Decentralized finance as the name suggests, is the term used for a variety of financial products and services that run on decentralized blockchains. It is the successful implementation of blockchain technology to rival and provide an alternative to traditional finance. It has opened up a new world of opportunities for users, more jobs and a new expertise field of technology. 

DeFi aims to create a level playground for everyone and reduce the number of people who can't access financial products. Its borderless , fast and a lot more rewarding to use. The earning potential is vast compared to traditional finmances. Most traditional lending platforms can't' give you more than 10% APYs on your assets but with DeFi, you can earn north of 100% APYs.  DeFi systems are automated, needs little to no human control and are more efficient due less errors, made possible by smart contracts.

Smart Contracts control the DeFi ecosystem. Transactions are done through Smart Contract programmed to do specific things without error, ensuring a purely peer-to-peer transaction. The technology does this by implementing a blockchain-based trust mechanism that allows secure peer-to-peer (P2P) transactions without a central authority.

Investing comes with risk which is applicable to DeFi as well. DeFi offers lucrative opportunities for earnings and these are  accompanied by enormous risk as well. You can lose your assets In DeFi through scams, hacking attacks, flawed and over-promised smart contracts. The risk to reward ratio in DeFi is high.

As DeFi-based earnings relate to the number of tokens earned, the price volatility of cryptocurrencies might result in a loss in terms of profit during a bear market. In such cases, investors tend to hold the tokens until the market price surges and provides unrealized gains. Also Impermanent loss can occur when the price of an assets moves against the user while still deposited with a protocol.

In addition, the risk in DeFi investment strategy can also depend on the intent of the pool owners. Hence, it is important to check the credibility of the service providers based on historical payouts.

Earning in DeFi ecosystem, as explained above could get your a lot of rewards in this space. The opportunities are enormous but you need to be smart about it. Everyone in the space are there for a purpose to grow their portfolio. You will need a portfolio tracker or Yield aggregator to keep track of all your wallets and projects you have interacted and invested on. you will be able to manage your assets from a single dashboard.  Yield Aggregators play keys role in the yield farming economy by leveraging different DeFi protocols and strategies to maximize user profits. 

 has a section on their platform for list of yield aggregators on different chains

In DeFi , you have to be smart, able to research and be less driven by emotions. There are many scam/rug projects in DeFi. In fact, it takes effort to differentiate real projects from fakes. Most projects out there only wish to steal your locked tokens and redeem them at liquidity pools, draining your funds. Make your findings before investing in a project. Read their roadmap, white paper and check if they are audited. DeFi products are certainly at the cutting edge of finance, cryptoeconomics, and computer science creating an open and accessible financial system available to anyone with an internet connection.

This is still part of DeFi 101 for Beginners series. We will be sharing the necessary tools in our next publications

DeFi Watch

Earning Passive Income in DeFi

You might have some missed feelings and ask questions about the importance of knowing the terminologies in DeFi. These terms are importance, it helps you grasps the fundamentals of what you are learning. The learning curve in the crypto space is never linear. You have to keep learning and learning, no limits whatsoever. These fundamentals form the basis on which new knowledge are built. You don't have to memorize it, just Learn it. 

We will list the term and put up little explanations on each. 

Its an official financial inspection of a project. The project's code are being reviewed for soundness by an organization with no shared interests.Usually, a DeFi protocol project will have a professional third party evaluate the codebase for feedback on weak points, allowing them to implement patches before going launch.

APY, Annual Percentage Yield, is an important concepts in DeFi. It is the total return on an investment over  a one-year period.. APY fluctuates wildly in DeFi which makes it best for approximate measures.

Decentralized aggregators like Balancer, 1inch Exchange, and Yearn Finance search for the best swap rates when buying tokens as well as the highest yields when farming.

Anti-Money Laundering (AML) regulations are aimed at preventing criminal enterprise within the cryptocurrency landscape. In practice, AML regulations are what require crypto exchanges to gather your identity documents for verification measures.

Automated Market Maker is a pool of cryptocurrencies offering liquidity between trading pairs to buyers and sellers. In practice, an AMM works a lot like a centralized exchange's order book, except they aren't maintained by a central authority and depend on participants to provide liquidity (see: Liquidity Providers).

