The Evolution of Investing - from Babylon to MELD

The Evolution of Investing - from Babylon to MELD

Francesco Ponziani

Francesco Ponziani

MELD Ambassador

February 4, 2022

The Evolution of Investing - from Babylon to MELD

The first record of investing dates back to around 1750 BCE with the famous Code of Hammurabi, the sixth king of the first Babylonian dynasty, where it was written in law that collateral in the form of land, could be exchanged for investment in a project. Harsh punishment ensued for any party that did not fulfill their contract, and so it was in the interest of both parties to fulfill and flourish their obligation. This obligatory responsibility is thought, by some, to have been the origin of the saying ‘Having skin in the game’!

Fast-forward to more recent times, the first modern-esque stock exchange, is thought to have been the Amsterdam Stock Exchange (ASE) established by the Dutch East India Company in 1602, where investors could be connected to potential investment opportunities. The exchange provided a market of liquidity, reduced transaction costs and a standardization of financial instruments making it easy and accessible to the masses.

The investing platforms we see today were built upon these foundations, and with the advent of technological breakthroughs like electricity and the subsequent internet, the way we invest was revolutionized and made available through a plethora of exchanges, brokers and banks to half of the world's population connected to the internet.  

The age-old question still stands however… What to invest in! From car manufacturers to new technology start-ups. The promise of making it BIG by investing in potential tech giants like Facebook and Google lures in the masses. But how do you avoid the pitfalls of a shifting trend, such as with Blockbusters or poor scaling models such as Myspace? The answer is you don’t! No-one can! Risk can only be limited through research, and although far removed from the fear of the harsh punishment during the Babylonian dynasty, the risk of lost capital dictates and governs our choices.  

Over the last decade a simmering wave of a new phenomenon may have triggered a seismic shift in the future of investing…any guesses? 

We’ve all heard of crypto right? Some more than others. Many declare it to be ‘Just a passing phase!’ ‘Only criminals use it!’ ‘It’s risky’. And yet as of 2021, nation-states have adopted Bitcoin. Over the past decade, early Bitcoin investors would have yielded an average yearly return of 230%, ten times greater than any other asset class. According to Bitcoincoinsdead.org, a documented database of influential Bitcoin skeptics, Bitcoin has died over 350 times since its inception in 2009, and yet it still lives on! Why? Its ground-breaking technology! And over the years the momentum it has gained has been staggering!

So what are we waiting for, let's all invest in Bitcoin right? 

Well… not quite so fast! Bitcoin's rise has not been without wild and unpredictable fluctuations, not for the faint-hearted and deemed by many to be a long-term hold. In addition, with now over 6000 crypto projects available to invest in, the investment arena just got a lot bigger! 

But what if there was a secure way of investing without risking capital! And not only that, what if that risk-free investment turned out to be the next big thing? Too good to be true? Well maybe not!

MELD has swiftly positioned itself as the first Decentralized Finance (DeFi), non-custodial banking protocol and has recently made history by successfully completing the first-ever Initial Stake Pool Offering (ISPO), with over $1 Billion worth of ADA contributed towards this pioneering concept. A major factor for its staggering success was the attractive risk-free environment where participants could earn rewards.

Traditionally, within crypto markets, where a company may need to raise capital, an Initial Coin Offering (ICO) might be launched, where investors can purchase a company’s cryptocurrency token, much in the same way as Initial Public Offerings (IPO) in stock markets. Although this could result in large returns for the investor, numerous projects within the crypto space have turned out to be fraudulent or performed poorly. Putting up capital towards a new venture, regardless of the amount of research carried out, requires a level of risk appetite that may not suit the majority. An ISPO mitigates this risk!

An ISPO allows a project to fundraise without requiring investors to part with any of their capital directly. In the case of MELD, delegators holding ADA delegate their crypto risk-free to MELD pools, only sacrificing their ADA rewards in exchange for MELD tokens. Risking funds not yet earned is a lot more attractive than risking already acquired capital, and MELD’s ISPO success is a testament to this. Another attractive feature of an ISPO is that delegators retain custody of their crypto and can choose to re-delegate to new crypto projects or remove them whenever they wish, with no lock-up period.

Since the conclusion of MELD’s wildly successful ISPO, new projects have been flocking to adopt the ISPO model, indicating that we may well be on the cusp of a new and widely adopted financial model for how start-up capital is raised.

But why has this not been done before?... To answer this, we need to go back and have a brief crypto history recap.

The Start of a Financial Revolution

In 2007/08 a global financial crisis occurred, likened by many as the greatest since the great depression of the 1930s. The causes were a culmination of factors, one primarily being the predatory nature of targeted money lending, resulting in the crash of the stock and housing markets. This sent shockwaves throughout the globe and although the road to recovery was relatively swift, something was born out of the ashes!... Bitcoin!

Frustrated by archaic and flawed global monetary systems that could lead to financial chaos, Bitcoin was created in 2009 by an anonymous entity using the pseudonym Satoshi Nakamoto, in an attempt to demonstrate to the world that there could be a better way.

The concept of Bitcoin was to have a monetary system that existed online, where trade could occur between two parties in a decentralised manner, where no central authority or 3rd party was involved. The underpinning success of Bitcoin, was the blockchain, an immutable database or ledger that stores all transaction history. Although secure, the decentralised nature of Bitcoin meant that it had inclusive accountability, meaning anyone could view and verify transactions on the blockchain.  

Following its rapid rise of success, people started to question what else could be stored and utilised on the blockchain! Voting Results? Property ownership? Identity? Supply Chain Data? Medical Records? Financial products?

Bitcoin, with its ground-breaking technology, had opened the floodgates and sparked a financial revolution!

