DeFi Guide

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The ultimate Decentralized Finance guide – Learn how to invest in Ethereum’s DeFi

While Bitcoin and the crypto market in general have advanced more and more into the mainstream in 2020, there is one part of the crypto-space that is a mystery even for long-term investors: Ethereum’s Decentralized Finance (DeFi). Despite exorbitant profit opportunities, even long-time crypto investors do not dare to invest in it.

Especially in the late summer of 2020, a few people made a big junk of money with DeFi. Others gambled away their savings within a few days or weeks with the prospect of returns of over 10,000%. Although these stories have become rarer, partly because the buzz and hype have died down, DeFi can still be a very interesting way to passively earn money with cryptocurrencies and achieve extraordinary returns. And in this e-book you will learn how!

A major obstacle for the entry of new investors is certainly the complexity and difficulty to understand all aspects of the DeFi sector. For this reason, we have created a guide that teaches the DeFi basics and shows you how to use Ethereum’s DeFi for your own profits.

🚀 Is it too late to invest in Ethereum’s DeFi? 🚀

Statements like “DeFi is dead” or “the hype is over” are often put into the room. In fact this is not true! The facts and figures speak a different language. DeFi coins still offer exorbitant profit chances on the one hand, on the other hand interest rates for lending are much higher than those of the traditional financial system. For this reason every crypto owner should deal with the topic of DeFi.  – Jake Simmons, Crypto News Flash

You don’t believe us? Then let us prove you wrong! In the following we have collected 6 good reasons why an investment in the DeFi-space is still lucrative and why it is only at the beginning of a rocket-like rise.

1.Total Value Locked (TVL)

The Total Value Locked (TVL), i.e. the total value of all investments made in the DeFi-space has risen continuously despite slight setbacks. This continues to show growing interest.

Defi tvl

Total value of all investments in Ethereum’s DeFi, as of December 03, 2020, source: https://defipulse.com/

2.DeFi tokens still record massive gains

The best performing DeFi tokens show high three digit or, in the case of the YFI token, four-digit gains since the beginning of the year (YTD), despite a stronger setback in their price development.

DeFi coins

The top 5 DeFi coins YTD – as of December 03, 2020, source: https://messari.io/screener/defi-assets-7EE8EDB1

3.Institutional investors re flooding the DeFi-space!

This is undeniably another massively bullish indicator. As the data from IntoTheBlock shows, on-chain transactions of $100,000 or more have grown strongly in the 4th quarter of 2020.

This means that after the fall in the price of some DeFi tokens, institutions are buying up these tokens at low prices. Especially YFI, COMP, LINK, Loopring’s LRC and Curve’s CRV experienced this trend.

A survey conducted by Crypto.com in October with 411 “decision makers” from traditional financial institutions revealed that 58% of those surveyed expressed the fear that they would “lose a competitive advantage” if they did not deal with DeFi products. 61% stated that they are “considering adoption of DeFi as a way to perform financial services with smart contracts”.

Galaxy Digital’s Q3 quarterly report also revealed that the big player invested millions of dollars in two funds focused on DeFi innovators: ParaFi Capital and Robot Ventures. The latter is a fund founded by Robert Leshner, CEO of Compound Labs. The report also shows that other large institutions are also accumulating DeFi tokens. As the report notes, “Three Arrows Capital, one of the largest funds in the industry, invested $10 million in Chainlink’s LINK token during a correction last week. The report also mentioned that Jump Trading, a leading trading company, had accumulated COMP, ETH and SNX tokens.

This shows: Even though COMP (-48%) or CRV (-80%) are far away from their all-time high, among others, institutional investors believe in the success of DeFi.

4.MetaMask reaches 1 million monthly users

The gateway to Ethereum’s DeFi, the Metamask wallet, reached the milestone of one million active users in September. This reflects the steadily growing interest in the DeFi space, as MetaMask is mainly used to participate in the protocols.

metamask users

Development of the number of MetaMask users in 2020, source: https://medium.com/metamask/metamask-exceeds-1-million-monthly-active-users-9da72a1e915d

5.Total number of DeFi users exceeds 1 million in December 2020

A report by Dune Analytics dated December 4, 2020 shows that the DeFi ecosystem has over 1 million unique Ethereum addresses as participants – a more than tenfold increase from the 91,000 addresses on December 4, 2019. Although it is unlikely to be 1 million users, as each actor can manage multiple addresses, the chart below shows the continued growth in demand for DeFi

defi users

Development of DeFi users, source: https://twitter.com/richardchen39/status/1334987924379676673

