What is Crypto DeFi and why should you care?

Introduction
The term DeFi or Decentralized Finance first surfaced in 2018 and was used to describe the first finance-related decentralized apps on the Ethereum network.
Simply put, DeFi is a Lego-like ecosystem of open financial protocols and applications built on top of blockchain networks like Ethereum, Solana, Avalanche and others.

DeFi’s main advantages over the traditional financial system are its decentralization(for the most part, but not all networks and applications are fully decentralized), openness, transparency and interoperability.

In comparison, the traditional financial system is extremely centralized, opaque and highly regulated with multiple rent-seeking intermediaries. Because of it, innovation in the space has been extremely slow or none at all for the past several decades and has offered limited opportunities for regular retail investors.

Quick history
The rise of blockchains networks like Bitcoin and Ethereum in the past 10 years, has made possible the emergence of this new financial paradigm in which new forms of money, financial applications and instruments offer exciting new yield opportunities for retail and institutional investors alike.

Since 2017, a multitude of new blockchain networks, protocols and Dapps (decentralized applications) focused on DeFi, have been launched and have been growing rapidly with incredible uptake from crypto-savvy early adopters and investors.

Mechanics
At the heart of DeFi are “smart contracts” which power all finance applications(DeFi Dapps)by creating, storing and managing digital assets. Smart contracts come in a variety of formats, from standards like ERC-20(fungible tokens) and ERC-721(non-fungible tokens)to contracts that store digital assets(Coins, NFTs, etc.) and interact with other smart contracts forming new powerful financial tools.

Here’s an example of how it works:
Aave is a money market or a lending/borrowing service on the Ethereum network. When you supply a stablecoin(token value 1-to-1 with the USD) like DAI or USDC to Aave, you receive aTokens which represent both your stablecoin in Aave and any interest you’ve earned from lending.
Since aToken is a token, you can send, receive, or even use aToken in other smart contracts.

Some of the more established and popular protocols are Compound, Aave, Uniswap, MakerDao, SushiSwap and DyDx.

As of this writing, aprox. $90 bn. TVL is currently invested in DeFi. TVL or total value locked, represents a key metric for the space and is the leading indicator of its incredible growth in the last few of years.

Ok, so what can you actually do in DeFi and how?

Here’s a short list of things that are currently available across the entire ecosystem.

• Buy, Sell, Trade on Decentralized Exchanges
• Borrow and Lend
• Derivatives & Indexes
• Prediction Markets
• Staking & Farming
• No-loss lotteries

In order to access any of these, you’ll need to do your research first, a wallet and a fiat gateway to exchange your cash to stablecoins.
I’ll follow up with a more in-depth guide on how to actually use these dapps and protocols for investing purposes.

Our team at Zyield.fi is working on making access to DeFi a lot easier and intuitive, similar to your regular investment account and curating some of the best opportunities currently available. Stay tuned!