**Tokenomics is an important concept in the cryptocurrency (crypto) field, which is a key factor that can influence the future of the project's token. In this article, BHO Network will explain the definition of Tokenomics and its importance.**


# What is Crypto Tokenomics
Created from a combination of the terms “token” (cryptocurrency) and “economics,” Tokenomics is an important concept. To understand this term, we first need to understand the definitions of its two components.

Economics is a social science that analyzes how individuals, organizations, governments and states allocate their resources primarily through the production, distribution, and consumption of products and services.

A token is a non-native digital asset based on an existing blockchain (e.g. ETH is the native token of Ethereum, and other projects may launch their own tokens on the ERC-20 standard).

Combining these two definitions, we can conclude that Tokenomics is the economy of the token, how it is adopted, distributed and operated by the project.

# The importance of Tokenomics
In the same way that central banks leverage monetary policy; the right design, management, and implementation of tokenomics allows project teams to create an efficient economy that facilitates growth. ecosystem development and token price growth.

For investors, tokenomics is a paramount factor to consider, as it greatly affects the future value of digital assets as well as whether the project is capable of achieving its set goals. out in its development roadmap or not.

Simply put, regardless of the team's expertise and dedication, the potential of the project, and the amount of capital raised from the funding rounds, bad tokenomics can lead to the total failure of the company. a cryptocurrency project.

# Tokenomics: 4 Crucial Factors to Consider
So what makes a good tokenomics project? Below, you'll find four key elements to answering this question.
## 1. Utility
Usability is perhaps the most important factor in the tokenomics of a crypto project. Scarcity has no value if the token has no application. Even if a token has a deflationary model, has the best price stability mechanism, has a decentralized and efficient on-chain governance and distribution mechanism, it will not have much value if it no use value.

So is fiat money, it only has value if the citizens of that country use it, such as to make their daily payments, investments and other transactions. This is also why some central banks have not supported digital assets in the past.

So crypto projects must build apps for their digital assets with functions that benefit the ecosystem and the participants.

Common functions include:
- Earning opportunities via activities such as staking, mining, yield farming, and revenue-sharing
- Governance
- Medium of exchange on a platform or in the whole ecosystem
- Collateral for other assets in the ecosystem (e.g., stablecoins)

For example, ETH’s primary utility is to cover transaction fees as well as the deployment of dApps and smart contracts. On the other hand, users utilize Bitcoin both as a store of value and a medium of exchange.

In general, the utility of a token is responsible for creating demand, which drives up the digital asset’s value if the supply stays the same or decreases.

## 2. Supply and Price Stability Mechanisms
Another crucial factor to crypto tokenomics is supply and price. Crypto projects also have to carefully manage the supply of their tokens, as it also has a direct influence on its price in the following ways:
- If the token’s supply increases while demand stays the same, it will lead to a fall in its price.
- On the other hand, the coin’s price will increase with the decrease of the supply (while the demand remains unchanged).

For that reason, if a crypto project seeks to facilitate great returns for investors, it can design the token as a deflationary asset that moves a significant portion of the coins out of circulation over time.

One alternative solution is to create an inflationary asset and reduce its rate of inflation gradually. Bitcoin is an excellent example, which halves the new coins that can be mined with each block roughly every four years until it reaches its maximum supply of 21 million BTC in 2140 (Bitcoin Halving).

However, in some cases, inflation or the lack of a maximum supply is necessary for a token to execute its core functionalities due to the nature of a crypto project’s solution. For example, while ETH’s supply doesn’t have a hard cap, the project mints new coins to incentivize validators to maintain the ecosystem.

Basically, crypto projects can control the supply of their tokens in two primary ways:
- By (not) limiting the number of coins that can be issued (maximum supply)
- By implementing a price stability mechanism that moves coins out of circulation (e.g., coin burnings and buybacks, as well as the halving in BTC’s case)

Overall, before investing in a coin, it’s essential to analyze the dynamics and mechanisms of an asset that directly impact its supply.

While some coins can maintain long-term growth with minimal increase in demand due to deflationary processes, there are others that experience inflation-induced price crashes even after attracting a record number of new capital and buyers.

## 3. Distribution
If a project fails to distribute tokens to their users in one way or another, no one will be able to use their network. For example, Ethereum will have no users if no one owns ETH to participate in the network and build Dapps.

Projects can distribute tokens in a variety of ways. Some choose to distribute more to the development team and early investors. Others, usually projects using the fair launch model, choose to distribute tokens to the community more.

For example, coin distribution occurred in the following ways at the below crypto projects:
- Ethereum kicked off with a crowd sale in which participants contributed 31,000 BTC. For that reason, crowdsale contributors received 60 million (83%) of the initial 72 million ETH, with the remaining 12 million ETH (17%) going to be distributed to the original contributors and Ethereum Foundation. After that, new ETH was created and sent to the miners as a reward for developing the ecosystem.
- There is debate in the community about whether Bitcoin creator Satoshi Nakamoto pre-mint the first few Bitcoins or bought them as a regular miner (since he was the first to mine BTC), we have can conclude that Bitcoin has a fair launch model in its initial distribution terms. Regardless of whether it is pre-mint or not, Satoshi's 1.1 million BTC is still in place, not a single Bitcoin of which is in circulation. That said, the remaining funds have been distributed among Bitcoin “miners” (just like in the case of ETH).
- Ethereum-based Uniswap has a completely different distribution model, combining the fair launch model and the ICO period of 2017 (the latter, the project team, investors and advisors benefit the most). After the September 2020 release, the initial supply of 1 billion UNIs is allocated as follows: 15% airdrop to the community, 2% to liquidity mining, 43% to admin fund, 21.51% to development team, 17.8% for investors and 0.69% for advisors (all of which have a vesting period of 4 years except for the part for airdrops and liquidity mining).

