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How to talk Decentralized Finance, #DeFi, like a Pro.
A Thread
1/ What is Decentralized finance (DeFi)?
A global, open alternative to the current financial system.
Products that let you borrow, save, invest, trade, and more.
Based on open-source technology that anyone can program with.
Can be KYC-less.
2/ DeFi is a collective term for financial products and services run on Ethereum or other blockchains, executed with DApps.
In DeFi, a smart contract replaces the financial institution in the transaction. Contracts are transparency to inspect and audit by anyone.
3/ Difference between #DeFi and Traditional Finance (TradFi)
Infographic:
4/ DeFi in Layers (Ethereum)
i. The blockchain – Ethereum contains the transaction history and state of accounts
ii. The assets – ETH and the other tokens (currencies)
iii. The protocols – Smart contracts that provide the functionality.
iv. The applications – the products
5/ What can you do with DeFi?
Send money around the globe
Stream money around the globe
Access stable currencies
Borrow funds with or without collateral
Start crypto savings
Trade tokens
Grow your portfolio
Fund your ideas
Buy insurance
Manage your portfolio
6/ Payments:
DeFi makes sending/streaming money around the globe as fast as sending an email. (Tornado, Sablier)
7/ / Lending and Borrowing:
You can earn interest on your crypto through lending. Decentralized lending works without either party having to identify themselves. Borrowing money from decentralized providers comes in two main varieties (peer-to-peer, pool-based) (Aave, Compound)
8/ Token Swaps:
Decentralized exchanges (DEXs) let you trade different tokens 24/7. (Uniswap, SushiSwap, Curve).
9/ Stable Currencies:
Stablecoins are cryptocurrencies without the volatility. How stablecoins get their stability (USDC, DAI)
10/ Advanced Trading and Prediction Markets:
Polymarket (prediction), Augur (prediction), dYdX (margin trading)
11/ Investments/Asset Management: Yearn, Set Protocol
12/ Crowdfunding: Quadratic funding is the mathematically optimal way to fund public goods in a democratic community.
13/ Liquidity Pools: One of the foundational technologies behind the current DeFi ecosystem. A liquidity pool is a collection of funds locked in a smart contract. Liquidity pools are used to facilitate decentralized trading, lending, etc.
14/ Liquidity pools are also the backbone of many decentralized exchanges (DEX). Users called liquidity providers (LP) add an equal value of two tokens in a pool to create a market. In exchange for providing their funds, they earn trading fees from the trades that happen in pool.
15/ Yield Farming is a specific use case of liquidity pools. Yield farming, also referred to as liquidity mining, is a way to generate rewards with cryptocurrency holdings by investing and/or lending it.
16/ Total Value Locked (TVL): TVL represents the number of assets that are currently being staked in a specific protocol, the total amount of underlying supply that is being secured by a specific application by DeFi completely.
17/ Total value locked is a metric that is used to measure the overall health of the DeFi and yielding market.
18/ Rug Pull: A rug pull is where crypto developers abandon a project and run away with investors’ funds, leaving them “rugged.”
19/ Miner Extractable Value (MEV): the measure of the profit a miner can make through their ability to arbitrarily include, exclude or re-order transactions within the blocks they produce; miners can exploit and profit from front-running, back-running and sandwiching transaction.
Thank you!
If you enjoyed it you can check some other Threads too.
How to talk Decentralized Finance, #DeFi, like a Pro.
A Thread
1/ What is Decentralized finance (DeFi)?
A global, open alternative to the current financial system.
Products that let you borrow, save, invest, trade, and more.
Based on open-source technology that anyone can program with.
Can be KYC-less.
2/ DeFi is a collective term for financial products and services run on Ethereum or other blockchains, executed with DApps.
In DeFi, a smart contract replaces the financial institution in the transaction. Contracts are transparency to inspect and audit by anyone.
3/ Difference between #DeFi and Traditional Finance (TradFi)
Infographic:
4/ DeFi in Layers (Ethereum)
i. The blockchain – Ethereum contains the transaction history and state of accounts
ii. The assets – ETH and the other tokens (currencies)
iii. The protocols – Smart contracts that provide the functionality.
iv. The applications – the products
5/ What can you do with DeFi?
Send money around the globe
Stream money around the globe
Access stable currencies
Borrow funds with or without collateral
Start crypto savings
Trade tokens
Grow your portfolio
Fund your ideas
Buy insurance
Manage your portfolio
6/ Payments:
DeFi makes sending/streaming money around the globe as fast as sending an email. (Tornado, Sablier)
7/ / Lending and Borrowing:
You can earn interest on your crypto through lending. Decentralized lending works without either party having to identify themselves. Borrowing money from decentralized providers comes in two main varieties (peer-to-peer, pool-based) (Aave, Compound)
8/ Token Swaps:
Decentralized exchanges (DEXs) let you trade different tokens 24/7. (Uniswap, SushiSwap, Curve).
9/ Stable Currencies:
Stablecoins are cryptocurrencies without the volatility. How stablecoins get their stability (USDC, DAI)
10/ Advanced Trading and Prediction Markets:
Polymarket (prediction), Augur (prediction), dYdX (margin trading)
11/ Investments/Asset Management: Yearn, Set Protocol
12/ Crowdfunding: Quadratic funding is the mathematically optimal way to fund public goods in a democratic community.
13/ Liquidity Pools: One of the foundational technologies behind the current DeFi ecosystem. A liquidity pool is a collection of funds locked in a smart contract. Liquidity pools are used to facilitate decentralized trading, lending, etc.
14/ Liquidity pools are also the backbone of many decentralized exchanges (DEX). Users called liquidity providers (LP) add an equal value of two tokens in a pool to create a market. In exchange for providing their funds, they earn trading fees from the trades that happen in pool.
15/ Yield Farming is a specific use case of liquidity pools. Yield farming, also referred to as liquidity mining, is a way to generate rewards with cryptocurrency holdings by investing and/or lending it.
16/ Total Value Locked (TVL): TVL represents the number of assets that are currently being staked in a specific protocol, the total amount of underlying supply that is being secured by a specific application by DeFi completely.
17/ Total value locked is a metric that is used to measure the overall health of the DeFi and yielding market.
18/ Rug Pull: A rug pull is where crypto developers abandon a project and run away with investors’ funds, leaving them “rugged.”
19/ Miner Extractable Value (MEV): the measure of the profit a miner can make through their ability to arbitrarily include, exclude or re-order transactions within the blocks they produce; miners can exploit and profit from front-running, back-running and sandwiching transaction.
Thank you!
If you enjoyed it you can check some other Threads too.
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