DeFi is more than just providing liquidity

The growth of the Decentralized Finance (DeFi) sector has been a recurring headline throughout 2021 and so far. Hundreds of billions of dollars Encrypted assets are locked in the protocols of many blockchain networks and earn income for their holders.

It was originally a simple Ethereum-based exchange interface that allowed the exchange of ERC-20 tokens in a decentralized manner, called Uniswap, which has developed into a huge ecosystem, which is full of decentralized exchanges and income farms. , Loan agreement and mortgage platform.

As the development continues and the old agreement is established, as digital technology slowly changes the global financial system, new projects have emerged that will incorporate more of the traditional financial sector into the DeFi field.

The following are some methods for users to participate in DeFi, rather than simply staking in the liquidity pool or depositing a loan agreement.

Decentralized derivatives trading

Cryptocurrency derivatives exchanges have been the target of regulators for a long time, and once provocative exchanges like BitMEX and Binance have found themselves succumbing to the will of the law and revising their operating practices when seeking a more legal status.

This further promoted the need for decentralized options for crypto traders and led to the creation of Protocols such as dYdX and Hegic, It provides similar services, but the goal is not a centralized structure of regulatory agencies.

DYdX is a non-custodial perpetual trading platform based on the second layer of agreement, which runs on the Ethereum network and provides users with up to 10 times the leverage of more than 20 cryptocurrency futures contracts.

Hegic is an on-chain option trading protocol that uses hedging contracts and liquidity pools to provide options contracts of up to 90 days, which can be paid in Ether (Ethereum), wrapped Bitcoin (WBTC) or USD coin (USDC).

Both platforms provide users with access to these advanced trading products without revealing their identities as required by centralized traders.

Binding, rebase and ultra-high APY tokens

A topic that is increasingly emerging in financial discussions is how to create a concept of a decentralized reserve currency that is not controlled by any government or central financial institution.

Olympus aims to solve this problem through the Decentralized Autonomous Organization (DAO) platform, which provides pledges and various bond products, including bound Ether, MakerDAO (DAI), Liquidity USD (LUSD) and Frax (FRAX) Ability.

Olympus’ binding process is basically a cross between fixed income products, futures contracts and options. The guarantor will receive a quotation outlining the terms of the transaction on a future date, including a predetermined number of native OHM tokens of the agreement, which will be received by the guarantor once the vesting period is over.

Funds raised through bond issuance enter the Olympus vault as collateral to support minted OHM tokens and help provide the potential value behind OHM tokens so that they can be used as a reserve currency or a medium of exchange.

The only other project that has funds to provide basic assets The value of each token is a stable coin, But as the name suggests, their prices are fixed, and the price of OHM can rise, providing users with new ways of income.

After the binding is completed, users can sell their OHM on the open market or mortgage it on the Olympus agreement. The current yield is 7,299%.

related: CFTC update: Biden’s new agency chooses cryptocurrency regulation

Crowd loan participation on Polkadot and Kusama

Another way that cryptocurrency holders can put their assets into use while helping the cryptocurrency ecosystem expand is through Participate in parachain auctions In the Polkadot and Kusama ecosystems, through a process called crowdfunding loans.

During the auction process, different projects compete for one of the limited parachain slots, connecting the project directly to the main Kusma or Polkadot network, facilitating the interconnection of all parachains in the ecosystem.

Through crowdfunding, users who hold native KSM and DOT tokens can “contribute” them to the fund pool used by the project Protect Parachain Slot, And they will return the tokens after a designated lock-up or binding period of up to one year.

In exchange for their contributions during the token lock-up period and the inability to obtain staking rewards, users will receive a specified number of new protocol tokens, which can then be used in the ecosystem or sold on the market.

This method provides token holders with a lower risk income opportunity, because all principal contributions are locked in the smart contract and returned after the specified lock-up period. According to the nature of the parachain auction process, mature projects in larger communities have already obtained parachain slots, thereby increasing the chances of their tokens to maintain or increase value, as long as the development of the protocol remains active.

In addition to regulatory threats, the DeFi ecosystem has few signs that its integration of the best parts of the traditional financial system and the development of innovative agreements provide a level playing field for retail investors.

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The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Every investment and trading action involves risk, and you should conduct your own research when making a decision.