DeFi Flashcards
DeFi
an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. The system removes the control banks and institutions have on money, financial products, and financial services
Incentives
A means of providing blockchain network users an award for activities within the blockchain network
Liquidity
the ease with which tokens can be swapped to other tokens
Smart Contracts
programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss.
Decentralization
the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network.
Composability
combining distinct components to create new systems or outputs. In software development, composability means developers can reuse existing software components to build new applications. A good way to understand composability is to think of composable elements as Lego blocks.
Layer 1-Stablecoin-lending protocol-collateral
Protocol
basic sets of rules that allow data to be shared between computers. For cryptocurrencies, they establish the structure of the blockchain — the distributed database that allows digital money to be securely exchanged on the internet.
Lending Protocol
users can lend and borrow crypto assets. A traditional system is where the platform gives a loan to the borrower. However, here, the platform enables P2P lending between network participants and removes any need for third-party involvement.
use it, fork it, everyone can build on it. may issues tokens on top of the code
Stablecoin
a cryptocurrency whose value is fixed to another asset, often currencies such as the U.S. dollar or the euro, though other assets are possible. This kind of crypto coin tracks the underlying asset, making its value stable over time, at least relative to the currency it’s pegged t
Algorithmic Stablecoin
some stablecoins aren’t backed by real assets at all. These are algorithmic stablecoins. As the name suggests, this kind of stablecoin uses an algorithm to maintain a consistent value. These algorithms usually link two coins and then adjust their price depending on the supply and demand of investors.
Collateralization structure based on code
“Minted”
Creating new crypto coins using a proof-of-stake (PoS) consensus algorithm. In contrast, proof-of-work (PoW) cryptos come into existence by being “mined.” The mining and minting terms were created from real-world coin making. Gold and silver are “mined” out of the ground and then “minted” into coins for circulation.
Liquidity Provider
incentivized to lend into protocol
interest paid to borrowers
there’s a balance between lending/borrowing that determines which you should be doing to maximize ROI
Decentralized Exchanges
DEX / AMM (Automated Market Maker)
Eth/Dai payer-to-pool = LP Token Uniswap Sushi Balancer
Incentives
more Eth=more tokens/interest/fee revenue Curve governance token, paid fees
like being a bank
Liquidity Pool
a digital pile of cryptocurrency locked in a smart contract. This results in creating liquidity for faster transactions. A major component of a liquidity pool are automated market makers (AMMs)
