Miners extracted $635 million in the last 2 years from "MEV" transactions. 

But what's MEV? 

In this thread I cover:

・ What happens when you send a transaction
・ How frontrunning and gas wars work
・ How miners maximise profit from block-production

🧵 

Before the thread starts, I'd like to point out @Quix_xyz, founder from @nodeify_xyz, explains hardcore blockchain stuff in a way a five year old can understand. 

Tomorrows he's gonna talk about MEV, I recommend joining! 

It will be enjoyable 👀 

https://twitter.com/nodeify_xyz/status/1531304434273161216?s=20&t=nB0TUzExDAxN5kJtmUwbbg

Your first question probably is why should I care about MEV? 

Well, there's a couple of "why's":

1️⃣ MEV could destabilise Ethereum
2️⃣ MEV leads to high gas fees 
3️⃣ MEV attacks mess with your profitability 
4️⃣ MEV accelerates innovation

Enough reasons right?

So what's MEV?

"MEV" sounds technical and therefor a bit intimidating, but actually it's not hard to understand.

Summarised, MEV is a term that describes all strategies miners can use, to extract most revenue from all unconfirmed transactions that wait in "the mempool" to get confirmed.

To grasp this, imagine signing off a transaction (TX).

Before the TX is mined into a block and confirmed on-chain, 4 steps happen off-chain.

During these 4 steps, a short window of opportunity occurs for miners to order TXs so they'll make most profit from block production.

Here's how that happens: 

1️⃣ You sign off your transaction (TX)
2️⃣ Nodes verify your transaction is legit
3️⃣ The node adds the transaction to the mempool
4️⃣ Miners order transactions for block production

MEV comes into play between step 3 and 4.

Let's look at each step.

Step 1: Signing off your transaction.

Here you are, convinced $CRAP is the next Ethereum killer so you must get a bag. All hyped up, you visit Uniswap, connect your MetaMask, place a buy-order for 100K worth of $CRAP and sign off the transaction in your MetaMask.

Now what?

Step 2: Nodes verify your transaction.

The dApp you use, let's say Uniswap, connects to the Ethereum network via nodes. They store blockchain data like transaction history. Consequently, checking if your 100K $CRAP buy-order is valid, is a job nodes are well-equipped for.

When you place the buy-order, Uniswap connects to a node and asks them to check: 

1️⃣ Does address have funds for this TX?
2️⃣ Is the signature the right one?
3️⃣ Is the gas limit of the TX not bigger as the block limit?

The node returns "yes", it sends the TX to its "mempool".

Step 3. The mempool.

The mempool, also known as the "dark forest", is where your buy-order for $CRAP waits to get selected by miners. 

Think of it as the queue in front of your favorite club, you have to wait until the bouncer lets you in.

The mempool isn't a very nice place to be for 2 reasons:

1️⃣ Data about unconfirmed transactions in the mempool is publicly available. 

2️⃣ There's a delay of a few second between the time your transaction resides in the mempool and when your TX is mined into the next block.

That opens possibilities for miners and bots to:

1️⃣ Copy your transaction and execute their TX prior to yours.

2️⃣ Order transactions in such ways they benefit most from it at your expense.

That's why some call the mempool the dark forest. 

https://medium.com/@danrobinson/ethereum-is-a-dark-forest-ecc5f0505dff


Step 4. Miners select TXs for block production.

Ultimately, miners decide which TXs they pick from the mempool, based on the highest gas fee. 

They're the gatekeepers to the blockchain and therefor have a final say in who's TXs get mined into the next block. 

That's power.

To see why, think of the queue in front of your favorite club again:

Unfortunately the club you visit can host only 100 guests while the queue counts 200 people. 

You are desperate to get in, so your promise the bouncer a tip of $10 if he safeguards your entry.

Other guests notice your bid so they start overbidding yours, because they don't want to be left out.

As a result a bidding war starts.

The bouncer, who has a final say which guests get in, decides to be a dick. 

He starts placing bids too.

By doing so, he artificially inflates the bidding war. 

This way, the bouncer is guaranteed he extracts maximal profit from the guests, who keep overbidding him, resulting in higher entry costs for guests who end up having less funds to spend on drinks.

Similar to bouncers, miners can extract maximal profit from pending transactions that are waiting in the mempool by re-ordering, frontrunning and competing with them, before they get mined into the next block.

Let's look at two examples.

Example 1: Priority Gas Actions.

Arbitrage opportunities arise when prices differ on two markets for the same token. 

Arbitrage bots scout and compete to make the same trade, which leads to higher gas fees, thus more MEV for the miner.

Here's the visual explanation.

↓

Example 2: Front-running. 

Miners scout mempools for large buy-orders. 

If they spot one, they place a similar buy-order before your buy-order. 

Price moves up and thus your entry, the latter moves up the price again, consequently the miner can sell his bag for profit.

I've covered two examples of MEV, but there are more: 

1️⃣ Liquidations
2️⃣ Time-bandit attacks 
3️⃣ Uncle-bandit attacks

If you're interested, here's the rabbit whole. 

https://www.mev.wiki/attack-examples

Now the question is if MEV is bad for crypto?  

One thing is sure, MEV can lead to high network fees making it expensive for the average Joe to send transactions. But maybe we have to swallow that as a security cost. 

Ironically MEV could lead to issues with security.

If MEV rewards are higher than block rewards and collected TX fees, miners might be incentivised to undermine consensus. 