The distribution model of a token greatly affects whether a crypto project has the necessary funding to achieve its goal in the roadmap, and whether its business model is sustainable. It also affects the investor's view of the project.

Since decentralization and transparency are two qualities that are valued in the crypto space, the community generally prefers the fair launch model. Assuming most of the money is distributed among development team members and investment funds, the community may feel suspicious. However, this model helps ensure developers and ecosystem participants have access to the resources needed to make their vision a reality.

But, to be fair, it is safer to distribute tokens equitably among (tens of) thousands of users rather than a few initial whales or large investors, as it greatly reduces the risk of such as price manipulation, project sabotage, or centralization of governance processes.



## 4. Governance
The last factor that determines the success of tokenomics and that project is governance. While it has an indirect effect on the future success of a crypto project and the project's token price, it is also an equally important factor, especially for tokens with administrative function.

Just like the impact a government has on a country's economy, a project's core development team or committees and governing bodies have a significant influence on a project's future and token price.

Furthermore, the governance process itself is also important. Regarding the governance model, here are some key highlights that investors should consider:
- The level of centralization (the core team has the ultimate authority vs. a fully decentralized community governance process)
- Whether governance occurs on the chain or off the chain (although, off-chain governance can still be decentralized)
- How accessible is the governance process for the average user (e.g., how easy it is to create a proposal and vote on it)
- The minimum share of votes required to approve a proposal
- The core team’s background, skills, and experience if they are highly involved in the project’s governance

Overall, while decentralization is highly valued in crypto, it doesn’t mean that all projects featuring decentralized governance are better than ones that are either fully or partly centralized. Transparency, integrity, cooperation via an efficient process, and a professional team (whether they are core developers or elected community members) matter more in this field.

# Tokenomics: a Crucial Concept in Crypto
Tokenomics has a significant impact on the future of the project and the price of its digital assets. For that reason, this is an important concept that everyone in the crypto space should know.

Project development teams can design their tokenomics to achieve their goals and achieve their vision faster. Investors can study tokenomics to assess whether a digital asset is worth the investment and its potential risks and returns.


Tokenomics is an important concept in the crypto field. In this article, BHO Network will explain the definition of Tokenomics and its importance.

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Tokenomics: 4 Factors That Determine a Crypto’s Success

**The world is changing day by day and life is becoming more difficult than ever, when prices are getting more and more expensive, requiring people to have more sources of income. However, with limited time and energy, creating a new source of income is not an easy task.**

Billionaire Warren Buffet once said: *“If you don’t find a way to make money while you sleep, you will work until you die.”* It means that passive income is the key to financial freedom.

In this article, BHO Network will cover some of the most popular methods of generating passive income with cryptocurrency.

# 1 — Staking native blockchain coins!

Risk level: Low — 3 to 20%. 

Many chains and tokens have their own way of validating transactions. Most proof-of-stake chains use validators that “mine” new blocks, and delegators that put their coins and thus trust in these validators to mine the right transactions. These often have the least risk involved, and therefore also offer the lowest possible yields. 

![Staking reward.png](https://cdn.bho.network/cms/Staking_reward_f0ff7e602b.png)

As you can see blockchains like Polkadot and Elrond offer double digits staking yields, but all the mentioned options are worth exploring. Do keep in mind that some chains (like DOT) experience inflation, lowering the actual yields. Chains like Ethereum will actually experience negative inflation close to -1 to -2%! meaning that the actual yields will actually be higher than mentioned. But, as always, do your own research on all of the options!

# 2 — Yield farming with USD stable coins!

Risk level: Low — 1 to 20%. 

Many DeFi protocols, CEX and DEX’s offer nice yield generating options for your stablecoins by lending them out to other investors or by using your funds to provide flashloan. 

The returns of these methods often vary according to the volume or intended use of your funds. If you are rewarded with platform native tokens instead of stablecoins, the return will also vary according to the value of those tokens. This investment method is the least risky of the mentioned options as there is almost no risk of price fluctuations of stablecoins. However, if you are a DeFi user, you need to be aware of Smart Contract risks.

![Yield Farming with stablecoin.png](https://cdn.bho.network/cms/Yield_Farming_with_stablecoin_90fbd23e4a.png)

Some of the projects and protocols that provide Yield Farming capabilities investors may consider include: Curve Finance, Aave, Uniswap, and Pancake Swap.

# 3 — Providing liquidity!

Risk level: Low/Medium/High — 5 to 500%. 

The world of DeFi and decentralized exchanges would not exist without liquidity pools and Liquidity Providers (LPs). Liquidity providers provide their assets on both sides of the pool eq. 50% in USDT and 50% in ETH. When traders come and trade in that pool, you will get a portion of the generated fees. These liquidity pools generate higher yields but are also exposed to more risk, eg. Impermanent Loss (IL). When the prices of the assets start to rise or fall it might (not) have been smarter to hold the asset instead of providing liquidity. 

![LP.png](https://cdn.bho.network/cms/LP_506532c2fb.png)
*Pools Liquidity and their rates of return - Source: https://coindix.com/*

As you can see the yields are a lot higher when providing liquidity, but so is the risk! Do proper research before investing in these pools as rewards and losses are a lot higher. When providing liquidity you should consider the following risk levels:
- Low Risk and Low Returns: are liquidity pools that require only 1 asset or stablecoins such as bridges or USD pools. Low-risk and low-return liquidity pools are usually liquidity pools with only a single crypto asset such as ETH or USDT, such as blockchain bridges or USD pools. 
- Medium Risk and Medium Returns: are the liquidity pools that are bound to a stablecoin on one side, and assets on the other side, like USDT-FTM. 
- High Risk and High Returns: are the pools that require 2 assets on both sides of the pool, like MATIC-ETH. 

