It's Been A DeFi Osmosis (Not Idea Generation) Kind Of Day

Idea generation is about quantity, not quality. Multiplication, not subtraction. Editing comes later. The goal of brainstorming is to walk out with buckets of ideas, not one precious idea perched on a pillow.

~ Sam Harrison

I do have an idea of what to write about today. As with only one clear shot on the 8 ball, I might as well take it. It didn't take any brainstorming because the idea factory was under maintenance.

You know what I mean? It felt as if I was never fully able to shrug off the daze of waking up. I keep wiping, but the sleep doesn't want to come out of the corners of my eyes.

Information Overload

Could it be that an excess of mind boggling blogs stumped me from the get go? It was a morning of heavy reading into deepening concepts. The kind of experience that pushes my learning bubble.

What was it that wore out my mental state in such a hurry? You might have guessed it. I took a trip further down the DeFi rabbit hole to expand my own knowledge.

It wasn't as if I woke up and said, "Hey, I'm going DeFi diving today"! No, not at all. It's good, however, that I took the plunge as it seems I have a lot to learn.

Yield Farming

All out DeFi to the extreme is more or less what I learned about Yield Farming. This is what they do:

It could be staking coins to collect a much higher APY than any conventional savings account could offer. They're also adding liquidity to pools on Uniswap and generating a yield from those loans.

Yield Farmers keep a sharp eye on trading protocols such as Uniswap or it's replica, SushiSwap to find the most aggressive returns. They may be borrowing on the loans they make to short an asset. Or they could be using that borrowed crypto to borrow again, in effect stacking their bets.

Whatever action a Yield Farmer decides upon, it carries a level of risk much higher than traditional finance. It also produces a heftier reward for taking such risk.

This is the basic jist of Yield Farming. LeoFinance itself has become quite attractive to Yield Farmers because of the early incentives as it launches wLEO on Uniswap. If you are helping to provide liquidity to wrapped LEO, you might consider yourself a Yield Farmer.

Liquidity Mining

In some cases, Yield Farmers who provide liquidity to pools also earn a token as a reward for their loan. This is on top of whatever the current APY is for said token.

Imagine how much Yield Farmers stand to gain if they're loaning, borrowing, and stacking? At the same time, they're earning additional tokens as a reward for all those loans. Then again, imagine how much they stand to lose should a pool (or whole decentralized trading protocol) dry up.

There's so much more on this topic it nearly fried my brain this morning. I doubt an article will top the one I found on Coindesk while searching, "What is Yield Farming"? It's more of a college level essay than a blog post.

https://www.coindesk.com/defi-yield-farming-comp-token-explained

The Dangers Of DeFi

From changing APY's to runs on liquidity pools, there's plenty of risk associated with DeFi. Yield Farmers are fine with rolling riskier dice for that higher return. Brady Dale goes over these in good detail withing his essay linked above.

He doesn't provide the kind of insight found in a post by our very own @f0x-society. How could the ability to borrow crypto put a entire blockchain at risk? At what point does the profit vs risk of an attempted 51% attack outweigh the profit of continuing to mine a blockchain?

Ready to burn some brain energy? Dive into the following post which explores some possible scenarios (I'm guessing) most of us have never considered.

DeFi May Be Risky But Is There Any Going Back?

As crypto moves to take on the roles of more traditional banking, it's back to the wild, wild, west. Not that crypto has ever been anything but that.

It just feels that the renewed interest in DeFi has reignited the flame of innovation. At the same time, it may be allowing the next wave of bad actors to get their foot in the door. What it doesn't feel like is that there's any going back.

Thanks for reading and as always...

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Posted Using LeoFinance