Crypto Academy / Season 3 Week 4 / Home work post Cefi-Defi Yield For @stream4u by aliimrankamboh

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· @aliimrankamboh ·
$0.06
Crypto Academy / Season 3 Week 4 / Home work post Cefi-Defi Yield For @stream4u
Hello my steemians fellows i hope your happy and Good.I feel refresh any time I attend lecture held here in the steemit crypto academy because I learn new things on daily basis.week 4 of the season 3 in the crypto academy. I attendeding the lecture delivered by our dear professor in the person of @stream4u on the topic CeFi-DeFi-Yield. The lecture has really educated me in no little way I have learnt a whole lot on other terminologie used in the crypto world.I will be working on the assignment task given by the my dear professor.


![1_2RTDtQ076oDPFnZ_BWiYRg.jpeg](https://cdn.steemitimages.com/DQma2twX4ireWMbhQxBztKNT2be3T3fnLW8gs5Co2vNrJyD/1_2RTDtQ076oDPFnZ_BWiYRg.jpeg)


QUESTION NO.1

WHAT IS IMPORTANCE OF THE DEFI SYSTEM? 

First and all lets understand what DeFi system is all about before stating the importance of  DeFi system.The Decentralized finance system is a type of financial system that is used in blockchain technology to perform any form of transaction at any point in time without interference of third party. This process is possible with the help smart contract. Now smart contract are written instruction in form of program codes that aids the transaction process in a blockchain technology. With that little knowledge we can now ride straight to the importance of the DeFi system.

ABSENCE OF CENTRAL AUTHORITY.

There is no central authority of the DeFi system. The system is design to operate without any central body giving an instruction to work on. All nodes in the DeFi system are design to work alone without any form of the interference.

ABSENCE OF THIRD PARTY.

The absence of the third party is one of the most important feature of decentralized finance system because with the third party out in a transaction process transaction become more faster and very transparent.

ABSENCE OF ANY FORM OF LIMITATION.

In DeFi system there are no restriction to how and when you should make your transactions. most also verification of identity does not hinder one from performing a transaction.

TOTAL CONTROL.

In the DeFi system users have total control their asset and resources and can withdraw or trade it any time. This implies that there are no limits in which one can go with his Transaction in DeFi system.

TRANSPARENCY 

The DeFi system is very transparent because transaction carried out on the blockchain has to be updated on ledger and this record are not usually altered hence there is no any form of false claim and that can not be proven otherwise.

QUESTION NO.2

FLAWS IN CENTRALIZED FINANCE.

Every system has some flaw associated with it and it is the main reason why on daily basis we make research because we need an optimal solution to which every problem that may be confronting us. With that been said the centralized finance system have it own flaws and few of this flaws will be listed.

PRESENCES OF THIRD PARTY.

Transactions in centralized finance system makes use third party. The presence of third party in transactions slow and the process of the transaction as every thing between the sender and receiver has to pass through the third party. This acts also gives room to some form of fraudulent activities by users.

LIMITED ACCESS.

In CeFi system the users are given some limited boundaries over their assets. This implies that users does not have complete authority over their asset. The authority they will be given to them by central authority.

VARIFICATION ISSUES 

In the case of varification issue the centralized finance system is the verification issues. All centralized finance system requires certain verification for transaction to be done and hence this may take  whole lots of time and resources.

COST OF TRANSPORTATIONS.

In this case the cost of performing transaction in the centralized finance system is quite because you pay for eventually all transactions carried out on the system. For instance I am to transfer money to 300 workers in my company.I have to pay for charges for carrying out this transactions most when I am transferring to a bank that is different.

QUESTION NO.3

EXPLAIN 2 DEFI PRODUCTS.

DECENTRALISED EXCHANGE (DEX)

one of the product of the decentralized finance. This product has a lot of  it among which is it allows users to buy,sell,stake,swap, exchange,borrow,lend and also provide liquidity.this feature are all in the DeFi system it implies that users can perform all this function without the involvement of a third party. The user has absolute control.The decentralized exchanges uses the automated market maker technology to quite the price of an asset. Now this is done from the liquidity provided in the liquidity pool. Example of decentralized exchanges are pancakeswap,uniswap, justswap etc.let discuss a little on uniswap.

UNISWAP.

![20210722_165241.jpg](https://cdn.steemitimages.com/DQmbTDw6y3vVgyXUVPSgt6Rz3J1AcMXSke7kXbF362nC9bw/20210722_165241.jpg)

This is protocol built on the Ethereum blockchian. which is allow users to swap any ERC20 tokens of their choices. The joy with this exchange platform is that it is designed in such a way that does not take any form of fees when transactions are been carried out.it also eliminate the the presence of in any transaction on the platform. In Uniswap prices of asset are not determined. just matching buyers and sellers together but the prices of asset are determined by a simple math equation and pools of token.

JUSTLEND.