This is the highest price a cryptocurrency asset , portfolio has reached against another asset. For example, BTC's all time high paired with USDT is $68,990.90. 

Aave tokens that represent the deposited or underlying asset. For instance, depositing LINK into Aave mints aLINK.

A bonding curve is a mathematical concept used to describe the relationship between price and the supply of an asset. Bonding curves are most often employed in the DeFi space during token launch and distribution. The more users buy the token, the higher the price goes for everyone. 

Centralized finance, commonly used as a reference to projects like Celsius, Nexo, and BlockFi that operate like normal centralized organizations within the DeFi space.

Refers to traditional finance or centralized finance institutions like banks and other legacy institutions. Sometimes used as a derogatory term on Crypto Twitter.

Centralized exchange. CEXs include Coinbase, Binance, Huobi, Gemini etc

Decentralized exchange. DEXs include Uniswap, Curve, SushiSwap, 1inch Exchange, Synthetix

Assets that are deposited and used to back a loan application.

DeFi products, protocols, and blockchains that function as close to seamless as possible with other products and protocols have high composability. The quality of being composable means a DeFi product or protocol integrates easily with others and is, therefore, more useful and efficient.

When you deposit an interest-generating asset in a DeFi platform, protocol, or exchange, rewards are sometimes reinvested into your original stake. This, in turn, increases (or compounds) your yield. Therefore, compound interest allows you to see greater and greater gains by simple reinvestment.

Contract Address refers to the address where the contract is deployed on the blockchain. Always double check the contract address on 

because scammers leverage on hyped projects to create a copy of it with same name. 

A term for crypto community present on Twitter.

 it refers to Compound tokens. Depositing tokens into the Compound Finance app mints their Compound equivalent (e.g., USDT —> cUSDT).

Decentralized Autonomous Organizations are created by and adhere to a set of smart contract encoded rules that are fair and transparent. The purpose of a DAO is to govern a distributed network effectively without relying on a central chain of command.

Financial products deriving their value from an underlying asset are known as derivatives. Popular derivatives within cryptocurrency trading include Bitcoin perpetuals and Ethereum futures. However, DeFi has created novel derivatives on protocols like Compound, Synthetix, and Aave, such as cUSDT, sUSD, and aBTC.

This is an Ethereum-standard cryptocurrency assets, built and issued using the ERC-20 protocol. Any cryptocurrency token issued on Ethereum is an ERC-20 by design.

A DeFi project launched without VC, angel, or a third-party investment of any kind. In a fair launch, all tokens are sold to the community and none are held back for a team or founder allocation. Recently, fair launches have come under fire for not providing enough team incentives, forcing popular fair launch projects like Yearn Finance to mint more tokens.

A flash loan is an under-collateralized loan instant cryptocurrency loan that doesn't require collateral, KYC checks, or any other form of upfront investment from the borrower. However, what it does require is that the loan is repaid within the same transaction block as the loan itself. In practice, this means the loaned funds can only be used on-chain to trigger smart contract actions. If a flash loan isn't repaid in the time it takes for the initial transaction block to confirm, the transaction is rejected and the issuer retains the funds.

Gas fees are the transaction fees paid to network miners who validate and confirm transactions in the background. Gas fees accompany every transaction interacting with smart contracts, such as when depositing, withdrawing, or transferring assets between decentralized exchanges, wallets, and DeFi pools. Ethereum gas fees are paid in ETH and become expensive during periods of high network congestion. Your wallet always needs to contain a bit of ETH for paying gas fees.

Governance refers to the maintenance, enforcement, and regulation of a decentralized protocol by token holders. Usually, when a DeFi protocol is released, it does so with a native asset such as COMP (for Compound Finance), AAVE (for Aave), and UNI (for Uniswap). Anyone who holds the protocol's native token can participate in governance decision-making and propose governance measures themselves.

The currency unit used to denominate Ethereum gas fees. Gwei, or gas, is paid in Ether (ETH). A gwei is one-billionth of one ETH.

