Yield farming, also known as liquidity mining, involves depositing digital assets into yield-generating protocols that reward users with a token that is issued to liquidity providers as an incentive to use the platform.įor example, a yield-hungry investor could lend USD Coin (USDC) on Compound and earn interest that is determined by market forces of the USD Coin borrowing and lending pool. When talking about the DeFi market, there is no way around the topic of “yield farming.”
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If you can download a suite of smartphone apps that can effectively do everything a bank does, why would you ever walk into a bank branch again? Yield Farming: The Hottest Digital Asset Trend in 2020 The idea of a bankless future is, therefore, not so far-fetched. Savings accounts, mutual funds, mobile payments-these can be replaced by a bankless alternative….today! Alternatives that are better than incumbents options-alternatives that are accessible to anyone in the world with a smartphone!”ĭespite still being in its early stages, the DeFi industry already allows individuals across the globe to download an app, buy digital currency, and deposit it to earn higher interest rates than on traditional savings accounts.Īnd best of all, this can be done without the need for paperwork, identity verification, or a KYC check. “We’re getting closer to the point where people don’t need a bank to bank. Mythos Capital founder and outspoken DeFi advocate, Ryan Sean Adams, wrote in his daily newsletter, Bankless:
The next iteration of this decentralized, bankless future are the autonomous financial products and services built on top of blockchain networks, such as Ethereum. The decentralized digital currency, Bitcoin, enables us to store, send, and receive monetary value over the internet. DeFi: The Next Step Into a Bankless FutureĭeFi proponents believe that the developments in the decentralized finance market are the next steps towards a bankless future. But given that the DeFi industry is only two years old, the size of this nascent market is already quite impressive. In comparison to Bitcoin’s $347 billion market capitalization, that may seem small. Image by Īt the time of writing, the total US dollar value “locked up” in DeFi protocol stood at $14.37 billion.
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What is DeFi?ĭecentralized finance (DeFi) refers to open-source financial software that aims to provide financial services to anyone with an internet connection.Īutonomous, internet-native financial protocols provide an array of financial services by replacing traditional financial intermediaries with smart contracts and a hard-coded economic incentive structure.
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Learn what DeFi is and how to invest in this new, high-risk digital asset class. Internet-based financial protocols are providing new avenues for tech-savvy investors to earn double and triple-digit yields, attracting more and more investors to this space. Decentralized finance, commonly known as DeFi, has been the hottest talking point in the digital asset markets in 2020.
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