In theory, miners could re-order transactions in blocks that are mined in the past, if there's an unrealised arbitrage opportunity. 

That's no bueno.

However, that's a topic I'm not covering in this thread. 

If you want to know more about MEV, i'd recommend checking out the linked website, googling the research paper "Flash Boys 2.0" and joining the MEV talk in the @nodeify_xyz discord tomorrow.

https://www.mev.wiki/


No one is a profitable investor, until there's a plan. 

But how to strategise your take-profit plan?

In the second thread of my take-profit series, we're gonna look at:

・ Timeframe of investments
・ Setting take-profit targets
・ Token unlocks 
・ Monitoring roadmap


🧵 

In my "Take-Profit" series I share lessons learned that helped me become more consistent in making profit. 

Threads:

1: Why it hurts to take profit
2: strategise your take-profit plan
3: Hedging yourself against psychological weak spots

Thread 1

👇 
https://twitter.com/Zetoveraleenzet/status/1529475044874760194?s=20&t=1lEiuf8gbWQRgTO6ldM2jg

Imagine you're in 50% profit but you are in doubt if you should sell. 

That's because your take-profit plan is absent. 

I'm guessing you want to know how to create a killer plan that makes you irresistible to emotion driven profit taking. 

But what comes into play? 

It goes without saying, there's a myriad of factors that constitute a take-profit plan:

・ Take profit levels
・ Token unlocks
・ Roadmap progression

However, in my strategy, timeframe of investment is undoubtedly the most important factor. 

Why's that?

Crypto projects have lifespans. 

If they don't deliver profit within that lifespan, destination crypto graveyard awaits them. 

Therefor, adjust your timeframe of investment to the lifespan of the crypto project. 

Believe me, that'll make it easier to take profit.

Wonder how to determine the timeframe of your investment?

Here's a cheat sheet:

1️⃣  3-6 months → hype → gambling → sell the pump

2️⃣  1 year → utility → investing → sell the news

3️⃣  3+ years → tech infrastructure → hodling → sell rewards

Take profit accordingly.

Unfortunately, chances are you are too optimistic about your investment. 

You probably reason your investment is a long-term one, in reality most crypto projects are not. 

The sheer amount of people who locked liquidity in node projects that'll never ROI, proves that claim.

That's why, for short term and mid term investment, I use a fairly simple rule:

Milk the investment before someone smarter kills the investment. 

If you feel this is bs, think again.

92% of crypto projects die after a year. 

Imagine you've done your job and set the timeframe for your investment.

Next steps await: 

・ Set take profit targets.
・ Mark token unlocks
・ Monitor roadmap progression
・ Adjust to market conditions

Let's start with take profit targets. 

If you're afraid that you take profit too early, it's loss aversion talking. 

Take profits targets force you to deal with loss aversion, to quit bullshitting around and to take profit as planned.

It's a hedge against loss aversion.

Now how to set take profit levels? 

I don’t care, you do you. 

If a x10 is a realistic target, go ahead. 

One thing tho, split take-profit targets and DCA out of your position:

・ 30% TP1
・ 30% TP2
・ 20% TP3
・ 20% Moon/ Anti Fomo bag

Don’t be over confident.

Set realistic goals. 

Not all your investments will do a x20 or x40, especially if the timeframe of investment is short.

Although parabolic runs happen, the chance of timing your exit in such a way you’ll time the exact top is slim. 

TP target 1 should not be a x10 away.

To determine where to put my TP targets, I use a bit of TA. 

Don't worry, you don't have to be a TA god. 

Simply understanding how to identify resistance and support areas will get you on the road. 

Tip: watch this video to grasp the basics. 

https://www.youtube.com/watch?v=azB9Q_9MYsI

To illustrate that let's take $ROSE. 

I’d set my timeframe of investment at +/- 3 years, 

Ideally I'd use the weekly timeframe but history on price action is more accurate on the 3D timeframe. 

Blue lines indicate my TP targets. 

At these levels I'd take profit.

That being said..

My reasoning is based on the idea to target an average entry of around $0.075. 

Needless to say, due to current market conditions my average entry will probably be lower. 

Based on the actual average entry, I'd re-asses my TP targets.


Token unlocks are noteworthy events for your take profit plan as well. 

It is at these times, tokens are released to investors who, if they desire to make a profit, can sell their tokens and create sell pressure in the process of doing so.

Your job is to:

・ Find out when token unlocks happen
・ What the inflation rate is of the circulating supply
・ How much profit investors will make if they sell their position at the current price. 

Bundle this information and mark the unlock dates in your calendar.

Let's take $ROSE again. 

Last week’s token unlock must have been part of my take profit strategy for sure. 

Undoubtedly, this unlock is the most notable one this year because  circulating supply is inflated from 3.5 billion in May to 4.2 at the end of June.

If I'd been in profit, it would've been a good idea to partially exit my position, prior to the token unlock.

Especially in this market, token unlocks can create negative price action. 

Act on it.

https://twitter.com/CryptoDamus411/status/1529752255984979969?s=20&t=X61d-sXOawIh06QsDRxAVA

Be aware, although token unlocks inflate supply, it doesn’t necessarily result in negative price action. 

In bull markets, demand can outweigh supply as illustrated by $ROSE in October last year. 

Know how to read the market at token unlock events.

Your last step is to monitor roadmap progression.

Mayor releases, like mainnets simply can't be absent in your take-profit plan. 

Expect FOMO-driven price action by dumb money, who take a position too close to the date of the release. 

