THE STEEMIT CRYPTO ACADEMY WEEK 7: INTRODUCTION TO DeFi & YIELD FARMING || LECTURES BY Professor @gbenga || Homework done by @xkool24 ||

Hello friends, it's nice being here again to participate in this week's homework Task. It was a nice Lecture from our able professor_@gbenga. Without much delay, I will want to take on the homework Task below.

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

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THE DECENTRALIZED FINANCE ECOSYSTEM (DeFi)

Decentralized Finance may be breakthrough from the centralized system of operations that needed to be consolidated for outright takeover of the financial activities in its platforms. Decentralized Finance is a blockchain base platform that doesn't require the activities of central financial players to execute it's traditional financial activities/instruments but rather uses its built smart contracts on blockchain. This financial players also known as the third party executioners include the brokerages , exchanges, insurance outfits or banks.

Decentralized finance has been seen to be a shift from the centralized system of transaction to the peer-to-peer platforms which is enabled by decentralized platforms and built on the Ethereum blockchain. DeFi has continued to expand its protocol networks and financial tools as it builds more leverage on its lending & borrowing platforms to stablecoins & tokenized BTC. This network expansion and activeness within the blockchain has been sustained with DeFis over $13 billion worth invested within the Ethereum smart contracts.

BENEFITS OF A DECENTRALIZED FINANCE
There are numerous benefits the DeFi could offer but with the scope of this post , I will limit my discussion on a few of them. We are meant to know that DeFi with the aide of the Ethereum blockchain protocols was able to derive it's outstanding benefits as seen it's platform.

• Transparency
  The protocols seen on both the Ethereum and DeFi is one that allows an open source for public persual, audit and also build on . All transactions made in the blockchain are made accessible to all parties and users in the network.

• Programmability
  DeFi are high in programmable smart contracts with capacity to create new financial instruments and digital assets.

• Immutability.
  This is the inability to tamper with transactions while still processing from end to end. This increases security and auditability of data in the ecosystem and also boost confidence.

• Permissionless
  DeFi allows an open access to all crypto users irrespective of geography. As far as the users are connected via internet, they will continually have access and permission to the platform.

• Other benefits include Interoperability and SelfCustody.

USE CASES FOR DECENTRALIZED FINANCE (DeFi)

The DeFi after when it was launched, has opened a new world of economic opportunities for all users in the globe. It is really indeed an emerging ecosystem of that also all other smart contracts to run on its protocols.

• Used for Asset management: it allows the user to own and control his data and assets (coins) via the use of wallets. It could be enhance by the use of private keys, passwords etc, all geared for security of assets.

• Compliance and KYT: unlike what is found in the centralized platform where a customer needs to go through the rigorous processes of compliance and KYC upgrade, the DeFi only works with the principle of Know Your Transaction (KYT). With this in place, tracing risk in real time is achieved with capacity to protect users against fraud and financial crimes.

• Data and analytics: DeFi pulse and Codefi Data are new DeFi apps used analysize risks in the platform, compare liquidity with yield and as well as track DeFi protocols

• Used as Derevatives: This simply means that can represent the real-world assets. This may include the fiat currencies, bonds, and commodities and also the cryptocurrencies.

• Used in Gaming: this has also allowed projects developers to be built on the DeFi protocols which is possible because of their built-in economies and innovative incentive models.

• Other Use cases include the DEXs, Developer and infrastructure tooling, For Identify, Insurance purpose, Lending & Borrowing, For Payment purposes, Stablecoin, For Savings purposes, Tokenisation, Trading etc. The use cases of the DeFi is indeed and expanded new opportunity that is yet untapped.

PROJECT/PROTOCOL IN THE DeFi ECOSYSTEM
Just as seen in the use cases of the DeFi, there are many project/protocols built and already running on the DeFi protocols. But in line with this I would be discussing the UNISWAP DeFi.