When providing liquidity to DeFi AMMs, impermanent loss refers to the loss of your deposited assets during price swings. Since AMMs like Uniswap don't use order books, prices are maintained by the ratios between assets inside liquidity pools. Therefore, if you deposit two assets and the price of one or both changes, you might withdraw less of your assets than deposited.

Know Your Customer (KYC) is a basic verification check required by centralized finance exchanges, CeFi platforms (such as Celsius), and others. 

liquidity is generally used in the financial markets to describe the ease by which an asset can be converted into cash without difficulty. In crypt, liquidity is the ability of a coin to be easily converted into cash or other coins.

Liquidity mining refers to depositing tokens into a DeFi protocol to provide liquidity while being rewarded for the deposit stake. Rewards are usually paid out in the protocol's native asset. 

Decentralized exchanges depend on liquidity pools to provide liquidity between assets and make trades possible. In centralized exchanges, order books handle this task. However, a DEX replaces the order book by effectively crowdsourcing liquidity. To incentivize liquidity providers, DEXs and AMMs provide rewards (shares of LP transaction fees or native token APY).

Users who deposit their tokens into liquidity pools such as those on Uniswap and Curve Finance are known as liquidity providers.

When a liquidity provider deposits tokens into a liquidity pool, their stake is represented by a minted LP token. The LP token represents the staked asset(s) and can yield farm other DeFi platforms or exchange back for the original assets.

Metamask is an ERC-20 Ethereum-based cryptocurrency wallet required for interacting with most DeFi platforms.

 Oracles provide both on and off-chain price data to blockchains / DeFi protocols.

Return on investment is a way to calculate your profits or losses from an investment in a DeFi platform.

Slippage refers to the gap in price that exists between what you're willing to pay for an asset and the seller's best price. Slippage typically ranges anywhere between 0.5%-2%, but in extreme cases can go as high as 3% or more for particularly illiquid tokens.

A blockchain-based, lightweight, programmable structure of code that executes functions as determined by the author. In practice, smart contracts run like autonomous programs that replace intermediaries and guarantee outcomes.

Tokens with value backed by underlying assets or pegged to the value of another asset. Dollar-pegged stablecoins such as USDT, USDC, and GUSD are endowed 1:1 with real dollar reserves, while other stablecoins use rebasing to arrive at a stable valuation.

Depositing cryptocurrency assets in a DeFi protocol to generate a yield (measured in APY) is known as staking.

Synthetics are blockchain-based derivative trading products representative of other assets. Synthetics, or synths, are often backed directly by the underlying asset, but this is not always necessary. Some synths are built by a basket of assets made to resemble and track the original asset. As an example, think of trading a plastic banana in place of a real banana.

Short for token economics, tokenomics refers to token design and includes factors such as circulating/max token supply, token emission rates, and vesting schedules.

Total value locked (TVL) is the total amount of value staked a given DeFi platform. Higher TVL means greater liquidity and confidence in a DeFi exchange. Examples of high TVL DeFi protocols include Uniswap, Curve Finance, Aave etc

Its the real financial asset or security that a financial derivative is based on.

Financial derivatives such as perpetuals, synthetics, and LP tokens (aLINK, wBTC, cUSDT) all derive their value from the original assets they track or represent. in this case, LINK,BTC,USDT are the underlying assets.

Yield is the amount earned by depositing, or staking, an asset in a DeFi platform such as Yearn Finance, Compound, Aave, Curve Finance etc

Yield farming  is a way to generate rewards with cryptocurrency holdings. It means locking up cryptocurrencies and getting rewards. Farming your tokens enables you to generate additional value from your assets by having them work for you.

DeFi 101: Terminologies in DeFi you need to know

The decentralized features of cryptocurrencies appealed to a lot of the populace. Its relatively a new asset class with a lot of potentials with more and more people willing to jump-ship to the crypto space from our traditional finance. Bitcoin and other cryptocurrencies offers some kind of an alternative access to finance and an hedge against inflation. At this point, only a handful of the world population has really tapped in on crypto due to the learning curve. We have all used fiat currencies all our lives except you are a 

Our Value systems work by attributing value to certain merchandise, asset etc. Same thing is happening in crypto . No matter how much you say you have in crypto, its always pegged to fiat to hold a value. To attain the massive adoption of crypto into the society, The people must be encouraged to be on the blockchain by creating easy ways to be on the crypto space and to exit it. 