Their FOMO is your exit. 

Why sell the release pump?

People mistake the delivery of a tech feature for a critical success factor.

In reality it's not. 

Getting people to use your tech and build dApps on your platform is. 

That's why blockchains have incentive programs, to attract developers. 

Now you can listen to fanboys screaming "paper hands who sell the release-pump are NMGI"..

I'd suggest you ignore them. 

After release, price often plummets because the "release" demand will dry up.

You're not supporting your favourite football club.

So take some profit.

In the case of $ROSE some major shipments are planned in 2022:

・ June - Smart contracts on Cipher mainnet
・ July - Interpara communication protocol
・ Q4 -  Parcel paratime mainnet launch

I'd be monitoring these, but I don't expect release pumps due to the bear market.

What I find more relevant to monitor during the bear, are adoption rates. 

A $235 million developer program to get web3 founders to build dApps on $ROSE must lead to more developer activity on the network. 

That's the relevant metric instead of the release of a product.

So how do you strategise your take-profit plan?

・ Lifespan of a crypto project determines investment timeframe
・ Set realistic take-profit targets
・ To hedge yourself against loss aversion
・ Monitor price action during token unlock events
・ Sell the release-pump 

Now the boundary to execute your take-profit strategy exactly as planned is high, because loss aversion and confirmation bias will make you fall into old routines.

That's why you need systems: 

To create new habits and learn how to silence the primitive part of your brain.

In a couple of days I'll share the last part of this "take-profit" series. 

I'm gonna share how systemised my take-profit strategy and how I used the same primitive part of my brain to deal with loss aversion, confirmation bias and emotions. 

That's it for now.

You can read the unrolled version of this thread here: https://typefully.com/Zetoveraleenzet/C61kwnq

Taking profit series part 2: how to strategise your take-profit plan.

Greed and Fear: they stand between you and being profitable. 

In coming threads about taking profit I'll dive into:

→ Why it hurts to take profit
→ How to strategise your take-profit plan
→ How to hedge yourself against your psychological weak spots

Part 1

🧵

To start off, I want you to understand this:

1) The reason you have a hard time taking profit is psychological.

2) Consequently, a take profit plan is a must have.

3) You need a system to hedge yourself against psychological weak spots while executing your take profit plan.

Part 1: Taking profit hurts.

That’s because you have two "monkeys" screwing with your emotions. 

Learn how to kill these two monkeys and become a champion in taking profits.

It's easier said than done but with the right attitude anyone can do it. 

Let's have a look.

You’ve probably aped into a project based on emotions. 

You’re convinced it’s a good play. 

Every one on Twitter agrees. 

Your investment is the next Ethereum killer.

Every time you open your chart, price has gone up again and it has gone "only up" for two weeks already.

You’ve thought about taking profit quite often but you didn’t. 

I mean.. what if you take profit and price jumps again? 

That’d be stupid, so you don’t take profit and voila.. price jumps again. 

You have probably made the right decision.

You didn’t. 

You’ve made every single decision based on your emotions which are driven by two psychological phenomena: 

1) Loss aversion
2) Confirmation bias. 

These are inherently human and make taking profit incredibly hard.

Beat loss aversion and confirmation bias and you’ll be a better investor. 

Unfortunately you can’t beat them if you’re unfamiliar with their workings. 

So let’s meet these two monkeys, that comfortably reside in your brain, and tell you not to take profit when you should.

Your brain is somewhat irrational.

Loss aversion proves that claim. 

You brain is hardwired to fire a bunch of neurotransmitters into your soul that make you feel crap when you face a potential loss. 

It’s the internal conflict you experience when you know you can take profit but don’t, because you’re afraid to miss the next pump.

Although that might play out well it often leads to paper profits in bull markets but unrecoverable losses in bear markets. 

That’s the loss aversion monkey. 

He tells you to put more weight on the extra bananas you potentially will miss in the future than the actual bananas you can have when you exit your position now.

It’s a heuristic, battled tested by 1000s of years of evolution.

To screw you over more..

a second monkey at play misguides you into forming biased opinions about your bananas.

He filters out information that challenges your reasoning and puts more weight on information that confirms your believes.

That’s the conformation bias monkey. 

He only likes tweets of fellow apes, confirming your bananas are still a good investment. 

When other apes raise questions about black spots and flies on your bananas, the confirmation bias monkey calls them fudders.

Many crypto investors can’t kill their these two monkeys and end up doing what humans do best:

Interpreting all new information so that their prior conclusions remain in tact and paper profit their position into a loss.

Silencing these monkeys is what you must learn. 

In other words, what do you need to battle loss aversion and confirmation bias, so your profitability can rise and shine? 

To battle loss aversion and confirmation you need: 

→ An exit plan for taking profit
→ A system to execute your plan

Let's look at them both.

The exit plan. 

The first blow is half the battle. 

In other words, if you've aped into a position but failed to deliver your DYOR, you can't build a proper take profit strategy. 

These are the correct steps:

1) Gather information
2) Plan exit-strategy
3) Build a position

Your take profit strategy must have or factor in:

→ A timeframe of investment
→ Take profit targets
→ Price alerts 
→ Token Unlocks
→ Roadmap events

Therefor, properly DYOR is a no-brainer to strategise a take profit plan. 

Without it, inner apes take over.

However, your take-profit plan is a paper version of reality. 

Undoubtedly, emotions will interfere with your decision-making of actually taking profit when it comes to that point. 

