Home Work Task 7 @gbenga - Introduction to Defi and Yield Farming

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Write on a Decentralized Finance Ecosystem as well as a Project/Protocol in the Ecosystem.

When we talk about DeFi, it’s an ecosystem being developed on either block chain or ethereum technology.
The term defi is an acronym, which stands for Decentralized Finance. It came about in the year 2018 in August.
It all come about on a telegram platform through a conversation between this technological gurus namely, Blake Henderson of OX , Bredan Forster of Dharma and finally Yeo of Set Protocol
Initially it was called DeFy but Henderson suggested DeFi. That was when they were discussing how to name the movement of financial system being built on an ethereum ecosystem.

SOME FEATURES OF A DECENTRALIZED FINANCE (DeFi) IS THAT
1 Its non custodial: meaning it allows individuals to have absolute control over their own assets.
Also over their own data and transactions can be done from one person to another within the ecosystem without any third party interference. Users control their own wallet by holding their own private keys and having access to them anytime.
Because they don’t have custody of your account that’s why we call it non custodial.
Total control is assured with Defi ecosystem.

2 Transparency is another key feature of DeFi

Its so transparent that everyone can easily access their account to verify how the application works. They can also give the individual the opportunity to track their assets with just a click.
Therefore you control your worth at your finger tips.

3 Decentralized

Protocols are developed on a public blockchain like ethereum and these blockchains are run by thousands of nodes.
DeFi platforms are built not be centrally controlled but to be are built to be managed by users themselves.
No third party to tell you what to do or control your finance.

4 DeFi ecosystems are compostable

Developers can build their own applications on the defi blockchain network with the help of open source codes on the defi .
This has brought about great innovations; hence, extra activities can be done on the blockchain.
Thus gives others the chance to generate other decentralized services.
With this when individuals don’t like how the application is being built, they can just copy the code and develop new ones.
Therefore, new apps can always be built on the old blockchain system in case the program is outdated or new innovations has to be done.

After listing the key features of DeFi , let’s go into the difference with CENTRALIZED FINANCE.
DeFi
1 No third party involved whiles centralized needs third part to operate
2 noncustodial when it comes to defi but custodial when it comes to centralized finance
3 involves the use of private keys and centralized does not use private keys.
4 total control over assets when it comes to DeFi but when it comes to centralized finance its in the hands of a third party.

• Decentralized Finace Ecosytem Consists of
  -Wallets and Assets Manangements eg localbitcoins
• Prediction markets eg augur
• Lending services eg binance
• Assets Tokenization eg tokensoft
• Market place and liquidity eg uniswap
• Stablecoin eg wbtc
• Compliance and identity eg civic
• Payments eg matic
• Infrastructure eg ydro

YEILD FARMING AND DEFI

This takes us back to the year 2017 where Maker DAO used the system and has since then be making impacts/waves.
Yield farming is basically the provision of a certain token into a pool in order to provide liquidity. Its more like staking (PoS) which investors earn more crypto currencies by investing their crypto into a farm in order to provide liquidity.
Also with yield farming the liquidity provides deposited funds into a liquidity pool which serves as a source of fund to exchanges or borrows

Several protocols or platforms have been used by investors to invest into yield farming since DeFi become prominent in the digital sector space of cryptocurrency.
Some platforms are Compound , AAVE, Balancer, Uniswap, Curve, Synthetix,(SNX), etc. .

How to identify a legit platform of DeFi

Scam is everywhere nowadays, and our digital platforms or decentralized finance is no exceptions.
Everyone is under attack. You could lose your assets in a twinkle of an eye to fake site who claims to be legit DeFi platforms.
Them come in disguise and if care and proper investigation is not done one could fall a victim to scam.
Please go through some of the things to do in order not to fall prey to scams.

1** PROJECT GOALS**

As an investor don’t just jump into any huge and over promising platforms rather take your time and look vividly into what they intend to bring to the table.
Too much promising staffs turns to be fraud. Too good returns on investments are most at times scams, so much is promised and in the end when the investor benefits for a while then its because he is lucky. One day they will just vanish into thin air with your investment.

2 SMART CONTRACT AUDITING
Its more advisable to do series of cross check on any project to check if its genuine and real before one enters into such contracts.
Check if the project has been audited before making any move.
Most at times project owners do not audit projects because of bad intentions behind it. Sometimes they just fudge something out of the blue just to dub investors,

PROJECT ACCESS TO FUNDS

Make sure there is no way the founder of the project can manipulate the contract since its locking up of funds. Your founder could be manipulating the system to his favor making himself rich whiles the investors earn peanuts or nothing at all.
If such thing or move is noticed then the one needs to advice himself not to venture into such contracts.

TRACE OF ANONYMOUS FOUNDERS.

Every details of the founder should be layed out to the general public. That way everyone knows who to held responsible in case of any defraud or scam.

CONCLUSION

DeFi has made the financial system more stable and that has made a great impact on the life of individuals who have invested on the platforms or protocols. yet its much advisable to make all the necessary investigation to avoid any scam or whatsoever.
thanks to @gbenga for this weeks assignment.