CRYPTO ACADEMY SEASON3 WEEK4 ASSIGNMENT POST FOR @stream4u BY @jimah1k

DESIGNED THIS IMAGE MY SELF

Hello guys;

It’s another wonderful week of this season's CryptoAcademy last week the professor gave a lecture on Coin market cap even though at the time of the lecture I wasn’t eligible to take part but I read the lecture notes and I have gained a lot of knowledge. I am happy that this week I am now eligible to take part in this week's lecture was all about Cefi, Defi, and yield. And I must commend our professor @stream4u for yet again delivering another understandable lecture. After reading the lecture notes and doing my research I hereby present my assignment for this week's task.

Q1

What Is the Importance Of the DeFi System?

Before I answer this question I would like to explain the term DeFi system so that from the explanation we will be able to tell some importance of the DeFi system.

DeFi system

DeFi system is a short acronym that stands for Decentralized finance system. To make this term more understandable Am going to explain the two words that make up DeFi which is Decentralized and Finance. In our previous lectures we all got to know that a decentralized system is one where the users have total control of their assets meaning there is no involvement of any third party or ‘middle man’ in transaction whiles Finance has to do with how you control and manage money. So now in the world of crypto you can say that DeFi is system that was established in the blockchain technology to grant the users total control of their assets or money. This is to mean there will be no involvement of any third party or ‘middle men’ when transactions are carried out. The users also have the power to transfer and receive assets at any time he desires. There are so many advantages of a DeFi below are the advantages or importance of this system.

IMPORTANCE OF A DeFi SYSTEM

Decentralized finance system ever since they were established on the blockchain have given provided some advantages below are some of the importance they provide.

Firstly, deFi systems provide the user with 100% Control of their assets or money this means that the user can send and receive money at any time without the involvement of a central authority I had an experience last week I went to send money to someone through the bank and I was told that the tellers who send the money are currently busy so I should come back in 5hrs time. in this case the money was mine but I was not having total control of it. In DeFi systems the user is granted total control because you can send and receive at anytime without central authority in the example states above the central authority can be referred to the ‘tellers who refused to send the money’ another example is the banks don’t open on Sunday’s limiting the control the user has on their money DeFi systems aims on erasing that.

Secondly, This system eliminates all Central authorities in transactions executed on the blockchain am going to use the same experience I had with the bank I was not able to send money because of central authority in a DeFi systems all central authorities are nullified or eliminated so anytime a user is performing any transactions he wont be interrupted by any central authority.

Thirdly, in a DeFi system in blockchain the transaction fees are always low because since this system eliminates third parties, no transaction fees are paid to them thereby saving the user from extra cost If you look at the CeFi system the user pays extra fees for the intermediaries thereby increasing the transaction cost per transaction.

Last but not the least, if you look at the registeration process of a DeFi system you will notice it’s very simple they only need few details of the user not personal details unlike the CeFi system which requires verification of personal details and also the user in a DeFi system is free to perform any kind of transaction once you are registered

Q2

Flaws in Centralized Finance.

When we say Flaws it means disadvantages or demerits of something. Here again I will explain what a centralized finance is (CeFi). CeFi system This system is the exact opposite of decentralized system, this system doesn’t give the users total control of their assets or money but is controlled by a central authority. Rules and regulations are made for the users to abide.

FLAWS OF CeFi

Firstly, in a CeFi system the user is not granted total control of his assets meaning he can’t enjoy the freedom of sending his assets at anytime he wishes but he has to follow the rules and regulations that are laid down an example is the bank if they say you can’t transfer money today because they aren’t working you can’t. You have have to wait until they resume.

Secondly, In the DeFi system I mentioned that there is the elimination of central authority but in this system central authority is key. Because the whole system runs on the rules and regulations that are set by the central authority. So let’s say you want to send money to someone the central authority need to verify the transaction before if goes through. If they decline it you can’t complain.

Thirdly, Long verification process before you can be able to start trading in a CeFi system the user needs to go through a lot of verification process where you will asked to give your personal details like you phone number, date of birth, emails and even your house address and sometimes if the user doesn’t verify his details you are banned from taking part in certain trades.

Lastly, High cost of transaction fees, this is because there are involvements of third parties whenever the user is a making transaction the transaction fee is different from the extra fee that will be charged for the third part making the transaction fees very huge unlike the DeFi system who’s fees are low.

Q3

DeFi Products. (Explain any 2 Products in detail).

From the lecture notes we found out that lending and exchanges are examples of DeFi products I will take my time to explain these two your understanding.

Lending

Just like how people go to the bank to borrow money. The same applies to DeFi system but here smart contracts help or aid people to borrow assets such that it connects or links the person who is supplying the assets(lender) to the one who is going to borrow. The one who borrows them pays back in interest. One of the most popular lending platform is Just lend

Justlend

Justlend is a platform that is powered by tron which allows user to supply tron based assets into a lending pool (people supplying assets to be borrowed) so that other users can borrow those assets and pay back with interest. Every assets in the justlend market has its Supply APY meaning yearly interest and borrow APY meaning yearly interest below is a table that shows the coin and its supply APY and borrow APY.

