Anchor, a DeFi savings product that promises reliable interest rates, is scheduled to launch in Q3 this year
The capital for interest rates will derive from staking rewards
The project will be launched on Cosmos, Polkadot and Terra blockchains first, but could scale to other PoS blockchains in the future
Three big blockchain companies, Cosmos, Polkadot, and Terra have teamed up to develop a DeFi savings product that aims to offer reliable interest rates on stablecoin deposits. The product, which will be called ‘Anchor’, was announced at the still ongoing Unitize conference on July 6th.
Anchor Launch Scheduled for Q3 This Year
According to the announcement, Cosmos, Polkadot, and Terra plan to launch Anchor across their respective blockchains already by the end of Q3 this year. Furthermore, the DeFi savings account will not be limited to these three blockchains only but will scale across other Proof-of-Stake blockchains in the future.
The joint operation’s Anchor aims to contest projects like Maker and Compound by offering a far more reliable interest rate. Do Kwon, founder and CEO of Terra, explained:
“While DeFi staples such as Maker and Compound have been revolutionary in creating fully decentralized crypto money markets, the volatility of their interest rates makes them unsuitable to be used as a household savings product. DeFi mass adoption needs the creation of a fully decentralized savings account that offers dependable APR.”
Interest is Derived from Staking Rewards
But how will Anchor be able to ensure a relatively steady interest rate, you may question. After the platform’s smart contracts receive stablecoin deposits, a portion of them will be used to acquire staking positions on compatible Proof-of-Stake blockchains. Most of the users’ passive income thereby comes from these staking rewards.
The development and operation of the joint venture will be overseen by a newly formed Interchain Asset Association (IAA), that consists of Do Kwon of Terraform Labs, Zaki Manian of Cosmos, and Jack Platts of the Web3 Foundation.
The partnered Proof-of-Stake blockchains have been otherwise very active lately. In late June, Polkadot announced a partnership with Gitcoin project, which will help in finding community support and funding. Meanwhile, the Cosmos (ATOM) network has recently seen the launch of Kava decentralized finance (DeFi) protocol on their blockchain.
Tokens are actually an old concept. Indeed, if we think of the original gold notes jewelers gave those depositing precious metals with them, we would realize that tokens were the original form of money. Nowadays, physical tokens are still very much in use, such as casino chips used to represent the money deposited in the casino to play at the tables. The idea of using some sort of object or plastic chip- as a representation of an underlying asset has a long history.
TrustCommerce in 2001 first introduced tokenization into the digital economy. In order to protect the credit card information of their clients, the company replaced the sensitive information for a digital equivalent with no ties to the original. This was revolutionary in the early days of online commerce as businesses in those days just stored the data on their servers with little protection.
The idea was to replace the account number with a randomized sequence of numbers called a token. The moment a commerce would issue a transaction the token would be forwarded to TrustCommerce which would process the payment without having to reveal the client’s data.
This method stopped individual vendors from having to store the credit card data on unsecure local servers. Since the process didn’t work in the opposite direction, the token could not be used to reveal credit card numbers. The information was secured even if the payment was intercepted during the transaction, something that is very common within the crypto world, asymmetric encryption.
Tokenization in a Distributed Ledger
The idea of using a physical token and digital tokenization were from the beginning a perfect fit for the blockchain. The distributed ledger with its innate ability of recording, validating, tracking, and trading of digital assets came to supercharge the original concept.
With the problem of double-spending solved by blockchain technology, the doors are wide open for a new type of market to emerge. Previously any digital representation of a physical asset could be copied endlessly. The only way to stop this from happening was to have a trusted central authority overseeing the economic transactions. This severely limited the possible real-world items to be sold in a digital space.
The immutability of a distributed ledger means that all participants in the market can be sure that the token they are buying is unique and represents the underlying object. This means auctions, private sales, fragmented ownership, and many other forms of economic transactions can now take place without a central authority.
Anything of value in the physical world can be tokenized and move to the distributed ledger. This is not only great for the sellers, but also for the buyer. Most of us are restricted from buying these objects due to the country we are born in or our economic situation. But with tokenization, we can buy anything that is on the blockchain and not purchase the whole thing, we can acquire a piece to resell later for a profit.
Asset Tokenization
Cryptocurrencies such as Ether or Bitcoin are digital assets by themselves. Also, tokens issued in a network like DAI, USDT, or ZRX fall in this category. We are able to buy them and trade them as we see fit.
