What is DEFI? Decentralized Finance Explained (Ethereum, MakerDAO, Compound, Uniswap, Kyber)
DeFi or decentralized finance is a movement that aims at making a new financial system that is open to everyone and doesn't require trusting intermediaries like banks. To achieve that defi relies heavily on cryptography, blockchain and smart contracts.
Smart contracts are the main building blocks of defi. If you don't know what smart contracts are or you want to refresh your knowledge you can pause this video and watch my introduction to smart contracts video first.
It's worth noticing that currently most if not pretty much all of the defi projects are built on Ethereum. The main reason for this is the Ethereum's fairly robust programming language called Solidity that allows for writing advanced smart contracts that can contain all the necessary logic for the defi applications, besides that Ethereum has the most developed ecosystem across all the smart contract platforms with thousands of developers building new applications every day and the most value locked in smart contracts which create an additional network effect. In fact, all the defi protocols mentioned in this video are built on Ethereum.
So what are flash loans all about? And how can they be used to borrow millions of dollars worth of crypto with no collateral? You’ll find answers to these questions in this video.
A flash loan is a feature that allows you to borrow any available amount of assets from a designated smart contract pool with no collateral. Flash loans are useful building blocks in DeFi as they can be used for things like arbitrage, swapping collateral and self-liquidation.
Flash loans, although initially introduced by the Marble protocol, were popularised by Aave and dYdX.
So, what’s the catch?
A flash loan has to be borrowed and repaid within the same blockchain transaction.
Confused about how Yearn Finance works? And what is the YFI token all about? You’ll find out all of this and more in this video.
Okay, let’s start with what Yearn Finance is all about.
The main element of Yearn Finance is the Yearn protocol.
The Yearn protocol, in essence, is a yield optimiser that focuses on maximising defi capabilities by automatically switching between different lending protocols.
Before we explain the mechanism of the protocol itself let’s see how yEarn came into existence. In early 2020, the author of Yearn protocol - Andre Cronje, started looking into automating his strategy for choosing the highest paying lending protocol for his stable coins.
The protocol, in essence, creates a pool for each stable coin. By depositing a stable coin to a pool, the user receives their yTokens that are yield-bearing equivalents of the coin that was deposited. For example, if a user deposits DAI, the protocol issues yDAI. The DAI that is pooled together can then be moved between different lending protocols to always maximise the yield.
For instance, if Aave offers a better yield on DAI than Compound, the yearn protocol can decide to move all or some of the DAI to Aave. The protocol checks if there is a better yield available at the time a user deposits or withdraws money from the pool, triggering a rebalance of the pool if necessary. If a user wants to withdraw their initial DAI + accrued interest they can redeem their yDAI and receive the underlying DAI.
One thing that the protocol always assures is to never swap the initially deposited stable coin to a different stable coin, even if there is a higher yield available. So for example, if a user deposits DAI, the protocol would never swap it to USDC, even if USDC has a higher yield. This is because most users want to withdraw the same stable coins as they initially deposited.
So what are NFTs all about? And how can they be used in decentralized finance? You’ll find answers to these questions in this video.
Okay, so let’s start with what NFTs actually are. NFTs stand for non-fungible tokens and they are one of the types of cryptographic tokens that can represent ownership of digitally scarce goods such as pieces of art or collectibles.
“Non-fungible” is not a very popular word so let’s see what it really means.
In economics, fungibility is the characteristic of goods or commodities where each individual unit is interchangeable and indistinguishable from each other.
Although NFTs can be implemented on any blockchain that supports smart contract programming, the most noticeable examples are ERC-721 and ERC-1155 standards on Ethereum.
When it comes to DeFi, NFTs can unlock even more potential for decentralized finance. Currently in DeFi, the vast majority of DeFi lending protocols are collateralized. One of the most interesting ideas is to use NFTs as collateral. This means that now you’d be able to supply an NFT representing a piece of art, digital land or even a tokenised real estate, as collateral and borrow money against it.
So is Yield Farming dead? Are there any good farming opportunities left? And when are 1000% APYs coming back? We’ll answer all of these questions in this video.
Before we jump into the main topic, let’s quickly recap what yield farming actually is.
Yield Farming, in essence, is a way of trying to maximise a rate of return on capital by leveraging different DeFi protocols. Yield farmers try to chase the highest yield by switching between multiple different strategies. If the strategy doesn't work anymore or if there is a better strategy available the yield farmers move their funds around.
Liquidity mining plays a big role in yield farming to such an extent that sometimes these two concepts are used interchangeably. Liquidity mining is a process of distributing extra tokens to the users of a protocol, for example, Compound distributing COMP tokens to lenders and borrowers on their platform or Uniswap distributing UNI tokens to their liquidity providers.
