This article is mainly aimed at new entry users, introducing what DeFi is, how to participate in DeFi, basic applications, etc., and strive to enable newcomers to understand and truly participate in the process of DeFi.
What is DeFi
DeFi is the abbreviation of the term Decentralized Financial (decentralized finance), which refers to digital assets, financial smart contracts, protocols and decentralized applications (DApps) built on the blockchain (mainly Ethereum).
Simply put, it is financial software built on the blockchain that can be pieced together like Lego to form an overall utility, similar to the software field’s ability to form an overall through API integration.
The essence of DeFi and CeFi (represented by centralized exchanges) is that everything you participate in is real. Every transaction, every loan, the coins stored in the liquidity pool, and the assets in the wallet, all actually exist on the chain, not a database record of the exchange.
The main applications of DeFi include exchanges, stablecoins, deposits and lending, wealth management, financial derivatives, payments, futures contracts, cross-chain payments, oracles and other businesses, and more emerging ones include lottery, auction, forecasting, and more.
DeFi has a huge range of products and services, but you may also find that they are too decentralized, so some aggregation applications have also been born, such as transaction aggregation, financial strategy agency, asset list, etc.
DeFi revenue sources
The main sources of revenue of DeFi are as follows:
1. Obtain currency price fluctuation income from transactions
2. Mortgage assets deposit and loan to obtain interest income
3. Provide liquidity for DEX (Liquidity mining) to obtain income
4. Yield 2arming income
5. Other windfalls (lottery, auction, IDO, etc.)
These benefits do not happen singly. You can use a base currency to obtain all the above benefits. That is to say, the benefits can be superimposed and magnified, but the risks will also be superimposed!
If you have the belief of LONG BTC, LONG ETH, and LONG DEFI, you can use this method of superimposing income:
1. Mortgage wBTC or ETH at OASIS and lend DAI (0 interest rate)
2. Observe the ranking of liquidity mining income in the invest of zapper.fi
3. Select a financial management strategy and exchange DAI for the corresponding token to bet
The above operations can allow you to enjoy financial benefits without moving your local currency (BTC, ETH). It involves the application types of DeFi’s stablecoins, deposits and loans, liquidity mining, aggregation tools, etc. You can basically understand how DeFi works after one operation.
How to get involved in DeFi
Participating in DeFi is to use various ecological applications. The following is a detailed introduction to wallets, exchanges, deposits and loans, mining, and data viewing.
To participate in DeFi, we must first understand stablecoins. The well-known stablecoins are USDT first. In the DeFi field, stablecoins are divided into three categories:
1. Stablecoins backed by “equivalent” US dollar reserves:
USDT, USDC, TUSD, etc.
2. Stable coins minted with digital currency assets as collateral:
DAI, sUSD, etc.
The credit assets behind these stablecoins are different. USDT and other institutions rely on Teher’s credit, and there is an audit risk. DAI and sUSD are self-issued by users by mortgaged digital assets. The risk is mainly the price change of the collateral, so the mortgage rate should not be too close to the liquidation line.
Stablecoins such as USDT are mainly exchanged through OTC channels, and stablecoins such as DAI are mainly minted through users’ personal mortgage digital assets (currently many 0 interest rate mortgages).
Everyone used to participate in some stable currency financial management. At present, there are many financial management products in DeFi, and many annualized incomes are more than 15%. Therefore, using the mortgage method to mint DAI is a stable arbitrage model, which can superimpose the profits of holding currency.
If you feel that DeFi application is troublesome, you can directly mortgage ETH into DAI, and then transfer the DAI to the exchange to participate in 16% annualized financial management. It is the most stupid method and the easiest to use.