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This was inspired by a true story.
A few nights ago I was sat with a friend of mine who wanted to invest $3,000 into the Bumper Finance token since it was close to it's all time low.
This can be considered an Undiscovered Crypto since the only place you can buy it is Uniswap.
Now he had a bunch of USDT on Binance and wanted to use $3,000 of that to buy BUMP tokens.
The first problem was that the average fee on the Ethereum network at the time was around $35 and he only had $26 worth of Ethereum in his MetaMask wallet.
So we were faced with the possibility of having to buy some ETH with his Tether, withdraw that to the wallet to pay fees…
And then withdraw the Tether to the wallet so we could trade it on Uniswap.
That plan quickly fell apart when we realised that if we bought $100 worth of Ethereum and withdrew it to the wallet to pay fees, the exchange was going to charge us a $35 Ethereum transaction fee to withdraw it.
That would turn that $100 worth of Ethereum into $65 before we’d even done the swap.
Then we’d be looking at another $35 Ethereum transaction fee to withdraw the $3,000 worth of Tether.
That would have been $70 in Ethereum transaction fees before we’d even done the trade (which would incur another hefty Ethereum transaction fee).
So we went back to first principles.
We asked, what is the end result we are going for here?
BUMP was trading around 8 cents at the time so we were looking to buy about 37,000 tokens.
The next question we asked was “what is the fewest number of steps to achieve that?”
Because of course, the fewer the steps, the less we’ll spend on fees.
Now, like with every problem, if you invest the time to precisely craft the question, the answer becomes obvious.
So what we ended up doing was taking $3,100 worth of Tether and buying Ethereum with it on the centralised exchange.
Then we withdrew all that Ethereum in one transaction to the wallet.
Now, transaction fees on Ethereum are only estimates because you don’t know what the total fee is until the transaction is complete.
I liken this to only being able to estimate the cost of fuel for a car journey. Until you get there, you don’t know precisely how much fuel you’re going to burn.
The same goes for Ethereum since, (in both cases) stuff happens along the way that affects the cost.
When the transaction withdrawing the Ethereum from the exchange was confirmed we only spent $6, so that was great.
But in any case, in one step, we now had $3,000 worth of value moved into his MetaMask wallet, but using Ethereum as a temporary store of value.
Remember that we bought $3,100 worth of Ethereum with his Tether, so we were expecting that extra $100 to get cut by the withdrawal fee to $65.
But since that transaction only ended up costing $6, we had $94 worth of, (let’s call it) “fee paying Ethereum” added to the wallet balance.
So let’s do an inventory here because the secret to this is keeping track of what is happening in your head since it’s not obvious looking at the numbers.
At this point in the process if we just look at the MetaMask balance it said the only asset we had in there was $3,120 worth of Ethereum.
But he and I knew mentally, that balance was actually sub-divided into 3 categories:
The $26 worth of Ethereum that was in there at the start
The $94 worth of Ethereum that we bought with Tether and withdrew from the exchange
The $3,000 worth of Ethereum that we bought with Tether and withdrew from the exchange in the same transaction
So now we were ready to do the Uniswap transaction, which was a piece of cake.
We went to Uniswap
We selected Ethereum as the asset we wanted to swap…
BUMP as the asset we wanted to receive…
The transaction fee on that was $43 worth of Ethereum…
And within 30 seconds, the transaction confirmed and the BUMP tokens appeared in his wallet.
Mission accomplished.
One of the main points here is to demonstrate how you can enhance your returns just by being a bit smarter with your money movements.
$35 saved on a transaction fee is the best return you’ll ever make because it’s like making a trade with no downside risk and a guaranteed profit of $35.
I’d take that trade every day.
And those opportunities are there all the time. It just requires a bit of know-how.
So to tie this back into the title.
Do you see now what I mean by using certain crypto assets as a “value transfer mechanism?”
In this case, we simply used the ETH asset to store our $3,000 worth of value for a few minutes while we moved it to where we wanted it.
The fact that ETH is a volatile asset doesn’t really affect us because we only held it for a short period of time.
But don’t get stuck on Ethereum, this is a principle you can apply to any network.
▶️ 3Speak