People usually start investing in cryptocurrencies through spot trading, which involves the direct buying and selling of assets. However, once they accumulate crypto assets, many investors face the dilemma of how to effectively manage them when not actively trading. This is where Binance Earn comes into play, offering a platform that allows cryptocurrency holders to earn income from their idle crypto assets.
Passive investing is a strategy that involves putting money into assets, such as stocks or cryptocurrencies, and letting it appreciate over time. This approach can be appealing because it allows investors to generate a steady stream of income without engaging in frequent trading, which may involve additional risks. In the field of cryptocurrencies, passive investing can be conducted through various means, such as staking, yield farming, and lending.
Binance Earn is a great entry point for those looking to start with passive investing. It provides a range of products designed to cater to both newcomers and seasoned investors. Binance Earn includes options like flexible savings, which allow for instant deposits and withdrawals, and locked savings, which typically offer higher interest rates in exchange for locking up funds for a specified time period.
Getting started with Binance Earn is quick and simple. Users first need to log into their Binance account and navigate to the 'Earn' section. This interface presents the various savings products, such as Simple Earn, High Yield, and Auto-Invest, along with a summary of the holdings and returns based on the last 30 days.
Investors can browse through a list of available products, each containing the estimated Annual Percentage Rate (APR) and the duration of the investment (see image below). To start earning, users have to select a product and subscribe to it. They can decide on the investment amount and confirm the subscription. The Flexible options enable the withdrawal of funds at any time, while Fixed products require the investor to commit their funds for a certain period in order to receive the rewards. It’s worth noting that users are still able to withdraw their funds at any time, even when using the locked products. The difference is that users will give up any accrued rewards when withdrawing from locked products before the predefined date.
Learn more: .

Binance Web3 Wallet, an integral part of the Binance app, is a user-focused crypto wallet tailored for users interested in exploring decentralized finance (DeFi) and decentralized applications (DApps). It enables secure and efficient management of digital assets, supporting activities like yield farming and token swapping across various blockchain networks.
Binance Web3 Wallet utilizes Multi-Party Computation (MPC) to enhance security, mitigating the risks of the centralized storage of private keys. It creates three "key-shares" stored separately in the user’s device, cloud storage, and the Web3 Wallet. Each key-share is secured with a recovery password known only to the user.
Setting up the Binance Web3 Wallet is straightforward. Users can start by logging into their Binance account via the app, navigating to the 'Wallets' section, and selecting 'Web3' to create a new wallet. Before using the wallet, users are required to back it up and set a recovery password to secure their assets. The backup process involves connecting to a cloud storage service like iCloud or Google Drive and setting a backup password that Binance cannot access or reset.
Binance Web3 Wallet has many benefits. For instance, users can set it up directly through the Binance app without having to manage seed phrases or private keys. The wallet is also directly linked to Binance Bridge and other service providers, facilitating seamless token swaps across various blockchain networks and ensuring competitive rates.
The wallet’s design focuses on user security and autonomy. Important features include protection against incorrect address entries and alerts on potentially malicious smart contracts. In addition, MPC plays a crucial role in every transaction, minimizing the risks associated with single points of failure and enhancing asset security.
Learn more: What Is Binance Web3 Wallet?

Key Takeaways

In crypto, an airdrop is a common marketing strategy used by projects to distribute free tokens to users, typically as a way to increase awareness and encourage adoption.

Airdrop scams are fraudulent schemes in the crypto space that lure users with promises of free tokens or coins, aiming to steal their crypto holdings.

This article covers what airdrop scams are, how they usually operate, and how you can protect yourself and your assets from scammers.

Introduction

In recent years, airdrops have emerged as a widely used marketing strategy for cryptocurrency projects to distribute their tokens to potential users and investors. However, with the rise in airdrop popularity, there was also a significant increase in the number of airdrop scams. In this article, we will delve into what airdrop scams are, how they operate, how they look, and most importantly, how you can protect yourself and your crypto assets.

What Are Airdrop Scams?