The main objective of crypto was to make moving values seamless from fiat to crypto and vice versa meaning being able to spend cryptocurrencies like fiat. “On-ramping” and “Off-ramping” is the solution to this. Businesses and end-users need off-ramps to make use of the value of their crypto in the physical world. Offering in-app, direct off-ramp to customers is a great incentive to keep users inside your application. This process enables moving values between two monetary systems with different dynamics. We will elaborate more on each process in the next section.

On-ramp is a service which allows for the exchange of fiat currencies (e.g., US dollars) for cryptocurrencies (e.g., Bitcoin, Ethereum) either through debit cards or money transfer services. Fiat is by far the most widely adopted form of currency globally, exchanging fiat is the most accessible method of access to cryptocurrencies. On-ramp creates easy access to the world of crypto. There are different implementation of on ramps by crypto centralized exchanges and decentralized exchanges.

Off-ramp is a service which allows for the exchange of cryptocurrencies (e.g BTC,ETH,SOL) for fiat. On-ramp is the important means of mass adoption but the availability of an off-ramp is significant, as it ensures users are not locked into a cryptocurrency and can exit (i.e., sell crypto for fiat) at any time. In a layman's term, off-ramp is when you “cash out” of crypto, converting your coins or tokens back into fiat money, or sometimes goods and services

Off-ramps are complementary to on-ramps and serve an important role in bridging the gap between traditional, fiat-dominated finance and the cryptocurrency marketplace. Fiat off-ramps are especially critical in the context of decentralized finance as well. Naturally, the easier it is for users to purchase cryptocurrency using their bank account or debit card, for example, the more participants there will be in the market.

There are a number of different options for both on and off-ramping. Here we explain exactly how and where to on- and off-ramp, what you’ll need in order to do this, and the implications of both processes.

The most common place for new crypto users to on-ramp is via a centralized exchange (CEX), such as kucoin or Coinbase. These platforms allow users to take their first steps into the crypto world by accepting credit card payments in exchange for coins and tokens, and tend to be people’s very first stop on the journey.

i). The first step when on-ramping via a centralized exchange is to open an account.  This requires you verifying yourself with a government issued ID, residence bill and others. While you can create an account on some CEX’s without going through KYC procedures, most exchanges limit your access to their services until you’ve provided this detail.

ii). Centralized exchanges are mandated by law to follow the financial rules which requires verifications.This aid in cobbing fraud and money laundering by making the owners of the account/wallets doxxed.

iv) Once the KYC data has been provided and approved, the account will be created. Afterwards, you will be able to buy our favorite cryptocurrency using your credit or debit card.

The cryptocurrency will be sent to the registered custodial wallets used during registration.

With the advent of Decentralized exchanges, other ways to on-ramp new users into crypto space were explored. On decentralized exchanges, on-ramps/off-ramps work without central pillar like in the centralized exchanges. The crypto ecosystem is constantly expanding and evolving to become more decentralized, and with it, users expect on-ramping options to match. A solution was created by enabling KYC-compliant integration for decentralized exchanges, enabling them to offer on-ramp services through APIs.

Some of the Platforms that offer these type of services  are Moonpay, Wyre Pay, Ramp Network , Mercuryo etc. They created APIs for DEXs to hook onto, taking care of documentation requests and the KYC process. This allowed the functionality to be “plugged in” to existing DEXs to give them on-ramping capabilities while remaining decentralized. 

The newly purchased coins will go directly to the users' personal wallet, and not a custodial exchange wallet, meaning you’ll have full control over your crypto from the moment you buy it. 

NFTs created massive adoption and onboarding into the blockchain ecosystem. In the past two years, NFT sector have pulled in a lot of people and this involves creating a smooth experience for the newbies . It should be easy to convert their fiats to cryptocurrencies. 

NFTs Marketplaces rose to the challenge by integrating on-ramp solutions. Platforms such as Rarible and OpenSea have made it possible for users to take their first steps into crypto via NFTs, by enabling crypto to be purchased on the platform by credit card (here again you’ll need to undergo a KYC process).