# 4 — Staking DAO/Dapp/Reward tokens!

Risk level: Medium/High — 35 to 500%. 

The riskiest, and therefore also the most rewarding strategy would be to invest and stake native tokens coming from DApps. Most DeFi applications have their own native token that can be used to vote, get a portion of (trading)rewards or improve the yield of their offered products/services. 

These rewards are often the highest but are usually paired with either increased inflation, smart-contract risk or centralisation risks. The price of these tokens is often highly volatile, as more tokens are given out the price usually decreases, and they usually consist of a centralised dev team that might fuck up or leave the project. The plus, however, is higher yields, more rewards, voting power and more upside potential. 

![Staking DAO DAPP Reward token.png](https://cdn.bho.network/cms/Staking_DAO_DAPP_Reward_token_cb0d95fe24.png)

As you can see some of these rewards are entering the triple-digit yields. As this seems like the most profitable, a lot of caution and research have to be taken into account before investing in these projects. These are highly risky and there are often caveats that are not immediately obvious. If it is too good to be true, most of the time it is!

# Conclusion
There are many opportunities in the crypto market whether DeFi or CeFi and investors need to know where to go to start generating passive income. There are many different ways of investing, and the methods and forms mentioned above will give the investor an idea of the different possibilities in the market. BHO Network will always advise investors to divide their investment evenly across multiple lines, thereby keeping themselves from taking too much risk and helping to diversify investment portfolios.


Billionaire Warren Buffet once said: “If you don’t find a way to make money while you sleep, you will work until you die.”

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Ways to generate sustainable passive income using Crypto

**Stablecoin is an important financial product that acts as a bridge between digital assets and fiat money. This is a cryptocurrency that strives to provide price stability and is backed by a reserve asset.**

Stablecoin has become popular because they provide the features of a digital currency - near-instant transactions, privacy and security of a decentralized system, but still have a stable price that is not volatile.

The price stability of Stablecoin makes it truly a medium of monetary exchange and a mode of storage of monetary value. Along with that, its value must be relatively stable for a long time to ensure constant purchasing power.

## Types of Stablecoins
There are several different types of stablecoins, classified by their mechanism of action

### Stablecoins backed and collateralized by fiat money
Fiat-collateralized stablecoins typically own and maintain a reserve of fiat currency, such as US dollars, as collateral to issue an appropriate amount of cryptocurrencies.

Other forms of collateral can include precious metals like gold or silver, as well as commodities like oil, but most fiat-collateralized stablecoins today use US dollar reserves.

These reserves are maintained by independent supervisors and are regularly audited for compliance with required regulations.

Tether (USDTUSD) and TrueUSD (TUSDUSD) are popular cryptocurrencies with a value equivalent to a single US dollar and backed by dollar deposits.

### Stablecoins backed and collateralized by crypto assets
This type of stablecoin is backed and collateralized by other crypto-assets such as other cryptocurrencies. Since reserve cryptocurrencies can also tend to be highly volatile, such stablecoins are over-collateralized, meaning that the total value of the collateralized cryptocurrencies in the reserve will always be greater than the value of the amount. stablecoins are printed.

For example, $2000 Ethereum could be reserved for the issuance of $1,000 worth of stablecoins. Therefore, Ethereum can fluctuate up to 50% in value without affecting the value of stablecoins. More frequent inspections and monitoring will add to price stability. Backed by Ethereum (ETHUSD), MakerDAO's value of DAI (DAIUSD) is pegged to the US dollar and allows various crypto assets to be used as reserves.

### Non-collateralized stablecoins or algorithmic stablecoins
Unsecured stablecoins don't use any reserves, but they do possess a central bank-like mechanism: maintaining a currency's stable value through changes in supply.

Terra USD is the largest algorithmic stablecoin, and also the largest stablecoin by market capitalization, after USDC and USDT. It maintains its value at $1 through a burn and print mechanism that will be performed by traders. Every time 1 UST is generated, $1 LUNA tokens will be burned and vice versa.

When the price of UST falls below $1, traders can burn the UST or remove it from circulation in exchange for $1 in Luna tokens. This reduces the supply of UST and thus increases the price of the token. If the price of UST exceeds $1, traders are incentivized to burn Luna in exchange for $1 UST, which increases the supply and lowers the price.

---

Currently, the total capitalization of stablecoins has reached more than $180 billion. However, stablecoins are and will always be a concern for law enforcement agencies. Recently, the US Federal Reserve - FED has warned about the risks of Stablecoins in the context that the UST coin has lost its peg and dropped to only $0.6 on May 10.


Here is what you need to know about Stablecoins!

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Things you should know about Stablecoins 

**Ever since the launch of Bitcoin, the blockchain industry has made significant strides. The new executive order issued this past March by Joe Biden, President of the United States, shows just how mature this market is. The total market capitalization hit $3 trillion in November 2021, an increase of 210 times since 2016.**

However, as an emerging market, Crypto cannot avoid security holes. The market has gone through many precious lessons about security, including the 3 biggest hacks in the history of this industry:

# Ronin Bridge
This is the largest hack in the history of Crypto, with a total value of stolen assets of $614 million at the time. The victim of the attack was Ronin Network.

Ronin is a sidechain or parallel network to Ethereum. Sky Mavis, the company behind the popular play-to-earn game Axie Infinity, developed Ronin in 2020 after finding that Ethereum's base layer was too slow and expensive to process all the transactions required for such a game.

On March 30, 2022, Ronin Network revealed that an attacker had stolen the private keys needed to validate transactions and transferred 173,600 Ethereum and 25.5 million USDT to his wallet. At the exchange rate at the time, the theft was worth $614 million. The hack was then discovered after a customer tried to make a regular withdrawal.

Shortly after, Sky Mavis announced that it had contacted the authorities, experts and investors to ensure the safety of users' assets, and track on-chain the number of stolen assets. 

