Steemit Crypto academy: Understanding Decentralized Finance Part -2 [Topic 5]

in SteemitCryptoAcademy2 months ago (edited)

Last week we had a great introduction to Decentralized finance. For this week, we are going further, by exploring and understanding the various DeFi terminologies coupled with the major Components/building blocks of the DeFi ecosystem.

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DeFi terminologies

DAO

This is an acronym that stands for Decentralized Autonomous Organization. It basically implies a peer to peer network system/entity ensuring Self-governance/control of an asset. In one of the DeFi protocols “MakerDAO,” those who hold MKR tokens govern the Maker protocol for instance in ensuring the stability of Dai.

Permissionless

This is one of the core aspects of DeFi that simply means “freely accessible”. Any user with an internet connection anywhere in the world has full access to the DeFi ecosystem.

Openly auditable

The DeFi ecosystem is open-sourced. It can be audited/customized by anyone anywhere in the world.

Composability

This implies the ability to build other protocols on top of the exciting protocols/ecosystem. The DeFi ecosystem is Composable. Developers have been able to build various DeFi products on the existing ones.

Smart Contracts

These are simply coded/programmed set of rules of procedure that automatically execute transactions when certain predesigned parameters are met. In DeFi, users interact with smart contracts without any 3rd party rather than the buyer, seller and 3rd party (middle man) model of traditional financial systems.

Automated Market maker

In DeFi, Digital assets are traded through leveraging liquidity pools rather than the traditional buyer and Seller trade exchange interactions. Users provide liquidity to what is known as a “liquidity pool”. Traders access those assets in the liquidity pool through borrowing and are automatically charged with a certain interest. Users that provide liquidity are also paid for providing liquidity to the exchange’s liquidity pool. This term is commonly used in DeFi trading protocols such as Uniswap DEX.

Liquidity

This simply means an asset’s ability to be converted into another asset.

DEX

This is an acronym that is abbreviated as Decentralized Exchange. DeFi has Decentralized exchanges such as Uniswap where trading of assets takes place through the interaction with smart contracts without a 3rd party.

Derivatives

This term refers to assets that derive their value from the real-world assets. This term is commonly used in the Synthetix DeFi protocol where synthetic assets replicate the prices of the real-world assets and users can trade those synthetic assets as though they were trading the real-world assets such as stocks, gold etc.

Stable coin

This is a term given to a certain class of Cryptocurrencies whose price value is fixed regardless of the price changes of the different crypto assets in the Crypto market. Stable coins are pegged to fiat currencies like EUR, Dollar, some are pegged to Cryptocurrencies, others to assets like Gold and this is done to ensure their price stability. For example, DAI is a stable coin used in the DeFi ecosystem. It is pegged to $USD.

Interested in learning more DeFi terms? checkout the DeFi encyclopia

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Components of Decentralized Finance – Building blocks for DeFi

The millage of the DeFi ecosystem is heavily dependent on the following building blocks;

Decentralized Infrastructure – Ethereum

Unlike Bitcoin, the Ethereum Blockchain is a unique blockchain because of its programmability. It has a computation logic termed as ‘Smart contracts’ that developers leverage in building various protocols on top of it. For DeFi to succeed it needed a decentralized infrastructure that eliminates the 3rd parties from the financial interactions. The Ethereum architecture is therefore an ideal infrastructure for the building of the DeFi ecosystem because of its 3 core aspects including Decentralization, smart contracts and the open-source peer to peer network system.

Stable Coin – DAI

For a new financial system "DeFi" to thrive it needed a stable coin. The Crypto world is highly volatile. Prices of different crypto assets keep changing from time to time. They can dip sharply or pump highly. The building and running of a DeFi ecosystem was next to impossible due to such a highly volatile Crypto market condition. DAI is a stable coin used in the DeFi ecosystem. Its value is pegged to the Us Dollar. DAI’s price is maintained by Maker(MKR), a governing utility token in the DeFi ecosystem.

Decentralized Financial services, DEX, payments

Another Building block for DeFi covers financial services, Decentralized exchanges, payment DeFi protocols etc.