If you haven’t watched it yet, I’d recommend watching my other video on Yield Farming to understand these concepts even better.
So are there any opportunities left in a down-trending market?
So, what is Ampleforth? How does it work under the hood and why do the number of my AMPL tokens keep changing every day? You'll find answers to these questions in this video.
Ampleforth, in essence, is a new cryptocurrency with a quite unique feature - its supply is elastic and can change every day while the ownership of the AMPL tokens is never diluted.
There are 3 states that the Ampleforth protocol can be in, these are expansion, contraction or equilibrium. Before we explain how they work let's introduce one more concept - price oracles.
Price oracles are used to provide external prices to smart contracts. There are two main functions of price oracles in Ampleforth. The first one is to provide a current exchange rate of AMPL/USD. The second one is to provide a Consumer Price Index value. The CPI is used to establish a "target price" which is a price of 1 AMPL that the Ampleforth protocol tries to aim for. The target price is currently at $1.009 and it represents the 2019 purchasing power of the US dollar as represented by CPI. The target price plays a very important part of the protocol as it is used in conjunction with the current price to determine if there should be a change in the total supply of AMPL.
The Ampleforth protocol is implemented as a set of smart contracts deployed to the Ethereum blockchain. The AMPL token implements the ERC-20 interface and can be easily exchanged on decentralized exchanges such as Uniswap.
ield Farming is now one of the hottest topics in decentralized finance and there is a high chance you may have already heard something about insane returns that some of the yield farmers are making. So what is yield farming? How did it all start? What are some of the examples of yield farming? And also what are the risks involved? We'll be going through all of this in this video.
But before we start, if you're new to DeFi you may want to pause this video and watch my introduction to decentralized finance video first.
https://youtu.be/k9HYC0EJU6E
Yield Farming, in essence, is a way of trying to maximise a rate of return on capital by leveraging different DeFi protocols.
Yield farmers try to chase the highest yield by switching between multiple different strategies. The most profitable strategies usually involve at least a few DeFi protocols like Compound, Curve, Synthetix, Uniswap or Balancer. If the strategy doesn't work anymore or if there is a better strategy available the yield farmers move their funds around. They may, for example, move the funds between different protocols or they may swap some of their coins to other ones that are currently generating more yield. In our yield farming world, this procedure is sometimes called crop rotation.
So what’s the story behind Uniswap - one of the most important protocols in DeFi? And why was the UNI token probably one of the best-distributed tokens ever? You’ll find answers to these questions in this video.
Uniswap is clearly one of the most important and the most discussed projects in the defi space. At its core, Uniswap is a protocol for decentralized exchange of tokens on the Ethereum blockchain. The Uniswap protocol is deployed as a set of smart contracts and it’s completely decentralized, permissionless and censorship-resistant.
Uniswap is built on the concept of liquidity pools and automated market makers or, to be precise, a constant product market maker.
So what is a vampire attack? And how was SushiSwap able to use a vampire attack to attract over $1B of liquidity in less than a week? You’ll find answers to these questions in this video.
On the 28th of August in the midst of new DeFi projects popping up pretty much every day, a new project called SushiSwap launched. The project quickly gained more and more traction in the DeFi community as it aimed at directly competing with Uniswap by forking the project and siphoning out liquidity with a process later called a vampire attack. The main goal of the project was to create a community-governed automated market maker and fairly distribute its token - SUSHI.
The concept of a vampire attack, although quite simple, is quite ingenious in its nature as it creates very strong incentives for liquidity providers to migrate their liquidity to a new platform. Let’s see what a vampire attack is all about.
So, what is Ampleforth? How does it work under the hood and why do the number of my AMPL tokens keep changing every day? You'll find answers to these questions in this video.
Ampleforth, in essence, is a new cryptocurrency with a quite unique feature - its supply is elastic and can change every day while the ownership of the AMPL tokens is never diluted.
There are 3 states that the Ampleforth protocol can be in, these are expansion, contraction or equilibrium. Before we explain how they work let's introduce one more concept - price oracles.
Price oracles are used to provide external prices to smart contracts. There are two main functions of price oracles in Ampleforth. The first one is to provide a current exchange rate of AMPL/USD. The second one is to provide a Consumer Price Index value. The CPI is used to establish a "target price" which is a price of 1 AMPL that the Ampleforth protocol tries to aim for. The target price is currently at $1.009 and it represents the 2019 purchasing power of the US dollar as represented by CPI. The target price plays a very important part of the protocol as it is used in conjunction with the current price to determine if there should be a change in the total supply of AMPL.
The Ampleforth protocol is implemented as a set of smart contracts deployed to the Ethereum blockchain. The AMPL token implements the ERC-20 interface and can be easily exchanged on decentralized exchanges such as Uniswap.