That's why you need systems for execution, additionally to your exit plan for taking profit.

Just as creating a take-profit plan, creating systems requires to put thinking in why you need one.

I'll help you answer that question. 

Systems for execution are great levers for growth and function as a hedge against the loss aversion and confirmation bias monkeys.

That's why you need one.

Here's what variables I use for my "system":

→ Growth objectives
→ Strategies to hack my psychological weak spots
→ Tools & people I can use
→ Set of rules

These variables are a mirror to taking-profit behaviour.

In the end, understanding your behaviour makes you a better investor and helps you grow as a person. 

Lessons learned from investing often apply in non-crypto related areas in your life too. 

That's why you should be in the crypto game. 

It's a fast track for growth.

Hopefully, after reading this thread, you understand the basics of how your brain sabotages taking profit. 

That's step 1.

Next threads:

Step 2: How to strategise your take-profit plan
Step 3: How to hedge yourself against your psychological weak spot. 

If you liked this thread, follow @zetoveraleenzet for more content about background information about hypes, trends and innovation in crypto.

Liked reading about how to take profit? You also might like reading about how to manage a crypto portfolio. 

https://twitter.com/Zetoveraleenzet/status/1525073729373360128?s=20&t=0KA8Mytvj0s9SgZIo1aFjQ

Taking Profit Part 1: Taking Profit Hurts

Greed and fear stand between you in becoming a profitable investor.

This Take-Profit series will help you understand:

→ Why it hurts to take profit
→ How to strategise your take-profit plan
→ How to hedge yourself against your psychological weak spots

Here's part 1

🧵

To start off, I want you to understand this:

1️⃣ The reason you have a hard time taking profit is psychological.

2️⃣ Consequently, a take profit plan is a must have.

3️⃣ You need a system to hedge yourself against psychological weak spots while executing your take profit plan.

The exit plan. 

The first blow is half the battle. 

In other words, if you've aped into a position but failed to deliver your DYOR, you can't build a proper take profit strategy. 

These are the correct steps:

1️⃣ Gather information
2️⃣ Plan exit-strategy
3️⃣ Build a position

How to Take Profit part 1: Taking profit hurts

How to manage a crypto portfolio? 

Six rules:

1. Set objectives 
2. Adjust your strategy to your financial situation
3. Balance out asset-allocation
4. Know your risk-appetite
5. Sync your strategy with your time available
6. Understand what you invest in

Here's how. 

🧵 

Rule 1: Set investment objectives.

I didn't set these for a long time and it was an expensive lesson.

22th of May 2021 $SWTH reached its ATH. 

My unrealised profit was a decent $8000..

If I'd taken profit. 

I didn't because I had no objectives. 

Don't make that mistake.

Setting objectives is a must.

→ They make it easy to take profit and cut out emotions.

→ They help you reflect on your behaviour when emotions take a run with you.

→ They help you to evaluate your investment strategy and adjust it. 

Please set objectives.

How to set objectives?

→ Have a purpose for spending profits such as wiping a mortgage debt clean.

→ Decide if you want to grow your portfolio value in USD, ETH, or BTC.

Knowing your objectives will improve your decision making unregarded of market conditions. 

Rule 2. Adjust strategy to your financial situation.

Few people can live from their crypto investments. 

Their main source of income are their jobs.

What's left after monthly recurring expenses is available capital to invest in crypto.

In my case that's 15 % of my income. 

Never do I invest more than 15 % of my monthly income into crypto. 

If my monthly income or portfolio value increases or decreases I'll evaluate and adjust. 

So should u. 

If you're investing without a decent financial plan, you're not set up the right way. 

Reassess.

Rule 3. Balance out asset allocation. 

Many influencers say something like this:

→ 50% blue chips
→ 30% stables
→ 20% high-risk 

It's not ill advice.

But, it's WHAT your portfolio should look like, not HOW to locate assets. 

"How" is more interesting right?

How I choose asset allocation is based on these questions:

→  What's my portfolio's exposure to asset classes?
→  What's are timeframes of my investments?
→  What are the fundamentals of my investment?

Let's look at them one by one. 

Exposure to asset classes.

Last years multiple assets classes originated from blockchain technologies:

→ Blockchain infrastructure
→ DeFi
→ NFTs
→ GameFi (guilds)
→ Crypto ETFs

The question..

How do you diversify your portfolio's exposure to these classes?

Unregarded of the asset class, understanding it comes first. 

Building exposure second. 

How so? 

Knowing which trends and factors drive sector growth and which metrics are important is key. 

If you don't, you're throwing darts hoping to hit the bullseye without aiming.

If you know sector trends, metrics and predicted growth you can strategise allocation. 

My rule of thumb for asset allocation?

Proven asset classes < emerging asset classes 

Simply because trends, metrics and forecasted growth are more reliable for proven asset classes.

Timeframe of investment.

Simply put, it's is the period of time of holding an asset in your   portfolio before cashing it out.

If that period is long, the impact of bearish markets on your portfolio are less meaningful.

General rule of thumb is you can take more risk.

However most crypto projects are low timeframe investments. 

Many won't survive bearish markets. 

Do you have lots of low timeframes investments in your portfolio? 

Be smart and take profit regularly. 

Otherwise bearish markets will severely impact your success ratio.

Fundamentals.

Success ratio is also a result of solid fundamentals.

To judge them I like to look at these three indicators:

→ The platform infrastructure is open-source 
→ Consistent user adoption and retention rates
→ Historical performance of price action

Why these indicators?

