General DeFi FAQ
New to DeFi? Here are some of the basics you should know.
What is Defi? DeFi, also known as decentralised finance. It refers to financial services using smart contracts, which are automated enforceable agreements that don't need intermediaries like a bank or lawyer and use blockchain technology instead. What is UNISWAP? Uniswap is a decentralised exchange in the form of two smart contracts hosted on the Ethereum blockchain, as well as a public, open-source front-end client. It's a 100% on-chain market maker allowing the swapping of ERC20 tokens, as well as ETH to an ERC20, and vice-versa. What is a liquidity pool? Liquidity pools are pools of tokens that are locked in a smart contract. They are used to facilitate trading by providing liquidity and are extensively used by some of the decentralized exchanges How do Liquidity pools work? Liquidity pools hold one or more token reserves. These reserves are programmed to perform trades according to a predetermined formula which continuously measures the supply of tokens held in each reserve. What is Liquidity Pool token? Liquidity pools extract a percentage fee from each trade that is deposited into the pool’s reserves. Any user can act as a liquidity provider to a pool and collect a share of its trading fees by depositing tokens into a pool and holding its “Pool Token”. What is APY? APY stands for Annual Percentage Yield. representation of an interest rate, based on a compounding period of one year. What is farming? Yield farming is a way to make more crypto with your crypto. It involves you lending your funds to others through the magic of computer programs called smart contracts. In return for your service, you earn fees in the form of cryptocurrency.
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