On-ramping on NFT marketplaces created an evolution of the crypto industry from a financial niche to something more culturally mainstream which everyone can identify with from art collectors, artist, designers to the normal average joe on the street.

Bitcoin ATMs are kiosks connected to the Bitcoin network that accept cash and convert it into Bitcoin; a new wallet is created each time this is done, putting your newly purchased Bitcoin into circulation on the blockchain. These ATMs are one of the first ways of on-ramping in crypto.

Unlike the other methods of on-ramping, Bitcoin ATMs are the only time when you do not require identification to use. However, It comes with limitations of finding an ATM and restriction on the amount of crypto you can buy using the BItcoin ATM.

P2P platforms have been being creating on/off- ramping solutions for decades even before the advent of crypto. We have the likes of perfect money, liberty reserves etc. They are digital currencies and the best way to convert values from fiat to digital currencies back then was through P2P tradings. In crypto, this method has been implemented by a number of centralized exchanges. for example, Binance, kucoin and a host of others. 

On a P2P platform users are matched and allowed to trade with each other.The centralized exchange act as the escrow. People can convert values from fiat to crypto and vice versa with little effort. For countries with restrictions on crypto, this has been the goto method to on ramp and onboarding people into the system.

After the great adventure into the world of crypto, you must have explored and made fortunes trading tokens, made swaps, staked tokens, sold NTFs or have become a whale by being a liquidity provider for DEXs. Now you want to cash out to buy things in real life. Basically, you need to Off-ramp. There are various ways of doing this, so let’s check them out in more detail.

The simplest way of off-ramping is simply buying goods or services directly with your cryptocurrency. This is a bit complex because not many real life businesses take crypto payments. You will only find a few places that accept certain coins and tokens as payment. El Salvador and The Central African Republic are the only countries that have implemented crypto as a legal tender. You will definitely find merchants in these countries which accepts crypto payments. 

Some companies offer services that can be purchased with crypto. 

, a leading blockchain-based travel booking platform offers services in this regard. You can book hotels, Resorts, Flights etc with crypto on the platform. We are still far away from mass adoption but it will definitely happen. 

Most centralized crypto exchanges provide a vector for converting your crypto back into fiat. You can find these feature on Binance. You could either withdraw to a Bank Visa/Mastercard or Bank Transfer through SWIFT and SEPA(EUR).  You ccn convert your tokens/crypto to fiat but yo will need to check if the exchange supports the conversion. Once you’ve made confirmations, you can simply “sell” a given amount of your crypto and have the fiat equivalent paid onto your regular bank card.  The transaction will entail a small service fee, which also differs between platforms and it can take a bit of time to complete the transaction.

The whole objective of crypto was removing the barriers to moving value around that means being able to spend your crypto when and where you like. Crypto debit cards are

like prepaid debit cards that can be loaded with cryptocurrency to make online and in-store purchases from merchants that don't accept cryptocurrencies. They are convenient and easy to use.

Examples of platforms offering Crypto debit cards are

These cards can be used just like a regular debit card from a bank. You wouldn't need to keep searching for merchants or services who accepts crypto payment. Your crypto assets are off-ramped and ready to be used on the card.

So to recap, on-ramping into crypto can be done via a centralized exchange, a decentralized platform with a buying integration, an NFT exchange or, in theory, a Bitcoin ATM. In nearly all cases, you’ll need to provide personal documentation to comply with anti-money laundering regulations, and where your coins are paid to depends on what type of platform you’re buying from. 

Now, you are well furnished with the lots of knowledge on On and Off Ramps. Explore your options, keep learning and enjoy the freedom that comes with being on the crypto space where you are in charge of your decisions. Freedom to store the value of what you earn, and spend it how you like. One important information to be aware of when never you do off-ramps on your assets, a taxable event may occur. It means you are liable to pay taxes.  

On and off-Ramps: Enabling The Mass Adoption of Crypto

Stable coins are coins/tokens that have relatively stable prices, typically being pegged to a , cryptocurrencies fiat currencies or commodities. The majorly pegged fiat currency is the USD(United States Dollar). These are tokens that attempt to peg their market value to real-world assets. This can be currencies like the U.S. dollar or commodities like gold. Stablecoins offer an easy way to move from volatile cryptocurrencies to a stable digital currency.