Recently, Binance has identified and recovered $5.8 million after an attacker attempted to transfer funds to the exchange through 86 different accounts. However, much of the stolen property has yet to be recovered. As of April 14, the attacker has successfully laundered about 18% of the stolen funds. The case is still being investigated and monitored.

# Poly Network
The second biggest attack happened on Poly Network with a total loss of up to $611 million at the time of occurrence. The victim of the hack was Poly Network, a smart contract platform that allows users to trade tokens between different blockchains such as Bitcoin and Ethereum.

On August 10, 2021, a hacker transferred $611 million worth of Poly Network tokens to three wallets under his control. According to an analysis by Mudit Gupta, a security researcher, attackers have found a way to 'unlock' (i.e. buy) tokens on the Poly Network protocol without 'locking' (i.e. selling) the corresponding token on other blockchains.

Fortunately, the attacker had returned the tokens the next day. While some speculated that he could not sell or "launder" the stolen tokens, the person claiming to be the attacker said he only stole them "for fun".

Within a week, Poly Network announced all of the assets had been returned, except for the $33 million worth of Tether, which was frozen shortly after the attack.

# Coincheck
The third shocking hack was the attack on the Japanese cryptocurrency exchange, Coincheck in January 2018 with a total of $547 million worth of NEM tokens stolen. The company admitted that it stored assets in a 'hot wallet', that is, a cryptocurrency wallet that is connected to the internet and is therefore vulnerable to cyberattacks.

Immediately after the attack, 16 crypto exchanges in Japan had to assemble into a unified self-regulatory body. Japan's financial regulator, the Financial Services Association, has also ordered exchanges to report on their cybersecurity measures.

At that time, Coincheck was one of the most reputable major exchanges in Japan, and Japan was also one of the largest crypto markets. So far, the identity of the hacker has not been verified, but more than 30 people have been arrested in connection with the sale and purchase of the stolen properties.

---

Above are the details of the top 3 crypto hacks with the greatest losses. Although blockchain technology has come a long way, it does not mean that cybercriminals are standing still. Every project, individual, or exchange must always remain vigilant in security. For retail investors, a very important security tip is to minimize the storage of digital assets on exchanges. Instead, your digital assets should be stored in personal wallets.

Understanding the importance of security, BHO Network is developing a crypto wallet helping users store their digital assets in the safest way. BHO Network's wallet is expected to be a secure crypto storage solution, with an easy-to-use and friendly interface. Moreover, the wallet will also support multi-chain, providing investors with a convenient as well as secure experience.

As an emerging market, Crypto cannot avoid security holes. Here are the 3 biggest hacks in Crypto's history so far!

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TOP 3 BIGGEST HACKS IN THE HISTORY OF CRYPTO

**If you've been looking into crypto or blockchain, chances are you've probably come across terms like "Layer 1" and "Layer 2" protocols. So what are these layers? Let's find out in this article.**

# Layer 0
Layer 0 is the basic component of Blockchain. It is the underlying technology that allows networks like Bitcoin or Ethereum to go live. Layer 0 includes the Internet, hardware, and connections that allow Layer 1 of the blockchain to run on. 

# Layer 1
Bitcoin, Ethereum, Solana, Avalanche, BNB Chain or Terra are all Layer 1s. They are private networks and have their own ecosystems. These networks process transactions on their own blockchain and use the network's native token to pay transaction fees. Layer 1 is responsible for the consensus mechanism, programming language, blocktime, and basic rules or parameters of the blockchain network.

## Layer 1’s problems
One problem Layer 1 often encounters is scalability. Networks like Bitcoin struggle to find ways to increase network throughput to handle enough transactions per second. Bitcoin uses the Proof-of-work consensus mechanism, a mechanism that requires high hardware power, and has the advantages of security and decentralization. Conversely, when the network has more users, the network has more work to do, causing slower transactions and higher gas fees.

## Solutions
Proof-of-stake is an alternative consensus mechanism to Proof-of-work that Ethereum 2.0 adopts.  This consensus mechanism will validate new blocks of transaction data against the collateral (stake) of network participants, resulting in a more efficient process. Many variations of Proof-of-stake have also been developed to increase the scalability of the network, including Nominated Proof-of-Stake - the consensus mechanism used by BHO Network. (For more information, visit: [NPoS - What is NPoS and how does it work?](https://bho.network/blog/article/what-is-npos-nominated-proof-of-stake-and-how-does-it-work))

Sharding is also a scaling solution for Layer 1 blockchains. Simply put, sharding divides the task of validating and validating transactions into smaller, more manageable chunks.  As a result, the workload can be distributed across the network to optimize the computing power of more nodes.  Since the network processes these shards in parallel, multiple transactions can be processed concurrently. BHO Network's BHO Chain will also aim at sharding as an important solution to increase the scalability of its network.

# Layer 2
Overlapping networks that stay on top of the base layer are called Layer 2 solutions. Protocols use Layer 2 to increase scalability by removing some interactions from the base layer. As a result, smart contracts on the main blockchain protocol only handle deposits and withdrawals, while ensuring that off-chain transactions remain compliant with regulations. Bitcoin's Lightning Network is an example of a Layer 2 blockchain.

Networks built on top of Layer 1 are often referred to as Layer 2 solutions. Protocols use Layer 2 to increase scalability by reducing interaction with Layer 1. Smart contracts on the protocol will only have to handle deposits and withdrawals, to ensure off-chain transactions are properly executed. Bitcoin's Lightning Network or Ethereum's Polygon Network are Layer 2 blockchains.

To differentiate, Blockchain is the first layer in a decentralized ecosystem, Layer 2 is an integration with a 3rd party that works with Layer 1 to increase the number of nodes processing the network, thereby increasing network throughput.

