Onchain

Inside the blockchain #

When we talk about “onchain” we are referring to processes that are carried out within a specific blockchain, usually with a currency that uses that network to function. Onchain activities include creating or exchanging tokens that can be currencies, digital objects or real estate contracts. What we can do with everything that is programmed there includes farming tokens, using apps, playing video games, transferring, buying and selling assets, leaving them still to generate money, participating in missions to receive more (airdrops), etc.

Wallet #

Onchain coins are stored in addresses within the blockchain. The so-called wallets are not the storage location (which is in the blockchain itself), but apps that allow access to that address, which is usually encrypted with a unique security phrase of about 12 words. Without that phrase, it is impossible to access that address and with it the coins attached to it. I can then have, for example, a single Ethereum address where I have my tokens, and with that single phrase I can access from different types of wallets.

Wallets like MetaMask and Rainbow can connect to several different blockchains, so you can have the same address on different networks as long as they follow the same nomenclature. Otherwise, the number changes but it is the same wallet connecting to different networks. The money loaded into that wallet is independent on each network. To transfer tokens between the various networks, so-called bridges are used  . Another common option is to convert within an exchange and then send to another blockchain.

Contract signing and network cost #

It is very important to keep in mind that using a blockchain always has one requirement: signing access to the process/contract/data exchange with which you interact. It is an authorization for another entity in code to access your tokens and all the information and power over them, achieve connection with your networks, etc. In Ethereum, for example, the contract with which you are going to interact is authorized (be it an app, a token, etc.), allowing processes in that interaction. Once the exchange of data is authorized, if there is also a transfer of assets such as the purchase/sale of a currency or a specific action within a dApp, a fee or gas is charged, which may cost more or less depending on the network used and according to the “slippage” or range given to the DEX to tolerate price changes that may arise while the operation is being carried out. The lower the slippage, the greater the probability that the operation will not be carried out, but as the slippage increases, the cost of the fee may increase.

Scams, honeypots, rug pulls #

Onchain activity is very careful, it is dangerous if the appropriate tools are not used and if contracts are signed that are not, given that there are malicious pages and links that drain tokens, NFTs, etc. Also,  never reveal your security phrase to anyone . If a dApp, currency or contract is of dubious origin or unknown, it is always advisable to refrain and carry out adequate research, make sure you know what you are interacting with, etc. It is essential because interacting with inappropriate contracts can represent losses and scams/theft of the entire account, which is why it is essential not to sign anything that is not certain of its reliability.

A  honeypot  is a currency that you can buy but cannot sell. It is programmed like this and it is possible to verify it before entering it. There are tools like Token sniffer that examine contracts to see if they have this type of deception in their programming, and they are also used to know when a currency is safe. In a honeypot, you can never sell the tokens you buy, therefore the money you invest does not return, eventually leading to a rug pull of the currency. A rug pull is when the person who programmed the currency decides to take the entire liquidity pool that that currency had. It is usually reflected as a large red candle that wipes out all the money there was, leaving the holders of this currency with their hands full of a token that is either worthless anymore, or is illiquid and cannot be sold.

That is why what they call DYOR in crypto is very important  : Do Your Own Research, that is: do your own research before depositing your money in anything.

Airdrops and Farming #

As we saw in the crypto guide, a coin is usually launched under models such as Initial Coin Offering or simply through so-called airdrops, which are literal tokens that fall from the sky: they are coins, NFTs or some type of token that are sent to wallets that They have participated in some type of raffle, mission within a network, made a transfer, held tokens or did something prior (or sometimes after) the launch of a coin, dApp or project. Airdrops can also be tricky, so it’s best to always do your research first and foremost.

“Farming” a token then means carrying out activities within a network or under a protocol or using a specific currency. By doing this, you obtain tokens or earn a ranking that gradually determines your placement in pre-sales, whitelists, receipt of NFTs or coins.

Some networks and their currencies #

There are many current networks. There are both L1, L2 and L3, for many types of uses and sectors. In the case of what calls us -cultural objects such as memecoins, social tokens and nfts-, there are several important ones:

  • Ethereum  – The most important altcoins have been created on the Ethereum network and it is an exemplary network for others. Over time it has gone from a heavier method with the environment to a system based on staking, where you can leave ETH frozen to contribute to the operation of the network and earn a percentage for it. Many currencies, apps, etc. are developed on Ethereum, and there are even networks created on Ethereum as such, the so-called Second Layer Networks or Layer 2 (L2).
  • BNB Chain  – Popular in 2021 with the PlayToEarn phenomenon and the shitcoins of its time, where ponzis and rug pulls abounded that turned it off against other competitors. It is still widely used, receiving volume of users, new currencies and projects. The fact that it is Binance’s onchain bet keeps it the same under the interest of many people.
  • Solana – One of the most popular networks today, especially when it comes to memecoins and NFTs, has been explosive in recent months. It is characterized by being low commission and fast, integrated with tools such as Telegram bots and large NFT markets. Furthermore, SOL as a currency, having good performance, is attractive for buying and selling, a token with an attractive volume for traders.
  • Base Network – The Base network is a light L2 network built by Coinbase within Ethereum, but that implements a series of technologies to make operations faster and at a lower cost, among other advantages. Base is the fashionable network these days and where movement is expected. It is created by the people at Coinbase, which is one of the largest exchanges in the world, which gives it a lot of strength. It is also easy to use, which makes it attractive for those new to crypto.
  • Degen :  Ultra-fast, low-commission L3 network, created in Base, where the $DEGEN token is used and marketed, born in airdrops from the decentralized social network Farcaster and since then the token par excellence of said community, which has been developing various types of dApps and utilities for it.
  • Blast : Another new, ultra-fast and low-fee L2 network, aimed at degens, betting, video games and experiments with tokens and nfts like Fantasy, a platform that integrates card games with profile pictures and trading.
  • TON : New, community network but using Telegram technology. It has high potential in that it has been designed as an open network for the community, its TON coin is priced well in the market and so far a lot of development is expected with it.

Onchain investment potential #

Coins within blockchains that belong to solid projects with potential are usually desired as purchases as an investment, given that since they are not yet listed on exchanges or have a still low market capitalization, they have the possibility of achieving future higher capitalization and multiply its price in case of successful projects or projects with a lot of buzz. An example of several sectors today that we find especially important in terms of medium and long-term investment:

  • Memecoins:  coins created from events, characters or cultural, political agents, from the Internet’s own narrative or from practically anything, animal or thought from any dimension or place.
  • AI:  Currencies of projects related to Artificial Intelligence, robotics and DePin (Decentralized physical infrastructures)
  • GamiFi  Currencies from video game projects, platforms, metaverses, development tools
  • RWA:  Real World Assets, projects focused on connecting the blockchain with things in the real world.

Onchain coin trading and rotation #

With onchain currencies, trading is done mainly by buying them and then selling them at a higher price. There are also some DEXs that offer the possibility of operating in Futures/Derivatives but it is not very common, the same is to use limit orders, since here they are usually purchases and sales directly on the blockchain. For trading, the so-called “low cap” or low market capitalization currencies are especially attractive (and risky), since they represent a greater opportunity to make greater profits, while being the riskiest in terms of investment. In general, memecoin trading is high risk and it is recommended to do it moderately and only with money that you are willing to lose.

These days, memecoin trading is one of the most popular: coins that are born on networks like Solana or Base and gain mcap until they reach millions or billions of dollars, reach exchanges, etc. The central idea is to be able to enter low points of these currencies to hold them for a while, then sell to get the investment out, part of which can be reinvested in another and so on. This is what is called rotation: Today I buy X currency and tomorrow I sell it at a higher price, so that with those profits I can buy the currency and repeat the process. Some obviously die and do not rise any more, so a large part of onchain trading is based on searching for them, tracking them, following their projects and communities, having alerts on their prices, etc.

To track onchain coins: #

  • Make sure if it is a project that may be fleeting or is it an investment in something that may be larger and long-term. Keep in mind that when a coin goes public, there are already people who previously acquired it in pre-sales or received tokens, therefore they are people who, added to the snipers (first to buy when it is launched), are going to sell it to make profits, which which is often done with the liquidity of those who enter a little later.
  • Therefore, it is not always necessary to enter in the first minutes of existence, but rather when the currencies are in consolidation stages and there is greater certainty that they will not be rug pulls. Therefore, it is important to verify it, to know that the liquidity pool has been blocked, renounced or burned, which ensures that whoever programmed the currency has no way to access it.
  • It is important that the project has sufficient liquidity proportional to its capital, to sustain the transactions and the volume it is handling.
  • Mcap is market capitalization, which is calculated by multiplying the price of the currency by the number of coins in circulation. The ideal is to hunt for coins with low capitalization to benefit from their growth, but sometimes it is okay when they are already established and have a little more strength. Still, they are risky.
  • Keep in mind how long the currency has been circulating, how many wallets have it, how many whales there are, whether or not they have large amounts of the currency, who has traded it, etc. The importance of this varies depending on the coins and tracking the wallets that buy them first, trade them the most or hold them in large quantities is interesting to discover other future projects and processes.
  • Community: it is essential to track the networks, to the dev, to know if the person who created it is known, if there are influencers or large pre-sale holders, what is the narrative it supports, what community is behind it, what is being talked about in X, how It is your Telegram, your roadmap, etc. The activity of the community and/or the onchain project is always essential.