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Recently I have been seeing posts mentioning about DeFi (decentralized finance) and the term is new to me. So I got curious and searched this forum for the question "what is DeFi" and I got 1 result from a post here by @Listing.Help . However, sadly I am not satisfied with the information on the article linked in the post.

 

So I will provide a set of related questions here for you guys to answer. Here they are:

  • What is DeFi? (a more detailed explanation) (SOLVED)
  • When was DeFi created?
  • What is its purpose? (SOLVED)
  • How widespread is its use among Bitcoin and the other coins? (SOLVED)
  • Do we really have an urgent need for it? Why? (Open-ended question)
  • Will it greatly affect the current low-end users of crypto? How? (Open-ended question)

You guys don't have to answer all of them, although I'd like to see them all resolved. Also, I will raise a few more questions as we go on.

Quote

Here are some additional question/s:

  • Does Yobit have a DeFi option on their platform? If not, are there indications where they will implement this option at some future time? (SOLVED)
  • What are the current DeFi-related projects and available cryptocurrency coins/tokens? What are now considered dead ones? (Open-ended question)

 

Too technical answers might fly over my head 😓 , so answers in layman (easy) terms will be greatly appreciated.

 

If you can offer a better answer than the previous replies as well, then feel free to do so.

 

Thank you for your replies.

 

UPDATE: The top answers so far are in this link.

 

Edited by kyoukage01
answers update added
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3 hours ago, kyoukage01 said:

What is Defi? (a more detailed explanation)

I try my best to explain DeFi in the cryptocurrency sphere. For the centralized finance system, you know there are  generally human middlemen to track every financial activities but in the case of DeFi system, everything will be handled by smart contract i.e.no middlemen. You are utterly free to control your financial activities.Nowadays, the most of DeFi platforms are created in the Ethereum and Cosmos blockchain network.

3 hours ago, kyoukage01 said:

When was Defi created?

First of all,  try to write the term properly "DeFi" not "Defi" 😊! These both terms are not the same. As DeFi alone is a concept, it will be very hard to tell you who was the first to generate this idea. If there were questions like "When was the first DeFi platform was created? ", "What was the first DeFi product?",you would find plenty of answers by using search engines. 

3 hours ago, kyoukage01 said:

What is its purpose?Do we really have an urgent need for it? Why?How widespread is its use among Bitcoin and the other coins?Will it greatly affect the current low-end users of crypto? How?

DeFi, the idea is to give you full financial freedoms. It depends on you if you need freedom to control your funds, wallet private keys, exchange activities, etc then you might choose DeFi platform as soon as possible.

Bitcoin itself, is very into DeFi system. 

I have already created some DeFi related topics, have a look at this if you are interested. 

Spoiler

 

Thanks ! 

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Defi which stands for decentralized finance has an interesting concept as they automate certain procedures that would require too many middlemen in the process. Once someone defaults on his loan, collaterals are instantly liquidated. This is something that cuts every middle man involved as lawyers, judges, and all other personnel needed which can be at least 10 people performing useless jobs. 

It can be used by banks and I bet they are looking into it since many years ago. I don't know when DeFi started but I know that banks were using the Ethereum blockchain to create and test certain applications. Perhaps some of what we see today.

 

Now, DeFi Lending as it has been utilized right now is total nonsense. What happens is this:

 

741974001-6834f74abae81c9cc0b29860a22fc1984b1c3976b9046a27cb2546d3d11ae48f.webp

 

This is all about yield farming which won't end well. The collateralized assets are mostly useless tokens. In short:

We lend our crypto, we receive interest (yield), we borrow crypto we pay interest but also when borrowing (at least on Compound) we get COMP tokens as well which we sell.

 

Where is the problem here? There is not enough to pay for withdrawals when they will massively happen because no-one actually trusts this system.

 

Then this happens:

 

796738489-a8f2085a97510bf957e7ee05e95a3b0699146bf0f056009f2eac22f56159dc36.webp

This image above is the end of DeFi (the useless lending part), it will be similar to that and many will be trapped in the DeFi liquidity trap.

I've made a post on a platform that I've stopped using now about this and contain more details. The subject was about Ethereum and how it has turned into a useless network for more than four months now. It is a long post and I can't rewrite the whole of it. You can find the link here.

 

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Frankly, I don't have much information about DeFi, but he is a user on the Ethereum network through a smart contract that gives any user full financial freedom to fully control the token that uses the Ethereum network.