## Layer 2 Scaling solutions
Layer 2 protocols have become extremely popular in recent years and they are proving to be the most effective approach to solve scaling problems, especially in PoW networks. Some solutions to scale Layer 2 are:

### Nested blockchain
Blockchain Layer 2 runs side by side with other layers. In essence, Layers 1 will be the ones who set the rules and settings, while Layer 2 will handle the business procedures. Thereby, the work will be divided among the layers of the network and reduce the workload on a network.

### State channels
A state channel improves total transaction capacity and speed by facilitating two-way communication between the blockchain and external transaction channels through a variety of approaches. To validate transactions over the state channels, miners do not need to participate immediately.

State channels enable two-way communication between the blockchain and external channels using a variety of approaches. State channels allow a group of participants to conduct an unlimited number of private transactions off-chain. Unlike regular on-chain transactions, state channels transactions are not public.

State channel examples include Bitcoin Lightning and Ethereum's Raiden Network. In the trade-off in the blockchain trilemma, state channels give up some decentralization in exchange for scalability.

### Sidechain
Sidechains are chains that run parallel to the blockchain and are used for large transaction volumes. Sidechains have their own consensus mechanism and are tunable for speed/scalability. Their utility tokens are used as part of the data transfer mechanism between the sidechain and the main chain. The main function of the chain is to ensure security and resolve conflicts.

Transactions on the sidechain will still be public on the distributed ledger. And security breaches on the sidechain do not affect the main network. Building a sidechain is quite a time-consuming and labor-intensive job.

### Rollups
Rollups are Layer 2 blockchain scaling solutions that execute transactions outside of the Layer 1 network, then upload data from the transactions to the Layer 2 blockchain. Layer 1 can keep backups safe because the data is on the base class.

Users benefit from rollups because they help increase transaction throughput, and reduce gas fees.

With the growing demand for expansion, the need to develop layer 2 scaling solutions is increasingly being promoted. Currently, besides the 3 solutions above, many new effective solutions have also been developed, such as Plasma, Validium, Hybrid, and Parachain - developed by Polkadot.

# Layer 3
The application layer is often referred to as Layer 3 or L3. L3 projects act as a user interface while hiding the technical aspects of the communication channel. L3 applications are what give blockchains their real-world applicability.

# Summary
In order for blockchain technology to be widely adopted, the problem of scalability needs to be solved. And since both Layer 1 and Layer 2 have limitations, it is essential to develop a system that combines the two.

Layer 1 is crucial as it serves as the foundation for decentralized systems. The fundamental scalability issues of blockchain are solved through Layer 2 protocols. Most Layer 3 protocols (DApps) currently run only on Layer 1 and ignore Layer 2. The three are all important because they help develop real-world applications for blockchains.


If you've been looking into crypto or blockchain, chances are you've probably come across terms like "Layer 1" and "Layer 2" protocols. So what are these layers? Let's find out.

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Things you should know about Blockchain Layers

**Substrate - is considered as one of the three core technologies that make up the future Web3 vision. Substrate is commonly used in Polkadot's ecosystem.**

**So what is Substrate? Why is the Substrate Framework mentioned so much?**

# What is Substrate?
Substrate is a modular framework for building and developing blockchain projects. This modular framework allows developers to build various blockchains based on libraries with custom or ready-made components. The creator of this tool is Dr. Gavin Wood, Co-Founder of Ethereum.

Each project represents different functions on Parachain. These projects are built using the Substrate engine. We can create these projects in other languages, but we can simplify and cut down on a lot of the time required for the process with the Substrate tool.

# Notable Features of Substrate
- Substrate is inherently integrated with the BFT (Byzantine Fault Tolerance) consensus algorithm, thus ensuring that the blockchain remains active in the event of one or more nodes being down, or disabled.
- A peer-to-peer (P2P) network
- Provides a WebAssembly developer toolkit to ensure high-performance developed applications.

# Benefits of Substrate
- Substrate is the fastest way to create a blockchain - Substrate will most likely solve the hardest problems for you such as the data layers and the consensus mechanism. To get started, simply use the default options and you're good to go!
- Substrate is new, but very popular - Although it has only been released since 2018, there are now more than 170 projects using Substrate.
- Substrate is more flexible than other blockchain networks - You are completely free to choose custom blocks or develop your own blocks using Substrate. Even with smart contracts, you can completely build your own, as long as you make sure that your blockchain can work.
- To become a blockchain developer, Substrate is the fastest way - Substrate uses Rust language, quite similar to JavaScript in command line, but similar to C++ in terms of logic. So if you only know JS, you will waste no time getting used to Rust.

# Notable Substrate Structure and Compatibility
## Notable structure
- Built on WebAssembly;
- Industry Standard Networking Libp2p;
- Highly scalable;
- Rust-based primary implementation for speed and reliability Javascript secondary implementation for development
- Wasm WebAssembly interpreter, written in Rust.
## Compatibility
Not all blockchains are suitable for all networks. With Substrate, however, you can combine features to fit the needs of each project:
- Ink Smart Contract 
- Status and transactions are encrypted.
- Limited asynchronous call options.
- Locked account level.
- Administrative tools and methods such as stakeholder referendums, approval voting, and qualified abstentions.

# Do Substrate and Polkadot necessarily need to go together?
If you follow Polkadot, you will see the term “Substrate” appear very often. This makes many people mistakenly believe that Substrate belongs to Polkadot, and that all Substrate projects are parts of Polkadot. However, this is not correct. There are many independent chains built with Substrate, and not all projects built on Substrate are in the Polkadot ecosystem.

# Projects built on Substrate
Currently, there are more than 170 projects built on Substrate, including some prominent names such as: Kusama, Chain X, Chain Link, etc. With the rapid growth in the number of projects, Substrate has shown that it's a fairly simple and easy-to-use toolkit, which makes it a popular choice for blockchain developers.