Airdrop scams refer to fraudulent schemes designed to deceive cryptocurrency users by offering fake airdrops – supposed giveaways of tokens or coins. These scams exploit the allure of free tokens to trick beginners and unsuspecting individuals into connecting their crypto wallets to malicious websites, transferring assets to fraudsters, or disclosing sensitive information.

How Airdrop Scams Work

Most airdrop scams will involve some sort of phishing technique that lure users into malicious websites. Let’s go through some common methods.

Fake airdrop promotion

Scammers set up phishing websites mimicking legitimate airdrop and promote it through various channels, including social media, email, and messaging platforms. Their goal is to trick users into revealing their sensitive information or connecting their crypto wallets. 

In other words, they lure users by promising free tokens in exchange for participating in the airdrop. Once users express interest, scammers may request personal information, wallet addresses, or even private keys under the guise of claiming the airdrop. However, instead of receiving tokens, victims may find their wallets drained or compromised.

Impersonation

Scammers impersonate well-known cryptocurrency exchanges or influencers to gain credibility and lure victims into participating in fraudulent airdrops. Scammers may also hack into legitimate accounts to take advantage of their followers.

Unsolicited crypto or NFTs (non-fungible tokens)

Be careful if you find assets in your wallet that you never bought or asked for. Scammers may distribute unsolicited crypto or NFTs to users’ wallets in an attempt to promote malicious websites. Typically, users can find the scammer’s website when checking their wallets on a block explorer or as part of an NFT image that suddenly showed up in their wallets.

Note that victims may also lose funds when trying to sell or transfer tokens received from scammers. If you receive suspicious tokens, do not try to sell or interact with them.

Identifying Airdrop Scams

Here are some red flags to watch out for when evaluating potential airdrops:

1. Unrealistic promises: Beware of airdrops promising exorbitant rewards or returns without any effort or investment on your part.

2. Suspicious requests: Exercise caution if an airdrop requires you to connect your wallet to a website or to disclose sensitive information such as private keys, recovery phrases, or personal details.

3. Lack of transparency: Scrutinize airdrop projects lacking clear documentation, whitepapers, or reputable team members.

4. Phishing attempts: Stay vigilant against phishing tactics, including fake websites, emails, and social media accounts impersonating legitimate projects or influencers.

Examples of airdrop scams

In the example below, the victim receives an NFT that contains the scammer’s website embedded in the token name.

Below are examples of scam NFTs distributed to Solana users, inviting them to participate in fake airdrops. This happened right after the legitimate Jupiter airdrop.

How to Avoid Airdrop Scams

Use burner wallets

A burner wallet is a crypto wallet you create specifically for a single-use, making them suitable for riskier interactions. The idea is to only use it with a small amount of crypto, so you can limit your losses if something goes wrong.

Conduct thorough research

Before participating in any airdrop, conduct extensive research on the project, its team members, and its objectives. Verify the legitimacy of the airdrop by checking official sources, such as the project's website, social media channels, and reputable cryptocurrency forums.

Exercise caution with personal information

Never disclose your private keys, recovery phrases, or other sensitive information to unknown or untrusted parties. Legitimate airdrops do not require such information to participate. Be wary of any requests for personal data, as they may be phishing attempts by scammers.

Verify authenticity

Double-check the authenticity of airdrop announcements and promotions through official channels. Look for signs of legitimacy, such as official branding, clear communication channels, and endorsements from reputable sources within the cryptocurrency community.

Stay informed and alert

Stay informed about common airdrop scam tactics and remain vigilant against potential threats. Keep yourself informed of the latest developments in the cryptocurrency space and learn about the best practices for protecting your assets.

Reporting and Taking Action

Report suspicious activity

If you encounter a suspected airdrop scam or fraudulent activity, report it to the relevant authorities, such as cryptocurrency exchanges, regulatory bodies, or law enforcement agencies. By reporting scams promptly, you can help prevent further harm to yourself and others in the community.

Secure your assets

In the event of a suspected compromise or security breach:

Take immediate action to secure your assets.

Transfer your funds to a secure wallet or exchange with robust security measures in place.

