Two Upcoming Ethereum Projects You Need to Know About
Potentially inseparable parts of your crypto life.
Bob owns a big, $20M apartment complex and Alice wants to invest into real estate.
Alice has 2 options: she can either buy the complex in its entirety, or buy shares of it. The former option requires her to have large amounts of money on hand, but the latter requires Bob to go through several regulatory compliance procedures such as getting an SPV and even sourcing buyers like Alice to negotiate prices.
Blockchain features like security token platforms can be the solution to this for good — automating compliance while sharding the ownership to achieve the same results.
Sounds exciting, right?
Here, we consider the two of the most technically advanced and critically useful blockchain projects out there in this article that can change how things are currently done in our world. Although there are many projects in other areas such as decentralized games to art, we’re honing in on the avenues most prone to common use with respect to the Ethereum environment with the latest developments of Layer 2 scaling protocols included.
Uniswap V3: Less money, less risk, more rewards
We’ve all heard of Uniswap, but the version we know (V2) is not the most it can do. Uniswap V3 brings about ranges of liquidity, but why is it so important? Consider this: the current state of Uniswap is that for more money you lock up, you earn more fees for your deposit. However, what if I were to tell you that you can now gain 6 times the amount of the fees that you would have gotten by depositing 5 times less? Uniswap is introducing a new method of capital allocation that brings up to 4000x capital efficiency along with it. In the past, when people lock up money, the liquidity is spread throughout the entire range of possible price fluctuations of ETH. Uniswap V3 now concentrates that whole curve down to a range, chosen by the depositor. By narrowing the range, this allows the investor to not only control their own risk associated with investing, but requires much less capital to maintain liquidity. In essence, one can now choose to deposit $100 to fund the $2000-$2250 price range, and another $90 to fund the $2400 — $2600 price range. You’ll be earning fees for movement of ETH price within the bound. If the price happens to shift out of those prescribed ranges, the money will be liquidated.
Given that, you might ask: “well, what if everyone’s pool just happens to all align and some sort of disaster with slippage happens, what do people do then?” First of all, even if there is a 1% move in ETH price, the liquidity pool will only cash out a few of the liquidity bonds because everyone’s deposits are in a concentrated range instead of covering the whole. This stabilizes the system and prevents mass scale failures and drops of ETH price and liquidity. Additionally, the same happens with price booms; the closer you get to regions where there’s less liquidity, the price begins to rebalance itself.
Even if there is literally no liquidity left (ETH drops to $0 in some disaster), you would only be losing a fraction of what you would’ve lost.
The main barrier to success was the smart contracts that were required for these features to come to life. In V2, the liquidity pool formula was xy=k, where an asset x and an asset y in a pool k, where the ratio of x and y would be the price of the pair. However, in V3, there is no constant x and y. Asset x is now fluid due to the concept of virtual liquidity, where one’s deposit must be available for liquidation at all values above or below the specified range. There is now a price range amplification factor that must be taken into account when looking at X for liquidation, making xy=k not work anymore. The contract also needs to be made solvent, where rounding must be correctly done. Otherwise, Uniswap V3 risks not having solvency in the long run. Fascinatingly, given the complicated nature of liquidity smart contracts, the Uniswap team has figured it out and will be launching in May.
Soulja Stake: The First PoC for Sharded Shares of Valuables.
One of the coolest projects I saw this year is called “Soulja Stake”, a platform that sold sharded copies of Soulja Boi’s latest album, made into an NFT. The platform even has a space where the artists can sign their album with a unique message for each person who bought a share of the album. Unique shares of ownership over Soulja’s new album was sold to the public. The most important thing is the large scale this could be done over: anyone could pitch in to buy a share of the new album and go through an automated series of steps to purchase.
NFTs are currently a method for providing liquidity for works of art, but that’s not the only place where sharded unique ownership is applicable. It’s also important in dealing with financial assets.
As I mentioned in the introduction, liquidating your house is a hassle. Prices rise out of people’s ability to buy, and full liquidation has lower than optimal returns because you’re making one person take the entire purchase. No one wants to deal with complicated paperwork though.
Selling secured tokenized shares of your house means more liquidity, less risk for individual buyers, faster, without as much complicated paperwork. The fact that this album of Soulja’s that was sold in this sharded way means that this way of selling things like houses is completely possible.
Each of these people can prove their ownership of their portion of the house with the unique token that they hold of the house. The owner can still maintain majority ownership of the property. Additionally, investors can participate in the property’s appreciation and related cash flows.
Owners of famous buildings like Faneuil Hall can also benefit from the liquidity premium from selling tokenized shares of property. Real estate developers can then also sell shares of the project to lower their capital investment costs.
What is so fascinating about this one, is that no one knows what the potential applications for this is yet. The platform hasn’t been fully built out, and similar platforms have not yet taken off as mainstream. To name a obvious few application off the top of my head, however, are land shares, expensive cars, or even the neighborhood dog.
No one needs to drive a racecar 24/7, which allows multiple people to own shares of it under specific conditions, while having it be cheaper for purchase. People can also apply the same logic to places like malls where enterprises have to buy into having the location.
No one also wants Billy 24/7, who can get annoying from time to time with his non-stop barking and pooping on the floor. Still, everyone loves dogs generally, so perhaps it’s possible to share the burden?
The primary barrier to access is simply the fact that this app hasn’t been platformized yet. The proof of concept and initial MVP of the smart contract is here, but the development team is currently trying to enable listings of multiple items to be put onto the site with their next iteration.
Conclusion:
Both of these applications of blockchain have immense potential for daily use and profit upon investment. The profit potential most likely will come from the per-use pricing strategy available to both of these blockchain applications. Especially considering that these projects are now open source with availability from other collaborators, and the fact that they are yet to be on market, the potential for future improvements is too big to miss.
I’m Xiangan — a 17 year old blockchain developer passionate for learning, and I appreciate you for reading! If you enjoyed the article, please feel free to follow me on my LinkedIn, Twitter, or check out my recently made BitClout. Drop me a line and let me know your thoughts!