BHO Network's BHO Chain is also built on the Substrate foundation, with proven stability, performance, and security. With NPoS consensus protocol instead of conventional PoW, BHO Chain can effectively save energy, and be environmentally friendly. In addition, BHO Chain has many other benefits, such as the Cross-chain Bridge feature that allows the transfer of crypto assets, tokens or data from one blockchain to another; and optimization for DeFi and NFT.

# Conclusion 
With the development of projects in the Polkadot ecosystem, Substrate is an essential technology in the future Web 3.0 vision. Substrate provides developers with a set of tools to create and develop blockchain quickly and simply. Substrate helps projects easily access and develop on the Polkadot ecosystem in particular and other ecosystems in general, including the ecosystem of the upcoming BHO Network.

We hope you have a good overview of Substrate. Follow BHO Network's channels for instant updates on market news and projects!



What is Substrate? Why is the Substrate Framework mentioned so much?

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What you should know about Substrate framework

**NPoS, Nominated Proof-of-Stake or Nominated Proof of Stake, is a fairly new mechanism where stakeholders have the right to choose specific validators to participate in the consensus mechanism. NPoS is used by Polkadot and many blockchains built on Substrate like Kusama or BHO Network.**

**So what is NPoS? And how does NPoS work?**

# Proof-of-Stake (PoS) and Nominated Proof-of-Stake (NPoS)
To understand Nominated, we first need to understand what Proof-of-Stake is. Proof-of-Stake is the consensus mechanism applied on most blockchains today to achieve distributed consensus. The mechanism requires users to stake a certain amount of tokens to be a validator of the network. The Validator will confirm, add transactions to the blockchain, and generate new blocks of data, and will be rewarded with either blockchain inflation or transaction fees.

PoS solves some of the problems of Proof-of-Work (PoW):
- Save more energy
- Requires less hardware power
- Easier to become a validator, through which the network will have more nodes, and will be more decentralized

However, the original PoS model has some disadvantages such as:
- PoS is based on shares that correspond to holdings. That means big token holders have better ROI and “the rich get richer”.
- Large token holders threaten the network's decentralized validation process. That means placing more power in the hands of rich validators.

From there, Nominated Proof-of-Stake (NPoS) was born. It was first introduced by Polkadot, the platform founded by the Co-founder of Ethereum. In NPoS, users are encouraged to participate in the protection of the network by staking native tokens and voting validators with good history. This solves the **“51% attack”** problem, meaning that a validator node holding a majority share in the network controls the network and approves fraudulent transactions.

# How NPoS works
For several times a day, the system selects a group of entities called validators, which will play an important role in protocols such as block production and finality gadget of the next session.

The validator team will have to stake tokens in the form of collaterals, committing to completing the required tasks. Any action that damages the protocol, a portion of the staked tokens will be cut off. Otherwise, they will be rewarded if done well.

The Nominators will also have their tokens locked with the Validator they vote for and receive rewards according to the percentage of tokens they contribute (per rata basis), and vice versa, when their validators fail to properly complete their tasks or damage the protocol, a part of their tokens in the pool will also be cut off.

# Advantages of NPoS
NPoS, having inherited the inherent advantages of the PoS model, is much more efficient than Proof-of-Work. It incentivizes all token holders to participate in Validator elections, increasing democracy and decentralization. The number of Nominators can be increased day by day to ensure the security of the network, but the number of Validators is kept the same, thereby maintaining the stability of the network.

In addition, because of fair reward/punishment mechanism, NPoS's model forces Nominators to choose validators that are most beneficial to the system. Therefore, the goal of the NPoS election process is to provide results that are fairly represented, and as secure as possible.

Furthermore, with the above model, the proportion of tokens staked on a validator will be larger than any single validator in the traditional PoS model, making network attacks extremely difficult for 2 main reasons:
- It is difficult for unqualified Validator candidates, because they need to build a reputation in order to be elected.
- Hacking the network will be extremely expensive as any attempt to attack will result in a portion of the tokens in the pool being destroyed.

Currently NPoS is commonly used in blockchains built on Substrate Framework, including BHO Network. With NPoS, BHO Network aims to build a network with good security, high decentralization, and above all, strong scalability.


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What is NPoS - Nominated Proof-of-stake, and how does it work?

**Crypto is a very new potential field, but extremely fertile for investors pursuing profits. Have you known all about the methods of making money in this market?**

In the previous part of the “Methods of making money in the crypto market” series, we went through the 5 most popular methods in the market: Spot investing (Hodl coin); Trade (Surf); Staking; Farming and IDO.

In this second part, we will continue to explore 5 methods that are less common but are sure to surprise in terms of their ability to generate profits.

# Exploiting - Mining
Mining or Exploiting is a familiar concept for many people. In essence, Mining is the process of using computer computing power to confirm and add transactions to the blockchain using the Proof-Of-Work (PoW) consensus mechanism, and get back a certain amount of coins and/or partial transaction fees.

In addition to Bitcoin and Ethereum, there are many other blockchain projects using PoW that can be mined such as Dogecoin, Monero, Litecoin, etc. To be able to exploit or mine, investors need technical expertise and specialized computers.

By using this method, investors will gain profits after deducting investment costs, maintenance costs and electricity bills.
Currently, the average cost of generating 1 Bitcoin is $33,766, of which the cost of electricity is $20,260.

# Validator
If mining is an essential activity for Proof-of-work, on the other hand, Proof-of-stake (PoS) validators will play a similar role. The validators will also be responsible for validating and adding transactions to the blockchain. Although no powerful computer hardware is required, validators will have to Stake a certain amount of cryptocurrency to be validators and be selected to validate transactions or do other tasks on the network, and will also be rewarded with cryptocurrency. Besides, investors will also need technical knowledge. The profit of being a validator also depends a lot on the price of the coin. In May 2021, the total daily reward for Ethereum validators reached over US$3 million after the ETH price peaked.

