Beginner’s guide to DeFi Basics | #LearnWithTENBO
👋 Hey Future DeFi Experts!
Today we’re pleased to release the first simple guide in the #LearnWithTENBO series. In this educational series we’re going to be covering a wide range of topics so that everyone, whether an existing TENizen, or future DeFi newbies can quickly understand how DeFi works, and how they can start earning the best rates on their crypto!
For today’s focus we will be covering some basic DeFi topics such as; What is DeFi? What are Yield Farming & Yield Aggregators? How does it all work? & How TEN Finance fits into it all. Hopefully by the end of this guide you will be ready to jump into the amazing world of DeFi applications and start earning!
Keep reading to find out how DeFi is coming to revolutionize the consumer finance space…
What is DeFi?
DeFi, or Decentralized Finance, is a movement that aims to bring financial services to the blockchain. These services include traditional financial products such as loans, insurance, and trading, but with the added benefits of being decentralized, transparent, and accessible to anyone with an internet connection.
Decentralization refers to the fact that DeFi services are built entirely on blockchain technology using smart contracts, which allows them to operate without any central authority or intermediary. This makes them fairer, more resistant to censorship, fraud, and other forms of corruption.
Transparency is another key aspect of DeFi. Because all transactions on the blockchain are recorded on a public ledger, anyone can see how DeFi protocols are being used and how they are generating revenue. This level of transparency is not possible with traditional financial institutions, which often operate behind closed doors.
Accessibility is another benefit of DeFi. Because DeFi protocols can be accessed from anywhere in the world with an internet connection, they have the potential to bring financial services to underserved communities and individuals who may not have access to traditional financial institutions.
Types of DeFi Platforms
There are many different types of DeFi platforms available, a brief description of the most common can be found below:
- Decentralized exchanges (DEXs): These are DeFi trading platforms that allow users to trade cryptocurrency directly with each other using AMMs (Automated Market Makers), without the need of 3rd parties or intermediaries. Users can easily access instant swaps for many available tokens. They also generally offer yield farming, where users simply provide liquidity to help support the protocol running and earn or ‘farm’ rewards in return.
- Yield aggregators: These platforms allow users to maximize earned yield from multiple yield farming DeFi protocols in one place. These work by creating specialised auto-compounding vaults that automatically route any earned interest back into the original deposit to provide users with the highest-yielding opportunities. (✅ This is what TEN Finance is)
- Lending platforms: DeFi lending platforms allow users to borrow and lend cryptocurrency, with the platform acting as a decentralized bank to evaluate the borrow limit of borrowers. Users can easily use lending platforms as a crypto savings account with the option to easily borrow against any deposited collateral to access instant liquidity. (✅ This is what LEND Finance is)
- Web3 / NFT Marketplaces: These are specific platforms where DeFi users can trade or purchase digital NFTs.
How Does DeFi ‘Yield Farming’ Work?
Yield farming works by providing the required liquidity to take advantage of any price discrepancies between different cryptocurrencies.
For example, if the price of BNB is higher on one CEX (Centralized Exchange) or DEX (Decentralized Exchange), a trader could buy BNB on the cheaper exchange, and then sell it on the more expensive exchange, earning a profit in the process.
Yield farming is a streamlined way of automating this process and making it more accessible for users who can ‘pool’ funds together in order to maximise profit earned via this exchange. See the simple image below to understand the user flow.
To start earning with yield farming, users must first deposit their cryptocurrency into a “liquidity pool.” This pool is essentially a communal collection of funds that gets used to facilitate trades on a DeFi protocol. By depositing their cryptocurrency into the pool, users are providing liquidity to the protocol and enabling it to function properly.
In return for their contribution, users receive a share of the rewards generated by the protocol. These rewards are usually paid in the form of tokens that are specific to the protocol, and can be traded on the open market or used to access other DeFi services. Users also typically receieve a share of the fees taken by the protocol.
This process is facilitated by “smart contracts,” which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts enable DeFi protocols to automatically execute trades and distribute rewards to liquidity providers without the need for a central authority.
What are ‘Yield Aggregators’? & What is TEN Finance?
Yield aggregators are similar to any typical yield farming platform but with a key difference, auto-compounding vaults. The purpose of yield aggregators is to automate the compounding process for users and therefore maximize the potential yield earned by the user. This process works by removing the need for any manual compounding by automatically reinvesting any earned yield.
The TEN Finance platform is a yield aggregator and simply serves one purpose for the users, to maximize DeFi yields in the easiest way possible. Our vaults offer a wide range of options for holders of any major coins to easily maximize their potential yield.
The image above helps to easily visualize the key differences between standard DeFi farming and farming the same vaults using a yield aggregator like TEN Finance. As we can see the automatic optimization of the same vault results in an additional 70+% in earnings over a year.
How does TEN Finance work?
TEN Finance works by connecting to various DeFi protocols and platforms through API integrations, and then using smart contracts and algorithms to automatically invest and optimize for the highest possible yield. This allows users to earn yield on their cryptocurrency holdings without having to manually manage their investments or spend a lot of time researching different yield-generating opportunities.
This automation of investments may seem like a minor thing but can lead to massive additional gains, without any additional interaction!
For example: You could stake Token X in a farm on DEX X and earn a base interest of 102% APR. If you staked the same token in a TEN Finance vault compounding once a day you’d earn 177% APY — Which is a huge increase for actually doing LESS work managing your portfolio.
❤️ Thanks for Reading!
We hope this brief guide serves as a valuable basic introduction to DeFi and everyone who reads this is now an expert in how yield farming works, where rewards/ interest comes from and how yield aggregators like the TEN Finance platform can enhance DeFi opportunities by optimizing your potential profit!
Be on the look out for an indepth, protocol user guide coming soon to teach you exactly how to start earning with the TEN Finance ecosystem. As the TEN Finance ecosystem continues to develops, many new farms will be added for users to enjoy and earn with.
💰 Discover how $TENFI Tokens can earn for you:
https://medium.com/tenfinance/meet-the-tenfi-token-extensive-utilities-exclusive-earning-for-all-tenfi-holders-410bb9fb38d4
📚 Continue learning about LEND:
https://lend.gitbook.io/home/
As we continue to prepare the protocol for exciting launches to start 2023 make sure you’re following all TEN Finance social channels to be the first to hear news, updates and fantastic earning opportunities 🤝
👋 See you next time TENizens!
✅ Follow the Official TEN Finance Socials:
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