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Decentralized Finance
As you already understood, DeFi stands for Decentralized Finance. What does it mean? If Bitcoin is decentralized money, then DeFi projects are decentralized banks. They provide all the same banking services - lending, deposits, currency exchange, and most interestingly, due to their decentralized nature, they can offer such opportunities that banks never dreamed of. But more on that later. Initially, most of the DeFi projects were based on the Etherium blockchain, but now many young firms are trying to build their platforms. And, of course, the entire DeFi industry is based on smart contracts that we discussed with you a couple of months ago. What is the advantage of DeFI over CeFI (regular banks)? Obviously, these are increased security and cheap commissions. As for risks, DeFI has a number of legal nuances, as well as all the risks that relate to working with smart contracts. Now let's delve into different types of DeFI offices.
SWAP
If you are a fan of hanging on the exchange, you may have noticed a bunch of fast-growing tokens with the Swap prefix. Most of them have colorful names and logos - UniSwap, SushiSwap, PancakeSwap, etc. In fact, this is far from a crypt for children, but very powerful projects. What is the essence of swaps? These are ordinary exchangers. For example, in the past, in order to exchange one coin for another, you had to use some kind of exchange like Binance and completely entrust your funds to it. Now you can entrust your money not to any particular office, but to the whole blockchain. There are several other interesting DeFi exchanges with more extensive functionality. For example - Dex. It operates on the blockchain, does not store funds and personal data of users on its servers, and acts solely as a platform for matching applications for the purchase or sale of assets.
Credit
How does DeFi lending work? Basically, you get a loan without the involvement of a trusted party or intermediary in the person of a bank or corporation. Cool? One of the first projects of this type was MakerDao, and now the promising Compound is mostly heard. What is the difference between them? Globally, the difference between all these swaps and lenders is only in the advancement of technology. Someone uses more secure data transfer protocols, while someone just has more money in the pool.
Stablecoins
One of the most important things in the DeFi sector is the creation of decentralized stablecoins. We all know USDT Tether. This is the token of a company that seems to have a lot of bucks to back up the value of the token in relation to the dollar. But it is not exactly. So, in order to remove this inaccuracy, we will need decentralized stablecoins, so that too much power is not concentrated in the hands of one firm. The same MakerDao is the creator of the Dai stable, which is very popular.
Farming
The DeFi industry has created an excellent passive income opportunity for a large number of moneybags. How it works? Let's say there is an uncle who has a lot of air and cue ball. He gives part of his funds to the liquidity pool of some swap. That is, into circulation, since often on newfangled exchanges there are stupidly not enough coins for exchange. As time progresses, the rich man stupidly cuts the commission for running his tokens. Of course, there is a nuance in this way of earning money, due to the sharp change in the price of an asset, but the topic is promising for the long term. There are even software programs that monitor DeFi projects and drive money through them in order to raise the commission. This is called yield farming. For example, one token of a similar farming project (YFI) is now more expensive than Bitcoin. True, the volumes there are quite childish.
Outcome
DeFi is a very logical step in the development of the crypto industry and that is why DeFi projects are growing so rapidly now. I have named not all types of decentralized offices. There are an order of magnitude more of them, for example, platforms for issuing tokenized securities or DeFi-escrow, which allow you to trade on centralized exchanges without placing your funds on them. In short, we are slowly moving into the future. That's all for me. All decentralization!
As you already understood, DeFi stands for Decentralized Finance. What does it mean? If Bitcoin is decentralized money, then DeFi projects are decentralized banks. They provide all the same banking services - lending, deposits, currency exchange, and most interestingly, due to their decentralized nature, they can offer such opportunities that banks never dreamed of. But more on that later. Initially, most of the DeFi projects were based on the Etherium blockchain, but now many young firms are trying to build their platforms. And, of course, the entire DeFi industry is based on smart contracts that we discussed with you a couple of months ago. What is the advantage of DeFI over CeFI (regular banks)? Obviously, these are increased security and cheap commissions. As for risks, DeFI has a number of legal nuances, as well as all the risks that relate to working with smart contracts. Now let's delve into different types of DeFI offices.
SWAP
If you are a fan of hanging on the exchange, you may have noticed a bunch of fast-growing tokens with the Swap prefix. Most of them have colorful names and logos - UniSwap, SushiSwap, PancakeSwap, etc. In fact, this is far from a crypt for children, but very powerful projects. What is the essence of swaps? These are ordinary exchangers. For example, in the past, in order to exchange one coin for another, you had to use some kind of exchange like Binance and completely entrust your funds to it. Now you can entrust your money not to any particular office, but to the whole blockchain. There are several other interesting DeFi exchanges with more extensive functionality. For example - Dex. It operates on the blockchain, does not store funds and personal data of users on its servers, and acts solely as a platform for matching applications for the purchase or sale of assets.
Credit
How does DeFi lending work? Basically, you get a loan without the involvement of a trusted party or intermediary in the person of a bank or corporation. Cool? One of the first projects of this type was MakerDao, and now the promising Compound is mostly heard. What is the difference between them? Globally, the difference between all these swaps and lenders is only in the advancement of technology. Someone uses more secure data transfer protocols, while someone just has more money in the pool.
Stablecoins
One of the most important things in the DeFi sector is the creation of decentralized stablecoins. We all know USDT Tether. This is the token of a company that seems to have a lot of bucks to back up the value of the token in relation to the dollar. But it is not exactly. So, in order to remove this inaccuracy, we will need decentralized stablecoins, so that too much power is not concentrated in the hands of one firm. The same MakerDao is the creator of the Dai stable, which is very popular.
Farming
The DeFi industry has created an excellent passive income opportunity for a large number of moneybags. How it works? Let's say there is an uncle who has a lot of air and cue ball. He gives part of his funds to the liquidity pool of some swap. That is, into circulation, since often on newfangled exchanges there are stupidly not enough coins for exchange. As time progresses, the rich man stupidly cuts the commission for running his tokens. Of course, there is a nuance in this way of earning money, due to the sharp change in the price of an asset, but the topic is promising for the long term. There are even software programs that monitor DeFi projects and drive money through them in order to raise the commission. This is called yield farming. For example, one token of a similar farming project (YFI) is now more expensive than Bitcoin. True, the volumes there are quite childish.
Outcome
DeFi is a very logical step in the development of the crypto industry and that is why DeFi projects are growing so rapidly now. I have named not all types of decentralized offices. There are an order of magnitude more of them, for example, platforms for issuing tokenized securities or DeFi-escrow, which allow you to trade on centralized exchanges without placing your funds on them. In short, we are slowly moving into the future. That's all for me. All decentralization!