# Play-2-earn games
Having become so popular after the boom of Axie Infinity amid 2021, play-to-earn games have become an income generator for many people. After Axie Infinity, there have been many games with a similar model created, and players who participate will receive cryptocurrency or valuable NFTs. At the time of the boom, many players in developing countries like the Philippines changed their lives thanks to Axie Infinity and earned more than $1000 per month just from playing the game.

However, there are many debates about the current GameFi, when it is said that they are not sustainable because the games are "not for entertainment but only for making money". A number of new GameFi projects have recently been built that focus on the entertainment element of the game to create a natural appeal towards gamers, such as FootEarn, a 3D Esports football GameFi applying blockchain technology and NFT invested by Polygon.

# NFTs
In the first half of 2021, sales of NFTs have reached more than $2.5 billion. NFT Everydays: The First 5000 Days by Beeple - a popular digital artist sold for 38,525 ETH - equivalent to over $69 million at the time of sale.

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*Beeple's art work - NFT Everydays: The First 5000 Days sells for 38,525 ETH*

The heat of NFT is undeniable and a lot of investors did not miss this opportunity. There are 2 main methods to make money from NFT:
- Trading: Similar to crypto, it is buying low and selling high, investors will buy NFTs at low prices and then sell them back at higher prices. However, this form is quite risky because it is difficult to truly value an NFT work, and the liquidity of this market is not as transparent and continuous as the traditional crypto market.
- Create and sell NFT: This form is safer as artists only have to spend a gas fee to mint their NFT and list it on NFT marketplaces. NFT Marketplaces like OpenSea will often charge in Ethereum and are quite high, so small artists should and often choose to list on smaller marketplaces.

# Airdrop
Airdrop is a form of almost “no capital but still profitable”. As the name implies, the airdrop is to let money fall from the sky, through completing certain tasks or just by registering, you will have the opportunity to receive airdrop containing fiat currencies or NFTs from the project. And with luck, this fortune can be much larger than you imagine.

In August 2021, decentralized derivatives exchange - DYDX made an airdrop for users who have deposited and traded on the exchange in the past. Investors who traded with a total volume of 1 to 10,000 USD  would receive 1163 DYDX tokens and if the trading volume was more than 1 million USD, the number of tokens that investors would receive is 9529 DYDX. DYDX reached an all-time high of $27 at the end of September, meaning there were 787 lucky people who received more than $257,000 from the sky.

![3 (1).png](https://bholdus.s3.ap-southeast-1.amazonaws.com/bholdus-web/3_1_11082915ae.png)

Airdrop is also a means that projects choose to promote images and identities. Investors who work hard to "hunt" for information and do airdrops can also make a small profit thanks to this method.


Crypto is a very new potential field, but extremely fertile for investors pursuing profits. Have you known all about the methods of making money in this market?

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Different Ways Of Making Money In Crypto - Part 2

**We've all heard of terms like "dilemma" or "trilemma". These terms are often used to refer to an attempt to strike a balance between two or three propositions (or solutions), since it is not possible to guarantee absolute satisfaction of all of these propositions or solutions.**

Ever since the birth of blockchain as a concept, researchers have always focused on three basic factors: decentralization, scalability, and security. In today's article, we will learn about the trilemma of blockchain - finding solutions to balance and ensure all three properties when building a blockchain network.

A perfect blockchain will have to ensure all three factors. However, let's look at the following issues to better understand the trilemma that blockchain is facing: increasing scalability and decentralization will make security problems more serious, and risks in security and widespread governance will increase. In addition, when increasing the security of a blockchain network, scalability will be significantly affected. In fact, blockchain projects often focus on developing only on 2 out of 3 factors to ensure the most balance. Several innovative solutions have been proposed to address this trilemma such as sharding, side-chains or state channels, though all are still in beta and not yet widely adopted.

# THE 3 ELEMENTS OF BLOCKCHAIN TRILEMMA
Here is a relatively easy-to-understand example in reality: we are always struggling to find a balance between life, sleep and social relationships. The blockchain trilemma is similar. An acknowledged problem in the crypto community is that if we want to create a truly decentralized system, we have to choose between security and scalability.

So what are the three elements of trilemma? Let's find out in the analysis below.
- **DECENTRALIZATION** - Decentralization is the division of management into smaller groups or entities, instead of centralized management on a large scale. For blockchain, decentralization makes it possible for all network participants in the world to manage their own crypto assets, instead of the centralized management from a third party such as banks or government organizations.
- **SECURITY** - Confidentiality. In essence, blockchain has inherited a very high level of security, with transactions being almost impossible to tamper with and change information. However, blockchain is not completely immune to security risks. If a hacker can control more than half of a blockchain network, information can be changed and transactions to steal assets can be made. In blockchain, the more nodes involved, the higher the security, but it also comes with a decrease in transaction speed due to slower synchronization of information between nodes.
- **SCALABILITY** - Extensibility. Similar to expanding a business into multiple branches or covering more networks, scalability is expressed by how much a blockchain network can expand while maintaining transaction and processing speed.
Scalability and decentralization often go together, and this leads to security vulnerabilities. Meanwhile, increased security limits an otherwise more scalable decentralized network. For a decentralized network, we will often need some extra procedures during operation, making it more difficult for expansion.

# DECENTRALIZATION AND SECURITY IN BLOCKCHAIN ALWAYS GO HAND-IN-HAND
Decentralization is the backbone of blockchain and cryptocurrencies. There will be no need for a centralized organization or a third party to manage and operate for the system to work. In finance, for instance, we have banks that act as intermediaries between users and their assets. Banks will set up a system for us to transact on, which is convenient, fast, and especially ensuring the safety and accuracy of the transaction cash flow. In return for this security, the user's assets will be under the control of the bank, and they can also lend our assets or invest in other things.

