Aave is an open-sourced money market platform on the Ethereum blockchain. Users can deposit assets as collateral for borrowing of another asset. This is an interest bearing protocol, that Rari Capital has integrated!
Digital wallet with address (0x........) allows you to receive transitions on the blockchain. The address is a character string that is used as your "personal id/identification"
Annual percentage yield represents the rate of return for your interest accrued. Unlike annual percentage rate (APR), APY stresses the idea of compound interest that you are earning in DeFi. To calculate your daily ROI, divide APY by 365 for the daily rate.
Oftentimes in inefficient markets, you have many opportunities to profit off of imbalances. This can happen with asset prices being different depending on the exchange or switching between interest rates.
Security and smart contract risk is the most important aspect of DeFi. All protocols should have their smart contract audited, which allows a third-party service into the codebase to check for potential bugs or vulnerabilities that may have not been noticed by the engineering team.
Market makers play a huge role in DeFi, as they play the roles of ensuring liquidity on both the buyer and seller’s end. An automated market maker is a smart contract that creates liquidity pools of specific ERC20 tokens which are traded algorithmically rather than individual trading. Liquidity providers (LP) earn fees based on their liquidity provisions in creating market efficiency.
This is used for long-term storage of crypto assets. Examples of this include hardware wallets and paper wallets.
Borrowing a digital asset to gain exposure on other assets.
Similar to Aave, Compound Finance is a money market protocol that bears interest to its users. Rari Capital has this protocol integrated!
Cryptocurrencies are also known as digital currencies. These are algorithmic based currencies that live on the blockchain and available to send and receive.