Consider enabling additional security features, such as two-factor authentication (2FA), to protect your accounts from unauthorized access.

Conclusion

Airdrop scams pose a significant threat to cryptocurrency users, but with awareness, vigilance, and proactive measures, they can be effectively mitigated. By understanding the tactics used by scammers, identifying red flags, and adopting best practices for safeguarding your assets, you can navigate the cryptocurrency landscape with more confidence and peace of mind. Remember, the key to avoiding airdrop scams lies in staying informed, exercising caution, and trusting reputable sources.

Further Reading

5 Tips to Secure Your Cryptocurrency Holdings

What Is Phishing and How Does It Work?

Common Bitcoin Scams and How to Avoid Them

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

🔥 Binance Highlights
Binance Academy partners with leading European educational institutions to offer university-accredited Web3 courses.Binance transfers all of SAFU’s assets to USDC.Binance FZE receives a VASP license from Dubai’s regulatory authorities.Binance completes the integrations of Tether (USDT) on the CELO network and DODO (DODO) on the Arbitrum One network.Binance adds ACA on Simple Earn Locked Products.

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The Hong Kong Securities and Futures Commission (SFC) approves Bitcoin and Ethereum spot ETF applications.Solana developers release a new software update, which aims to address the Solana blockchain’s congestion problem.The UK government plans to introduce comprehensive legislation for the regulation of crypto assets by June or July.A jury finds the exploiter of the Mango Markets decentralized exchange guilty of fraud and market manipulation.Tether expands beyond its USDT stablecoin offering and launches four new business divisions: Tether Data, Tether Finance, Tether Power, and Tether Edu.

📖Binance Academy Knowledge
What Is a Bitcoin ETF?What Is Solana (SOL)?What Is a Decentralized Exchange (DEX)?What Are Appchains (Application-Specific Blockchains)?What Is the Binance Inscriptions Marketplace?

Binance Launchpool is a platform that allows crypto holders to earn new tokens by locking some of their existing assets, such as BNB and other supported tokens. This process is completely free, with users receiving new project tokens in exchange for locking some of their assets.
Participating in Binance Launchpool is straightforward. First, it is easy to earn tokens. A user locks some tokens with Binance and gets other tokens in return. New tokens are rewarded based on the amount of locked assets and the Launchpool period. This method simplifies the process of earning new tokens, making it accessible to a wider range of users. 
In addition, Binance Launchpool offers flexibility to its users. Participants can withdraw their rewards and unlock their funds at any time. Furthermore, Binance additionally supports projects featured on Launchpool by offering advisory services, enhancing community engagement, and extending marketing reach.
To participate, simply navigate to the Binance Launchpool page, and select a project you're interested in that is accepting contributions. Then, pick a pool to allocate your funds to. After locking your assets, you will start earning the project tokens.
The total rewards, farming period, supported tokens, and maximum hourly rewards can differ from project to project. When the farming period is over, your locked assets and all earned rewards will be automatically sent to your Binance Spot account.
Learn more: .

Binance Launchpad is a pioneering platform for Initial Exchange Offerings (IEOs), which has transformed crypto crowdfunding by providing a secure and efficient environment for crypto projects to raise capital.
Binance Launchpad ensures protection for users and projects by offering robust security measures during token sales. It supports growth by giving projects exposure to its millions of global users, ensuring substantial and the availability of multiple trading pairs after the launch.
In addition to facilitating token sales, Binance Launchpad provides support from Binance’s listing and investment teams. They carefully evaluate applications to ensure only the most promising projects are launched. As such, crypto projects can benefit from launching their tokens within a trusted platform, leveraging Binance’s reputation as the leading global exchange.
Token sales on Binance Launchpad operate on a subscription-based model. Participants need to commit a specific amount of BNB to the token sale. To participate in a token sale on Binance Launchpad as an early contributor, individuals must hold BNB in their Binance wallet and subscribe to the sale during the designated subscription period. 
Launchpad token sales are structured in a straightforward way. The sale process spans several days, beginning with the BNB Holding Calculation Period and ending with the Final Token Distribution. Additionally, the token sale pages provide access to essential resources such as the project's website, whitepaper, and research report. They also offer details on the sale rules and a frequently asked questions (FAQ) section to guide participants through the token sale.
Learn more: .