Historical price action tells you if projects can weather bear markets.

If they have,

+ have maintained user adoption and retention,

+ the platform infrastructure is open-source, 

You're investing in long term ecosystem plays.

DCA is the way to go.

Rule 4. Risk appetite, don't bite off more than you can chew.

Risk appetite is the willingness expose your portfolio to three types of risks to make a profit.

What risks?

→ Systematic risk
→ Unsystematic risk 
→ Asymmetric risk

Let's look at them.

Systematic risk is driven by macro events and developments:

→ Monetary policies of central banks 
→ Black swan events like covid
→ The Ukraine War 

Systematic risks impact all markets and asset classes.

Currently, we're witnessing systematic risks playing out.

Unsystematic risk is sector and company specific and driven by high levels of uncertainty. 

Think of: 

→ Newly forked blockchains or crypto projects
→ Algorithmic stable coins 👀 

They require lower risk appetite because they can shit the bed over night.

(Hello $LUNA)

Asymmetric risk is defined by the imbalance between the potential loss of investment vs. the potential profit.

Think of making 10K with $100 at risk.

Many people see all their investments as asymmetric risk plays.

They're wrong ending up being overexposed to shit projects.

So how do you use these types of risks to define your risk-appetite? 

It's a personal preference:

I'm more risk averse meaning I only expose a little percentage of my portfolio to unsystematic and asymmetric risk.

I take profit regularly on these investments.

Check your portfolio and make up your risk-appetite.

Is your appetite for risk low, but the majority of your investments  exposed to unsystematic risks?

Don't be a hero.

→ Downscale that percentage
→ Take profit regularly
→ Allocate profits in solid crypto projects


Rule 5. Your time available determines your investment strategy.

Time is the most valuable currency we have.

→ It can only be spent once
→ It's impossible to get back
→ You always need more of it 

So how does this impacts your investment strategy?

Well, managing your investments requires time. 

Be brutally honest with yourself..

Do you have time to actively monitor all your investments?  

If the answer is no, you must adjust your investment strategy to the time you have available. 

Otherwise you're not in control.

Sometimes not being in control is the best thing that can happen. 

Not when it comes down to your investments.

Being in control of your investments is a state of mind.

That's why your investment strategy must be in sync with your time available.

What happens if you don't?

You'll end up in a nasty state of mind: 

→ Constantly checking token prices of your project 
→ Adding more and more projects to your portfolio
→ Emotion driven decision making. 

Your investments will manage you. 

Don't let that happen.

Rule 6: Understand what you invest in.

Since blockchain projects are essentially tech products, does that mean you must know how to code?

Nope.

But you should understand basics. 

Example: if you invest in L2 projects, at least get familiar with how the tech works.

Why is it important understanding basics? 

Here's my personal example.

I was new to DeFi in the summer of 2020 and didn't educate myself on how yield farming worked. 

Never cared or spent time to read about impermanent loss.

Turned out to be a stupid thing to do.

I provided liquidity to the FLM/ETH pool on Flamingo Finance. 

When I removed liquidity, magic had happened. 

My ETH had become significantly less and my FLM increased a lot. 

Net Loss? 

0.5 eth. 

About $1035 at the current rate.

The lesson I learned is simple:

If you can't explain the basics of how protocols or the underlying tech work..

You don't have the knowledge to manage your investment. 

Educate yourself first, invest later.

That's it.

These six rules are not set in stone. 

But..

They are great instruments to create a successful investment strategy tailored to your personal life, goals and risk tolerance.

Cherry-pick what you like and do let me know if you miss rules or have a different approach!

You can read the unrolled version of this thread here: https://typefully.com/Zetoveraleenzet/4ehOEgo

Six rules for managing crypto portfolios

The promise of Web3 is huge but mainstream adoption is a far-cry from reality.

However, @Hivemapper shows us the potential of three driving factors of Web3.

And the good thing is..

Data suggests crypto twitter hasn’t discovered this potential passive income gem.

🧵

Before diving into three driving factors of Web3, let’s have a look at Hivemapper:

A decentralized mapping protocol built by people using Hivemapper dashcams.

In return for mapping, drivers mine the native token HONEY.

It's the web3 version of Google Maps.

Here's how it works.

Anyone can install the Hivemapper dashcam, collect street images and mine HONEY.. 

Drive to earn money. 

Hivemapper transforms collected street images in high quality map data.

Map consumers buy "map credits" to access this data via Mapping APIs.

When map customers buy "map credits" (in cash), they burn HONEY tokens.

These burned tokens are added to the reward pool and come into supply when map contributors collect map imagery.

This brings us to Hivemappers tokenomics.

Total supply: 10 billion HONEY.

The supply will come into circulation based on the rate of mapping progress.

The more people map streets? 

The faster tokens come into supply.

This has an inflationary effect.

How Hivemapper regulate this inflationary effect?

They've put in place a capped Net Emission Model: 

・ Number of tokens that come into supply every 2 year is capped

・ The minting rate will decrease every two years with max 40% 


There's a 2nd inflationary effect. 

Token allocation:

Rewards for map contributors -40%

Investors managed to get a big stake - 20%

Employees did well too - 20%

Operations of business - 15%

Govern and facilitation of network - 5%

Do I like this distribution?

From the perspective of a retail investor you're not in the best position.

Investors and employees have a big stake in the allocation.

If they sell they’ll inflate the supply causing potential sell-pressure.


