Poloniex - Crypto Asset Exchange
source link: https://poloniex.com/learn/defi
Go to the source link to view the article. You can view the picture content, updated content and better typesetting reading experience. If the link is broken, please click the button below to view the snapshot at that time.
DeFi 101: Tokens, Tools, and Trading
From smart contracts and oracles to yield farming and liquidity pools, DeFi comes with lots of concepts that can make it hard to keep up. In our Beginner’s Guide to DeFi, we break down these terms and help you stay up to date with the latest in DeFi.
Get notified about our new DeFi listings and offerings
What is DeFi?
DeFi is an abbreviation of the term decentralized finance which refers to the ecosystem of assets, smart contracts, protocols, and decentralized applications (DApps). The DeFi ecosystem aims to create an open and accessible financial system that doesn’t need to rely on a central authority.
DeFi vs. TradFi
All this talk of DeFi probably has you wondering, what’s the main difference between DeFi and TradFi (Traditional Finance)?
- Gives the control over to users
- Is widely accessible and transparent
- Overcomes many of the restrictions in traditional finance
TradFi
- Relies on central authorities
- Is commercially recognized
- Can typically provide simpler user experiences
What are the use cases for DeFi?
There are many different applications and services created within the DeFi ecosystem, with more popping up all of the time. Some of the most popular DeFi use cases today are lending and borrowing, trading, and stablecoins.
Lending & Borrowing
One of the most popular use cases for DeFi today is lending and borrowing through decentralized lending protocols. Similar to the way that our P2P lending works, DeFi lending protocols allow lenders to earn interest on their crypto assets and while giving borrowers access to more capital for trading, typically with leverage.
Trading
Decentralized exchanges, also known as DEXs, enable users to trade crypto assets without giving up the ability to self-custody their assets. When trading on a DEX, users can exchange assets with each other, peer-to-peer, without needing to trust each other or a third-party. There are also DeFi derivatives products that provide a decentralized alternative for advanced trading features like futures, indices, and options.
Stablecoins
Stablecoins are a type of cryptocurrency that are pegged to a stable asset of some kind, typically fiat currencies. Like many other DeFi use cases, stablecoins are created with varying levels of decentralization. Decentralized stablecoins provide more everyday use cases for cryptocurrency as they are not subject to the typical volatility that is involved with other crypto assets.
Other Use Cases
Other use cases, from insurance to mortgages and more, are constantly being created and improved upon as the interest in DeFi increases. We’ll likely see more and more use cases for DeFi in the coming months and years.
DeFi Terms To Know
As with any industry, there are many terms to know when you’re learning about DeFi. Dive into some of the top terms and buzzwords in DeFi below.
Smart Contract
A smart contract is a self-executing contract where contract terms are directly written into the code.
Permissionless
In a permissionless system, anyone can participate in the network and contribute to building and maintaining it.
Interoperable
When a system is interoperable, that means value and information can be shared freely across networks without intermediaries.
Liquidity Pool
A liquidity pool is used to improve trading by creating a large pool so traders can swap between assets without set trading pairs.
Yield Farming
At a basic level, yield farming is when users put their funds to work in an attempt to generate the biggest returns possible.
Oracle
Oracles are used by smart contracts to connect with “real-world” data that can then be used to execute the contract’s terms.
Get notified about our new DeFi listings and offerings
Recommend
About Joyk
Aggregate valuable and interesting links.
Joyk means Joy of geeK