Cryptocurrencies' prices are unpredictable and have a tendency to fluctuate, often wildly. Generally, people expect to be able to know how much their money will be worth a week from now, both for their security and their livelihood. Stablecoins offers that confidence for users and an easy way to move from volatile cryptocurrencies to a stable digital currency.

Other than use for keeping liquidity from volatile cryptocurrencies, stablecoins have foudn applications in different spheres in the crypto space both in the centralized and decentralized finances.

They have been spikes in the growth of Stablecoins over the years with no signs of stopping as they’re the backbone of DeFi. There is more than one type of stablecoin available. To understand them and how they differ, let's explore. The chart below from DappRadar shows the meteoric rise of stablecoins.

The first type of stablecoin, USDT, is directly backed on a one-to-one ratio by a fiat currency. That means for every stablecoin created, a custodian, like a bank, will have equal reserves of the fiat currency. These custodians get audited regularly, ensuring that the currency reserves are accounted for to maintain the 1:1 peg.

Examples of fiat-backed stablecoins are: Tether (

Crypto-backed stablecoins are similar to fiat-backed stablecoins as they maintain their peg from their collateral.

Cryptocurrency is volatile, unlike most fiat currencies, meaning that crypto-backed stablecoins require over-collateralization. It means the amount of cryptocurrency needed to issue the stablecoin must be worth more than the amount created.  

A clear scenario could below. Lets say a crypto-backed stablecoin needs $2 of Sol for every $1 stablecoin created. If the price of the cryptocurrency falls, then more Sol needs to get added to maintain the peg. Otherwise, the Sol gets liquidated, paying back the debt created to issue the stablecoin.

 Example of crypto-backed stablecoins are MakerDAOs 

Algorithmic stablecoins exist without collateral. Instead, an algorithm manages the supply to keep the peg. If the price is above the peg, more stablecoins are issued to reduce the price. And, if the price is below the peg, then stablecoins are bought or removed to increase the price. 

Examples of algorithmic stablecoins are Fei protocol (

Commodity-baked stablecoins are backed by commodities such as gold.  These are currently less popular than the other types of stablecoins. Hopefully , we get to see more of commodity pegged stablecoins as the industry develops. The best example of a commodity-backed stablecoin is PAX Gold (PAXG) which represents one ounce of gold. 

Hybrid stablecoins combine more than one stablecoin in an attempt to secure the desired peg. Typically, if a stablecoin loses its peg, then the consequences can be disastrous for its holders just like in the case of UST stablecoin. The other stablecoin mechanism helps to keep the peg in case one fails.

) is an example of a hybrid stablecoin. 

The future of stablecoins will be decentralized  stable coins (algorithmic stable coins) as other forms of are not censorship resistant.  especially , the tether usd (USDT), the feds might eventually go hard on them to by seeking to regularize their activities. If this happens, it will be catastrophic for the crypto space be enormous amount in billions is held in this stable coin. This is another takes, if it happens, that's when we will value the algorithmic stablecoins like DAI. Then DAI and other algorithmic stable currencies will provide decentralized dollar for the crypto space.

What are Stablecoins?

Finance is a term that has been for years, from the inception of commerce by mankind. Finance has evolved over the years through different ages of civilization. Its simple term is management of funds and assets. Finance is a term for matters regarding the management, creation, and study of money and investments. It involves the use of credit and debt, securities, and investment to finance current projects using future income flows. 

Fast forward to the modern times, finance has evolved to encompass the management of money and includes activities such as investing, borrowing, lending, budgeting, saving, and forecasting. The further advancement reflected in the cryptocurrency space with the emergence of defi. This opened a lot of opportunities to more financial instruments creating lots of spaces for new 

DeFi means decentralized finance. Decentralized finance (or simply DeFi) refers to an ecosystem of financial applications built on blockchain networks. These products are permission-less, meaning they don't use third parties. Instead of financial intermediaries, such as brokers and banks, everything is automated into the protocol via smart contracts. 