Does that mean you shouldn't invest?

Nope.

But is does mean you DYOR on the vesting periods. 

Check the WP, it's in there.

Btw: a helpful tool for monitoring token unlock is Unlock Calender.

(If you're wondering: I'm not getting paid for to promote Unlock Calender) 

So far I’ve basically copied Hivemappers WP.

Yay for them, convenient for you.

I’m gonna stop doing that now. I suggest you read their WP yourself. 

What I want to get into is why Hivemapper is a solid investment imo.

Reason 1: Data suggests Crypto Twitter hasn't discovered Hivemapper.

Influencer coverage is low.

Last week the number of average daily tweets hovers between 60 and 100 (that spike was a give-away).

fyi: I used #hivemapper (purple) and "hivemapper" (pink) as keywords.

The hashtag network of @hivemapper supports this hypothesis.

People tweeting about Hivemapper used #blockchain #decentralized & #giveaway the most last week.

Popular hashtags #passiveincome and #x1000gems weren't used.

There’s some room for growth in terms of reach eh?

Reason 2: VCs believe in Hivemapper

Four weeks ago Hivemapper received $18 million in funding in a series A from Multicoin Capital.

The fact it’s a series A provides some certainty about the lifespan the project.

https://www.businesswire.com/news/home/20220405005894/en/Hivemapper-Raises-18M-From-Multicoin-Capital-to-Create-the-World%E2%80%99s-First-Decentralized-Mapping-Network

Reason 3: An experienced team.

CEO Ariel Seidman founded Gigwalk in 2010. 

He proved how to lead a start-up to success:

Gigwalk currently has 1.7 million users.

2nd pro: profound industry experience and knowledge.

Do some LinkedIn digging here:

https://www.crunchbase.com/organization/hivemapper/people

Reason 4: The Geospatical Analytics Market. 

In laymen terms the geographical data industry. 

Think combining your current location, destined location, real-time data and possible routes towards it. 

It’s a $256 billion market by 2028. 

And it's ready to be disrupted.

I'll tell you why. 

The Geospatial Analytic industry has multiple market segments.

Hivemapper aims to disrupt the geographic information system (GIS) segment. 

Predictions market size value in 2027? 

$21.1 billion. 

That’s a decent X2 from now.

Required means of production in this industry?

・ Hardware and patents
・ AI software
・ Geographic data
・ Lot of capital and smart people

Together they aggregate, update, cover and analyse geographical data and transform it into sets of tailor-made products and services. 

What kind of services? 

Imagine planning the location for a new distribution centre. 

You'd ask yourself this: 

What’s the best location to build that centre in order to have the best delivery routes to areas where you want to gain market share?

With geospatial technologies like Mapping APIs you can compute that answer based on data such as: 

・ Routes
・ Traffic density stats
・ Population stats
・ Max cost per delivered package
・ Cadastral data 

The smart mapping industry is dominated by big guys like Google, Mapbox, TomTom and Pitney Bowes. 

In markets with few big guys price competition is low. 

And just like in the old days..

The biggest bullies in the playground determine who get's to swing the fly. 

According to Hivemapper this results in:

・ Out-dated maps
・ Low coverage in high costs areas
・ Exploit of user data
・ Expensive products and services

To give you an idea:

In 2018 Uber paid Google $53,000 to use Google Maps. 

Each day. 

Room for an alternative right? 

But how can Hivemapper build one? 

That's where the three driving factors of web3 come into play:

・ Decentralised means of production

・ Open-source technologies

・ Tokenised economies

Let's have a look.. 

Driver 1: Decentralised means of production.

Web3 enables businesses to produce and scale faster, at lower costs, without the need to have ownership over means of production. 

Hivemappers competitive advantage is exactly this.

Why?

Margins of competitors become Hivemappers opportunity. 

They can undercut the margins of competitors and run a sustainable and cost effective business because costs of production are low. 

That's the power of not having ownership over means of production.

Think about it. 

There won't be a single Hivemapper employee on the paycheck driving around mapping streets.

There's not a single car on Hivemappers balance requiring maintenance.

It’s you and me doing that.

At zero cost for Hivemapper.

It’s how Airbnb disrupted the hospitality sector. 

It’s how Uber disrupted the taxi industry.

It's how Netflix disrupted the entertainment industry.

It's how Hivemapper could disrupt the mapping industry. 

Driver 2: Open-source technologies.

Traditionally businesses protect intellectual property to defend market share. 

In web2 and web3, free-to-use protocols and infrastructures lead to many advantages. 

Open-source protocols lead to new industries growing faster.

Take blockchain technologies as an example.

Rapid innovation (think Ethereum) 

Leads to increased interconnectivity (think EVM) 

Which leads faster adoption (think TVL cross-chain).

Owning the 1th layer of new technologies often lands you the best spot in an ecosystem.

The open-source strategy is applied by Hivemapper. 

This indicates 3th party manufacturers will be able to build secondary hardware products using Hivemappers patented technology.

Hivemapper will not control a product. 

It will control an ecosystem.

Driver 3: Tokenised economies

Money is a mechanism for putting people to work and to organise production. 

In web3 crypto projects use game theory to incentivise people to "work" for the protocol in return for "money". 

Think of staking tokens or providing liquidity.

Hivemapper applies game theory too.

Miners receive token rewards for contributing to map coverage, freshness and quality. 

