All thanks to the crypto academy founders, this project gives many steemians, especially the newbies to know more about cryptocurrency and trading
This is the first time I am participating in the #steemitcryptoacademy homework task, I hope I earn good mark.
[image source](pixabay.com)
**Question 1 : what is the important of Defi system?**
According to professor @stream4u, DeFi system is able to provides a disclose financial ecosystem in that a lot of small financial services can be made in and it would be in a Decentralize way. *So it's one of the important.*
Another important of DeFi system is that you will have 100% power over your investment or money or asset, unlike bank that once you deposit money, they have full control over it. And in DeFi system, anybody can invest their assets and earn good profit, not like bank that gives you little profit after making huge profit with your money. DeFi don't have middle men to handle your money or asset. You are in control over your investments.
**Question 2 : Flaws in centralised finance**
Professor @stream4u explained that in centralised finance, you will have limitations on your own assets or money, so even if it is your own asset you do not have all 100% power on your own investment.
Good example is the banks and other financial institute that use our money and make an invest it the Stock Market, banks also give loan to other with high interest, this process, the banks and other financial institutes just give you a little out of the huge profit that they made while they use your money and you still won't even have 100% power on your own money.
**Question 3 : DeFi products (explain any 2 products in details)**
* **Lending**
* **Decentralized exchanges**
**Lending:** *Just like the Banking system, people can save their money and when others lend their assets, they gain good interests. But in this process, Smart Contract always act as a mediator that execute the loan system and join lender and borrower, because there is no mediator the lender earn in high returns. This Lending system always work on Public blockchain and it create some usefulness, unlike the traditional.*
**Decentralized exchange:** *This exchange has a social network of equal partners able to conduct business without using a middle man. The transaction on a blockchain with no need of mediator, the importance of it is that you don't need to sign up, no need of identity verification, and there is no fees.*
**Question 4: Risk involved in DeFi**
*There are 3 common types of risks in DeFi, they are:* **financial risk,** **technical risk** and **procedural risk**,
**Financial risk:** *This risk connect to the potential price of investment chances and administration of the favourable circumstances. Financial risk is usually attribute to a firm or the dangerous acceptance of a person.* *This Financial risks still depend on the objectives of a person for management of a fruitful investment portfolio.*
**Technical risk** *This risk directly connect to both software and hardware outflow of DeFi commodity or services. Technical risks in DeFi that primarily come up from the outcome with protocols, hardware, and software. The threat of technical risks is supreme as they can settle how the platform functions completely*
**Procedural risk:** *Interestingly, the procedural risks primarily focus on the any type of security risks that has anything to do with DeFi products and services by users and the common security risks in DeFi is phishing attacks in which a malicious agent makes a copy of website or service to attract a no suspecting users to sharing their information that is sensitive.*
**Question 5: What is Yield farming?**
Yield farming can be define as a project that gives it's users chance to lock their money/assets and investors receive gain for it.
Yield farming is a process that let's cryptocurrency holders to lock up their assets and in return reward them with profit. Not just profit, but more specifically and it is a way that allows you gain either in fixed or variable interest by investing cryptocurrency in a DeFi market.
**Question 6: How does yield Farming works**
In the process of Yield farming, we act act as the Banks; The investors are acts the same.
Yield farming always work with a supply and demand provider and a supply and demand pool (liquidity) that powers a DeFi market. Those that provides Liquidity are the investors who deposits money into a smart contract. The liquidity puddle is a smart contract filled up with cash. The functions of Yield farming is based on the automated market maker (AMM).
**Question 7: What are the best yielding farming and why they are the best**
To me, I will choose **Bearn** and **Venus** as the best yielding farming platform
**Bearn** farming platforms usually look to give a great extent yield farming environment and to increase the capability in between the Ethereum blockchain and BSC. Bearn cross-chain negotiation transaction's new product, the bVault, offers 2 times/3 times reward systems. Even the Vault holders are still able to earn 3% of the new minted BDO in addition to elevated APYs and increase fees on the farmed assets.
Bearn’s liquidity pools stays high as well as their ETH farm generates more than a thousand percent APY and BSC farms with over there hundred percent APYs (but not always, it varies)
**Venus** is a collection of ordered steps that solve a mathematical problem in money market for decentralized borrowing and lending. Venus Users can make deposit of assets like BNB, ETH, and stablecoins like USDT to earn interest.
Any Interest you earn on Venus can be used as concomitant to lend more digital assets or to create coin.
Venus was Launched in October 2020, and it now one of the largest protocols on BSC within a 24-hr volume of $237M and more
**Question 8. The calculation methods in yield farming**
Two ways that Yield farming is calculated are: **Annual percentage rate (APR)** and **Annual percentage yield (APY)**
**Annual percentage rate** (APR) *It is the percentage of early rate of return that the borrower would pay to the investors or the depositors.*
**APR** does not include the compounding interest, you only earn when you lock your assets or cryptocurreny for certain period of time. Assuming you have APR offer 100% for the year, if you lock your $2000 assets, after a year you will receive $4000. Remember that $2000 was your initial investment and $2000 is the Annual Percentage Rate.
**Annual percentage yield** (APY) *is the annual rate of return that is charged to the asset or money borrowers and later paid to the lenders.*
**APY** let's you have compound interest, this process works in the way that your daily profit gets re-invest in an automatic way so have more gain.
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**Question 9: Advantage and disadvantage of yield farming**
**Advantages**
* *One of the major advantage of yield farming is that it is one of the best way to storing assets/cryotocurrency in the savings accounts.*
* *The Yield farmers can earn in a considerable way, high gain by yield farming more than how they would earn through traditional banks.*
* *Holders that their funds or cryptocurrency are sitting idle can just lock their funds into DeFi protocols so as to earb more gain by making it a great source of passive income*
**Disadvantages**
* *The DeFi space is still going on experimental cycle. So many new projects are deployed because of the experiment. And the most delicate risk with that kind projects is the software code.*
* *The slightest of mistake in the software code can result to hacking or manipulating of the protocol and result to losses for everybody. The recovery of the code against that kind of attacks depends alone on the code writer*
**Question 10: Conclusion on DeFi and Yield farming**
Yield farming is a way of making more gain with your crypto. It just involves you lending your cryptocurrency to others through the magical way computer programs we called smart contracts. For your service, you can earn fees in the cryptocurrency form.
DeFi is a blockchain base form of finance that does not depend on central financial intermediaries like bank, brokerages or exchange to give traditional financial instruments, it makes use of smart contract instead on blockchains and commonly on etherium