Curriculum/DeFi

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Introduction

Cryptocurrency is witnessing the birth of a new subculture of decentralized finance (DeFi). Currently an ethereum-specific phenomena, DeFi is moving to popularize financial concepts that the PolyTech community is well positioned to capitalize upon.

Recent events have driven a wave of new capital into the DeFi ecosystem, in particular, a new trend of DeFi platforms distributing tokens and other incentives in exchange for liquidity (called "yield farming" or "liquidity mining"). The extreme price movements as a result of this activity are reminiscent of the 2017 ICO craze that accompanied bitcoin's $20,000 bull run.

However, there are key factors that differentiate DeFi from earlier bull cycles. For one, rather than simply using tokens as a fundraising mechanism, innovation in smart contracts is enabling new kinds of financial speculation. The reward-driven economics of deflationary tokens, bonded curves, and governance tokens, have successfully incentivized a new generation of users into the DeFi ecosystem.

With an emphasis on high-returns and ultra-usable interfaces, DeFi is the collision of gaming culture with gambling. We are witnessing the large-scale gamification of finance.

Key concepts

Yield farming

Popularized by the $COMP token, yield farming means staking capital on DeFi platforms in exchange for tokens that are distributed according to a regular schedule.

Liquidity mining

One of the most interesting activities inside DeFi, liquidity mining or liquidity staking reward users for providing liquity to exchanges by given them a percentage of transaction fees. This effectively solves the liquidity problem faced by decentralized exchanges.

Interest rate arbitrage

Similar to yield farming, DeFi users can gain easy profits by keeping an eye on interest rates and moving tokens across plaforms to abritrage the difference.

Token economics

TBC

Resources

News reports

Analytics

Exercises

MetaMask is your portal to Web 3.0... TBC