Cryptocurrency	Supply APY	Borrow APY
Tron (TRX)	4.7%	2.61%
Tether USD(USDT)	6.46%	1.37%
TrueUSD(TUSD)	5.61%	1.46%
SUNOLD(SUNOLD)	0%	10.48%
JUST Stablecoin(USDJ)	10.56%	1.66%
JUST(JST)	12.90%	2.74%

source

source
A screenshot of justlend market

Decentralized exchanges

This is also one of the main products of the DeFi system which allows its users to buy and sell his assets, swapping of assets lets say you have BNB you can swap the BNB for CAKE or other assets using this decentralized platform without the disturbance or interruption of any third party. Also users can also earn by providing liquidity into a liquidity pool and harvesting the rewards. An example of a decentralized exchange I will be talking about is PancakeSwap.

PancakeSwap

Pancakeswap is a exchange platform which is purely decentralized which was lunched in September 2020 which uses AMM which is an acronym which stands for automated market marker the AMM allows the user to trade or sell his digital asset the main aim of the establishment of this platform is to help or aid users to be able to exchange tokens or swapping. this platform runs on binance smart chain and uses BEP-20 tokens with pancakeswap the user can stake his or her tokens to earn rewards. transaction fees in pancakeswap are lower as compared to BTC and ETH. Pancakeswap is compatible with trust wallet BSC and also metamask.

PancakeSwap price statistics

Pancakeswap	Statistics
Pancakeswap price	$12.59
Price change 24hr	$1.3
24h Low / 24h High	$11.09 /$13.31
Volume / Market Cap	0.1568
Market Dominance	0.19%
Market Rank	#34

source

Source
Pancakeswap home page

Q4

Risk involved in DeFi.

Every platform has it advantages and disadvantages I have already talked about the advantages of a DeFi system now I will be talking about some risks involved in a DeFi system.

Firstly, one risk that is involved in a DeFi system is in a decentralized exchange like PancakeSwap a liquidity provider provides liquidity of two assets of equal proportion into a liquidity pool and one asset is more volatile than the other or increases in price impermanent loss maybe experienced this loss will become permanent if the liquidity provider withdraws his assets.

Secondly, DeFi systems uses smart contracts to operate transactions so when there is a slight problem with the code structure of the smart contract the user is likely to lose all his assets which is very bad because on e it’s lost it can not be retrieved again.

Thirdly DeFi systems lack insurance policies for incase you are hacked or loss your funds. So if your account gets hacked or you lose your funds you suffer the loss because there is no insurance policy to return or payback some of the assets lost. CeFi system provides insurance policy to its users.

Last but not least, another risk involved in DeFi system is transaction takes time before they can be executed unlike the CeFi system which executes many transactions within seconds and also the transaction fees at some point in DeFi systems are very expensive.

Q5

What is Yield Farming?

Traders or investors earn tokens by locking their assets over a given period of time into a liquidity pool and come back after that given period to claim the rewards. (APY). Yield farming is sometimes referred to as letting your cryptocurrencies work for because you just lock them and come back and claim rewards so it is advised we lock the assets we aren’t in need of currently so that we will gain rewards.

Question 6

How does Yield Farming Work?

This system works in a way that the user who provides these assets usually two, is referred to as the liquidity provider (LP). The LP provides these two assets into a liquidity pool and lock them over a given period. Now when you lock these assets, the assets provided by the LP is then used to supply to other users who want to borrow. Once they borrow they will pay in interest that’s when the yield farmer gains profit. Automated Market Marker(AMM) is responsible for setting up or creating a liquidity pool for users to supply their assets to.

I provided liquidity of CAKE-BNB sometime ago so I am going to show you how to stake LP tokens in farms.

• First of all make sure you pancakeswap is connected to your BSC wallet.

• I clicked on farms, selected CAKE-BNB pool and clicked on approve contract and I made sure I confirmed it on my BSC wallet.

• clicked on stake LP and clicked on confirm.

• CAKE-BNB LP staked.

Q7

What Are the best Yield Farming Platforms and why they are best.

First of all I am going to list examples of yield farming and select the platforms I think are the best.

• PancakeSwap
• Curve finance
• Uniswap
• Aave
• Yearn finance

Among this yield farming platforms I think PancakeSwap and Curve are the best and I will present my reasons.

PancakeSwap

ASU said earlier on Pancakeswap is a exchange platform which is purely decentralized which was lunched in September 2020 which uses AMM which is an acronym which stands for automated market marker the AMM allows the user to trade or sell his digital asset the main aim of the establishment of this platform is to help or aid users to be able to exchange tokens or swapping. this platform runs on binance smart chain and uses BEP-20 tokens with pancakeswap the user can stake his or her tokens to earn rewards. transaction fees in pancakeswap are lower as compared to BTC and ETH. Pancakeswap is compatible with trust wallet BSC and also metamask.

