm-what-are-automated-market-makers

- https://cointelegraph.com/ethereum-for-beginners/what-is-dao