107th Edition

Aug 19, 2023

Ethereum Stamped Newsletter

Hi there πŸ‘‹πŸ»

This has been a week we probably won't look back on too fondly simply owing to the market movements (unless this turns out to be the dip before the bounce, fingers crossed). But nonetheless, good or bad, the world of Web3 is never uneventful. And we sure have quite a few events to talk about.

Here's all the action from the last week in the world of Web3.


This edition covers:

  • Impermanent loss and how to avoid it
  • Shibarium's live
  • Visa x Ethereum
  • and Spot Bitcoin ETF launched

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πŸ“– Crypto Simplified


Dread it. Run from it. Impermanent Loss cannot be ignored when it comes to providing liquidity. Impermanent Loss (IL) is a risk that occurs when participating in DeFi liquidity pools. It happens when the price of your deposited assets changes from when you deposited them.

πŸ‘‰ Essentially, if the rewards you earn from fees make up for the losses or if the price goes back to where it started, you're good.

πŸ‘‰ But if you withdraw your money from the pool before it bounces back, that temporary loss becomes a permanent reality!


Impermanent Loss Explained With An Example🧐

πŸ‘‰ Say you deposit 1 ETH and 100 DAI in a 50:50 pool. Assuming the value of 1 ETH is 100 DAI, this means a total deposit of 200$, which accounts for a 10% stake in a pool of 10 ETH and 1000 DAI.

πŸ‘‰ Suppose the price of 1 ETH increases to 400 DAI; the ratio of ETH and DAI in the pool will change to correct the imbalance. Thanks to the work of arbitrage traders adding DAI and removing ETH, you end up with 5 ETH and 2000 DAI in the pool.

πŸ‘‰ As a result, when you withdraw the 10% stake you had in the pool, you end up with $400 worth of funds (0.5 ETH and 200 DAI).

πŸ‘‰ Although you made a profit, there is a catch. Had you just held your DAI and ETH without participating in the pool, your holdings would've been worth $500 (1 ETH worth $400 + 100 DAI worth $100).


How To Mitigate Risk Regarding Impermanent Loss

πŸ‘‰ Say yes to less - Choose less volatile asset pairs like stablecoins to reduce the risk of IL.

πŸ‘‰ Ratios matter - If you do go for a liquidity pool with volatile assets, it is preferable to go for one with a smaller ratio of the volatile asset, say 20% of an 80:20 split rather than a 50:50 split.

While the prospect of providing liquidity in exchange for rewards seems attractive, the threat of IL should not be overlooked. So remain cautious when putting your assets in these pools, and make sure you understand the risks. And always DYOR!


πŸ”­Top Highlights of the Week

1. There's a new blockchain in townπŸ‘‹


This week saw the launch of one of the most hotly anticipated blockchains- Shibarium, developed by Shiba Inu (no prizes for guessing this one right).

πŸ‘‰ Shibarium is a high-speed, low-cost, Layer-2 blockchain.

πŸ‘‰ The network is designed to be metaverse and NFT-oriented.

Our takeaway: The network, while promising, still has a major kink that needs to be ironed out ASAP- the broken Shibarium bridge. Its current condition has resulted in $2.5M worth of users' crypto being stuck on it. While the Shiba Inu team assured that it was simply a result of a huge influx of funds, the issue still remains to be resolved.

2. Bet no one saw that collab comingπŸ‘€


Imagine paying your Ethereum gas fees with a Visa card. Well, you don't have to imagine anymore. Visa has turned this into a reality.

πŸ‘‰ Users can pay gas fees off-chain with a Visa card.

πŸ‘‰ It eliminates the need to hold ETH to pay gas fees.

Our takeaway: This is huge for the crypto community. Visa is used by over 100M businesses in ~200 countries, and it saw a total volume of $14T in transactions last year. So there's no question of trust. And this is only the latest in a long line of actions Visa has taken to expand into the crypto space.

3. It actually happened🀩 But not where we expected😐



Europe just saw its first spot Bitcoin ETF being launched this week, despite all the attention being on the US, with multiple applications being submitted to the SEC in the past few weeks.

πŸ‘‰ It was listed by London-based Jacobi Asset Management on Euronext Amsterdam

πŸ‘‰ The ETF will trade under the ticker β€œBCOIN”

Our takeaway: Jacobi actually received the approval for the ETF in 2021, and held off its launch for so long due to unfavorable market conditions. But now that it has launched, this is a huge step in the journey of Bitcoin adoption, with the asset becoming available to a much larger mainstream audience now.


Disclaimer: All price movements are recorded up to 03:30 PM UTC, 18th August 2023

The top currencies clearly did not have a good week, as weekly returns were completely in the red, and by quite a margin.


Disclaimer: All price movements are recorded up to 03:30 PM UTC, 18th August 2023

The sectors didn't fare much better either, as weekly returns were disappointing.


Crypto Jargon of the Week πŸ€”

Explain Like I'm 5

β€œIOU (I Owe You)”

Informal acknowledgment of a debt

We both know it but it isn't official

Example- IOUs can involve anything from cash to physical and digital assets

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