Ok, before understanding what Reef cryptocurrency is, we must know a little background about Reef finance. Before doing research about this particular crypto, I didn’t know much about Reef other than the name and usual surface knowledge. But then I started doing some deep research on reef cryptocurrency, and hence my article.
Understanding Reef cryptocurrency
So, let’s begin with the main principle and concept behind crypto Reef. Upon doing extensive research I found out, Reef is a very interesting project and if it blows up then it’s going to change the game of how decentralized exchanges and centralized exchanges work.
Reef Finance is all about refinance and that it is really new, which means it is also very high risk for investment. So, if you have a very low risk tolerance, then it’s probably not going to be the investment for you. But if you want to know what their vision is, then you must read this article.
For the purpose of this article, I read their published white paper, which in my opinion is very technical. And one thing I realized is that if you don’t have a certain type of technical knowledge and skills and if you haven’t played around with the market and arbitrage, then it can be really hard to understand.
Problems in Centralized & Decentralized finance and How Reef Cryptocurrency is trying to solve the issue
Let’s talk about the problem that Reef cryptocurrency is trying to solve. So, as we know current centralized exchanges like Coinbase, binance are isolated, and they have a huge risk of actually being hacked that’s why we never keep our crypto on centralized exchanges.
Decentralized exchanges on the other hand have little liquidity and are difficult to use. If you are using decentralized exchanges like uniswap, and you know how to use Coinbase wallet and Metamask then you are a very smart early adopter. I firmly believe that the average person does not know how to use Metamask and Coinbase wallet, and they are confused by this. Which means that they are completely shut out from the decentralized exchange market.
The problem with both the centralized and decentralized exchanges are that they both have integration problems with the current DeFi ecosystem. Which means we have large investors that gets horrible yields when they invest in cryptos and for the traders who are trying to arbitrage, that is buy low on one market and sell high on another market, they are not so profitable.
The problem with arbitrage bots is that they are trying to buy low and sell high, right? But there is also a lot of competitions right now, who are trying to do the same thing in order to profit and so, it turns into the game of how much fee you can pay in order to arbitrage properly and stay profitable. Because if you pay too much on fees, it cuts into your returns. So, people with the best algorithms can arbitrage properly, but it is a very competitive market. But these arbitrage bots really actually serve a really important purpose because as we know all the different exchanges have different prices.
So, if you look at bitcoin at one exchange, it’s going to have different price then bitcoin on another exchange. So, what this arbitrage bots do is they take these two exchanges and buy low from one exchange and sell high on the other one. This keeps the prices of our cryptocurrencies in the equilibrium amongst all the exchanges.
Currently, there are a bunch of bots that are trying to arbitrage the spread between exchanges so that it works right now. But still there is a big liquidity problem with the decentralized exchanges. There is just not enough liquidity. And so, Reef tries to solve that problem by connecting crypto asset buyers and sellers to liquidity pools in exchanges and the DeFi ecosystem.
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In addition to solve the yield problem with investors, Reef provides a crypto asset management solution that is AI powered which looks to maximize yields for investors. The solution that Reefs gives for trading of assets is called the Global Liquidity Aggregator, which can access trading liquidity from both centralized and decentralized exchanges.
Smart lending, borrowing, farming, staking and mining via AI driven Reef Smart Yield Farming Aggregator would help maximize yield returns for investors. And this kind of pitch of Polkadot. Because Reef is made on top of Polkadot. Under Polkadot shared security model, Reef can take advantage of Polkadot’s high resilience and forkless upgradability. In addition, Reef is also a decentralized network that is governed by Reef cryptocurrency holders by a decentralized autonomous organization.
DeFi liquidity problem
Now, let’s talk about DeFi liquidity problem. First, we have to define liquidity. Liquidity is the ability to trade numerous assets at any time without causing a big change in price, which is known as Slippage (When asset price changes a lot due to huge purchases/demand). What happens in Slippage is, let’s say you’re a whale, and you’re buying a 6000 bitcoin. So, as you are buying 6000 bitcoins, the price of the bitcoin that you are buying at the latter half of the bitcoins keep getting higher because you’re raising the demand up.
And that’s because you should not buy bitcoin in huge quantity instead, buy them in little chunks when they are dipping. Basically, you would want 6000 bitcoins at single current market price and then after that they can rise after that. So, that’s a kind of example of liquidity problems. But that’s only because there’s such a small supply of bitcoin. Try buying 6000 XRP, your price of XRP will probably not move at all as there is a huge supply of XRP available in the pool.
Now, any exchange to function well, there has to be money that is flowing in and out of the exchange. And for a good supply of money or tokens, there needs to be a balance between the exchanges and when there’s not then we have market makers usually bought to buy low in one exchange and sell high on the other exchange to keep everything balanced and in equilibrium. They make the profit from the spread, the difference between the price and the two exchanges.
Now, here’s the big problem. The problem is that with DeFi and cryptocurrencies growing so fast, the current DeFi liquidity providers can’t provide enough liquidity. So, some DeFi products actually have to go and access the centralized liquidity sources in order to make things function. And that’s what exchanges and companies like BlockFI do.
