What is DeFi?

If you’re diving deep into the world of cryptocurrency, you have probably heard the term “DeFi” used to describe a variety of new protocols and assets.

First, it’s important to acknowledge DeFi is a newer term just now coming into wider use. This means that DeFi, short for decentralized finance, doesn’t have a strict definition. Rather, it is attempting to describe what a certain class of cryptocurrencies is now striving to achieve.

That said, DeFi cryptocurrencies can be said to have emerging commonalities.

Most DeFi projects are software protocols that run on top of another cryptocurrency – commonly Ethereum or Cosmos – and that use a combination of that protocol’s crypto asset (as well as their own and maybe others) as a means to automate a financial service.

A great example of this in practice is the cryptocurrency DAI.

Put simply, DAI allows users to “lock” cryptocurrency in a smart contract running on the Ethereum blockchain, where the funds are used as collateral to generate new assets that power its lending service.

DeFi projects like DAI can also incorporate what’s called a “governance token,” a crypto asset that may allow users to influence project direction or generate earnings from the service.

Proponents of DeFi cryptocurrencies argue that this means they serve as “capital assets” similar to stocks and bonds. So, whereas Bitcoin may serve as a pure money or store of value, these new crypto assets aim to provide exposure to the value of the service provided.

Note: The above represents our best effort to summarize the state of the industry’s cutting-edge.

As always, you should exercise scrutiny when analyzing projects and protocols, and this may count doubly so for projects operating at the emerging edges of the technology.

Neb

DeFi NEB is a track for aggregate income, mainly for BSC chain liquidity staking mining. Although the concept of an aggregator sounds hardcore, its Real aggregation is one of the core features of the Internet.

DeFi, which started in 2017 and broke out in 2020, continues to contribute to the open financial infrastructure. DEX, encrypted stable currency, lending protocol,

Decentralized futures/options platforms, synthetic assets, oracles, decentralized insurance protocols and other modules, almost all forms of traditional financial productsAll can be found in DeFi NEB.

If it is said that the different modules of DeFi are like Lego blocks, free combination is achieved. DeFi NEB aggregators package different modules

Well, it improves liquidity, usage costs, UI, etc., and aggregates the liquidity of different platforms to provide transaction convenience and save transaction costs.

Under the DeFi model, artificial intelligence switches funds to high-yield DeFi projects for liquidity mining according to the level of real-time mining income.

Artificial intelligence has various forms, such as artificial intelligence automatic intelligent investment, collective trading, automatic compound interest, risk control and other applications.

In order to ensure the flexibility and scale of mining, NEB will also cooperate with third-party Smart Pools, and quickly deploy through the existing mining pools of Smart Pools.

NEB monitors market conditions through big data, and targets top mines from time to time to help users obtain super high head mine income. Low price, quick return on capital, high profit and low risk.

Aave

Aave is a highly popular decentralized finance platform that allows users to borrow/lend several different digital assets in a completely peer-to-peer (P2P), automated fashion. The project uses a smart contract framework that makes essential financial services accessible to everyone globally, all without the need of banks, brokers, and other intermediaries.

At press time, the platform offers 26 crypto assets that can be deposited in return for handsome returns. 25 of these assets are available for borrowing. These assets include prominent ones such as Ethereum, Chainlink, USD Coin, Aave (LEND), amongst others.

Fantom

Fantom is an open-source smart contracts platform designed to simplify the process of borrowing, lending, and trading of synthetic assets. Simply put, synthetic assets are tokenized blockchain-based derivatives of an underlying asset — i.e., a mix of traditional derivative assets and digital currencies.

From a feature-driven perspective, Fantom has gained an increasing amount of traction recently because it can provide a solid mix of security, stability, and decentralization — commonly referred to as the blockchain trilemma.

Lastly, thanks to its use of a propriety consensus mechanism referred to as ‘Lachesus’ it can deliver extremely fast transaction speeds and a robust dApp development environment. Economically, a single transaction on the network costs just a fraction of a cent, making it extremely attractive to those users looking to process voluminous, multiple transactions.

Cake DeFi

To have your cake and eat it is the dream of every DeFi user. Investors want all of the rewards without taking any of the risk, and this is what Cake DeFi aims to deliver.

Based in Singapore, Cake DeFi has created a core DeFi platform with staking, lending and liquidity mining services, enabling investors to deposit their crypto assets and earn a passive income. Its DeFi ecosystem is based on the DeFi Chain blockchain network, a fork of the original Bitcoin blockchain, and it is powered by its native DFI token.

Cake DeFi’s most novel product is its aptly-named EARN, which is a single-sided liquidity mining service for investors who want to earn passive rewards while protecting themselves from the traditional volatility of the crypto markets.

According to Cake DeFi’s co-founder and CEO Dr. Julian Hosp, investors have understandably become much more risk averse over the last year due to the onset of crypto winter. As such, EARN aims to give those investors a way to transparently earn a generous yield on their investments while keeping the risks to an absolute minimum.

“EARN will allow users to get unbeatable returns on Bitcoin, which they can transparently track on the blockchain,” Hosp said. “The Volatility Protection feature will also protect them against impermanent loss, especially in such times of market volatility.”

Cake DeFi’s EARN uses some clever algorithms to ensure its users will generate a competitive return, regardless of the market forces beyond their control. It’s possible to allocate either BTC or DFI and receive rewards on those deposits every 24 hours with a claimed annual percentage yield of 10%. Of course there are DeFi protocols that offer higher APY than this, but very few that offer the same kinds of protections as EARN does. Rewards are allocated in EARN tokens, which is the platform’s native asset, and are autocompounded to increase yields over the long term.