PancakeSwap price statistics

Pancakeswap	Statistics
Pancakeswap price	$12.59
Price change 24hr	$1.3
24h Low / 24h High	$11.09 /$13.31
Volume / Market Cap	0.1568
Market Dominance	0.19%
Market Rank	#34

source

Curve

According to my research this yield farming platform is the largest platform with over 8.2 billion assets that are locked This platform is a Ethereum based platform. Curve also provides the users with many assets in the pools to choose from with relatively high APY most of the pool coins provided by curve are stable coins. Users are advised to use stable coins to provide liquidity because it helps reduce impermanent loss since there non Volatile. Just as PancakeSwap curve’s platform is user friendly. According to curve statistics

Total pool deposits and daily volume
Deposits: $8,575,347,081.89 (includes factory pools)
Daily volume: $294,561,252
Factory daily volume: $5,737,061
Source

Source
A screenshot of list of pools from curve

Curve DAO TOKEN	Statistics
Curve DAO TOKEN PRICE	$1.45
Price change 24hr	$0.191
24h Low / 24h High	$1.25 /$1.47
Volume / Market Cap	0.2286
Market Dominance	0.04%
Market Rank	#91

Source

why are they the best

PancakeSwap and curve both have a user friendly platform everyone with little knowledge of the computer can use their platform and also apart from the rewards you can earn by supplying liquidity into a liquidity pool PancakeSwap has some features you can earn with.

let’s take a look at some features of pancakeswap which you can make money with in pancakeswap a feature called lottery with this feature users can win assets. What happens is that users buy tickets with their assets if your ticket Number is the same us the wining numbers you win the price pool. and team battle can help the users to win some assets

Also the transaction fees in pancakeswap is lower than some yield farming platforms with high APY rates.

If you look at Curve finance it provides the most pools among all the yield farming platforms with very good APY. this pools that they provide are mainly stable coins this way one might avoid impermanent loss.

Q 8

The Calculation method in Yield Farming Returns.

If a yield farmers wants to calculate his returns there are two ways you can do it there are;APY and APR

APY

This is the annual percentage yield(APY) or the yearly interest, it is calculated with a formulae

APY = (1 + r/n)^n - 1, where n= The total compounding period, r = rate

I am going to calculate the APY of this cake I staked using the formulae the APY from the screenshot is 106%,
therefore Rate = 1.06, n= 365 substitute into the equation you will have

APY = (1+1.06/365)^365-1
APY = 1.88194033695
APY = 1.88194033695 * 0.65
APY = $1.22326121902 = $1.2233

Profit after 1year = 1.2233 + 0.65 = $1.8733

APR

This refers to the annual percentage rate of an investment this can be calculated by

Again I will be using a real example to calculate my APR on the cake I staked.

(APR) = 71.22%, to find the interest I would make for a month divide the APR by 12(i.e 12months) which would be (71.22/12) = 5.935%. Meaning I will be earning at rate of 5.935% monthly. To find the amount worth in dollars, divide 5.935 by 100 and multiply by the amount of cake I invested which is 0.25. This can be mathematically written as (5.935/100 * 0.25). Which is equal to $0.01484 monthly profit.

The question was yearly profit so 0.01484 * 12 = $0.17808 APR will be earned a year.

Q9

Advantages Of Yield Farming

Firstly, yield farming helps the users to gain a lot of profits by letting your cryptocurrencies work for you that is by locking them in a liquidity pool and gaining profits annually.

Secondly, low start up capital meaning you don’t need to have over $500 before you can be a yield farmer as low as $0.65 worth of CAKE can do the trick.

Thirdly, yield farming platforms doesn’t require any personal details before you can supply in liquidity all you need is you asset abd you can supply as many liquidity as you want there is no limit.

Last but not least the user is at liberty to borrow assets without any participation of any third party since its decentralized in nature and also you can decided to lock your borrowed assets and earn on them.

Disadvantages of yield farming

Firstly, the yield farmer may experience impermanent loss if the assets he supplies to the liquidity pool is volatile or if one of the assets increases in price. So it is advised to use stable coins to supply liquidity.

Secondly, Some yield farming platforms have high transactions fees due to high cost of network maintenance an example is uniswap and other Ethereum based platforms.

Last but not the least when the slight problem in the coding of the smart contracts the user might loss his assets and here is the case DeFi systems are not having any insurance.

CONCLUSION

DeFi system have broken then chains of users giving them total control of your assets. Send and receive your assets at any time without any influence of a third party. Just like every other systems they have their advantages and disdisadvantages despite the disadvantages I can say that the good over-ways the disadvantages and it’s the reason many are opting for Decentralized finance.

Yield farming helps us to make good use of our crypto currency’s by making them to work for us. You can gain lots of profits from yield farming it is advised that when you are providing liquidity to the liquidity pool you should use stable coins to avoid impermanent loss. Thank you professor for this wonderful lecture.