CRYPTO ACADEMY WEEK 7 HOMEWORK POST FOR [@gbenga]||23-03-2021||Introduction to Defi and Yield Farming||

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DECENTRALIZED FINANCE(DEFI)
Decentralized Finance is a form of financial transaction that does NOT involve intermediaries like banks or brokerage.As such,**DeFi is said to be open source, transparent and permisionless.

In another sense,we can say that DeFi is a system of financial transaction that is built on a blockchain (record of immutable transaction which is secured by cryptography).

ETHEREUM ECOSYSTEM
ETHEREUM is an open-source and decentralized blockchain that is run with the cryptocurrency called Ether(ETH). Ethereum was launched in 2015.
Ethereum ecosystem runs on a decentralized blockchain which makes it to be trustless, permisionless and transparent.There are over 200 projects built on Ethereum.
Ether(ETH) is the native currency in the Ethereum blockchain which is traded as a digital currency and is used to run applications in Ethereum.Interestingly,Ether is only second to Bitcoin (BTC) in the cryto world.

KEY FEATURES OF THE ETHEREUM BLOCKCHAIN

•No intermediaries or third parties are involved in the ecosystem.

•The Ethereum blockchain offer users the opportunity to transfer ETHER from one user to another.

•It is also used to run secure contracts because the transactions are permanently recorded in a ledger.This will help to reduce the risk of fraud.

•Transactions are fast,quick and reliable.

•Transactions are auditable and transparent and as such it is easy to trace activities.

•It also offers decentralized functions because the transactions are NOT stored in a central server that is controlled by a single authority.It cannot be manipulate by any third party.

ACTIVITIES THAT ETHEREUM ECOSYSTEM WILL STRENGTHEN

•Lending and Borrowing.

•Decentralised Market Places.

•Monetary banking services.

PROJECT BUILT ON ETHEREUM ECOSYSTEM

UNISWAP

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Uniswap is a decentralized exchange that runs on the Ethereum blockchain.Its native token is UNI.

This means that Uniswap is an open source decentralized software which is NOT under the control of any third party or a single authority.
Changes cannot be done by any third party except if all the users vote for such changes.

Such decentralized exchange offers high security and transparency as no single authority can delete or erase or control the transactions therein.

Uniswap was built in 2018 and it offers trading of ERC-20 with the support of a wallet like MetaMask.

KEY FEATURES OF UNISWAP

•It is Open source:
Which means one can create his own decentralized exchange with its code.

•Users have total control of their funds.

•It is highly secure as user's data is not entrusted to any third party

•Users can exchange ERC-20 tokens without intermediaries

WORKING PRINCIPLE OF UNISWAP/HOW IT WORKS

It is clear that there is NO central authority or Order book required for transactions to take place on Uniswap.

For this to happen,Uniswap has what is termed Liquidity Pool which is created by Liquidity Providers.Once you have an Ethereum address,you can contribute to the Liquidity Exchange and make money.

The people that contributed to the Liquidity Pool are rewarded with a token according to the value of their contribution to the pool.

For instance,if one contributes $5,000 to a pool of $100,000 it means the person will earn a token of 5% from that pool.

It is worthy to note that there is a fee of 0.30% for trading on Uniswap.The 0.30% goes to the reward pool and the contributors to the pool rewarded from the proceeds according to their contribution.

Inorder to contribute to the Liquidity pool,one needs to have equivalent ETH and ERC-20 tokens which you can exchange(Exchange smart contract) or contribute(Factory smart contract) to earn money.

BENEFITS ON UNISWAP(UNI)

•It is flexible.

•Level of security is high.

•Much privacy and compatibility.

•Not subject to censorship

HOW PRICE IS DETERMINED ON UNISWAP
Price of a token is not determined by the price set by the seller or buyer.
As The token is being bought,a proportional amount of the token has to be sold so as to maintain a balance.Them the price is determined by:
•The constant product formula
and/or
•The ratio of tokens in the pool

TO USE UNISWAP
First off You need to have
•A wallet like MetaMask

•ERC-20

•ETHER(ETH)

•Then place an order on the number of UNI you wish to buy.

Currently UNI is around $33

CONCLUSION
Decentralized finance is the future of transparent and secure financial transactions.The banking method will soon give for the quick, reliable, permisionless and transparent mode of transaction.
Ethereum ecosystem will play a big role in this paradigm shift will take the financial world to a state of eldorado.

Thank you Professor @gbenga @steemcurator01 @steemcurator02

REFERENCES
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