Cake DeFi said EARN’s algorithm combines the high yields of liquidity mining with the low volatility of crypto lending to deliver on its promises.

To date, Cake DeFi’s products have proven themselves to be among the most reliable in the DeFi industry. Its most recent Q2 2022 Transparency Report highlighted how it recently surpassed the one million customer milestone, with more than $375 million in rewards paid out to date.

Uniswap

Uniswap is one of the largest and best-known DEXs in the business and an essential tool for most DeFi investors. Uniswap first and foremost provides a way for traders to exchange cryptocurrency tokens securely and conveniently, with lower fees than one centralized exchanges. Users can also earn a passive income by depositing tokens into liquidity pools.

Uniswap uses an AMM model that relies on smart contracts to set prices and execute trades. Because of this, the platform is fully decentralized, with no intermediary involved.

Like Aave, Uniswap is able to facilitate crypto trading due to its use of liquidity pools, which are pools of user-contributed funds that are locked in smart contracts. These funds are used to facilitate the trades of users who want to buy and sell various cryptocurrency pairs. With each transaction on Uniswap, a small fee is collected that is then distributed among the pool’s liquidity providers. In this way, it’s mutually beneficial, as traders can swap tokens with lower fees and those who provide the liquidity can earn rewards for doing so.

There are good reasons why Uniswap has emerged as one of the most popular DEXs in the DeFi space. The vast majority of DEXs provide a poor user experience with their clunky designs, whereas Uniswap is known for its slick and simple user interface. Uniswap’s web and mobile apps are extremely user-friendly and have a highly polished design that looks extremely professional. It’s simple to connect a crypto wallet and get started, either by swapping tokens or providing liquidity.

Thanks to its user-friendliness, Uniswap has built up a large audience that provides a second big advantage. Because it has more users, it has more total value locked – meaning more liquidity – than any other DEX. As a result, traders are unlikely to experience any issues or limitations when swapping various kinds of tokens.

Last but not least, Uniswap supports a wide variety of crypto wallets, including MetaMask, Trust Wallet, Coinbase Wallet, Ambire Wallet and many others. All in all it’s extremely easy to use and caters to everyone, explaining why Uniswap is one of the most trusted DeFi apps in the business.

The Future of DeFi Beyond Crypto

“All sources of value will be tokenized so that value can flow freely across geographies and industries,” explains Tarsi. “People from traditional finance are often skeptical about DeFi because it’s just about tokens. But this misses the point. Tokens can be used to represent anything—real estate, social clout, employment, community membership.”

It isn’t crazy to think that our future will allow almost anything to be valued and transacted. Hence the term we’re dubbing ‘integrated value exchange’—a system in which many forms of value can be exchanged digitally with relatively low cost and friction over decentralized networks. We have the capability today to represent almost anything as a token and monetize and/or transact it. The main problem that prevents us from achieving this lies in liquidity. Will there be a market for tokens that can actually be bought or sold? With the innovation of liquidity pools to create markets—the foundation of DeFi—the exchange of value across assets becomes much more accessible.

In DeFi, liquidity is provisioned and aggregated across many different cryptocurrencies to enable decentralized trading. Creating pools of liquidity can be drawn from instantly, rather than having to match a buyer and seller at the time of transaction. DeFi incentivizes people who provide up-front liquidity in order to create markets between assets. When you want to access some of this liquidity, an algorithm will determine how the transaction will work (i.e., how much of one asset you should get and at what price for another). These algorithms are referred to as Automated Market Makers (AMMs).

What’s interesting about this phenomenon is that these pools of liquidity can be tied together. Pools of liquidity may exist across different assets but not necessarily between each specific asset. For example, a pool (or market) may exist between Asset A and Asset B and also between Asset B and Asset C. But what if we want to convert Asset A to Asset C? Traditionally, you might have to find a buyer or seller for Asset B, make that transaction, and then go and find a buyer/seller for Asset C. This could be expensive and time-consuming and creates friction when trying to make this process happen digitally.

Think about it: a whole payment processing industry exists for this purpose, and the number of assets they exchange between is still very slim. However, if all of the liquidity was readily available and could ‘hop’ between assets frictionlessly, you can make the leap from Asset A to Asset C much more efficiently. DeFi enables this, and it can do so across a much broader selection of assets at a level of an efficiency greater than what is possible currently. In a future where there will likely be trillions locked in DeFi liquidity and where the spider web of ‘liquidity connected assets’ grows wider and wider, we can imagine how the exchange of a myriad of assets will be possible with very little friction. This would mean there could be much more liquidity for previously illiquid assets, like real estate, art, and other physical assets.

This concept gives rise to an entirely new paradigm of how value can be transacted. Within the next decade, you may go into your favorite store and choose to pay with a digital wallet composed of a combination of different assets that you own. Perhaps some fiat currency (i.e., USD), some Bitcoin, some digital collectibles (i.e., NFTs), and maybe even some instantaneous debt you need to issue to cover the rest of the purchase (i.e., a DeFi loan). There may even be a day sometime soon where you will be able to pay for everyday items in tokenized representations of your home’s equity. As Tyler Tarsi stated, tokens can be used to represent anything, and therefore the possibilities are endless for what you will be able to transact with given ample liquidity.

While at the checkout counter in the future, you would simply scan your smartphone over the cashier’s point-of-sale system which would trigger a transaction from your universal wallet that would store all of your assets. Based on the assets you decided you wanted to pay with, they would all be automatically exchanged and transferred to the merchant in whatever form of value they wish to accept.

While there may be some other hurdles to realize this vision for all asset types, such as assessing the value and accessing liquidity for unique assets like real estate, these are not challenges outside the scope of what we can achieve. The future will be seamless cross-asset value transfer, or ‘integrated value exchange.’