More specifically, the term DeFi may refer to a movement that aims to create an open-source, permission-less, and transparent financial service ecosystem. One that is available to everyone and operates without any central authority. The users would maintain complete control over their assets and interact with this ecosystem through

peer-to-peer (P2P), decentralized applications (DApps).

In 2021, a report came out on the number of un-banked people in the world. These people have little to no financial services. World Bank estimated the un-banked to be 1.7 billion people around the world don't have bank accounts. This is a big gap which DeFi is planning to change. The core benefit of DeFi is enabling easy access to financial services, especially for those who are isolated from the traditional financial system.

DeFi are built on modular framework , with interoperable applications on public blockchains. This has created a fly wheel effect to create entirely new financial markets, products, and services.

Traditional finance relies on institutions such as banks to act as intermediaries and courts to provide arbitration.

DeFi applications don’t need any intermediaries or arbitrators. The resolution of every possible dispute, and the users maintain control over their funds at all times are built into the smart contract. This automation reduces the costs associated with providing and using these products and allows for a more friction-less financial system.

As these new financial services are deployed on top of blockchains, single points of failure are eliminated. The data is recorded on the blockchain and spread across thousands of 

, making censorship or the potential shutdown of a service a complicated undertaking. 

Open Lending protocols are among the most popular application types in the DeFi ecosystem. Open, decentralized borrowing and lending have many advantages over the traditional credit system. These include instant transaction settlement, no credit checks, and the ability to collateralize digital assets, no credit checks.

Since these lending services are built on public blockchains, they minimize the amount of trust required and have the assurance of cryptographic verification methods. Lending marketplaces on the blockchain reduce counter-party risk and make borrowing and lending cheaper, faster, and available to more people.

As DeFi applications are, by definition, financial applications, monetary banking services are an obvious use case for them. These can include the issuance of stable coins, mortgages, and insurance.

As the blockchain industry matures, there's an increased focus on creating stable coins. They are crypto assets usually pegged to real-world assets that are easily digitally transferable. As cryptocurrency prices can fluctuate rapidly at times, decentralized stable coins could be adopted for everyday use as digital currencies that are not issued and monitored by a central authority. 

Because of the number of intermediaries involved, getting a mortgage is expensive and time-consuming. With 

, underwriting and legal fees could be reduced significantly.

Insurance on the blockchain could eliminate the need for intermediaries and allow the distribution of risk between many participants. This could result in lower premiums with the same quality of service. 

Some of the most popular DeFi applications available are Decentralized Exchanges (DEXs), such as Binance DEX. These platforms allow users to trade digital assets without needing a trusted intermediary (the exchange) to hold their funds. The trades are made directly between user wallets with the help of smart contracts. 

Some exchanges, known as Automated Market Makers (AMMs), use liquidity pools to facilitate trading without directly needing a counter party to match your trade. Uniswap and Pancake Swap are two of the best-known examples. Since they require less maintenance work and managing, decentralized exchanges typically have lower trading fees than centralized exchanges.

Blockchain technology may also be used to issue and allow ownership of a wide range of conventional financial instruments. These applications would work in a decentralized way that cuts out custodians and eliminates single points of failure.

Sometimes you don't want to be limited to trading particular coins or tokens. Derivatives platforms such as dYdX and Synthetix allow people to do more than spot trading. For example, users can make leveraged trades in which they bet more than they have, or even create "synthetic assets" that mimic traditional stocks and commodities

DeFi DApps can be used to automate and optimize the compound of yield gained from staking, reward pools, and other interest-bearing products. You may sometimes hear yield optimization referred to as yield farming. 

For example, you might receive regular rewards from Bitcoin mining, delegating

. A smart contract can take your rewards, purchase more of the underlying asset, and reinvest it. This process will compound your interest, often significantly raising your returns.

Of course, you can do this manually. Using a smart contract, however, saves time and optimizes compounding. Your funds are usually pooled together with other users’, meaning that gas fees are shared across all members of the yield optimizing smart contract. 

Smart contract are series of algorithms coded to run a predetermined set of instructions, stored on a blockchain which are executed automatically when interacted with. Since their terms are written in computer code, they have the unique ability to enforce those terms in an automated manner. This enables the reliable execution and automation of many business processes that currently require manual supervision.