Financial services

There are various financial services in the DeFi ecosystem including Compound which is a DeFi protocol facilitating the borrowing and lending process in the DeFi ecosystem. When a user deposits money in Compound ecosystem, he is rewarded with COMP tokens. Those who are borrowing money are charged with interest. There are other various lending services on DeFi and they include Aave, bZx, DeFiner, Reflexer, Swap rate etc.

Decentralized exchanges

In finance, trading is one of the core aspects. Therefore, the building of the DeFi ecosystem needed a Decentralized exchange where traders can exchange tokens by leveraging smart contracts without the need for a 3rd party. In traditional centralized financial systems, the buyer, seller and the 3rd party have to trust each other in all their trading deals but with a decentralized exchange, smart contracts are trustless. In other words, there is now no need for people to trust each other in DEX trading exchanges.

It’s now just a matter of initiating a sell or buy trade and the transaction is automatically and instantly executed by the smart contract system. There are various Decentralized exchanges for DeFi including Uniswap, Airswap, Tokenlon etc.

Payments

DeFi has various decentralized payment protocols offering quick and secure payments for example Flexa, a payment platform that is enabling merchants to accept digital currencies securely without any risk of Fraud and volatility caused through off-chain collateralization. Fuse is another payment DeFi protocol that is ensuring business integration in Blockchain.

For a more detailed list of the Various DeFi protocols, visit the DeFi Pulse


Homework task: Getting involved in the DeFi ecosystem requires one to have a DeFi web3 wallet; one must even know how to use it. The following is a list of some of the DeFi wallets; Select one and explain how to use it.

Meta Mask
MyEther wallet
Coinbase wallet
Argent wallet


Rules and Guidelines

  • Post your home task article in the Crypto academy community.
  • Your article should be between 300 - 1000 words.
  • Use an exclusive tag #yohan2on-week5 and also tag me @yohan2on in your homework post so that I can easily find your work.
  • Be original and creative in your work.
  • Plagiarism is highly prohibited on Steemit and it will not be tolerated in this homework task.
  • Ensure to clearly reference any borrowed content.
  • Use copy-right free images and clearly showcase their source.
  • The homework task runs till 14th/03/2021
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Hi professor! these DeFi terminologies are a must to understand this DeFi dapps, and the whole ethereum blockchain, there is so much information involved, the stablecoins, as a their use to provide a protocol with an "stability o a pattern" to secure the investment on the protocol, financial terms such as collateral, and the way oracles brings external information to the smart contracts, are things, that I have learned from this week and it´s reinforce with this lesson, thanks a lot!

I just sumited week 4 lesson I hope you can check it out

https://steemit.com/hive-108451/@joseantpp/esp-eng-homework-topic-4-introduction-to-decentralized-finance-defi-a-new-fintech-revolution-part-1

#venezuela #affable

It's another powerful one from you. Thanks professor @yohan2on, everything was well detailed.

I present the task solution to you sir,

https://steemit.com/hive-108451/@fredquantum/steemit-crypto-academy-task-5-understanding-decentralized-finance-part-2-or-how-to-use-myetherwallet-mew-or-lecture-by-yohan2on

Thank you.

Prof. Thanks with this excellent presentation again. Just submitting my homework for the 4th week. I will key into this too. More power to your elbow.

Hello Professor @yohan2on . Below link is my homework post for week 4, I make it yesterday. I think you missed my post. I hope you are able to review my homework 🙏

https://steemit.com/hive-108451/@zheyeng/crypto-academy-week-4-homework-post-for-yohan2on-introduction-to-decentralized-finance-defi-a-new-fintech-revolution-part-1

Another very interesting lesson for me to explore. Thank @yohan2on

Good day Professor @yohan2on. I really enjoyed the lectures and the assignment given was awesome cause it gave room for more knowledge. Here's my entry link
https://steemit.com/hive-108451/@kadosh2340/crypto-academy-week-5-homework-post-for-professor-yohan2on

Honourable Professor, @yohan2on at first I would like to thank you for your informative lecture and content. I am very happy to submit last week's homework provided by you. And I have intended that I will submit this homework.
Sir, I am Bangladeshi. Many steemit users of my country don't understand your English lecture fully. But they also interested. For their better understanding, I have translated your post in Bangla language. Now I beg your permission to post it. If you give permission, only then, I will post it finally in this community. Thank you in advance.