The Next Generations

For all of Bitcoin’s accomplishments, it was soon apparent it was limited in what utility it could offer. Although transactions were secure, they were slow and no conditional data could be attached. These limitations sparked the ‘Blockchain Industry’ where 2nd generation blockchains were developed to satisfy the need of the ever-expanding market.

In August 2014 Ethereum launched its native token, Ether (ETH), through an ICO selling 50 million ETHs for $0.31 per coin, raising over $16 million for the project.

Ethereum led the way as a 2nd Generation blockchain with its ability to perform smart contracts. Transactions on the blockchain could now be customised, attaching certain conditions to a transaction in a decentralised manner. This was a significant advancement in blockchain technology and resulted in an explosion of DeFi, contributing to the fame and price appreciation of Ethereum.

As with Bitcoin, Ethereum was still restricted in the sense that it had issues with scaling and sustainability. Dependent on current network conditions, network fees known as ‘gas’, can be disproportionately expensive relative to crypto holdings. This makes DeFi on the Ethereum network only viable for crypto holders with significant capital. A typical transaction fee on the Ethereum network costs anywhere between $25 to $50 and beyond. This inconsistency and expense is not a recipe that can scale and appeal to the masses.

In 2015 Ethereum co-founder Charles Hoskinson initiated Cardano, a 3rd generation blockchain project with its focus directed towards building and improving upon its predecessors in three key areas; scalability, interoperability (the ability to integrate with traditional financial institutions), and sustainability.

To tackle these key areas, Cardano adopted a heavily scientific approach, being the first-ever blockchain to be vigorously tested through peer-reviewed research. The results have been fruitful, and one of Cardano’s greatest achievements has already been realized with its governmental deal in Ethiopia bringing digital identity to the nation. 

Cardano implemented a revolutionary first-of-its-kind Proof Of Stake (POS) consensus which governs the laws and parameters of the blockchain. Some breakthrough benefits of POS include security protocols, reduced centralisation by design, energy efficiency, and cheap transaction costs. A typical transaction cost on the Cardano blockchain is in the region of 0.17 ADA, about $0.20 at today’s prices, a stark contrast to Ethereum gas.

A New Era for DeFi 

Built specifically on the Cardano, MELD offers a series of refined financial instruments, allowing DeFi to be used in a way like never before!

Imagine taking out a negative interest loan, having to pay back less than you originally borrowed or, wait for it... a self-repaying loan! Yes, you heard correctly! A self-repaying loan, where the yielded earnings from the collateral cover the principal. Not only that but loans can also be taken out as FIAT currency, something that has never been done before; all made possible by the technological advancement of the Cardano blockchain.

Cardano’s low transaction cost, capital-efficient transactions, and general architecture allows MELD to resculpt the financial landscape, by accessing untapped liquidity and extracting maximum value for its users. In other words, as well as having no middle man to pay, this will allow YOU, the customer, to earn more interest and yield for your crypto assets through staking and providing liquidity. 

MELD uses Automated Money Makers (AMM), an underlying autonomous protocol, that allows an individual to provide liquidity on a decentralized platform in exchange for transaction fees and/or tokens. On the MELD platform, providing this liquidy in the form of MELD tokens, provides lenders and Liquidity Providers (LP) compensation should the market become unfavorable. In exchange for this risk, 40% of all transaction fees are distributed to insurance pool providers.

As well as insurance, the utility of MELD tokens offers fee reductions, governance and Increased Annual Percentage Yield (APY). Natively and cheaply developed non-fungible tokens (NFT’s), offer further utility in the form of increased APY, with exciting new benefits in the pipeline. Another marvel of the Cardano blockchain is that there are no fees for failed transactions, a frustration that has plagued many before on other networks.  

To expand into a wider market, the infrastructure of MELD allows the implementation of non-native assets such as BTC, ETH and BNB to be MELDed (wrapped), into a form that is usable on Cardano and natively stored in wallets, with more assets to be developed later on. This unrestrictive and facilitating architecture provides huge scope for much deeper liquidity pools, and if the ISPO is anything to go by, I wouldn't be surprised to see a huge tsunami of crypto holders, utilizing the MELD platform and allowing them to experience financial freedom like never before!

With MELD wanting to enable the $15 trillion currently locked out of the global economy from the 2 billion people that remain unbanked, an evolving strategy needs to be adopted in order to compete with the fast-paced and competitive market that is crypto. To help accomplish this, MELD communicates regularly with the ever-growing community, positively acting upon their feedback and engagement. One recent outcome from this engagement was the offering of a 50/50 rewards pool for the ISPO. 

Another important strategy is the cultivation of strategic partners. To bank the unbanked you must first connect the unconnected, and MELD’s partner, World Mobile, fits this bill.

World Mobile aims to connect EVERYONE EVERYWHERE, through a revolutionary new business model, by building networks from the ground up, financially incentivising the people that would benefit directly, made possible by the Cardano blockchain. This bold and ambitious goal could see the hundreds of millions of people currently unconnected, suddenly coming online in great need of a revolutionary financial service.   

With the Cardano ecosystem still in its infancy, I for one find it truly exciting to see MELD positioned as one of the pioneering front-runners of this magnificent financial innovation!

Disclaimer

The opinions shared within this article are those solely of the MELD Ambassador. Note that the content within should not be considered financial, legal, or tax advice. Neither the author nor MELD Labs PTE Ltd. are financial, legal or tax advisors. None of this content should be used to make any form of financial, tax, or legal decisions. Do your own research and consult professionals as needed for official policies, restrictions, and requirements in your jurisdiction.

If you believe in the MELD vision, want to support this initiative, and want to help promote the future of finance then we want you to join the MELD Ambassador Program!

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Cardano
defi
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