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@Whited35

19 hours ago, Whited35 said:

First of all,  try to write the term properly "DeFi" not "Defi" 😊!

Sorry, it was a typo I overlooked 😝 . I've fixed it now. Thanks for pointing it out.

 

As for your answers, I especially liked the pros and cons on the topic you've just linked. But assuming I understand it right, would this mean that DEX are exchanges that primarily deal in DeFi?

 

@BTC Future

Thank you for your answers. I will have to read the article you linked a few more times at some point though, as some points have flown over my head.

 

The picture in your post doesn't display properly here. My browser might be at fault: my OS is Windows XP, thus my Firefox browser is stuck at the version allowed for the OS. I am planning to acquire a new computer, but negotiations are stalled in my area due to the pandemic. On that note, can you replace the picture with another of a different format i.e. a JPEG or BMP one?

 

This is related to my third question "What is its purpose?": does DeFi solely deals in loans/lending only, or does it serve other purposes?

 

@Moaz

Errm... right. Thanks for that... effort.

 

... ... ...

 

Thanks for the answers guys. My newest question is now this:

  • Does Yobit have a DeFi option on their platform? If not, are there indications where they will implement this option at some future time?

And please forgive me for being quite annoying for asking too much 🙂 .

 

Edited by kyoukage01
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3 hours ago, kyoukage01 said:

This is related to my third question "What is its purpose?": does DeFi solely deals in loans/lending only, or does it serve other purposes?

Right now all DeFi are just dealing with crypto lending services. I tried editing my post but I wasn't allowed. This is the image from Compound which explains how DeFi works in general:

 

asdf.png.1bc4b19bdbcf5c8cd12811c3b5b63fd6.png

I remember reading that MakerDAO would accept some real-life assets as supply chain invoices and royalties from artists. This will be interesting but I doubt that anyone is willing to risk real assets with DeFi. 

Also important is this news (link) which states that 90% of the whole DeFi market is based on 500 addresses, meaning that even less than them (perhaps maximum 100) are moving the whole DeFi market.

 

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5 hours ago, kyoukage01 said:

@Whited35

Sorry, it was a typo I overlooked 😝 . I've fixed it now. Thanks for pointing it out.

As for your answers, I especially liked the pros and cons on the topic you've just linked. But assuming I understand it right, would this mean that DEX are exchanges that primarily deal in DeFi?

Awh, no need to say sorry. Just a minor mistake 😊. For your last question, exactly you are getting the right point. DEXes are operated without any central authority to track your financial activities. DEX,DeFi products or services all belong to DeFi itself. 

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It looks like there aren't as many answers as I would expect. This may show how clueless the majority of crypto users are to the inner workings of DeFi itself, which can turn out to be a problem if they will blindly start to deal with it without the proper knowledge.

 

Anyway, I found an article that may answer one of my questions:

On 8/7/2020 at 9:36 AM, kyoukage01 said:
  • How widespread is its use among Bitcoin and the other coins?

And here it is:

Spoiler

Bitcoin DeFi May Be Unstoppable: What Does It Look Like?

Leigh Cuen

 

One of the quietest yet best-funded bitcoin companies in the world is gearing up to enter the 2020 decentralized finance (DeFi) bull run. 

In July the DG Lab conglomerate, which like Ethereum powerhouse ConsenSys includes both an investment arm and an adjacent software company, open sourced its proposal for self-sovereign derivatives trading on the Bitcoin blockchain, using the Lightning Network. 

These contracts turn bitcoin, the asset itself, into programmable money capable of a wider variety of functions. 

This offers a stark contrast to the typical DeFi approach so far, which relies on “wrapped” representations of bitcoin or exchange platforms. The Silicon Valley startup cLabs recently acquired DeFi firm Summa, which spearheaded the bitcoin-on-Ethereum approach. Now it looks as though DG Lab, founded in 2015, is the leading incumbent exploring DeFi opportunities for Bitcoin.

“I’ve been working on a proposal to integrate DLC [Discreet Log Contracts] and channels into the Lightning Network,” DG Lab researcher Ichiro Kuwahara said of his recent work. “We can establish many contracts without broadcasting transactions on the blockchain.”

This software uses the Lightning Network to execute business logic without clogging up the base-layer blockchain. The hottest trend among Bitcoin veterans these days is imagining DeFi functionality applied to the bitcoin currency through such layers. There are many opinions on how to approach this opportunity, from DLC to soft forks.

Competition

Not everyone agrees on how to use Lightning for smart contracts. 

