Decentralized Finance, or DeFi, refers to a growing trend in the financial sector to leverage blockchain technology to create an alternative financial system that operates independently of traditional intermediaries. The DeFi movement aims to provide an open financial system that is accessible to a wider range of participants, while offering greater transparency, security, and accessibility through the use of decentralized applications.
At the heart of DeFi are decentralized applications, or dapps, built on blockchain platforms such as Ethereum. These dapps offer a range of financial services including lending, borrowing, and trading, and enable users to interact with financial assets in a secure and transparent manner. The key advantage of DeFi is that it operates on a decentralized network, which eliminates the need for intermediaries and enables users to retain full control over their financial assets.
The benefits of DeFi are substantial, including greater resistance to censorship, tamper-proof transactions, and enhanced transparency. While DeFi is still in its early stages, it has the potential to transform the financial landscape by creating a more open, accessible, and secure financial system. This represents a significant opportunity for individuals and institutions to participate in a new financial paradigm that prioritizes decentralization, security, and transparency.
DeFi is rapidly gaining momentum as an alternative to traditional finance, and a growing number of individuals and institutions are exploring ways to participate in this new financial paradigm. The growth of DeFi has been facilitated by the increasing availability of user-friendly wallets, exchanges, and other tools that make it easy for people to interact with decentralized applications and cryptocurrencies.
The DeFi ecosystem is also attracting significant investment, with a growing number of projects being launched that aim to provide innovative financial services and products. Many of these projects are built on Ethereum, which has become the leading platform for DeFi applications due to its open source nature and its ability to support smart contracts. The growth of DeFi is driving innovation in the blockchain and financial industries, and there is great potential for further developments that could benefit individuals, businesses, and society as a whole.
DeFi represents a significant opportunity for the financial industry to evolve and provide more accessible, transparent, and secure financial services. As the DeFi ecosystem continues to grow and mature, it will likely play an increasingly important role in shaping the future of finance and the global economy.
Why SoDeFi?
What problem are we solving?
Navigating the nascent DeFi ecosystem is difficult. There are tens of chains with hundreds of projects providing unique service offerings through decentralized applications. Tracking the space to understand how it is developing and where are the best opportunities to deploy cryptocurrencies and invest is a daunting task. Participation is made ever more difficult by technical jargon, untrustworthy influencers and volatile, rapidly changing returns.
What is our solution?
Story of DeFi (SoDeFi) simplifies participation in DeFi by providing narrative-based insights and analysis to DeFi users. Our analysis is straight forward, concise and actionable in order to drive further growth in the DeFi ecosystem.
How is our analysis done?
How is our data compiled?
SoDeFi uses open source DeFi data collected directly from blockchains via data aggregators such as DefiLlama and Dune Analytics. The data is then processed through proprietary algorithms to visualize trends and economics activity in DeFi.
How we develop our narrative?
We are a team of finance, economics and technology experts that have closely followed the development of DeFi over the past decade. Our insights are driven by research and conversations with investors, venture capitalist and builders in the DeFi space. We aim to be object and fact-based while sharing the insights we hear.
Annual Percentage Yield (APY): Is a standard metric used to express the effective annual interest rate earned on an investment, taking into account the compounding of interest. APY takes into account the frequency of compounding and the interest rate, and provides a simple and accurate way to compare the yield of different investment options.
Decentralized Exchange (DEX): A platform that allows for peer-to-peer trading of cryptocurrencies without the need for a central authority.
Smart Contract: A self-executing contract with the terms of the agreement directly written into lines of code.
Liquidity Pool: A pool of assets that is used to provide liquidity to a DEX, enabling users to trade assets with ease.
Stablecoin: A cryptocurrency with a stable value pegged to a stable asset, such as the US dollar.
Yield Farming: The practice of lending or staking assets in a DEX liquidity pool to earn rewards.
Oracle: A service that provides real-world data to smart contracts, allowing them to make decisions based on this information.
Gas: A fee required to execute a transaction on the Ethereum blockchain, used to incentivize users to validate transactions on the network.
Total Value Locked (TVL): Is a metric used to measure the total value of assets locked in DeFi protocols. TVL reflects the amount of assets that have been deposited in DeFi protocols, and serves as a gauge of the size and popularity of the DeFi ecosystem. TVL is calculated by summing up the value of all assets that have been deposited in DeFi protocols, such as decentralized exchanges, lending platforms
DeFi Glossary:
Returns in DeFi: Returns or income are generated through the following ways across DeFi protocols:
Lending and borrowing: By lending out assets on a DeFi lending platform, users can earn interest on their deposits. On the other hand, borrowers can pay interest on their loans.
Staking: Staking involves holding and locking up a certain amount of cryptocurrency in a DeFi protocol in exchange for rewards. This rewards system helps secure the network and incentivizes users to participate.
Yield Farming: Yield farming refers to the practice of providing liquidity to a DeFi protocol in exchange for rewards. Users deposit their assets into a liquidity pool and earn a share of the fees generated from trades executed on the platform.
Trading: DeFi trading platforms allow users to trade assets and generate profits from price fluctuations
Real World Assets (RWA) in DeFi: The connection between real-world assets and DeFi lies in the tokenization of these assets on a blockchain. Tokenization enables real-world assets to be managed and traded on decentralized platforms, creating new possibilities for investment and financial services. Decentralization and transparency provided by blockchain technology increase trust and reduce costs associated with traditional methods of managing real-world assets. This opens up new opportunities for investment and financial services within the DeFi ecosystem.