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So I am starting to write about Farm Finance, and up till now I wasn't really up to speed on what DeFi was really all about, and as I usually procrastinate in layers, anything that requires me to actually learn a new topic, goes to the bottom of the list, like taking out the trash. So this contest has me going back to school, and boy, I thought I knew a bunch about Crypto, well, let me tell you, with DeFi, I had to start at the bottom, and claw my way back to the surface. The biggest problem I've run into is the new DeFi speak, is that most of it is spoken in obscure (to me) financial techno geek, I need to learn a new language first! Damn!
So, let's see what I have learned, DeFi is a Decentralized Banking Structure sitting on top of the Ethereum Blockchain that seems to have thrown out most of the "Old School" legacy institutional banking structures and rules. It basically makes loans or pays interest on Crypto coins or tokens, making profits doing what is called Industrial Automated Yield Farming.
As a side note, it's almost like the real world is following them with real robots in the AG industry. I wonder if there is some way to create coins for them? and now they they have created their own tokens that they pay out to both lenders and debtors on top of the normal costs or profits accumulated as a bonus.
Comparing legacy Banking with savings accounts that pay interest to Yield Farming, is somewhat the same, other than four important differences.
they create a Token of value ( kinda like a bank stock)
it rewards the lenders tokens above and beyond interest paid from deposit.
it also can reward borrowers with tokens as well!
uses automated Bots to calculate the best investment directions
Another way to explain yield farming would be to compare it with traditional finance. For example, suppose you want a new savings account that offers the highest annualized percentage yield. You would compare the accounts and see which one can give give you the best return for your money across different products. The returns of different yield farming strategies could be expressed in the same way. However, when you think many savings accounts might have a 0.1% APY, meaning you don’t get a lot for your investment, yield farming can boast as much as 100% APY.(maybe)
In DeFi, there are all sorts of strangers on the internet to provide the required liquidity. Hence, DeFi projects like this attract HODLers with idle assets that are struggling to find interest paying ventures with innovative strategies.
I'm still learning, and I'm sure I made have made a few oops on my descriptions, but now that I have dove deep into the subject, I think I'll create a 3D graphic of it to have it make sense to me. I'll keep my eyes open for more learning opportunities.
if you like what you see, come on over to PublishOx ....My ambassador link