The Decentralized Finance (DeFi) Thread

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I'm transitioning into Linux and I want to be sure if I use any wallets that doesn't get lost if something ever happens to my OS. On my Manjaro computer I had to reinstall Manjaro again because the screen hung. I do have a keepkey but was having trouble accessing my crypto for reasons I don't remember. Once my Linux installation is complete I hope to figure out what's going on with my keepkey. I think they were bought out. I also did have MetaMask but can't find my password.

I did some more research on ENJ. It's a NFT and @EdMarlo wrote up a nice post a while back on how the next generation is going to be into NFTs as a status symbol. ENJ has partnerships with Atari and Microsoft. I believe it's based in Japan and since it's a gaming NFT there's potential for someone to make the next Pokemon. I remember somebody saying ENJ possibly could revolutionize real estate by making it more affordable to the average joe. I reread this thread a couple more times today, it's kind of making a bit more sense.

Once I get all my security in place I'll pick up some ENJ.
 
I was running into issues with Wasabi yesterday. I know I downloaded it and I can locate the files on my terminal. I just can't locate the directory or open the program. Stuff like this makes me nervous to have wallets locally.

I'll try again with Electrum and not hold as much crypto locally. Or maybe buy a sole purpose cell device and download Samourai. It's just that I have too much value stored in Coinbase and just in case anybody here doesn't know Coinbase is worth billions and there's talks of IPOs. Hackers are motivated to break in and steal money.
 

Coja Petrus Uscan

Hummingbird
Gold Member
Here are some updates after playing around with DeFi a bit.

The first thing to note is this is obviously a very infantile space. It has numerous issues from technical, moral and economic standpoints. Many DeFi projects skew towards somewhat accidental ponzi schemes, much of which is based on the economic illiteracy of all participants. Though with all things crypto there is great promise. Before reading this I would recommend reading the OP and this post.

There are now numerous functions on DeFi, including insurance. The main ones are:

1) swaps and pool
2) yield farming
3) vaults
3) staking
5) lending and borrowing

Swaps and Pools

Covered in some detail in the above-linked posts, but a bit green around the ears.

Swap is the name for exchanging a token on a decentalised exchange (DEX). The swaps draw on a pool of tokens deposited into a smart contract by 3rd parties. This is open to anyone. You typically deposit a 50:50 ratio of tokens based on the dollar value. When people use the pool to make a swap the people who pooled their tokens get a slice of the swap as a fee, usually about 0.3%. The popularity of pools varies, but some popular pools have about as much volume as there is in the pool.

For example if ETH is trading at $2000 and BAT is trading at $1, you would deposit 1 ETH and 2,000 BAT. To do so you have to pay a gas fee. As of writing this is about $40 on the most popular DEX (Uniswap), down a lot from recent highs. This is for tokens on the Ethereum network. So it is something only really worth doing if you have $10K+.

There are two downsides to pooling tokens on DEXs: 1) risk the smart contacts have been compramised - some have, but the benefit of DeFi is such breaches can't be hidden, like Mt Gox; 2) as the dollar value of the deposited tokens changes, pooling your tokens can and often does cause you to loose gains that you would realise if you had just held the tokens. For example,

If you deposit 1 ETH at $2,000 and 4,000 ENJ at $0.50 and the price of ETH goes up to $3,000, while ENJ goes up to $5, you will end up with a significantly larger amount of ETH, but a significantly smaller amount of ENJ. In the case of the given example you would have a much higher dollar amount if you had held the coins in your wallet.

Thus, depositing to pools is a new skill, like day trading, with those looking to make gains requiring to have a lot of time to dedicate to the craft.

Where you can get much safer gains is when at least one of the coins has very stable value, e.g. a stable coin paired with a crypto. The downside of this more carefully or keep some power around for dips. Right now Uniswap has a rate of about 51% APR for ETH- is, as we are likely in a protracted bull market, if you want to get good gains you need to keep half of your stash in inflating fiat and only half in deflating crypto. That is good if you either want to playUSDC; 54% for ETH-USDT; 66% for ETH-DAI; and 6% for ETH-PAXGold.

A listing of ROIs for a few leading platforms can be found on Liquidityfolio.

Alpha Homora has leveraged pools.

Curve is the main platform for lending pools of stablecoins, e.g. USDT-USDC, with some very high rates.

From a financial perspective pools and swaps are legitimate. There is nothing inherent to that system that is a ponzi or quasi-ponsi. People want to exchange tokens and poolers make fees for taking the risk of pooling. This is going in a much better direction than legacy finance and CEXs. Uniswap is the most integral of the platforms, as the largest, with the broadest array of tokens, whose token is not used in ponzis and it has not been hacked.

N.B. some pools offer their own token as a reward, this should offset the potential losses of price fluctuations. However, it is a ponzi, which is outlined below.

Yield Farming

Yield farming is where you deposit your tokens on a platform that then tries to get the best returns by making investments with those tokens. Those investment may be guided by decentralised governance or private actors. It's like an investment bank for crypto. Yield farming has drawn a lot of attention because of offering very high yields, often in excess of 100%. This is typically achieved by offering part of the underlying yield + a huge dose of the platform's token, e.g. Sushi, Bao. This is a ponzi, though may of the participants and probably most of the platform creators don't realise this. People are making huge gains buying tokens on the cheap, they 10X and then on top of that they get about 1% interest over a few days or a week ... So people are piling in, most of them oblivious to the mechanics of what is going on.

Platforms include Sushi and Harvest.finance.

Vaults

Vaults are where single tokens are deposited, and interest returned. These all or mostly (not sure) are free of the losses of the price instability mentioned in Swaps and Pools. Yearn is probably the largest vault platform. They are typically for stable coins. Vaults operate by the coins being invested and they don't tend to be attached to ponzi platform tokens, though Harvest.finance does offer pools that get their ponzi token as a reward.