In the field of cryptocurrency, crowdfunding is a method of gathering the initial capital to begin the development of blockchain projects. Today, let’s take a look at various types of crypto crowdfunding and how they generally work.
One of the crowdfunding methods is the Initial Coin Offering (ICO). During an ICO, projects create tokens and offer them to early contributors. This process functions as a campaign, where investors acquire project tokens in exchange for funding the project.
Another type of crowdfunding is the Security Token Offering (STO), which involves issuing security tokens that represent ownership in an underlying asset, such as equity in a company or rights to a share of profits.
Initial Exchange Offerings (IEO) are token sales conducted through cryptocurrency exchanges. This provides projects with an existing user base and platform for fundraising and offers investors more assurance regarding the credibility of the project, as exchanges generally conduct due diligence.
The Initial DEX Offering (IDO) resembles the IEO but only targets traders within a particular decentralized exchange (DEX) for fundraising. This crowdfunding method is considered flexible as tokens are usually instantly listed on an exchange after the completion of an IDO. However, varying liquidity levels in DEXes may negatively impact the fundraising process compared to methods with more consistent liquidity.
An Initial Game Offering (IGO) is a method of crowdfunding utilized to raise funds for the initial development of blockchain games, often offering discounted in-game assets and tokens to early investors. IGOs are tailored to the gaming industry, enabling developers to directly obtain funding from their target audience. IGOs have contributed to an expansion within the blockchain gaming sector.
Learn more: What Is an Initial Exchange Offering (IEO)?

Key Takeaways

Puffer is a native liquid restaking protocol (nLRP) built on EigenLayer. 

It is designed to enhance the performance and diversity of Ethereum proof-of-stake (PoS) validators, making native restaking more accessible and decentralized.

Puffer’s slash protection mechanism and validator tickets ensure consistent rewards and increased security for stakers.

Introduction

Puffer's primary goal is to establish a new standard for secure validator operations while preserving Ethereum's decentralization. 

Puffer Finance introduced a new approach to Ethereum staking, making liquid restaking more accessible. It addresses the challenges of centralization and accessibility in staking through its permissionless framework, native restaking capabilities, and commitment to decentralization. Through robust slash protection mechanisms and validator tickets, the protocol can offer consistent rewards and increased security for ETH stakers.

But before discussing how Puffer works, it’s worth clarifying the differences between liquid staking and liquid restaking.

Liquid Staking vs. Liquid Restaking

Liquid staking refers to the process of tokenizing staked assets. For example, when you stake ETH on a platform like Lido, you receive stETH in return. Liquid staking tokens (LSTs) like stETH allow you to contribute to the network’s security without sacrificing liquidity. Then, you can use the LSTs elsewhere while your native ETH is staked.

Liquid restaking takes the concept further, enabling the use of staked ETH to expand blockchain security to other “external” modules and systems, such as oracles, sidechains, and rollups. This allows validators to better utilize their assets and supplement their staking rewards.

How Does Puffer Finance Work?

Puffer is designed to enhance the performance and diversity of Ethereum proof-of-stake (PoS) validators. Unlike traditional staking models that require validators to lock up a significant amount of capital (32 ETH) and maintain technical infrastructure, Puffer provides a more accessible alternative. With Puffer, individuals can participate as validators with as little as 1 ETH, lowering the barrier to entry and promoting decentralization.

Native liquid restaking protocol (nLRP)

Puffer is built on EigenLayer, which is a specialized blockchain layer optimized for staking operations. Puffer operates as a native liquid restaking protocol (nLRP):

Native means that Puffer only uses native ETH. 

Liquid refers to the liquid staking mechanism that gives users liquid staking tokens (LSTs). For every ETH you stake on Puffer, you get one pufETH, which you can use in other DeFi applications while your ETH is staked. 

Restaking refers to the liquid restaking mechanism that allows the ETH deposited on Puffer to be used as collateral for services on EigenLayer.