They provide liquidity to these DeFi products that need liquidity. So, when you deposit your cryptocurrencies into BlockFi, they give you an interest rate, and it’s pretty high. But in return they take your cryptocurrencies that you deposited and lent it out as liquidity to these DeFi products that actually needs liquidity, and they charge them higher interest rate than that, so they collect on the spread as well. This all because of the problem that there is just not enough liquidity in certain decentralized exchange pools.
Now, the current problem with the centralized exchanges for a lot of these DeFi products is that the centralized exchanges charge a high fee and also, they lack security. But with decentralized exchanges, they’re facing a liquidity problem and a large Slippage.
DeFi fragmentation problem
Then we have a DeFi fragmentation problem. So, what we have right now is we have a lot of DeFi products and platforms, but they all have a high barrier to entry for those people who want to participate.
That means a person who wants to get involved in these DeFi platforms to benefit they need to have financial knowledge, tech savviness and understanding of complex economic models, group physiology & sentiment trends. So, the problem is that there are lots of DeFi products available, but there is no standard for interaction.
Therefore, Reef cryptocurrency is trying to attack this opportunity by consolidating the way of access and connecting all these fragmented platforms. So, that’s the problem Reef is trying to solve.
Reef’s solution to all the above-mentioned problems
Let’s talk about the Reef cryptocurrency’s solution to solve the problems.
Global Liquidity Aggregator: This DeFi liquidity aggregator will aggregate liquidity from the decentralized and centralized exchanges. Liquidity pool and other sources into one big global liquidity pool that exchanges can draw from. So, it is literally trying to become a monopoly like the one true source.
And now the Reef cryptocurrency was built on Polkadot that means that they make integration with other blockchains easy and liquidity aggregation products actually protects users from market manipulations and front-running attacks.
Smart Yield Farming Aggregator: It is Reef’s DeFi yield engine, which extracts the opportunities that are available in DeFi. So, basically, this will allow normal people without the extensive knowledge in the field of cryptocurrencies to access high yield opportunities in DeFi that they are shut out of because of the knowledge gap.
So, they are trying to be a one-stop shop for interest investment. Basically, with lending and borrowing, staking for you because staking things like Polkadot is actually pretty complex, liquidity farming and insurance coverage.
Is Reef cryptocurrency a good investment?
Let me tell you, Reef cryptocurrency has the potential to become big only if it can fulfill their goals. The ambition of Reef Finance is quite big and in order to achieve that it’s a massive task. Reef Finance is all about refinance and that it is really new, which means it is also very high risk for investment. So, if you have a very low risk tolerance, then it’s probably not going to be the investment for you.
Because traditional investment cannot keep up with the way that the government is going around with our money. So, let’s say that pensioners need at least a 10 percent annual return in order for them to stay afloat. But what kind of traditional investment gets you a 10% return consistently year after a year? Well, not a lot. So, a lot of pension managers are actually looking into bitcoin because even though they don’t want to, that’s the only way for them to make that 10% year after year in order to keep their clients safe.
Another thing about Reef cryptocurrency is that they are non-custodial, which means that, Reef is decentralized. The assets are controlled by the users and are not stored on the platform. So, users keep their own private keys and their crypto, and this is going to be the killer for a lot of platforms that are like BlockFi. Because platform like BlockFi, you keep your cryptos on their platform which is unsafe. If they get hacked, you will lose everything. But with Reef cryptocurrency, you can still keep your own keys and control it yourself, hence there is not a huge chance of you losing your cryptos.
Finally, they have something called as Smart Asset Management.
It is apparently a UI that helps you diversify and maximize your investments. And even allow you to easily rebalance your DeFi investments in order to maximize your investments and profit with the lowest risk.
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So, is it a good investment? The Reef cryptocurrency has certainly lots of potentials and its goals are really high. If Reef can actually be able to solve those above-mentioned problems in DeFi then yes, Reef can become huge. But will Reef be able to achieve those goals that, remains to be seen.
Having said that, I am not an investment advisor, so you should not listen to me when it comes to investment, rather you should do your own diligence and seek experts advise before investing. Please read the Disclaimer. Cryptocurrency market is very volatile in nature and is highly risky. So, please be careful, is my advice.
Personally, if I were you, I would not make a rush decision to buy the Reef cryptocurrency. Instead, I will wait and watch for the time being. Because I want to say again that it is a new project with very high ambition, but the truth is most of the startups fails. So, for me, I am not sure right now if I want to invest in this project or not.
What is Reef Cryptocurrency/ Reef Token?
So, how does Reef token or crypto fits into all the above-mentioned problems and solutions. Well in order to power everything for you to rebalance your DeFi investments, to get access to the global liquidity pool that’s going to cost you gas in a way. So, Reef token is that gas, in order to power that entire operation.
As Reef platform gets more adopted than, it’s only natural that Reef token is going to be appreciated in price. So, that is Reef toke.
Reef Token Price
|Fully Diluted Market Cap||$241,003,680.60|