# How to talk #DeFi like a Pro

By [EtherSiim ](https://paragraph.com/@ethersiim) · 2021-12-01

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How to talk Decentralized Finance, [#DeFi](https://twitter.com/hashtag/DeFi?src=hashtag_click), 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:

![DeFi vs TradeFi](https://storage.googleapis.com/papyrus_images/a211dfe47e9ca593c5d6d7c147e1044b7a8e50ee067917e61237d3a217beb32f.jpg)

DeFi vs TradeFi

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.

[https://twitter.com/EtherSiim/status/1447492904730116096](https://twitter.com/EtherSiim/status/1447492904730116096)

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*Originally published on [EtherSiim ](https://paragraph.com/@ethersiim/how-to-talk-defi-like-a-pro)*