Smart contracts is faster, easier, and reduces the risk for both parties. Nothing comes without risk, new types of risks were introduced by smart contracts. As computer code is prone to have bugs and vulnerabilities, the value and confidential information locked in smart contracts are at risk.

Every new technological advancement face challenges . challenges drives more innovations. In the DeFi space, we aren't oblivious of this of the inherent challenges from poor performance, high risk of user error, bad user experience and cluttered ecosystem. Makers in the ecosystem are making giant stride to tackle the challenges. 

There are inherent risk in DeFi Ecosystem despite the offers of appealing APYs. Even though they are decentralized, you are essentially consuming financial services, and some of the risks are familiar:

If you take part in crypto loans or any other kind of lending, you’re at risk of the counter party not repaying their debt.

The legality of certain services and projects can be difficult to ascertain. If you are invested in a smart contract that is subsequently shut down due to regulatory problems, then your funds can be at risk.

The assets you hold have different risk levels affected by their liquidity, trustworthiness, token smart contract security, and associated project and team. As the DeFi pace has many low market-cap tokens, token risk can be particularly high.

 Code vulnerabilities can undermine the security of smart contracts you’re invested in. Your wallet could also be compromised due to connecting to DeFi DApps and giving them certain permissions.

If you’re staking in liquidity pools, divergences away from the price ratio you entered at will cause you to lose some tokens deposited in the pool if you withdraw.

DeFi ecosystem Started off the Ethereum chain. Nevertheless, the trend has since moved to other blockchains and there are so many choices to choose from. However, there are now many blockchains to choose from with healthy DeFi ecosystems. Almost any network with smart contract capabilities can host DeFi DApps. 

 is a popular choice, along with Fantom, Solana, Polkadot, and Avalanche.

Finding projects and DeFi protocols will require some research. Online forums, messengers, and websites can help you learn about new opportunities. However, you need to be extremely careful with any information you find. Always be cautious and double-check the safety of any project you read or hear about.

A browser extension wallet like MetaMask or a mobile one such as Trust Wallet will do the job. A custodial wallet (one where you don't own the private keys) is less likely to allow you to connect to DApps.

This seems obvious, but you might need a mixture of assets. For example, using any DApp on BNB Smart Chain will require BNB to pay your 

. Ethereum will require Ether (ETH). If you want to get started with liquidity pools and stake manually, you'll need a pair of coins of equal monetary value.

At its most basic, that's all you'll need. If you don't feel comfortable setting this up yourself, you can still access some DeFi services through a centralized entity. We'll cover this in a later section discussing centralized finance (CeFi).

DeFi also offers financial services that aren't available in the traditional realm. By layering different DeFi services (sometimes known as DeFi legos), it's possible to create brand new products that utilize multiple platforms. This flexibility allows for innovative products that anyone can develop strategies for.

Arguably the most significant difference between DeFi and traditional finance is accessibility. Anyone can create a wallet and begin using DeFi services so long as they have some crypto. There are no sign-ups or identity verification needed. To access traditional finance services, 

 checks must be completed and other conditions met. This fundamental difference makes DeFi accessible to the un-banked, improving financial inclusion.

Decentralized finance is focused on building financial services separate from the traditional financial and political system. It will alleviate a lot of norms in our common world where censorship, financial surveillance and discrimination dominates. Not everything benefits from decentralization, finding the use cases that are most suitable for the characteristics of blockchains is crucial in building a valuable stack of open financial products.

DeFi could take power away from large centralized organizations and put it in the hands of the open-source community and the individual in the nearest future. This will create a more efficient financial system once its ready for mainstream adoption.

DeFi and WEB3 has created a more decentralized world  where people collaborate irrespective of Race, ethnicity and religious beliefs. 

Always check our page to read more of DeFi. We have lots planned on the pipeline.

DeFi 101; Short glimpse at the DeFI World

This is welcome message to my future readers and myself. A lot of magic will be made on here. This page will demystify all about Decentralized Finances. Decentralized finance (

) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies.

This will include  Emerging DeFi tools,  Guides ,On-chain news , DeFi health  and a whole lots of values to be added as we grow the publication.