Bitcoin veteran Jeremy Rubin, who launched his Judica startup this summer, believes Blockstream’s Liquid Network, which companies like Crypto Garage use to experiment with such smart contracts, overcomplicates the construction. 

“I think we can do it much simpler. … It’s solvable on-chain but can be done in [Lightning] channels as well,” Rubin said in an interview, explaining how his proposed Bitcoin soft fork could optimize the base layer for smart contracts. “I can construct this contract, which is a derivative, without you being online. I can make a valid contract then email it to you.”

These days, both ends of a Lightning transaction need to participate at roughly the same time for the payment to go through. (Or, at least, both need to set everything up in advance.) Rubin is arguing there’s a way to make it so one party can execute a consensual transaction. Public keys allow the other party to see, whenever they come online, proof of everything about the deal.

“It’s this notion of flow and conditionality that doesn’t currently exist in Bitcoin,” Rubin said. “[These 2020 DeFi projects] are about helping define commutes … a sequence of steps that can happen based on choices along the way.”

There are enough engineers working on DeFi options for Bitcoin that one of them might technically work, even if socially it doesn’t catch on. Only time will tell which ones find product market fit, and how that may or may not spur crypto adoption.

Japanese bulls

Stepping back, the DeFi bulls at DG Lab Fund raised over $93 million in 2019 and, according to the firm’s blog post, are raising a second fund in 2020. 

The fund invested in DG Lab, the separate namesake startup, which simultaneously attracted investors from Japanese enterprises including the e-commerce giant Kakaku.com and the telecommunications provider KDDI. Meanwhile, the DG Lab Fund itself invested in River Financial, Arwen, Blockstream and Curv, to name a few, in addition to startups in adjacent sectors such as AI and security.

“We have several startups that are working with DLC. For example, Suredbits is one of the key players in this field and we are working closely with them,” said Shunichi Kimuro, senior manager at DG Lab Fund. “We wanted to show what is possible using the Bitcoin protocol by using our peer-to-peer [P2P] derivatives.”

Yet another startup called Crypto Garage, in which DG Fund did not invest directly, is using Blockstream’s Liquid technology to explore this type of smart-contract software. 

“You define the outcomes of your contracts and create a transaction for each of the outcomes. And it can only be unlocked with one of the outcome transactions or with mutual agreement between the contract participants,” Crypto Garage engineer Thibaut Le Guilly said in an interview. 

Rubin pointed out that even if he disagrees with Le Guilly on certain aspects these Bitcoin projects have much more in common with each other than with Ethereum DeFi projects.

Different goals

“There’s a really big gap between DeFi, as Ethereum is trying to do it, and P2P finance,” Rubin said. “Uniswap is really great. But they tokenize their liquidity pools. … We [Bitcoiners] are talking about finding a way for people to work directly with each other.”

Bitcoin DeFi projects aren’t using representatives of bitcoin, they want to enable traders to do tasks directly with bitcoin.

“There are about 20 people in the Bitcoin community working on tools, applications and specifications for [Discreet Log Contracts], including at SuredBits,” Le Guilly said in an interview. “[Traders] don’t have to involve an exchange.”

It appears as though Ethereum DeFi advocates offer a different interpretation of decentralization than their node-obsessed Bitcoiner brethren. Bitcoin advocates are focused on every user being able to participate in the network by running their own full financial stack, while Ethereum fans are more focused on the ability to offer their services from any data center around the world.

Bison Trails CEO Joe Lallouz said his infrastructure startup can easily move accounts across borders, thanks in part to a distributed team. This, from his perspective, is a slightly decentralized step away from Silicon Valley norms.

“If Amazon said you can’t run nodes, for example, we can very quickly and seamlessly move our infrastructure to other cloud providers,” Lallouz said. “Everyone at the same time would have to say the blockchain network is something we don’t support [to censor our customers] across the internet.” 

While Ethereum DeFi experiments attract quick flashes of capital, losing considerable sums as advocates iterate, Bitcoin DeFi experiments seem comparatively modest. Yet, veterans know not to underestimate the Bitcoin development scene in Tokyo, home to the creators of self-sovereignty experiments including BTCPay and DG Lab. This period may just be the calm before a perfect storm. 

“Once there are enough people to create a real market, we might offer services or tools we can monetize,” Crypto Garage’s Le Guilly said. “At this stage, our goal is to raise awareness about what can be done with Bitcoin.”

source: https://www.coindesk.com/bitcoin-defi-japan-smart-contracts

 

From what I've been seeing, most of the DeFi activities focus on Ethereum. The above article describes how Bitcoin will be rigged for DeFi use, and AFAIK, other altcoins do not have known DeFi options.