Rewards vary based on:

・Mapping over- or under-mapped areas
・Refreshing map-data 
・The mapping quality of your images
・Customer mapping needs 

This will create a tokenised mapping economy. 

The advantages for Hivemapper? 

1) Network effects leading to an exponential increase of product value for customers. 

2) The possibility to serve customers needs on hyper local level. 

It's Google's worst nightmare ;)

So to summarise, put together these 3 driving factors of Web3:

・Decentralised means of production
・Open-source technologies 
・Tokenised economies 

Enable Hivemapper to:

・Produce at lower cost
・Innovate and scale faster
・Grow exponential 

Consider reading their WP.

Now, the question is.. should you invest? 

That's up to you. 

Be aware I've left some information out of this thread to encourage you to DYOR on Hivemapper. 

I'm not gonna hand it all to you on a silver plate ;)

Here's a link to their whitepaper:

https://hivemapper.com/mapping-network#


Drive to earn with Hivemapper.

It's great seeing node projects steer away from node-only utility by creating P2E games like @GodsofAsgardP2E. 

But how hard is designing P2E games?

In my coming #P2E threads I'll answer that question so you're prepped for getting most out of the 2nd play-to-earn cycle.

🧵

Creating #P2E games is a massively hard job. 

Why? To create, launch and run successful games you have to overcome difficult challenges.

Challenges P2E games face are threefold:

▶️ Game design is a balanced craft not easy to apply
▶️ Tokenomic models for games are complex
▶️ A highly competitive landscape across multiple blockchains

In the 1th thread of my P2E series I'll focus on game design.

What is game design?
 
Game creation is the art of balancing out a set of four components. Together they form systems of gameplay that provide players with:

▶️ Strategies
▶️ Decision-making options
▶️ In-game economies
▶️ Interactions guiding players towards victory.

Let’s zoom in on the four components of designing addictive and fun games: 

1⃣  The Core Loop Play
2⃣  The Triple Rs
3⃣  Player Interactions 
4⃣  Player Experiences

The core loop play in games is a set of default actions players have that recur every turn, resulting in decision-making processes and strategies for winning the game:

1⃣  Action
2⃣  Outcome
3⃣  New Options

Fairly simple concept to understand right?

The core loop plays must be easy to grasp in a few sentences. Many #P2E games have this core loop play:

Use your #NFT character to fight other players/ the environment, get rewarded or penalised for and breed new characters or update  existing characters for better stats.

A simplified version of Axie's Infinity core loop play looks like this. 

Designing a functional core loop play is fundamental for #P2E developers. If it’s intuitive and players understand it they give playing the game a shot. 

If core loop play sucks, adoption sucks meaning time spend in game is zero.

Nailing the core loop play isn’t simple tough. 

Recurring actions that players have result in a decision making process based on factors such as:


▶️ Rules, rewards and available resources
▶️ Player and environment interactions
▶️ Player experience

Time and resources spend in game are the two metrics that matter most especially for #P2E games that have inflationary token mechanisms, which most have. 

That’s a topic for the next thread. 

The second component of game design is “the Triple Rs”

Triple Rs stands for:

1⃣  Rules
2⃣  Resources
3⃣  Rewards

These are mostly deterministic game ingredients that help players understand how to play games.

Rules:

Rules provide frames for playing the game. Think of how players can win games, the quantity and stock to flow ratio of resources and what players can or can’t do while playing games.

Resources:

Inventory of games such as #NFTs, items, stock, time, currencies and collectables that players need to:

▶️ Upgrade or breed characters
▶️ Construct buildings
▶️ Unlock achievements
▶️ Collect to win points
▶️ As a medium of exchange
▶️ Etc, etc

Rewards & Penalties:


The amount of resources the game rewards or slashes players with while playing the game. 

Rewards and penalties incentivise risk taking, strategy forming and decision making.

The Triple R component determines how the game rewards or penalises players for their choices of interactions. 

That brings us to the third component

Player Interactions:

Good games offer players varieties of options for having interactions with players and environments. Good game design must take care of frustrating players during these interactions so outcomes can't be taken for granted. 

This makes designing “player interactions” a game of probabilities that enable players to create strategies, decision-making and consider risk-rewards ratio’s.

Designing interactions is the art of creating fundamental tension between players, environment and resources. Essentially the main question game developers have to ask is:

“How do in-game interactions frustrate or reward players”.

In-game interactions must frustrate a player to a point where dopamine kicks when the game rewards the player for overcoming challenges and taking risk. 

That’s when it’s addictive, that’s what increases retention rates, that’s what drives revenue streams.

Finding equilibrium between frustrating and rewarding players is the honeypot game developers look for. 

The right balance makes games:

▶️ Dynamic
▶️ Challenging for players to test different strategies 
▶️ Forces them to evaluate their decision-making process.

That brings us to the fourth mechanism: player experience.

Player experience is what #P2E criticaster call fun and is a measure for player engagement. Creating addictive player experiences is the sum of three variables:

1⃣  Growth
2⃣  Difficulty
3⃣  Depth


Growth:

Game play must be adjusted to the level of skills and knowledge gamers have at any given moment when they play the game. The complexity level of the game must match the level of experience of the gamer.

Difficulty: 

That’s why difficulty of rules, quests, game-play and strategies must not be too high for new players but also not too low for experienced users. This is part of finding equilibrium between frustrating and rewarding players.

Depth:

To keep players engaged (time spent in game) a game must have different layers of difficulty and growth. It’s the sum of all layers in a game that enable players to discover and test new strategies and decision making processes for playing and winning a game.