In other words, Puffer’s native liquid restaking mechanism allows validators to use their staked ETH in other activities while maintaining their validator status and generating yields. This enhances capital efficiency and ensures that validators' assets are fully utilized, contributing to a more robust staking ecosystem.

Permissionless framework

Puffer Finance adopts a permissionless framework, enabling anyone to run a validator on the protocol. This democratization of staking ensures that the validator set remains diverse and decentralized, mitigating the risk of centralization. By removing barriers to entry, Puffer can empower individual stakers to participate in Ethereum's consensus mechanism, aligning with the platform's ethos of decentralization.

Slash protection and MEV autonomy

Validators' assets are protected through Puffer’s innovative slash protection mechanism. By leveraging anti-slashing hardware support and robust security protocols, Puffer minimizes the likelihood of validators being slashed for malicious behavior or operational errors.

Additionally, Puffer gives validators autonomy over their MEV (Maximal Extractable Value) strategies, allowing them to optimize rewards while maintaining security and integrity.

Validator tickets and enhanced rewards

Puffer Finance introduces the concept of validator tickets, which guarantee rewards for stakers regardless of validator performance. This innovative approach ensures consistent rewards for stakers and incentivizes early participation in the protocol. Moreover, Puffer's integration with Eigenlayer supercharges rewards for validators, providing additional incentives for participation and contribution.

Puffer Airdrop

As of April 2024, there are no official announcements regarding a Puffer airdrop. However, users can earn Puffer Points by depositing stETH or providing liquidity to the Puffer platform. While we can’t be entirely sure, some users speculate that these points might be later used as part of an airdrop eligibility and distribution process.

Closing Thoughts

Puffer's mission is to establish a new standard for secure validator operations, focusing on maintaining Ethereum's decentralization. They achieve this by implementing anti-slashing technology to mitigate risks and by enabling a wider variety of validators, enhancing diversity in node operators.

The Puffer Finance protocol offers a decentralized, accessible, and innovative solution for Ethereum validators and stakers. By leveraging liquid staking, slash protection, and native liquid restaking capabilities, Puffer can make Ethereum's PoS ecosystem more efficient and accessible to everyone.

Further Reading

What Is Liquid Staking?

What Is EigenLayer?

What Is Maximal Extractable Value (MEV)?


Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

Fibonacci retracements are a fundamental TA tool often used to identify potential support and resistance levels. Derived from the Fibonacci sequence, a mathematical concept where each number is the sum of the two preceding numbers (e.g., 0, 1, 1, 2, 3, 5, 8, 13, etc.), Fibonacci retracements provide insights into potential price reversals or continuations.

 The primary Fibonacci ratios are 23.6%, 38.2%, 50%, 61.8%, 78.6%, and 100%. A Fibonacci retracement level is calculated by dividing the vertical distance between significant highs and lows by these key Fibonacci ratios. Traders often use these levels to anticipate areas where the price may experience a reversal in its current trend. For instance, during an uptrend, traders may look for the price to retrace to one of these levels before resuming its upward movement, potentially offering an opportunity to enter a long position. Conversely, during a downtrend, these levels may act as areas of resistance, providing potential opportunities to enter short positions. 
The 50% retracement level is particularly important as it is not only a Fibonacci ratio but also a psychological level where market participants may perceive value or indecision. Traders often pay close attention to price action around this level as it can provide significant insights into the momentum of the prevailing trend. 
One of the key principles behind Fibonacci retracements is the concept of the "Golden Ratio," which is approximately 61.8%. The 61.8% ratio is considered to have mathematical significance and often acts as a strong area of support or resistance.
Fibonacci retracements can be applied across various timeframes, from daily to monthly charts. The principles remain the same, but the significance of retracement levels may vary depending on the time period. 
Learn more: A Guide to Mastering Fibonacci Retracement.

