![]() ![]() Assets such as tokens are submitted to smart contract addresses managed by a third party. Decentralized Crypto ExchangesĭEX or decentralized exchanges enable users to trade their crypto assets using smart contracts. The liquidity mining concept is different from proof-of-work (pow), as you can read here. It is a form of passive income where you are not required to constantly make investment decisions. The reward is in the form of trading fees and governance tokens. Liquidity mining or DeFi mining is a process where users lend their crypto assets like coins and tokens to different liquidity pools to earn rewards depending on their share of investment in a liquidity pool. Depending on the DeFi platform, users can avail interest payouts daily, weekly, or monthly. Similarly, there is a savings account that works like a traditional savings bank account but offers much higher interest rates. Smart contracts are used to borrow or lend money on DeFi apps. Borrowing and LendingĭeFi apps improve traditional borrowing and lending apps by removing the need for a third party or an intermediary. This ensures low fluctuation in the value of a stable coin.ĭai and Carbon are examples of such stable coins used by DeFi apps. As its value is pegged to another exchange-traded commodity, it is unlikely that a stable coin’s value goes below the value of that asset. The value of stable coins is linked with an external asset such as a fiat currency. Stable coins are known as a major solution to the volatility risk of DeFi coins. The major drawback associated with blockchain coins is their volatility, where price fluctuations are very common. Some common DeFi coins are Ether, Solana, Cardano, etc. Stable CoinsĭeFi coins are used to provide incentives to users using the DeFi platform. ![]() Let’s look at some common use cases of decentralized finance (DeFi) service apps. ![]()
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