As you might begin to understand designing games is a difficult craft of balancing out a set of deterministic variables and probabilities incentivising players with in-game rewards and economies.

Adding blockchain to that equitation.. well it doesn’t make it any easier and opens up a whole new set of challenges. I’ll dive into those challenges in my next threads.

For now I want you to remember that good game design is the sum of these four parts. Keep these in mind when you analyse a #P2E project. 

Let’s finish this thread with plotting the four components of game design on the highly anticipated #P2E game @GodsofAsgardP2E based on what we know from the medium articles. 

https://twitter.com/GodsofAsgardP2E/status/1499773237298753541?s=20&t=6tgY_JwtPOe-S-FNUTkH8Q

The core loop play of Gods Of Asgard:

Battle enemies and survive to get rewarded with items, new #NFTS and native in-game tokens so you can breed new characters or upgrade existing characters.

Rules, Resources and Rewards of Gods Of Asgard:

Rules:

▶️ Only if you end up having a top 3 placement you earn yield
▶️ First place earns maximum yield
▶️ Fighting is not allowed outside the fight zone
▶️ Enemies are stronger in the winter area

Resources:

▶️ Potions
▶️ Artefacts
▶️ Food
▶️ NFT characters with various rarity scores
▶️ Combat attributes
▶️ In-game tokens

Rewards:

▶️ Yield for winning battles
▶️ Temporary rewards (potions)
▶️ Restored health (food)
▶️ Upgraded characters stats (potions)

Player Interactions:

It's hard to see what interactions players will have in Gods of Asgard but reading medium articles point towards:

▶️ Combat with non playable characters
▶️ Hunt for food to increase/ restore health
▶️ Combat other players (future)

Outcomes of these player interactions are programmed probabilities for winning or losing. This might make Gods of Asgard a repetitive game with few profound layers for strategy forming and decision making. 

To be clear: this is an observation, not a judgement. 

Player experiences (assumptions): 

▶️ Growth will be a result of increased stats and items of characters.

▶️ Difficulty will be stats of the enemy and unlocking challenges

▶️ Depth is harder to judge, my assumption is that depth will not be the strongest part of the game

Is that bad? That depends. Most #GameFi projects focus on investors, not gamers. 

Problem is that when there’s only earn, there’s no play and when there’s no play there’s no earn. This could be harmful for in-game economies.


These are #P2E dilemma’s I’ll cover in next threads. Your Twitter attention span has been stretch out enough! Well done if you've made it this far. 

Topics I’ll cover in the next threads are:

▶️ How do #P2E projects make money?
▶️ Tokenomic models for games
▶️ What blockchains have #GameFi momentum


You can read the unrolled version of this thread here: https://typefully.com/Zetoveraleenzet/IQb8zSz

Understanding GameFi; Game Design, Game Economies, Blockchain Landscape

1/ Redlight Node District tweeting “how does a gasless blockchain sound to you” sounds innovative and bold. I wondered.. is this marketing crap or are they on to something? 

So last week I dived into subnets, gasless chains and scaling blockchains to answer my question

🧵 

2/ Let’s start with a little disclaimer. I made this thread to emphasise part of your FA/ DYOR skillset should be the ability to distinguish legit announcements or marketing crap.

I'm not gonna make friends. 

3/ Spoiler alert.

RNDs “gasless chain” sounds innovative and bold. It’s not, it’s a bad idea, and will probably be a subnet of Avalanche.

I’ll explain you why in this thread about subnets, blockchains and the function of fees.



4/ To comprehend why Redlight Node Districts’s tweet should be taken with a grain of salt we must learn to go beyond the hype. 

5/ Let’s start of with two assumptions about RNDs tweet: 

A) Redlight Node District won’t create an own blockchain, but a subnet on Avalanche

B) Redlight Node District will create a new blockchain

Let’s start with A..

6/ IF you haven’t heard about subnets on Avalanche it needs some explaining what a subnet is, what problem it solves and what utility subnets have.

For a deep dive check: 

https://twitter.com/das_connor/status/1456592161420587017?s=20&t=xTVx536FYQdq9-pgUaG39Q

7/ Let’s start with the problem

A huge challenge blockchains have is scaling the number of transactions per given period. Scalability is 1/3 challenges of the blockchain trilemma.

https://twitter.com/FrancescoCiull4/status/1504715236665970688?s=20&t=xTVx536FYQdq9-pgUaG39Q

8/ Let us focus on scalability.

Sometimes you notice blockchain networks are congested. This slows down your transaction and increases fees. Transactions with higher fee get priority in the current block and transactions with lower fee gets postponed to the next block minted.

9/ This happens because nodes can only run an x amount of request per given period. If networks are congested it means the number of transactions at that given time are bigger than the maximum number of requests nodes can handle. It results in a higher time to finality. 

10/ What is time to finality? 

It's a metric used to indicate how long a user has to wait before receiving a confirmation that the transaction is stored on the blockchain and thus won't be changed or cancelled. 

11/ Being able to increase the maximum transactional throughput per given period a node can handle without harming security and decentralisation is the honey pot blockchains look for. How can blockchains achieve this?

12/ To answer that question we have to understand a bit of what happens on the backend side of blockchains when you send and receive funds or interact with smart contracts.

13/ When hit "send" or "claim" in the dApp you use, it send outs a request to nodes in the network. These nodes contain historical data of all transactions made so they can reject or approve requests such as sending or swapping tokens.