The Ichimoku Cloud is a collection of TA indicators that help traders determine market momentum, trend direction, and S/R levels. It uses a combination of moving averages to compute a cloud that can help predict potential price fluctuations.
The Ichimoku Cloud consists of 5 lines:
1. The Tenkan-sen, or Conversion Line, is the fastest line in the Ichimoku Cloud. Calculated as the average of the highest high and the lowest low over the past 9 periods, it offers insights into short-term price momentum.
2. The Kijun-sen, or Base Line, represents the mid-term trend. It is calculated similarly to the Tenkan-sen but over 26 periods. A crossover between the Tenkan-sen and the Kijun-sen can signal potential shifts in market sentiment.
3. Senkou Span A, or Leading Span A, is the midpoint between the Tenkan-sen and the Kijun-sen, plotted 26 periods ahead. 
4. Senkou Span B, or Leading Span B, represents the average of the highest high and the lowest low over the past 52 periods, also plotted 26 periods into the future. The area between Senkou Span A and Senkou Span B forms the cloud, providing insights into potential future S/R levels.
5. The Chikou Span, or Lagging Span, is the closing price plotted 26 periods in the past. It can help traders gauge the current momentum and assess potential trend reversals.
The key part of the Ichimoku Cloud indicator is the cloud. It is formed as the area between Senkou Span A and Senkou Span B. When Senkou Span A is above Senkou Span B, the cloud indicates an uptrend and is colored in green. When Senkou Span A is below Senkou Span B, the cloud signals a downtrend and is colored in red (see image below).
Learn more: .

🔥 Binance Highlights
Binance Charity airdrops up to $1 million to Binance users living in the areas affected by the Taiwan earthquake.The Binance Women in Technology Academy extends its training programs to reach women in earthquake-affected areas of Turkey.Binance Research reports the latest key trends in crypto.Binance Labs invests in BounceBit to support Bitcoin restaking and CeDeFi innovations.Binance lists Bittensor (TAO) with Seed Tag applied.

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Uniswap receives a Wells notice from the SEC.Former FTX executive Salame’s sentencing is rescheduled to May 28, 2024.Arthur Hayes predicts a Bitcoin correction around the Bitcoin halving.Robert Kiyosaki backs Cathie Wood’s $2.3 million Bitcoin prediction.Sam-Bankman Fried submits an appeal to challenge his 25-year prison term.

📖Binance Academy Knowledge
What Is Crypto Staking and How Does It Work?A Beginner's Guide to Decentralized Finance (DeFi)What Is Uniswap and How Does It Work?What Is Liquid Staking?What Is the Binance Inscriptions Marketplace?

The Stochastic Oscillator is a momentum indicator used in technical analysis to identify overbought and oversold market conditions. It oscillates between 0 and 100, with readings above 80 indicating overbought conditions and readings below 20 suggesting oversold conditions.
The Stochastic Oscillator is calculated by comparing the current closing price to the range of prices over a specified time period, typically 14 periods, to determine the relative position of the current closing price within that range. The formula for the %K line of the Stochastic Oscillator is: %K = [(Current Close - Lowest Low) / (Highest High - Lowest Low)] * 100. %K is known as the fast stochastic indicator. The "slow" stochastic indicator is known as %D and is a 3-period of %K.
Traders can use the Stochastic Oscillator to generate potential buy and sell signals. When the indicator crosses above 80, it suggests that the market may be overbought and could be due for a correction, signaling a potential sell opportunity. Conversely, when the indicator crosses below 20, it indicates oversold conditions, suggesting that the market may be oversold and could be poised for a reversal to the upside, signaling a potential buy opportunity. 
The Stochastic Oscillator has several variations. One of them is the Full Stochastic Oscillator, which uses the highest high and lowest low over a specified period, in addition to the closing price, to calculate its values. This variation provides a smoother indicator line and can offer more accurate signals compared to the traditional Stochastic Oscillator. 
Another variation is the Slow Stochastic Oscillator, which applies a moving average to the %K line, resulting in a slower and less responsive indicator. This variation is less prone to false signals but may lag behind market movements compared to the traditional Stochastic Oscillator.
Learn more: 5 Essential Indicators Used in Technical Analysis.

Key Takeaways

Appchains are specialized blockchains designed to serve the needs of individual applications.

