DeFi (Decentralized Finance) has done the unthinkable by becoming an entire industry of its own in only a few years. With a total value locked of $95.3 billion at the time of this writing it is clear that the DeFi movement is progressing on a positive path.
It is DeFi’s strong underlying foundation based in blockchain technology that ultimately gave rise to these monumental successes. A critical building block of DeFi comes from smart contracts, which are controlled directly by pieces of code that implement arbitrary rules.
These contracts on a blockchain like Ethereum’s provide a complete language that can be used to create or encode a variety of systems including cryptocurrencies, dApps (decentralized applications), DAO’s (decentralized autonomous organizations), NFT’s (non-fungible tokens) and more.
A few common elements that characterize the DeFi space include decentralization, trustless transactions (through smart contracts), and non-custodial asset exchange (no intermediaries).
Web 3.0 Wallets
If you are new to DeFi, getting started is relatively simple. As you would need cash in your personal wallet, or money in your bank account, with DeFi you also need to first fund a Web 3.0 wallet.
One of the main functions of a Web 3.0 wallet is to inject a global API into dApps, which allows them to request and grant access to users’ blockchain addresses. This lets you interact with dApps and use various DeFi services. Web 3.0 wallets also enable you to store digital assets like cryptocurrencies.
Perhaps the most well-known and functional Web 3.0 wallet is MetaMask, and you can download it easily on a chromium-based browser.
DeFi Service Rundown
Ranging from the obvious to the innovative, DeFi has a few key services that can help you take instant control of your financial future.
Swaps: when one decentralized asset is swapped for another. For beginner’s sake, these assets should be on the same blockchain and token type (i.e. Ethereum blockchain ERC-20 token). Decentralized Exchanges (DEX’s) are the platform where most ‘swaps’ take place.
Trade: decentralized orderbook based exchanges allow users to put in bid and ask orders between assets when trading for profits (as opposed to instant swaps) is the main goal.
Pools: liquidity pools drive markets and put power back into the hands of the user. By supplying a monetary amount of two pairs, users are then given a commission (usually between .5%-.1%) of all trades in the pool equivalent to their stake.
Farms: the next stage of liquidity pools and serve as a reward for users who have locked their liquidity in pools. Also referred to as yield farming, these are some of the highest % yields that can be found in DeFi.
Staking: similar to how interest is earned in a traditional savings account. As opposed to ‘pools’ and ‘farms’, there only needs to be one asset utilized for staking.
Highlighting Autonio’s Beginner-Friendly DeFi Products
Smartdex 2.0 will provide a ‘one stop shop’ for all swapping, trading, liquidity providing, and yield farming.
Staking can be accessed on the new NIOX Suite Dashboard at suite.autonio.io
Enjoy learning and trading with Autonio!