Now, the tokenization of a real-world asset is a different story entirely. The process begins by taking the physical object and creating a digital equivalent on a distributed ledger. The token becomes the representation of the asset, much like casino chips are mirror images of the money deposited in the casino. The value is transferred to the blockchain where it can be accessed by the participants in the market. This means that holding the token confers ownership of the asset.
The newly created token is now part of a large pool of buyers and sellers. This is unprecedented since previously markets for real estate, art, precious metals, jewels, and other valuable objects were limited by geographic location. Not so in the blockchain where the entire globe has the potential to participate. Furthermore, this opens the doors for an object to be broken down into smaller pieces and owned collectively. I could never afford an original Rembrandt, but now I can buy a tiny piece in the blockchain and sell it when it appreciates. The changes are far-reaching for several industries, such as the music market which is expanded in this article.
Projects bringing tokenization to the blockchain.
Tokeny Solutions a star-up company from Luxembourg. The focus of the generation of tokenized securities as a replacement for traditional exchange markets. The market is investment bans, trade funds, mid-size companies, and trading shops. They offer through their platform the digitization of the securities these firms regularly trade to gain a larger liquidity pool.
Templum, a United States company based in New York. Its main platform is focused on providing tokenization services for the financial sector of the city. They offer digitization of securities, bonds, shares, commodities and basically any physical or non-physical good that is commonly traded in markets around the world.
Masterworks, a platform that offers the possibility to invest in fine art. It permits its users to purchase fractional shares of paintings in the same way we could buy shares in a stock market. They claim that a piece of one of the works of art they have for sale can go for as low as twenty US dollars. They want to bring the world of art collecting to a wider public by giving every person in the world the capacity to become a partial owner of a great work of art.
The tokenization of real-world assets is quickly revolutionizing markets around the world. The flood gates are now opening a new horizon of possibilities that are quickly approaching. Whether gold, securities or fine works of art, tokenizing is giving average people investment opportunities that used to be accessible to only the wealthy in the past. Right now, we have the chance to gain early entrance to a new type of industry. The world of blockchain is once again showing us that the change is only starting and the future is bright for those who are awake.
The selection of this week’s most interesting coins consists of three cryptocurrency projects that are expected to benefit from the upcoming upgrades, announcements, and other events, both in terms of attention and valuation.
1. Zcash (ZEC)
Zcash is another anonymity-focused cryptocurrency that obscures the transaction data in this week’s selection. To hide sender’s and receiver’s wallets and identities Zcash makes use of zero-knowledge proofs, which act by increasing the number of potential inputs and outputs for a transaction. On Zcash it is also possible to opt for an unshielded, i.e. public transaction.
Similarly, to Grin, also Zcash will upgrade its network this week. The fourth major Zcash network upgrade is scheduled to launch at block 903000, which is estimated to be mined on July 16, at 10:23 UTC+00:00. The network update has been dubbed ZcashHeartwood and will integrate to ZIPs. Flyclient (ZIP-221) will ensure that also light clients have access to efficient proofs of Proof-of-Work, while Shielded Coinbase (ZIP-213) sets new consensus rules that allow Coinbase funds to be mined to shielded Sapling addresses, which is impossible in the older versions of the network, as shielded transactions required significant memory and CPU resources. More info can be found on the official Heartwood page.
2. Algorand (ALGO)
Algorand is a blockchain platform that can be used for digitalization and tokenization of almost any kind of asset via the creation of so-called Algorand Standard Assets (ASAs). Additionally, the project features Atomic transfers – a solution for secure and immediate settlement for multiparty transactions – and supports the on-chain creation of smart contracts. Furthermore, Algorand has implemented a pure proof-of-stake (PPoS) consensus protocol, meaning that anyone holding ALGO can participate in the process and be rewarded for that.
A New York-based private investment platform Republic.co is set to conduct a sale of Republic Note Tokens, the company’s profit-sharing tokens. The sale of Republic Note tokens will be open to both accredited and non-accredited investors on July 16. The company, which seeks $8,000,000 of a fresh capital via the sale of their token, will issue 800,000,000 Republic Notes. At launch, however, only about 310 to 380 million notes will be up for grabs at a price of $0.12 per note and a minimum investment of $100. Holders of the Notes will be eligible for potential dividends and Republic also plans to make the Notes a tradable asset. Find out more here.