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THE UNISWAP DeFi

The UNISWAP is a Decentralized application built on Ethereum blockchain that comprises of a set of computer programs which allows the swap of cryptocurrency tokens with its unicorn. Just like the decentralized platforms, Uniswap does not work with the trust concept but rather depend solely on the workability of it's blockchain protocols. A certain set of conditions are met so as to receive value from the other user.

Users of the UNISWAP platform have the capacity to lend to the liquidity pool which are made readily accessible to borrowers who met the set up guidelines with fees paid back to lenders as interest rates in the ecosystem as compensation for funds deposited. That is to say, it enables transactions between cryptocurrency tokens on the Ethereum blockchain

UNISWAP IN THE ETHEREUM BLOCKCHAIN

UNISWAP protocol is simply that liquidity pool developed on the decentralized Ethereum blockchain that enables users to trade without necessarily passing through the third parties or intermediaries. It is a DApp that does not require centralized unit to authorize trades but which comes with high degree of decentralization and censorship resistance. Being a liquidity pool, it does not enroll in listing process, hence there are no listing fees charged on the DApp.

HOW DOES UNISWAP WORK
UNISWAP is designed from the variant model of Automated Market Maker (AMM) in the form of Constant Product Market Maker which does not align to the usual traditional architecture of exchanges that works with order books. AMM are smart contracts with liquidity which enables traders transactions. Liquidity pool can be funded by anyone with capacity to deposit value twice of the token in the pool.

Liquidity providers provides value of two tokens into the pool can either be in ETH or ERC-20 tokens and due to the volatility of the market, Liquidity pools are made up of Stablecoins such as DAI, USDC or USDT to retain the value of tokens in the pool.

So, for example, in the ETH/USDT liquidity pool, let's assume the ETH portion to be x and the USDT portion to be y. The x and y variables are multiplied to to get the total liquidity in the pool. The total liquidity in the pool is seen as "k" bearing in mind that total liquidity "k" will remain constant.
With this theory, Total liquidity in the pool is calculated as; x * y = k

Let’s say if xkool24 wants to buy 10 ETH for 3000 USDT using the same ETH/USDT paring liquidity pool as quoted above, this automatically increases the USDT value in the pool by 3000 and decreases the ETH value of the pool by 10. This simply indicates that the price of ETH will go up due the transaction that reduced it's quantity in the pool. This mechanism is what determines the pricing. The larger the liquidity pool, the easier the process orders.
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HOW DOES UNISWAP MAKE MONEY
All fees gotten from the liquidity pool goes to the liquidity providers hence making no fraction getting to the founders, recently a portion of this fee was dedicated to the development of Uniswap and improvement of it's version. A 0.3% of this transaction fee are paid to the liquidity providers which automatically goes into the pool for onward claim by the liquidity providers. Let's also remember that fees are distributed based on the share owned in the pool.

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UNISWAP UNI TOKEN
Its native token is known as UNI, which is regarded as a governance token. This token (UNI) allows holders of it to vote when there are new developments and changes in the platform. This changes may include, how newly minted token should be distributed to developers and the Community as well as also determine changes in fees.

The UNI token was seen to be created out of competition pull (by SUSHISWAP) who tried to incentivize users to relocate to its DApp. This prompted the creation of 1billion UNI tokens.with over 15illion given out as nouns to all UNISWAP users. Each person was seen then to received about 400 UNI tokens which amounted to over $1,000. Funnily, ShushiSwap is a fork of Uniswap.

HOW TO QUICKLY USE UNISWAP

• Access pay by using https://uniswap.org
• Click on the “Use Uniswap” icon & select your preferred wallet
• Login into your wallet and allow for synchronization.
• Goto swap token option on your screen and input all details then click on swap
• A preview window of the transaction will appear and you will need to confirm the transaction on your ERC-20 wallet.

Note: You have to wait for the transaction to be added to the Ethereum blockchain. The progress of your transaction can be checked by inputting your Transaction ID into https://etherscan.io/. For the transaction ID, that would be sent to your wallet.

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Thank you for all your attention here. Professor @gbenga, this is my entry for week-7 homework Task

Cc: @steemcurator01, @steemcurator02