Life of a Small Time Investor #3
Thank you for reading, I am Dukefish, an EOS advocate and this blog series “Life of a Small Time Investor” is intended to share my experience with the crypto world and help those learn from my mistakes and triumphs. Though as always, this blog is not investment advice just how the chips have fallen for me so far. The greatest knowledge I can part to you is make sure you Do Your Own Research!
Stemming the Tide
So should we take today’s little bit of green as the end of this bloodbath or is this merely King Canute trying to command the sea? Day to day watching of the market can cause anxiety and worry and is not something I advocate doing unless you are day trading. I would like to see several days of green candles before we can start to even contemplate that the bloodbath has ended. Will it just be a stabling out at a new support or will it bounce back, or will the sea roll in further and engulf us all, who knows? I fear that it wont be the bounce we all want.
Unfortunately the hash war of Bitcoin Cash is still ongoing and the DOW dropped a few hundred points during the week, with big tech companies taking stock price losses. Political uncertainty with the US/China trade war and the Brexit debarcle, to name a few issues, are putting pressure on traditional markets. Any fluctuations in the financial world is going to have a rippling effect in crypto. So Hash wars is not solely to blame.
Ripple (XRP) still claims the number #2 spot of the marketcap ahead of Ethereum (ETH) by a solid four billion margin. I think that this will most likely be the new norm, as ETH slow transaction speeds, the promise of sharding, that has still not manifested, and Dapps that have user numbers so low it is laughable. EOS is still the forerunner for Dapps to be built. The cryptosphere needs some killer Dapps to emerge and start disrupting for it to really shoot up in value, but we are still in it’s infancy. Stellar (XLM) has also overtaken EOS in the marketcap rankings pushing EOS to #6. Though the gap is a “mere” four hundred thousand US dollars, so I can see these two switching places a few times as (one hopes) the market stabilizes.
This entry is going to focus on making passive income within the EOS ecosystem, as who doesn’t want to increase their pot! At present there are only two real ways to generate passive income. Staking gambling tokens and leasing/renting out your EOS resources (CPU and Network) on Chintai. There is a third option currently in development by block one, REX tokens. In which staked tokens can be rented out but it is still not here yet nor is a release date.
There is also the BOID token, while not strictly a passive income it is worth commenting on. This is a token you can ‘mine’ in exchange for committing CPU power to the BOINC network and helping with noble scientific projects. I plan to talk about this in more detail in a later installment of this blog.
So I want to talk about Chintai first. This site helped create a market place for those who want to lease their tokens for gains and is designed for Dapps and users to borrow CPU and network time. With CPU price fluctuation it can be most annoying when trying to act with Dapps and the cost is too high thus stopping you from doing your transaction(s). I have used Chintai to lease 100 EOS worth of CPU for about 0.3 EOS for 7 days. Giving me more than enough CPU to be able to use on the gambling Dapps. I have not tried to lease tokens of my own as of yet as by doing so requires liquid coins not staked, and it means you lose your voting power while they are rented out. This is a problem that they intend to fix and something I look forward to in the future.
The user interface is fairly simple, I do love seeing a graph, who doesn't in this space! The order book is clearly visible and you can set the interest rate and length of renting you wish to do. There are no transactions costs for using this service and you are loaning your coins to people using the network. It is sponsored by multiple block producers hence keeping the price free and it enables developers a platform to get more resources without having to pour lots of money into EOS. Airdropping you new project is expensive if you do it solo but renting the CPU you need is a great addition to this market.
So REX is a very similar idea to Chintai and was originally mentioned in the EOSIO white paper. Though unlike Chintai this is going to be implemented by Block One themselves and allow you to use your staked tokens to generate passive income. To quote from Dan Larimer's medium post on the topic back in August.
"A EOS holder can lend their tokens to the Resource Exchange and will receive REX tokens for their EOS at the current book value of the Resource Exchange. The REX will generate fees by lending the EOS which will increase the book value. At any time the holder of REX tokens can convert REX back to EOS at book value."
Image Credit to EOSraychain
He also proposed that the extra fees generated in the EOS sphere will be added into the REX pool, this means the RAM trading fee and EOS from the name auctions, as well as any new resources that get implemented into EOS. A key difference between Chintai and REX is that in order to use this new system you will have to have staked EOS and have your account actively voting for at least 21 block producers. This resource exchange is designed in the hope of promoting more voting and reduce voter apathy by generating passive income. Again who doesn't want to increase their pot!
A recent update on GitHub and reported today indicates that REX is well on its way and will be implemented into the EOS main-net soon. It may usurp Chintai usage but both are trying to solve a very complex problem. I have faith that once it goes live this will be a game changer for EOS and really signal its superiority to other blockchain projects.
Gambling Dapps & Dividends
Now I have talked about these before but I am going to focus on the dividends offered by these sites. Again word of caution, gambling is addictive and you can lose it all. Only wager what you willing to lose and remember the casino model is one of the most profitable businesses out there.
So the gambling sites EOSBet and Betdice were the first to offer tokens (BET & DICE respectively) of their own and to reward dividends on those holding them. BET tokens however can not be traded and exchanged at present so there liquidity is non existent, but by holding these tokens you are granted instant dividend payouts based on the house's profit. In BET token's case the 100% of house profit is distributed to BET token holders, without having to stake or do anything other than earn them. You do have to go onto the site to claim your reward but it is a couple of clicks and boom dividends in your account. At present EOSBet are dropping tokens at a 20:1 ratio, so every 20 EOS wagered you will receive 1 BET token.
Betdice rewarded tokens on a sliding scale, at launch it was x100 for every EOS bet but as more and more were minted this multiplier has halved. At present the return for each EOS wagered is x3.125. If you were in early enough you could have made quite a large stack compared to starting now. I did get up to 35000 DICE but my greed got the better of me and I lost in the those first weeks. Kicking myself but alas it is all part of the gambling experience. Now BetDice requires you to stake your DICE tokens in order to receive a payout, though they only contribute 50% of all profits to the payout pool, but the payout pool is automatically distributed once per hour you do not have to go claim it yourself.
So you might feel as if you have missed out accumulating large volumes of these tokens already, though there are many clones of these gambling sites. Funcity was brought to my attention recently as a new gambling site and they offer CITY tokens at a rate of x10 at present. They also have a clear indication on the main page of when the multiplier will drop. They are referring to there tokens being "mined" with each bet and are offering dividends to those who stake there CITY tokens.
As with all these tokens it will be a share of the profits that you receive, so the more successful and used gambling sites will have bigger payout pots and some may just dry up altogether. I can see this market lasting for a good few months before this gold rush stabilizes and we end up with one or two key EOS based casinos dominating this sector. Again my money is still on BetDice coming out as the victor.
Making passive income is key to adoption as it will lure new people to the market as they can make gains with little to no input, just hodl and you get some return. Who doesn't want that. However when I started writing this article this morning there was a sea of green, not huge upwards swings but green none the less. As markets tried to balance out from this drop and people are seizing buying in at a lower price. Now it is the evening and I have finished it seems all those green gains have been wiped away, it seems King Canute can not keep the tide at bay. I am still bullish long term, as hope is a pesky thing, but I still believe that as new Dapps hit the market and adoption slowly but surely gains traction the cryptosphere will bounce back over the next few months and years.
Thank you for your time!