Excellent explanation of terms related to DeFi Wallets

Here is my entry this week:

Twitter

asjfk.png

These tasks are my interesting ones, I have learned a lot from them. thank you Professor.

I look forward to your verification of week 4, thank you very much

https://steemit.com/hive-108451/@dairhial07/homework-task-4-introduction-to-decentralized-finance-defi-by-yohan2on-or-or-esp-eng

Thanks for that reminder. Verification done!

Good day teacher my HOMEWORK 4 HAS 5 days ando bot has bien reviewd , I m afraid It lose its validity.

https://steemit.com/hive-108451/@torrealba2719/crypto-academy-week-4-homework-post-for-yohan2on

Nice explanation sir, I really do appreciate your effort, below is a link to my assignment. I hope you will find time to go through it.
(https://steemit.com/hive-108451/@hadassah26/crypto-academy-week-5-homework-post-for-yohan2on-on-understanding-decentralized-finance-part-2-by-hadassah26-the-coinbase-defi)
Thanks again.

Honourable professor, @yohan2on
I have translated this post into Bangla language. This Bangla version will help other Bangladeshi users to better understand.
https://steemit.com/hive-108451/@md-raju/5

Respected Professor @yohan2on, l have been trying to have your attention regarding my post for homework week 4 that has not yet been reviewed. Please can you review my post. Thanks

https://steemit.com/hive-108451/@mawattoo8/crypto-academy-week-4-homework-post-for-yohan2on

Saludos @yohan2on, esta es mi entrada de la TAREA 5:
Gracias

Dear Professor @yohan2on, my post is now 4 days old and still is unreviewed by you. I am afraid that it will not be curated. Can you please review it asap.

https://steemit.com/hive-108451/@mawattoo8/crypto-academy-week-4-homework-post-for-yohan2on

Undoubtedly one more wonderful lesson and homework task. We are gradually learning many new and practical things. I have some user experience with D3Fi wallets, I'll be participating soon.

I just submitted week 4 homework task because we have some time left for last task yet.

Thanks.

Dear professor @yohan2on. It's been 4 days since I submitted my task 5 for review. I hope to have your review on it sooner. Thank you, sir.

https://steemit.com/hive-108451/@temitopef/homework-task-5-understanding-decentralized-finance-part-2-coinbase-wallet-or-by-yohan2on

Thanks professor @yohan2on for the wonderful lecture. More wisdom, knowledge and understanding of God.

This is my entry;
https://steemit.com/hive-108451/@temitopef/homework-task-5-understanding-decentralized-finance-part-2-coinbase-wallet-or-by-yohan2on

Dear professor @yohan2on. This is my link for the week 5 task. Thank you, sir.

Hello professor @yohan2on, I hope you are well today, I leave here my participation, I send you a greeting and a hug.

Hi,
Dear Professor, @yohan2on
You are requested to have a look on my assignment task.
Here it is :: https://steemit.com/hive-108451/@eh-shohag/crypto-academy-week-5-homework-post-for-yohan2on

Pretty cool that there's a crypto academy here! Very useful.

Pretty cool that there's
A crypto academy
Here! Very useful.

                 - mycryptodk


I'm a bot. I detect haiku.

And you are most welcome to participate in it.

Hola profesor, excelente clase , aquí le dejo mi tarea, gracias por el gran trabajo que esta haciendo.

Hello professor, excellent class, here is my homework, thank you for the great job you are doing.

https://steemit.com/hive-108451/@danay/steemit-crypto-academy-understanding-decentralized-finance-part-2-topic-5-danay

Sorry for the delay, I am coming to it.

Thanks for the quick response prof :)
I really appreciate it!!

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