Staking

Some platforms offer staking of their token, on which you get interest, sometimes in excess of 100%. In some cases there is no function other than to generate interest - pure ponzi. In other cases staking provides you with a share of voting power in the projects governance and maybe a share of some platforms fees. Though I think it's hard to justify the yields, which tend to be about 20%.

Lending and Borrowing

Platforms like Aave and Compound allow you to deposit coins, which are then borrowed by others for gambling. At least the better platforms are legitimate. The interest rates tend to be much lower than other platforms.

Binance Smart Chain

One interesting development over the last month or so is the rise of Binance Smart Chain (BSC) and it's related projects. ETH competitors like EOS, TRX and ADA are either unreleased or have virtually no ecosystem. Binance has spent the last year quietly funding various projects to stick on it's chain, essentially copying ETH and its accouterments. Binance Smart Chain is the only real contender to ETH at the moment as a result. A token transfer on Binance is $0.15 and virtually instant, as opposed to $15 on ETH and taking 2-3 minutes. In particular their main DeFi platform, PancakeSwap, has just gone wild. I believe that this is due to a combination of getting things just right. And when the ETH fees became ridiculous ($180 for a swap) people piled in for 100%+ interest on PancakeSwap, much of which is printed out of nothing. The DeFi gold rush is over, from Aug-Feb. There are now over 500 DeFi projects. There will be some that make huge gains, but it's too difficult to pick them now. If you want to make a DeFi play look at Binance Smart Chain projects, like BRY (LINK for Binance). You can also get stupid interest on these tokens. As the largest exchange they have also been inducing people to move tokens from ETH to BSC by offering it as a withdrawal option for many tokens, and at 1% of the fee and with instant transactions coins are slowly moving to BSC just so people can actually do something with them. I don't expect BSC to flip ETH, but it should continue to eat into its dominance this year.

Conclusion

Most of what is going on in DeFi is reminiscent of the dot-com-bubble. People are seeing zeros pop on the end of balances and are full of exuberance, while lacking knowledge of what is actually going on - people buying their own coins up for more yield and zeros. It's a smaller, but more rampant version of what The Fed is up to. When this bull market ends, this will all end terribly for most. These projects will crash 95% or more and most will disappear in the next crypto winter. But it is a testing bed and powerful advances are being made. Projects are becoming more resistant to censorship and centralised control as the array of dependable services rises. Uniwsap, Aave, Compound, Maker, Yearn and Curve are solid projects and I expect them to survive the winter, when yields and volume will crash. Those will be some of my main coins to buy back after Peter Schiff has his third Bitcoin is dead victory dance.

One of the main things this shows is that there can still be decent interest from what will ultimately be safe investments. Even in a crypto winter there will be 5-10% APR on loaning stablecoins. This lending to gamblers market is currently the preserve of a handful of gilded institutions protected by insane regulations.
 

Deepdiver

Crow
Gold Member
Clicked on the Curve link above and saw the following Stablecoin pools.
I will have to research the counterpart risks with DAI though... USD USDC and USDT are well known. https://www.curve.fi is q very basic website looks like a shoestring budget operation.

Pool Base APY Rewards APY Volume▼
3pool USD
DAI+USDC+USDT 2.26% +10.55%26.38% CRV $88.5m

sUSD USD
DAI+USDC+USDT+sUSD 1.5% +15.16%37.89% CRV $32.4m
+5.70% SNX
 

Coja Petrus Uscan

Hummingbird
Gold Member
Clicked on the Curve link above and saw the following Stablecoin pools.
I will have to research the counterpart risks with DAI though... USD USDC and USDT are well known. https://www.curve.fi is q very basic website looks like a shoestring budget operation.

Pool Base APY Rewards APY Volume▼
3pool USD
DAI+USDC+USDT 2.26% +10.55%26.38% CRV $88.5m

sUSD USD
DAI+USDC+USDT+sUSD 1.5% +15.16%37.89% CRV $32.4m
+5.70% SNX

Curve has the second most-locked value of all DEXs, only around $100M behind Uniswap: https://debank.com/ranking/locked_value

Uniswap's token is ranked about #13, while Curve is near #100 (market cap). The Curve token has more utility as it is used in the platform's governance. Though I see it's essentially a ponzi token - not a bad think if you sell out at the top. I think the yield on it is ~20%. It's not clear what the UNI token will really be used for.

I heard Curve had been hacked, but seems that is not the case.

As for Curve's interface, it is quite common for these DeFi platforms to use retro or child-like interfaces. See also:

DokiDoki - https://degacha.com/
Badger - https://pbs.twimg.com/media/EoPaBqzXYAQdAQV?format=jpg&name=medium
Harvest - https://harvest.finance/

I have only used Curve for swaps.

It looks like the main return you get for pooling is their CRV token. Given the market their token is by far the most undervalued, followed by Badger and 1Inch.

Currently the best yields you can get are ETH-stablecoin pairs. Given we are in a bull market I think it's a good play, though better to just be all ETH.

At the moment I am only staking or using ETH-DeFiToken pairs, as those are safe bets.
 

Deepdiver

Crow
Gold Member
Name​
Ticker​
Rank​
Avalanche​
AVAX​
45​
Celsius Network​
CEL​
50​
Enjin Coin​
ENJ​
70​
Flow​
FLOW​
85​
Axie Infinity​
AXS​
236​
Rarible​
RARI​
320​
Terra Virtua Kolect​
TVK​
417​
Unistake​
UNISTAKE​
432​
Falcon Project​
FNT​
550​
Opacity​
OPCT​
673​
DeFi Yield Protocol​
DYP​
732​
UniCrypt​
UNCX​
733​
 
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