One of the most exciting sectors in blockchain today is DeFi, and it’s changing the way we think about money, investment, and wealth.
Decentralized finance (DeFi) is a new financial framework consisting of decentralized blockchain protocols and underlying smart contract technology. DeFi, as it is most commonly known, makes it possible for users to access different types of financial products and services without the need for a centralized authority.
In theory, DEXs seek to offer alternatives to centralized exchanges, but in practice, they embody the pros and cons of each type of exchange.
A decentralized exchange (DEX) is a peer-to-peer (P2P) marketplace that connects cryptocurrency buyers and sellers. In contrast to centralized exchanges (CEXs), decentralized platforms are non-custodial, meaning a user remains in control of their private keys when transacting on a DEX platform. In the absence of a central authority, DEXs employ smart contracts that self-execute under set conditions and record each transaction to the blockchain. These trustless, secure transactions represent an accelerating segment of the digital asset market, and are pioneering new financial products.
Instead of relying on the traditional buyers and sellers in a financial market, AMMs keep the DeFi ecosystem liquid 24/7 via liquidity pools.
Automated market makers (AMMs) are part of the decentralized finance (DeFi) ecosystem. They allow digital assets to be traded in a permissionless and automatic way by using liquidity pools rather than a traditional market of buyers and sellers. AMM users supply liquidity pools with crypto tokens, whose prices are determined by a constant mathematical formula. Liquidity pools can be optimized for different purposes, and are proving to be an important instrument in the DeFi ecosystem.
Liquidity pools enable users to buy and sell crypto on decentralized exchanges and other DeFi platforms without the need for centralized market makers.
A liquidity pool is a crowdsourced pool of cryptocurrencies or tokens locked in a smart contract that is used to facilitate trades between the assets on a decentralized exchange (DEX). Instead of traditional markets of buyers and sellers, many decentralized finance (DeFi) platforms use automated market makers (AMMs), which allow digital assets to be traded in an automatic and permissionless manner through the use of liquidity pools.
Crypto yield farming is an emerging sector of DeFi that enables you to earn rewards and interest on your crypto.
Yield farming crypto can generate passive returns on holdings using decentralized finance (DeFi) protocols — but participating in it is very rarely a passive endeavor. Yield farmers often execute complex strategies, moving crypto assets between platforms to maximize liquidity mining returns. More recently, leveraged DeFi yield farming protocols have begun to issue under-collateralized loans to liquidity providers and yield farmers. Through this mechanism, users borrow crypto assets to increase exposure to risk and reward.
Compound is a decentralized, blockchain-based protocol that allows you to lend and borrow crypto — and have a say in its governance with its native COMP token.
The main backbone of today’s DeFi movement is Ethereum, a decentralized blockchain that enables smart contracts upon which other decentralized blockchain-based applications (dApps) with native cryptocurrencies can be built. Compound is one such protocol, primarily concerned with the financial services of borrowing and lending your crypto.
Aave is an open-source and non-custodial protocol to earn interest on deposits and borrow assets with a variable or stable interest rate. It also enables ultra-short duration, uncollateralized flash loans designed to be integrated into other products and services. It began as ETHLend in 2017 after raising $16.2 million in an Initial Coin Offering (ICO) to create a decentralized lending platform.
Curve is one of the most popular platforms in DeFi because it favors stability and composability over volatility and speculation.
Curve is a popular automated market maker (AMM) platform that offers a highly efficient way to exchange tokens while maintaining low fees and low slippage by only accommodating liquidity pools made up of similarly behaving assets. While this approach results in lower fees for the liquidity providers who supply the pools with tokens, Curve incentivizes their participation by integrating with external DeFi protocols and delivering rewards in the form of CRV tokens and interest.
The Uniswap (UNI) protocol is a paragon of the power of dApps, and a driving force behind the rapid growth of the DeFi ecosystem.
Uniswap is one of the largest decentralized cryptocurrency exchanges by transaction volume, and a leader within the decentralized finance (DeFi) space. The Uniswap platform is a blockchain protocol that uses automated market makers (AMMs) and liquidity pools to facilitate peer-to-peer trading. Liquidity providers add tokens to Uniswap pools and are rewarded with a fee proportional to their share of the pool.
This website does not offer any financial advice. You should consult with your financial advisor for all your financial decisions. You are the only one that is responsible for any of your possible gain or loss. Cryptocurrency is a very speculative asset. Please do your own research and due diligence. Cryptocurrency space is changing by the second and information regarding the space also changes by the second.