Decentralised Finance (DeFi) refers to an ecosystem of blockchain-based financial services designed to provide an alternative to the centralised nature of legacy financial institutions, such as retail banks and brokerage firms.
Most DeFi projects are still in their startup phase, but their rapid development has already made a strong impression on early adopters and investors. Not too surprising, considering the advantages of the DeFi economy: total decentralisation, complete transparency, unprecedented accessibility and zero bureaucracy compared to your grandma’s banking services.
Not to mention DeFi has been extremely rewarding (as in lucrative) to participate in the past couple of years, and is expected to continue in this trend.
DeFi is here to stay
Most decentralised apps (dApps) and platforms operating in the DeFi space are built on the Ethereum blockchain and take full advantage of its smart contract functionality.
A smart contract is an agreement that has been encoded into the blockchain, making it practically impossible to be breached, reneged or forged. Powering the core of the DeFi infrastructure, smart contracts eliminate the middleman and allow dApps to operate in a truly decentralised manner with cryptocurrencies in the form of tokens.
Not requiring a middleman to facilitate transactions between users makes all DeFi financial transactions trustless.
No trust is required because all transactions are happening on the blockchain and are facilitated by blockchain protocols,
which guarantees that no transaction can be altered or tampered with in any way.
A major reason that explains DeFi’s rapid rise in popularity recently is its ability to generate steady passive income (a.k.a. yield) for crypto investors. There are two most common yield-generating use cases:
Lending and borrowing
A variety of dApps enable cryptocurrency users to conveniently borrow other crypto or fiat currencies by using their crypto holdings as collateral.
The collateral gets locked into a smart contract where it remains until the borrower has repaid their loan to the lender. On the other hand, the lender earns interest for as long as that loan is secured with the borrower’s collateral.
A very popular DeFi use case, yield farming refers to the practice of investing (staking) crypto tokens and being rewarded with passive gains in return. This feature is available on most DeFi dApps such as yearn.finance, as well as on decentralised exchanges (DEXes) like Uniswap and Sushiswap.
Okay but how to participate in the DeFi economy without having to do a ton of research or taking on unnecessary risk? After all, DeFi tokens can be as volatile as any crypto asset out there. There is one easy, stress-free way.
Putting your idle crypto assets to work
Investing into any one of Phuture’s crypto index products provides you with both exposure to the crypto markets and an instant way for generating passive income. Our DeFi protocol interacts with Uniswap and Sushiswap to periodically rebalance all Phuture index products in order to maintain optimal quantities of assets in a wildly fluctuating market environment.
This way you get the benefits of holding a basket of diversified crypto assets while minimising the risk of the occasional (albeit only temporary) sharp corrections to the downside that crypto is known for.
In order to steadily generate passive income from your crypto exposure, we have integrated with yearn.finance's vaults to earn a yield on the assets that sit within our index products. Much like a fractional reserve system would function, we only need to hold just enough of any one asset on the Phuture platform to be able to support redemptions and rebalances of our index products.
The rest of the assets can be placed on yearn.finance to start earning a yield that is then passed on to Phtuture index investors.
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