Appchains can enhance scalability through application-specific resource allocation and offer more flexibility via modular architecture.

Some examples of appchains include Polkadot parachains, Avalanche subnets, and Cosmos zones.

Introduction

Appchains emerged as blockchains designed to meet the demands of individual applications. In this article, we will explore what appchains are, go through some of their benefits, compare them with layer 1 blockchains, and take a look at a few examples of appchains.

What Are Appchains?

Appchains are specialized blockchains designed for a specific function. Unlike general-purpose blockchains that offer a variety of applications, appchains are focused on individual applications. This approach allows for transaction processing, fees, smart contract functionalities, and many other factors tailored to the needs of particular applications.

How Do Appchains Work?

Appchains operate based on the main principles of blockchain technology, but with changes that make them tailored to the needs of individual applications. Each appchain dedicates its resources to a specific task, ensuring that they are not spent on unrelated applications. 

Appchains can implement various consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS), that are most suitable for individual applications. For instance, an appchain for a financial application might choose to use a different consensus mechanism than one designed for supply chain management. 

In addition, smart contracts on appchains can be specifically designed to meet the demands of individual applications. This allows for more complex contract logic that can enhance the functionality and efficiency of individual applications.

Typically, the architecture of full-fledged appchains is composed of five layers:

1. Network layer. This layer manages the peer-to-peer network functionalities. It enables nodes within the blockchain to communicate, exchange data, and participate in transaction validation processes.

2. Application layer. This layer hosts applications that run on the blockchain. It offers interfaces that developers can utilize to build, deploy, and oversee the operations of decentralized applications (DApps).

3. Data layer. The data layer is responsible for organizing and storing blockchain information. This includes maintaining the blockchain's state, recording transaction details, and handling smart contract data.

4. Consensus layer. This layer implements the consensus algorithm of the appchain. It can incorporate various consensus algorithms, such as Proof of Work (PoW) or Proof of Stake (PoS).

5. Smart contract layer. This layer facilitates the automation, verification, and enforcement of smart contracts.

Benefits of Appchains

Scalability

Appchains allocate resources to focus on a specific task or function. This specialization can result in higher transaction throughput and reduced latency for individual applications. This helps address the scalability challenges of general-purpose blockchains.

Modularity

Appchains are characterized by their modular architecture, distinguishing them from general-purpose blockchains that typically feature a monolithic design. The modular structure provides developers with the flexibility to customize the blockchain's functionalities according to the specific needs of individual DApps.

Interoperability

Appchains are designed to support interoperability, facilitating communication between different DApps. This enables users of one application to easily access the advantages of another.

Appchains vs. Layer 1 Blockchains

Architecture

The architecture of appchains is adaptable and can be aligned with different blockchain layers, allowing them to either be built on top of existing networks or operate independently. In contrast, layer 1 blockchains feature a uniform structure with a set of defined rules that network participants must follow, limiting their ability to adjust to the specific needs of individual DApps.

Consensus algorithm

Appchains can implement consensus mechanisms that are most suitable for their particular use case, which can vary depending on the underlying layer they are built upon or if they operate autonomously. Conversely, layer 1 blockchains are typically bound to their inherent consensus models, such as PoW or PoS, which may not be as adaptable to specific applications but provide a stable and uniform method of reaching consensus.

Scalability

Appchains are designed to prioritize scalability within the context of individual applications, which can result in high transaction throughput and low latency. In contrast, layer 1 blockchains often face scalability issues as they accommodate a wide variety of applications.

Appchains vs. Sidechains

Although both appchains and sidechains communicate with the main chain, sidechains are designed to perform a variety of tasks. So, unlike appchains, sidechains serve multiple purposes and are not tailored to a specific application.

Examples of Appchains

Polkadot parachains

Polkadot's parachains are individual blockchains that run in parallel within the Polkadot ecosystem. They are connected to Polkadot's Relay Chain, benefitting from its security. Parachains are identical to appchains as they can have their own tokenomics, governance models, and functionality, making them tailored to the specific needs of individual applications.