 

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On 8/7/2020 at 6:36 AM, kyoukage01 said:

Do we really have an urgent need for it? Why?

Now the use of defi exchanges is increasing then centralized exchanges. And for me yes it urgent need of this because by this we don't need to suffer from transactions. By this we can make transactions by our own wallet and this works fast. 

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On 8/18/2020 at 9:17 AM, malik6314193 said:

Now the use of defi exchanges is increasing then centralized exchanges. And for me yes it urgent need of this because by this we don't need to suffer from transactions. By this we can make transactions by our own wallet and this works fast. 

From what I have garnered from the previous replies, DeFi is specializing in moneylending services. I am not so much concerned about the way transactions get faster but its implications instead. Like all moneylending services, DeFi can be a potential debt trap, and what will happen if I do not pay up the debt? And how will DeFi platforms liquidate assets, if able?

 

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Decentralized finance is doing great in the crypto market. Look at the price of Yearn Finance which was just started trading from &700 a month ago and it has already reached $39k today which is very high even higher than bitcoin. I would suggest to invest in new defi projects.

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DeFi allows you to take a loan, without applications or reviewed by any bank. All activities such as lending, borrowing, structuring derivative products, and the buying and selling of securities, can now be done through DeFi. Everything is done through smart contracts. 

 

i personally believe DeFi is just fad and will fade off in few months. It is just another way to seduce people bring more money in crypto..

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Frankly, I don't have much information but as I understand DeFi is a decentralized investment, with whatever amount you put into an Eco system project, to get a profit or a percentage on that amount.

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If you got some answers you should shre them with us hare as most of the people including me, don't  know  they system  you  are using but you should be  more clrea by songs. 

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On 8/7/2020 at 2:36 AM, kyoukage01 said:

Will it greatly affect the current low-end users of crypto? How?

It depends. There are many tokens under defi, it is also a platform for lending but I have not tried that before if actually true. The price of defi is what will greatly determine this but the high end users will be more positively affected. 

On 9/1/2020 at 10:31 AM, Izeal said:

Decentralized finance is doing great in the crypto market. Look at the price of Yearn Finance which was just started trading from &700 a month ago and it has already reached $39k today which is very high even higher than bitcoin. I would suggest to invest in new defi projects.

Saying any coin is higher than bitcoin is wrong, you should not even mention such at all. The value of a coin does not lies in the price but lies on its marketcap. 

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Decentralized finance, in my opinion, serves a purpose of providing a currency, controlled by no one person, but everyone. It gives people an opportunity to invest in something much more interactive, whereas centralized ones have always been pulled by the government.

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10 hours ago, BitcryptoHan said:

It depends. There are many tokens under defi, it is also a platform for lending but I have not tried that before if actually true. The price of defi is what will greatly determine this but the high end users will be more positively affected.

I've been reading a lot of news lately about DeFi exit scams. Someone also mentioned that it is becoming like the ICO craze where there were also scams. If DeFi is going to become a new platform of choice for scammers, it will greatly affect just about anyone who gets duped. But I think the high-end users won't be affected that much since they are more cautious, unless I overestimate their knowledge and experience. The inexperienced low-end users are the ones who will suffer the brunt of the exposed scams.

 

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8 hours ago, kyoukage01 said:

I've been reading a lot of news lately about DeFi exit scams

Here is another one here

 

8 hours ago, kyoukage01 said:

Someone also mentioned that it is becoming like the ICO craze where there were also scams.

Defi will surely become like ICO, the scam will be like ICO scam. Let us all check out how 2020/2021 will be. 

8 hours ago, kyoukage01 said:

If DeFi is going to become a new platform of choice for scammers,

Yes, because it has rooms to contain malicious actors. 

 

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do we really need it urgently? why?

 

What I can say is that we do not need them urgently, the world is filling with so many new projects, that this can cause the main reason why the Defi arose to be overshadowed and give us a not very clear picture about their future, we can see it with cryptocurrencies, an endless number of new projects arose and many have collapsed making many doubt if they are really safe, that is why the Defi do not need them urgently, it is not a race, the Defi must take your time to mature little by little and give us a value with great security without being filled with many junk tokens that will be a drag in your future, IF we need them but, not with urgencies, delay time and thus demonstrate what they are worth so that we all see their true value ..

