All you need to know to invest in DeFi

According to Footprint Analytics, DeFi’s TVL was $ 274.4 billion as of November 23, 2021, but a year ago it was only $ 13 billion.

The rapid development and growth of DeFi has cheered everyone involved in the blockchain space, resulting in a large number of investment institutions. As of the press date, cumulative funding since 2021 totaled $ 24.8 billion, an increase of 626% compared to $ 3.4 billion in 2020.

So what is this powerful beast known as DeFi?

What is DeFi?

DeFi is an acronym for Decentralized Finance, also known as Open Finance. With the rapid development of blockchain, its application scenarios are enriched, of which finance is the most promising industry. It actually refers to a decentralized protocol used to build an open financial system that aims to allow anyone in the world to participate, regardless of time and place.

CeFi and DeFi

Simply put, DeFI is the duplication of traditional finance into a blockchain network. Unlike traditional finance, it provides blockchain decentralization and uses smart contracts to replace traditional financial privileged institutions that allow users to access financial services at low cost and with high efficiency. As shown below, all types of services in open finance are found in traditional finance.

DeFi acts as an integral part of the vast cryptocurrency world, providing many of the mainstream financial services similar to the traditional financial world in a way controlled by the masses rather than centralized entities. increase.

History of DeFi

Bitcoin has laid the foundation for peer-to-peer payment services since its launch in 2009, but Ethereum, launched on July 30, 2015, maximizes the potential of blockchain in finance and forms an ecosystem. Encouraged the launch of new startups and projects for decentralized finance.

Running the MakerDao protocol is a turning point for financial applications in the blockchain space. This allows users not only to transfer money between two addresses, but also to spend more money. MakerDao is an Ethereum-based protocol that allows users to use digital assets as collateral to obtain DAI (a stable coin issued by MakerDAO, fixed at 1: 1 to the value of the US dollar). , Open and unauthorized DeFi ecosystem.

Since then, other smart contracts have come online, creating an increasingly dynamic and interconnected ecosystem.

Released in September 2018, Compound provides a market for borrowers to over-secure loans, and lenders receive income from interest paid by borrowers. That liquidity mining innovation caused the DeFi explosion in 2020 and was called the DeFi Summer.

Launched in November 2018, Uniswap – Ethereum’s Decentralized Exchange (DEX) Platform – provides a convenient trading mechanism that allows users to exchange various tokens on Ethereum.

Since then, DeFi applications have emerged, ranging from the most basic lending to more complex synthetic assets, payments and insurance. A rich and evolving decentralized financial ecosystem has been developed.

6 sectors of DeFi

1. Stablecoin: Foundation of the DeFi ecosystem
2. Transaction layer: With the development of DeFi, performance issues on blockchain, especially Ethereum, are becoming more and more prominent. Therefore, at the transaction level, many blockchains are actively looking for solutions, with Layer 1 to improve blockchain performance and Layer 2 to improve performance. Of Ethereum.
3. Oracle: Oracle provides pricing information for all types of Dapps / protocols. This is a bridge that connects the on-chain and off-chain worlds.
4. DeFi Basic Project: Stablecoin, Transaction Layer, and Oracle are the sectors that form the infrastructure of the DeFi ecosystem, on which you can build a variety of decentralized applications. Among them, DeFi basic projects can be divided into several categories such as DEX, lending, and derivatives.
5. Aggregator: The presence of lending platforms and spreads between different DEXs has stimulated the formation of aggregators. Investor returns are improved by converting highs and lows based on spreads between different platforms.
6. wallet: It serves as one of the most important components of the DeFi ecosystem and is considered a browser for DeFi investors to use different Dapps.

DeFi Knowledge Components

DeFi basics

• DeFi ecosystem
• DeFi sector
• Top DeFi project

Defi project information

• Ecosystem and type
• Tokens and economics
• Function comparison with competitors
• Ranking and numbers

Industry updates

• Fundraising news
• New DeFi project
• Attack news
• Reports and books

How do I get information about my DeFi project?

With so many DeFi projects, how can you get to know them better and faster? You can start with two aspects:

DeFi information

• DeFiLlama: Cross-chain data, project category
• Debank: Crosschain data, project category, publication date
• Footprint analysis: cross-chain data, industry and project dashboards, visualization platforms

Industry reports and books

Report: Report:

Intro book

Overview

This article briefly introduces you to what DeFi is, some of its basic ecosystem, and how to understand your project.

Then share more information on how to participate in a DeFi investment and features that are different from various DeFi projects. We welcome subscriptions and communication. Let’s DeFi together!

This report was provided by Footprint Analytics.

What is a footprint?

Footprint Analytics is an all-in-one analytics platform for visualizing blockchain data and discovering insights. Clean up and integrate on-chain data so users of all experience levels can quickly start exploring tokens, projects, and protocols. With over 1000 dashboard templates and a drag-and-drop interface, anyone can create their own customized charts in minutes. Reveal blockchain data and invest smarter with Footprint.