Decentralized platforms, dApps, DeFi protocols, and other decentralized projects could sound intimidating and complicated for a broad public. This limits the mass adoption of these promising and revolutionizing technologies.We aim to reach a wider audience with low or insufficient expertise in this field to help anyone get involved in this new, advanced, fair decentralized world.
We use multiple data sources both with original first-level data and data aggregators.
As for data aggregators, we prefer to use long time existing, reputable, and proved reliable data providers.
Most of our sources are listed in our “Useful resources” section.
In a nutshell, Blockchain can be explained as a data structure that keeps records about transactions in a proven secure, transparent, and decentralized way.
It can be also described as a chain of records stored in the forms of blocks which are not controlled by any authority.
The more deliberate explanation can be found here
Coins are any cryptocurrency that has its own independent blockchain (Bitcoin, Ethereum, EOS, …)
Altcoins – short for alternative coins, are any coins that are not Bitcoin.
Tokens are cryptocurrencies that do not have their own blockchain but exist on a parental blockchain.
At the moment, most tokens with cryptocurrency features are ERC-20 tokens based on Ethereum
Each DeFi protocol’s underlying smart contract on the Ethereum blockchain has assets deposited (locked) on its account.
The total balance of Ether (ETH) and ERC-20 tokens held by these smart contracts is referred to as TVL.
TVL(USD) is calculated by taking these balances and multiplying them by their price in USD.
DeFi is short for “decentralized finance” which is an experimental form of finance that does not rely on centralized financial intermediaries such as brokerages, exchanges, or banks, and instead utilizes smart contracts on decentralized blockchain platforms, mainly Ethereum.DeFi platforms allow people to lend or borrow funds, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in a savings-like account.
Automated market makers are smart contracts that create a liquidity pool of ERC20 tokens, which are automatically traded by an algorithm rather than an order book. This effectively replaces a traditional limit order-book with a system where assets can be automatically swapped against the pool’s latest price.
There are no buy or sell orders, and traders don’t need to find someone else to sell their coins to. Instead, a smart contract acts as the maker in an exchange transaction.
The concept is similar to quick-swap services, but the difference is that the company’s reserves are replaced with liquidity pools based on smart contracts.
A liquidity pool contains two assets in a trading pair. The relative percentage of each token in that pool is what determines the theoretical price of a particular asset. The first live AMM was Bancor, but the most popular platforms today are Uniswap, Curve, Kyber, and Balancer.
Liquidity pools, in essence, 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.
One of the first projects that introduced liquidity pools was Bancor, but they became widely popularized by Uniswap.
Some liquidity pools pay their rewards in multiple tokens. Those reward tokens then may be deposited to other liquidity pools to earn rewards there, and so on.
The basic idea is that a liquidity provider deposits funds into a liquidity pool and earns rewards in return.
Yield farming also referred to as liquidity mining, is a way to generate rewards with cryptocurrency holdings. In simple terms, it means locking up cryptocurrencies and getting rewards.
In many cases, it works with users called liquidity providers (LP) that add funds to liquidity pools.
Yield farming is typically done using ERC-20 tokens on Ethereum, and the rewards are usually also a type of ERC-20 token.
However, cross-chain bridges and other similar advancements may allow DeFi applications to become blockchain-agnostic in the future.
Yield farmers will typically move their funds around quite a lot between different protocols in search of high yields. As a result, DeFi platforms may also provide other economic incentives to attract more capital to their platform. Just like on centralized exchanges, liquidity tends to attract more liquidity.
DEXes or decentralized exchanges are a type of cryptocurrency exchange that allows for direct peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary.
This system contrasts with the centralized model in which users deposit their funds and the exchange issues an ‘IOU’ that can be freely traded on the platform. When a user asks to withdraw his funds, these are converted back into the cryptocurrency they represent and sent to their owner.
The most obvious benefit of decentralized exchanges over centralized ones is their “trustless” nature. A user is not required to trust the security or honesty of the exchange since the funds are held by the user in his/her personal wallet.
Another advantage of DEXes is the privacy it provides. Users are not required to disclose their personal details to anyone, except if the exchange method involves bank transfers, in which case the identity is revealed only to the person that is selling or buying from you.
Furthermore, the hosting of decentralized exchanges is distributed throughout the nodes involved – meaning that there is no risk of server downtime.
APR (annual percentage rate) and APY (annual percentage yield) are two ways to calculate interest on investing money or taking out loans or credit. APR reflects the simple interest rate over a year’s time, while APY describes the rate with the effect of compounding or the interest on interest (more on this later).APR represents the annual rate charged for earning or borrowing money/coins/tokens. APY takes into account compounding, but APR does not. The more frequently the interest compounds, the greater the difference between APR and APY. Investment companies generally advertise the APY, while lenders tout APR.
An index fund is a portfolio of stocks or bonds just like a financial market index. A cryptocurrency index fund follows the same principles. So, instead of investing directly into different coins or tokens, an investor buys the index tokens which mean shares in the fund. Rebalancing of the index portfolio can be done either by an automated algorithm or by market experts.Investing through a cryptocurrency index fund reduces the risks mainly because your investment doesn’t depend on the performance of a small number of coins. It’s a cost-effective way of protecting an investor’s finances against the volatility of this market, where no cryptocurrency is a 100% secure investment. Another major benefit is that the index fund does all the work. It tracks variables like price, performance, or capitalization of various cryptocurrencies to decide how to rebalance the portfolio (similar to the S&P500 index with stocks).