Become a better investor
Let's dive deeper into the fundamentals of this innovative technology.
Resources shown in the video:
Yield farming is a way to generate rewards with our cryptocurrency holdings by adding to liquidity pools.
When we deposit tokens into the liquidity pool on Uniswap, we receive LP tokens that represent our ownership of that liquidity pool. We could take our LP tokens from Uniswap and then deposit them on an application called Badger (app.badger.finance) to earn interest in other types of rewards.
Yearn finance is an example of a yield aggregator. Instead of us trying to find the best yields in defi, deposit your assets with yearn they'll do it for you in an automated fashion. We can earn somewhere between 0 to roughly 40% on our tokens with the different vaults here.
We can also check out Aave, which is an application for lending and borrowing. I could lend out tokens I own by depositing it and earn about interest. If I wanted to borrow tokens, I could put up different tokens that I own as collateral and pay interest. All of this lending and borrowing comes straight out of our MetaMask wallet.
We can connect our wallets to exchanges and applications that are on different blockchains. PancakeSwap is similar to Uniswap but, if I try to connect my wallet, I get halted because PancakeSwap lives on the binance smartchain; it doesn't live on ethereum like Uniswap. So I actually need to go to my MetaMask wallet and switch blockchains, which I can do right in the browser. Once I switch chains, my MetaMask wallet links up nicely. This also happens when we switch to other applications on different blockchains.
Coingecko is an example of a Web 2.0 application - uses email and password information held in a centralized location/server. Decentralized applications do not keep our information, rather we can connect our crypto wallets to them.
First, we decide what kind of token we want to buy, such as MANA for the application Decentraland. On Coingecko, we can click the little contract address, then up to our Metamask wallet and we can add the token.
By decentralizing liquidity for everybody, what are we actually is creating exchanges where you and I can provide the underlying capital by which we and other people can do trades. If you look at our example on Uniswap, by adding liquidity you'll earn 0.3 percent of all trades on the WETH - MANA pair proportional to your share of the pool
Uniswap is the biggest decentralized exchange and they're also called an automated market maker because, instead of a centralized market maker creating a market artificially, we have code, we have al, we have mathematics, and we have you and I providing our liquidity. That's all we need.
To get an idea of how these two tokens create a market, we can head over to uniswap.com and we can actually track our MANA - ETH pair. What you'll notice with uni swap is every asset will also have an ETH pair. So every asset on uni swap has a two-sided liquidity pool and one side of that liquidity pool is ETH. Therefore ETH is our bridge asset between all of these pools.
If I wanted to go from WBTC to USDC, we would have to go from WBTC through ETH and then to USDC.
Gone are the days of the order book. Order books are a way for centralized exchanges on wall street, or any of the major central exchanges of the world like tokyo or london, to keep track of transactions. Centralized exchanges hold funds, have a buy side, and a sell side by which you and I can trade underlying stocks and they house all of the funds. In the decentralized world, you and I provide those funds and the public blockchains track the transactions when we use decentralized exchanges like Uniswap.
There are a myriad of tokens that we can trade that are all compatible with a Metamask wallet and follow the same token standards. Token standards are being created on different blockchains so that if uni swap and then another organization build two different tokens we want them to be compatible so we can do business with each other.