3. Grin (GRIN)
Grin is a cryptocurrency, which offers a far greater level of privacy to its users than other major blockchains. By utilizing MimbleWimble technology its blockchain can hide most of the transaction’s data, such as sending address, receiving address, and amount of coins sent. In addition to that, transaction data can be further anonymized by aggregating multiple transactions and by being relayed among private nodes in a process called “random walk”.
This week Grin will undergo its third out of four planned hard forks. The third hard fork is scheduled to trigger at block height 786,240 and will bring Grin v4.0.0. to the mainnet. This network-wide upgrade is estimated to happen on July 16. Stored GRIN coins will not be affected; however, users will need to update their binaries to continue using the network. Additional information regarding GRIN’s July 16 hard-fork can be accessed here. Grin will conclude the series of four hard forks, which have been planned ever since the project’s launch, at block height 1,048,320, when the last scheduled blockchain split will take place.
By now, you probably already know some of the biggest advantages surrounding crypto, which might be why you invested in it in the first place. But, like any other form of income, you do need to pay taxes on it. According to the IRS, there are two ways in which you’d have to pay.
Let’s say you buy Bitcoin and keep it for a year or longer. You’ll have to pay long-term capital gains on that Bitcoin when you decide to sell. These long-term capital gains will show up on your Schedule D and will be taxed at a certain percentage based on your income.
If you’ve held onto your Bitcoin for less than a year, you’ll have to pay if the realized value of the Bitcoin is greater than it was when you first acquired it.
Of course, the idea of paying taxes on crypto hasn’t come without its hiccups. In 2019, for example, Reddit exploded with confusion, frustration, and even anger over the idea of taxing cryptocurrency, with one user suggesting that the IRS’ was “going crypto fishing” and only had bad data to work with, which meant they didn’t know how much money people actually owed in crypto taxes.
While it can seem confusing (and even frustrating), it’s important to know how crypto taxes work and how they’re calculated, so you can be in the know about your Bitcoin.
How Are Crypto Taxes Calculated?
An easy way to think about the taxation of cryptocurrency is to consider it a piece of property. That’s exactly the way the IRS looks at it. So, it’s taxed in a similar way to a stock. If you have any experience buying and trading in the stock market, you’ll probably be more familiar with crypto taxation.
Simply put, you will be taxed on any gains you make with your crypto between the time you acquire it and the time you choose to sell it or exchange it. Your taxes will be calculated on your gains or losses within a period of time.
As far as the rate, cryptocurrency taxation is based on which tax bracket you fall into. For example, if you’re in the 10-15% income bracket, your long-term capital gains tax rate would be 0%. If you’re in a higher bracket, you could be taxed at up to 20%.
So, what will you need to calculate your crypto taxes?
The most important thing is to have a record of your transaction history in order for you to track your tax lots. In addition to that history, you’ll need specific information from each sale, including:
The date of sale
Fiat value at the time of sale
Date of acquisition
Fiat value when you acquired it
The amount of the token sold
Obviously, keeping track of all of your exchanges in such detail, one by one, can start to get a bit overwhelming, especially if you tend to make a lot of transactions (hence, people’s frustration and outrage on platforms like Reddit). That’s where a program like CryptoTaxCalculator can help.
Tracking Your Taxes
Though it may sound confusing, it’s so important to track your crypto taxes, and it doesn’t have to be as complicated as you think.
When working with a platform like CryptoTaxCalculator, you can do everything from uploading transactions to reviewing data all in one place. That allows for an easy generation of tax reports that are simple to understand even if you don’t have extensive experience with cryptocurrency. We’ll automatically categorize your transaction history to make it easy to know where your exchanges have taken place.
In the final report of your taxes, we will include a full breakdown of your transaction history that allows you to clearly see each capital gain event. Some of the information you can expect on your report includes:
Cost of trade
Currency breakdown
Fees
Total gross and net gains
Long-term gains
Amount remaining
Once you receive the report, you can download it in CSV form to make it easy to share with your accountant or to do your taxes on your own.
If you need more information or have any questions about how CryptoTaxCalculator works or how it can help you to keep your exchanges organized and your data well-documented for your accountant, feel free to contact us via the live chat feature on the app. Crypto taxes don’t have to be as complicated as they might seem. It starts with organization and tracking, and we pride ourselves on making that part easy for you with fast and secure reports, and support whenever you need it most.
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