What happens to your funds when you deposit them in EMP.Money??
So - I have received a few messages recently about the following:
Where do our funds/tokens go when they leave our protected wallets and are invested in EMP protocols? I know it's in the liquidity pool, but how is it protected?
This is a GREAT question - here is my answer:
Before I jump in and answer this question - it's important to understand that DeCentralized Finance is unlike anything that any of us have been used to before with ‘regular banks and financial institutions'.
The fundamental values upon which DeFi is built - is completely different from those from the 'legacy financial system' that we have all grown up with.
In other words - what I am saying is - we have to get comfortable with things being completely different from how they have always been.
So - all that said - let's answer the question 'what happens to my money when I deposit into EMP.Money?'
Let me try and explain!
In order to answer this - you need to know about Smart Contracts.
Anytime we deposit anything into EMP.Money - it is locked into a smart contract.
A smart contract is computer code that is immutable (unable to be changed) - and is a way of adding pre-set conditions to a financial transaction.
In other words - a smart contract is a program that is stored on the Blockchain - that runs when predetermined conditions are met.
So - when you deposit some funds into EMP.Money - your funds are locked into a smart contract - that nobody else has access to - except for you.
You can access those funds at any time (unless you deposit into the Detonator - as the Detonator is designed to reward those that lock their funds)
So - when you deposit into EMP.Money - your funds are added to a smart contract that only you have access to.
It's IMPORTANT to note - that your funds do NOT leave the EMP protocol.
EMP do NOT take investors' money and put it somewhere else - or use it for other investments.
(this is the opposite of what has been discovered that FTX was doing. It's been revealed that FTX customer's deposits were being used to cover margins for other investments)
Whenever you purchase something that you want to deposit/stake into EMP.Money - most of the time you will go to Pancake Swap and purchase your asset.
Pancake Swap is 100% decentralized
(in other words - you don't need any verification/ID or anything to use it)
(unlike most exchanges that are centralized - meaning you do need ID and verification to use them)
Whatever you purchase at Pancake Swap you really do own (again - something that it would appear FTX did NOT do)
Anything you purchase at Pancake Swap is directly verifiable on the Blockchain - so you really do own these assets.
As opposed to FTX - who were a ‘middleman’ - and as has now been proven - were involved in some shady shenanigans of customers' assets.
But the headline is - when you deposit in EMP.Money - your funds are locked in a smart contract at EMP.Money that is:
A: verifiable on the blockchain
B: Accessible to you at anytime
🥸👉Just to be REALLY 100% clear about this...
Try and think of it like this.
Any cryptocurrency that you have - is not actual physical currency (as you know). There are no physical bitcoins or Ethereum tokens in the world. All crypto really is - is code.
So when you buy Bitcoin - you are if you like - purchasing some 'exclusive code' - that is locked in a smart contract - that you can access at any time.
When you purchase - your ‘money’ is swapped for ‘code’ - and it’s your code that has the value. And that code lives on the Blockchain.
So that is where your funds are - they are exclusive code linked directly to you as the consumer….
While I am here - one other thing to mention:
When you purchase and HOLD any cryptocurrency on an exchange like Coinbase, Binance, etc you are allowing THEM to be the custodian of your assets.
This means that although it's your crypto - as it's on an exchange - the exchange technically 'controls' it. And if something happens to the exchange (like it has with FTX.com) - you may lose access to your crypto.
The perfect scenario is to remove your crypto from an exchange and store it on something like a Ledger Nano - which is a hardware wallet.
This is literally a piece of hardware (like a flash drive) that saves your private keys.
Your private keys are what make your crypto yours.
If you keep your crypto on an exchange - the exchange has your private keys.
Until last week - millions of people (myself included) kept most of their crypto on exchanges.
But since what has happened to FTX - it's now advisable to move your crypto to a hardware wallet.
So - just to be clear - when you purchase and HOLD any cryptocurrency on an exchange like Coinbase, Binance, etc you are allowing them to be the custodian of your assets.
However - with a defi protocol like EMP, YOU are the custodian of your assets.
This is a very important difference.
To use EMP.Money you use MetaMask.
MetaMask is DeCentralized.
You have access to your own private key in MetaMask (whether you knew it or not)
No one else has access to your MetaMask private key.
(that's why it's so important NOT to lose your 12 word seed phrase when you set up your MetaMask because you can't access your private key otherwise)
I hope this helps!
~ chris farrell