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Defi stands for ( decentralized finance) there is alot of application about finance in the Defi which help in the crypto world. Defi give the inspiration about the "block chain " the technology behind the" bitcoin ". Ot also help and give information about the block chain and defi is distinct because it expand the use of block chain help to transfer the simple value to complex financial system. 

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Will it greatly affect current low-end crypto users? How?

The Defi are created for all users, whether large or small investors. You just have to know how they work and how to get the most out of it.
Whales are undoubtedly the ones that get the most profitability.
But you can see them as a bank, in which you can put your assets (add liquidity) and they pay you for it, offering you profits in their protocol token.
You can also request loans in cryptocurrencies with a relatively low interest rate. You can use that loan to make investments in other defi that offer you greater profitability than your loan and thus you make a profit. That can be done by small and large investors. both make a profit, you just have to assess the risks and have a well-defined plan, so you know what to do with the assets.

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Decentralized finance, in my opinion, is for the purpose of providing a currency, controlled by no one but everyone. It gives people the opportunity to invest in something much more interesting Defi is a new transparent, fair, global decentralized financial ecosystem, without intermediaries and easily accessible where users have full control of their financial assets.

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Thank you very much for describing the defi technology in such detail, until this moment I used defi only as a tool for earning money, but now my vision of technology has expanded greatly. But I still think it's pretty risky to invest in it.

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On 07.08.2020 at 04:36, kyoukage01 said:

Recently I have been seeing posts mentioning about DeFi (decentralized finance) and the term is new to me. So I got curious and searched this forum for the question "what is DeFi" and I got 1 result from a post here by @Listing.Help . However, sadly I am not satisfied with the information on the article linked in the post.

 

So I will provide a set of related questions here for you guys to answer. Here they are:

  • What is DeFi? (a more detailed explanation) (SOLVED)
  • When was DeFi created?
  • What is its purpose? (SOLVED)
  • How widespread is its use among Bitcoin and the other coins? (SOLVED)
  • Do we really have an urgent need for it? Why? (Open-ended question)
  • Will it greatly affect the current low-end users of crypto? How? (Open-ended question)

You guys don't have to answer all of them, although I'd like to see them all resolved. Also, I will raise a few more questions as we go on.

 

Too technical answers might fly over my head 😓 , so answers in layman (easy) terms will be greatly appreciated.

 

If you can offer a better answer than the previous replies as well, then feel free to do so.

 

Thank you for your replies.

 

About DeFi.

It`s very simple idea. If all traditional finance institute(banks, stock market etc.) - just software, which control with some-kind of legal entity, then why not create all of these institutes on Ethereum or another blockchain smarts contrcts.

So there were protocols that allow you to trade crypto on decentralized exchanges (Uniswap), lend (Compound), manage monetary policy and issue stablecoins (MakerDAO), rebalance assets (TokenSets), create derivatives (UMA), insure risks (Nexus Mutual), and generally do everything that traditional financial institutions do.

If ICO was about raising capital, then DeFi is about all the other functions of the traditional financial market.

One of the very first services of this kind was the Maker project, launched in 2017 and allowing you to get a loan in the Dai stablecoin secured by the Ethereum cryptocurrency.

Edited by DeHydra
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On 07.08.2020 at 04:36, kyoukage01 said:

Recently I have been seeing posts mentioning about DeFi (decentralized finance) and the term is new to me. So I got curious and searched this forum for the question "what is DeFi" and I got 1 result from a post here by @Listing.Help . However, sadly I am not satisfied with the information on the article linked in the post.

 

So I will provide a set of related questions here for you guys to answer. Here they are:

  • What is DeFi? (a more detailed explanation) (SOLVED)
  • When was DeFi created?
  • What is its purpose? (SOLVED)
  • How widespread is its use among Bitcoin and the other coins? (SOLVED)
  • Do we really have an urgent need for it? Why? (Open-ended question)
  • Will it greatly affect the current low-end users of crypto? How? (Open-ended question)

You guys don't have to answer all of them, although I'd like to see them all resolved. Also, I will raise a few more questions as we go on.

 

Too technical answers might fly over my head 😓 , so answers in layman (easy) terms will be greatly appreciated.

 

If you can offer a better answer than the previous replies as well, then feel free to do so.

 

Thank you for your replies.

 

The DEFI was created, when the bitcoin was created (third january , 2009) because the bitcoin was the first decentralised finance. Before it was another crypto, called DigiCash but it was centralised. Proofs you can find there: https://ru.wikipedia.org/wiki/Биткойн

 

Edited by DarkSark
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