6.Lower fees are getting closer

Ethereum’s transition to Proof of Stake will solve the problem of high gas fees and make DeFi lucrative for everyone! In addition, various DeFi projects are already developing solutions to the problem. Synthetix (SNX) already presented a live demo of its layer 2 solution in September. Uniswap, the leading decentralized exchange, is working on Uniswap V3. According to founder Hayden Adams, a layer 2 solution will be a major part of the upgrade.

📖 What to expect from the e-book

The e-book is structured in such a way that it introduces you step by step to DeFi-space. After a short introduction to what DeFi actually means and what advantages DeFi has over the traditional financial system, we give you an overview of all investment opportunities. Now that you have developed a good basic understanding, we will introduce the most popular and successful DeFi protocols and applications. Specifically, you will learn all about in great deatail:

  • MakerDAO,
  • Compound,
  • Uniswap,
  • Curve Finance,
  • Balancer,
  • and Yearn.finance.

Afterwards we will show you the most helpful tools to invest in Ethereum’s DeFi. In addition to a wallet that you can use to interact with all applications, we will also show you the best websites that you can use to find the highest returns (APY).

In the fifth chapter, we show you how to invest in the most successful DeFi protocols. With our instructions you will learn how to use Yearn.Finance, Uniswap, Compound and Balancer and evaluate the risks of your investment. As you will find out, using the above mentioned DeFi applications is “nothing magical”. We will also show you the risks of each protocol so that you can make an informed decision about the risk and potential of your investment.

🚀 The greatest success stories of Ethereum’s DeFi 🚀

Yearn.finance – Automated yield farming & a token that is worth more than Bitcoin

The probably most popular DeFi protocol after Uniswap is Yearn.finance and not without reason. The project is the gateway to a multitude of possibilities to do yield farming (not only)! The user needs practically no knowledge of the complex processes and interrelationships in the background, but can fully rely on the programmed logic of Yearn.finance’s various products, and can therefore run automated yield farming. In boom times, returns far above 100% were not uncommon.

That this was a true revolution in the field of DeFi-space and especially for yield farming was also shown in the rocket-like rise of the protocol. In August and September 2020, investors had deposited close to USD 1 billion into Yearn.finance in order to benefit from Yearn.finance’s automated yield farming and other strategies. As of mid-July, only cryptocurrencies worth less than USD 10,000 had been allocated, according to data from DeFi Pulse.

yearn finance tvl

Source: https://defipulse.com/yearn.finance

But not only the protocol, Yearn.finance, but also its governance token called YFI caused a sensation in 2020. At times, the YFI token traded at $38,000, a price almost twice as high as Bitcoin’s all-time high. The main reason for the massive price is that there are only 30,000 YFI, all of which were already distributed to users of the protocol in the early months.

Compound – A pioneer of yield farming

When it comes to yield farming, Compound with its COMP token must be named without a doubt as one of the pioneers in the industry. Like so many Governance tokens after it, COMP’s price exploded within days of its official launch. While 1 COMP was trading at 61 USD at the launch on June 18, the price had already reached 359 USD by June 21. This means that the price of the COMP token almost tripled within three days.

At that time, users rushed into the protocol to participate in the COMP farming and to secure their own tokens. Even though the hype, as well as the price, has subsided in the meantime, COMP is still making strong profits and trading in the top 50 by market cap. Currently, the protocol still distributes approximately 2,880 COMP to protocol users every day. The distribution is proportional to the demand for credit in the respective market (ETH, USDC, DAI…) Within this market, 50% is distributed to the lenders and 50% to the borrowers.

Uniswap beats Coinbase in trading volume!

In October there was a “flippening”, which most experts probably did not foresee for the year 2020. The DeFi madness drove the monthly trading volume of Uniswap to 15.3 billion USD. This was the first time that a decentralized exchange surpassed the industry leader Coinbase (USD 13.6 billion), signaling the beginning of a revolution from overpriced, centralized exchanges to decentralized exchanges that do not charge unnecessary trading fees.

Sneak peek into the e-book

cnf_EFI_guide_en1-5

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