For blockchain, it is the users who will manage their assets and transactions. The essence of blockchain is a set of pre-built commands based on conditions, and these commands will replace the management and execution of a third party. The blockchain network will always remain secure, as each transaction needs to be confirmed and approved by more than half of the nodes before execution. The more nodes there are, the more decentralized the blockchain network is, and the higher the security.

The absence of a centralized management organization is great and fair for users. However, in terms of system expansion, this is a huge drawback. More nodes joining the network means more information needing to be processed and updated, leading to slow transaction speeds and difficulties in expansion.

# BLOCKCHAIN NETWORK EXPANSION AND ACCOMPANYING SECURITY RISKS
For the expansion hurdle, we can think of it like the simple concept of weight. As weight increases, the object becomes heavier and moves around slower. The expanded blockchain network will also slow down transactions, as updating information between nodes takes more time.

A common approach is to limit the scalability of the network to prevent its effects on performance. However, this will actually help hackers have a better chance to control the blockchain network because of the limitation. This is not the optimal way to do it, and this justifies the difficulty of scaling a network, which is an important problem that needs solutions for the blockchain trilemma.

# WHY BLOCKCHAIN NEEDS SCALABILITY?
Imagine that the number of traffic roads is finite and cannot be further expanded. With the increasing number of people traveling, traffic jams will happen more often and at some point, it will take you all day just to cover a short distance. A non-scalable blockchain network means that at some point, you will have to wait a really long time for a transaction to be confirmed and executed. This will make it impossible for users to transact on that network, which leads to the project’s failure.

Blockchain is a technology full of potential, and scalability is essential in order to bring this technology to the masses. If the blockchain network cannot be expanded, it will not be able to compete with the traditional centralized models in terms of transaction speed, convenience, and bandwidth when used for a large number of users.

So what approaches can we take to solve these problems?

## LAYER-1 SCALING SOLUTION
Currently, the new generation of blockchain technology is focused on developing scalability to reach the masses. There are two common solutions, which are designed based on the layer on which the blockchain is built. We can call it the Layer-1 scaling solution - the solution for layer 1 blockchains (also known as the foundation blockchain), and the Layer-2 scaling solution - the solution for layer 2 blockchains (also known as blockchain extension, which is integrated into layer 1).

In this article we will cover solutions for Layer-1. As a blockchain platform layer 1, BHO Network also uses this approach to solve the problems of network scalability.

When popular foundation blockchains such as Bitcoin, Litecoin, Ethereum, etc. want to increase scalability, they will need to intervene and make changes directly from the protocol to increase the transaction speed and the number of transactions that can be done simultaneously. One method that can be employed is to increase the amount of data stored in each block, or increase the validation speed of each block, so that the entire network throughput will increase.

Additionally, the following approaches are also being researched and developed for Layer-1 blockchains:

## IMPROVE THE CONSENSUS PROTOCOL
The traditional consensus protocol Proof-of-Work (PoW) has shown disadvantages in terms of speed as well as environmental friendliness due to the need for large computing power. Currently, the majority of new blockchains use the Proof-of-Stake (PoS) protocol with many improvements. Instead of requiring miners to solve cryptographic algorithms that use the computing power of hardwares such as graphics cards or CPUs, PoS uses the number of tokens being staked in the network to validate transaction information on blocks.

Ethereum, the largest blockchain ecosystem, will move completely to the PoS consensus protocol in the near future. Ethereum expects the processing capacity of the Ethereum network to increase significantly with faster transaction speeds, while preserving the decentralized nature and security of the blockchain.

The BHO chain of the BHO Network ecosystem also uses a consensus protocol similar to PoS, which is nPoS (nominated PoS). NPoS is an improvement in terms of efficiency and processing speed compared to PoS, thanks to a change in the selection of nominators, which are nodes that are authorized to validate transactions in the blockchain network.

## SHARDING
Sharding is a technology adopted from the distributed database management method, and it has become one of the most popular to solve the problem of scaling the blockchain network Layer-1 today. Sharding breaks down the state of the entire network into shards, making it easier to manage each piece than to manage the whole thing. These network shards are processed in parallel by the blockchain network, allowing different operations to take place sequentially.

In the future, each node will be tied to a shard instead of storing the entire state of the blockchain at every node. The shards will provide the state of their blocks to the mainchain, while using communication protocols between shards to synchronize addresses, balances, and states. Ethereum 2.0 along with Zilliqa, Tezos and Qtum are pioneers in testing and applying sharding in their blockchain networks in the future.

BHO chain will also move towards sharding as a critical solution in increasing the scalability of its network.

# CONCLUSION
Although blockchain trilemma is a concept that is not really popular for everyone yet, some regular users have already realized the problems that blockchain is facing as more people use it and blockchain networks become more expansive. Slow transaction speed and security vulnerabilities leading to stolen assets are prominent issues recently.

However, with the constant research and improvement of projects to solve this trilemma, future blockchains will be faster, more secure, and open to more users. Blockchain will return to its inherent decentralized nature, instead of traditional forms of centralized management.

BHO Network, with its strong scalability, is a technological solution and a solid foundation for other projects to take advantage of and develop on, thereby contributing to accelerating advancements of the blockchain and cryptocurrency industry.


In today's article, we will learn about the trilemma of blockchain - finding solutions to balance and ensure all three properties when building a blockchain network.

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Blockchain Trilemma And Its Scalability

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BHO Network is built on BHO Chain (BHC-20) - a foundational and critical component of the BHO Network in enabling the development of a complete ecosystem based on blockchain technology.

BHO Network - Bring blockchain to life

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