Avalanche subnets

Avalanche subnets represent separate blockchains created within the Avalanche network. They enable the development of application-specific blockchains, with each subnet supported by its unique set of validators that agree on the state of a set of blockchains.

Cosmos zones

Cosmos zones function as independent blockchains linked to the Cosmos Hub, serving as the equivalent of appchains in the Cosmos ecosystem. They use the Inter-Blockchain Communication (IBC) protocol to transfer data across the network.

Closing Thoughts

Appchains are blockchains designed to serve the specific needs of particular applications, providing greater scalability and flexibility compared to general-purpose blockchains. They are customizable, allowing developers to pick the specific parameters that fit their applications. As such, appchains can help enhance the performance and efficiency of individual applications while reducing the load on general-purpose chains.

Further Reading

What Are Decentralized Applications (DApps)?

Blockchain Scalability - Sidechains and Payment Channels

What Is Cross-Chain Interoperability?

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Williams %R is a momentum indicator used in technical analysis to identify overbought and oversold conditions in the market. It oscillates between 0 and -100, with readings above -20 indicating overbought conditions and readings below -80 suggesting oversold conditions (see image below).
Williams %R is calculated by determining the highest high and the lowest low over a specified time period, usually 14 periods. The current closing price is then compared to the highest high and the lowest low to calculate the percentage of the range that the price has covered. The formula is: %R = (Highest High - Close)/(Highest High - Lowest Low) * -100. 
Traders can use Williams %R to identify potential buy and sell signals. When the indicator crosses above -20, it suggests an overbought condition, indicating a potential selling opportunity. Conversely, when Williams %R crosses below -80, it suggests an oversold condition, indicating a potential buying opportunity. It’s important to note that Williams %R does not have internal smoothing. As such, it is plotted upside-down, with values closer to -100 indicating a potentially bullish market and values closer to 0 indicating a potentially bearish market.
In addition, Williams %R can be used to determine market sentiment. When Williams %R rises above -50, it signifies that prices are in the upper half of the high-low range for the specified lookback period, suggesting bullish sentiment. In contrast, when Williams %R drops below -50, it indicates that prices are in the lower half of the high-low range for the specified lookback period, signaling bearish sentiment.
Williams %R also has its drawbacks. For example, it can generate false signals in trending markets. Traders may experience whipsaws, where the indicator gives premature signals that do not materialize into significant price movements. As with any TA indicator, it is recommended to use Williams %R in conjunction with other tools, such as RSI or MACD, to mitigate the risk of false signals.
Learn more: 5 Essential Indicators Used in Technical Analysis.

The Bollinger Bands indicator is a TA tool that measures market volatility and helps identify potential overbought or oversold conditions. They consist of three lines: a middle band, which is a simple moving average (SMA) of the closing prices over a set number of periods, typically 20 days, and two outer bands, calculated as the middle band plus minus two standard deviations (see image below).
Bollinger Bands are commonly used to spot potential overbought or oversold conditions. When the price breaks the lower band, it may indicate that the market is oversold and could be poised for a bounce. Conversely, a price surge above the upper band suggests the market may be overbought, signaling a possible correction. 
The ability of Bollinger Bands to identify overbought or oversold conditions is based on the mean reversion theory. This theory states that prices tend to return to their average after deviating from it. In the context of Bollinger Bands, it implies that the price is likely to revert to the middle band after moving away from it.
Bollinger Bands can also be used with trading strategies, like the Bollinger Squeeze. The Bollinger Squeeze occurs when there's a shift from aggressive price movements to price consolidation. This change is indicated by the narrowing distance between the upper and lower bands, signifying reduced volatility (see image below). Following this consolidation phase, the price typically undergoes a significant directional move, which is what many traders aim to catch.
It’s important to note that Bollinger Bands also have limitations. As Bollinger Bands derive from a simple moving average, they assign equal importance to both recent and older prices, underestimating the impact of recent price data. In addition, the settings of a 20-day SMA and two standard deviations may not suit every market scenario. Some traders adjust these parameters often to fit their trading style and objectives. 
Learn more: Bollinger Bands Explained.