![20210722_170019.jpg](https://cdn.steemitimages.com/DQmRsaJgKL3LnUuxpJgAB76YBpABkmrnaDYzKkBbftQtTaT/20210722_170019.jpg)

Just lend is a  lending platform that is built using the Tron blockchain. it allows user to put in their asset into the lending pool for period of time just so to earn a certain percentage of reward. This platform also allows borrowers to borrow certain amount of asset from the lending pool.

QUESTION NO.4

RISK INVOLVED IN DEFI.

SAMART CONTRACTS RISK.

 In this case the earlier explained that the various transaction in DeFi system done strictly using smart contract. And we earlier said smart contract are written program that works on the blockchain and enables both buyers and sellers.make proper transaction without no third party interference. The risk here is that it is a program codes it can be hacked and change by anyone who has access to the code there by rendering all resources useles.

IMPERMANENT LOSS RISK.

In this case when the amount of asset deposited in pool drops at the time of withdrawal of the said asset. For example you deposited 1000 Steem in the liquidity pool when the price of 1 steem is $90 at the time of your withdrawal the price of 1 steem later dropped than $20. You will notice an impermanent loss at this stage.

INSTABILITY OF BLOCKCHAIN.

In this case Challenges encountered in the blockchain most often than known causes instability to Defi block hain. Hence project connected to this Defi are usually affected of this instability.


QUESTION NO.5

WHAT IS YIELD FORMING?

One other method where you can earn passive income in the DeFi system. Here users lock up their asset for a period of time and then earn profit at the end. Users who lock up their asset are known as liquidity provider. More also the are reward based on how long they are able to lock up their asset in the liquidity pool. And the rate of their interest here is calculated using either APR and APY.Both lending and borrowing takes place in the pool.where this asset is been deposited.those who wish to borrow this asset pays back with certain amount of interest based on the duration and how much of this asset you are borrowing. Here liquidity provider earns passive income without any stress. It is recommended that instead of storing your asset in your wallet you should consider yield farming to earn for yourself some amount of asset.

QUESTION NO.6

HOW DOES YIELD FARMING WORKS.

Yield farming works in this manner the liquidity providers which happens to be users lock up their asset into any pool of their choice to earn interest at end. This asset locked by user is used to perform some form of transactions means borrowing to other users so that at the end the will payback with the interest. This same token locked by the users is used for quoting prices of an asset in a decentralized exchange the automated market maker.

STEPS TO ADD LIQUIDITY ON PANCAKESWAP.

Step 1

![20210722_172813.jpg](https://cdn.steemitimages.com/DQmX5MoLH1SDmNx51CmVkmjE5M3tJdd1QapWSys1jyN1BEb/20210722_172813.jpg)

STEP 2

![20210722_172708.jpg](https://cdn.steemitimages.com/DQmepdVYCUY585EVQQFtHdckBcX8xoxRvkttHezSnDD4Ecp/20210722_172708.jpg)

STEP 3

![20210722_172834.jpg](https://cdn.steemitimages.com/DQmYADdK2UgrN3ErCTKBos6H2BVqdobwyj2pWHDseuyCJoW/20210722_172834.jpg)

QUESTION NO.7

WHAT ARE THE BEST YIELD FARMING?

UNISWAP.

Uniswap is  decentralized exchange that offers different services to users. One of the manor activity is the swapping of tokens. This DEX is also used to lend to token to different users from the liquidity pool and the end the user pays back with certain percentage of interest. Uniswap has it own native token known as UNI and it is current number 11 based on market capitalization ranking and has a value of $16.72$

WHY UNISWAP IS AMONG THE BEST.

uniswap is one of the most popular DEX due to the large amount of liquidity locked up in the pool. This platform is very secured when compared to other DEX that offers yielding services users prefer it because you are sure that your asset is save. Every swapping service has fees attach to it and that is how liquidity providers keeps makes more passive income.

PANCAKESWAP.

In 2020 Pancakeswap came into existence. It is relevant in the decentralized exchanges.it came into existence can never overemphasised because it offers many services such as staking.yield farming and gaming just to mention but a few. Pancakeswap is built on the Binance smart chain network. It uses the automated market maker protocol to handle liquidity in the platform. Pancakeswap has a  token called CAKE and it is presently number 32 in the market capitalization ranking and has a value of $12.90.

WHY PANCAKESWAP IS AMONG BEST.

The Binance smart chain network Pancakeswap is one of the top decentralized platform. it has a lot of features associated to yield farming like add liquidity, liquidity pool etc. Pancakeswap is also cost effective when compared to other other decentralized exchanges built on the Ethereum blockchain. Liquidity providers earn rewards. The only issue associated with the panacakeswap is the issue of impermanent loss which also applicable almost all the farm yielding platform.

QUESTION NO.8

THE CALCULATIONS METHOD IN YIELD FARMING RETURNS.

ANNUAL PERCENTAGE.

Returns on investment in yield farming is calculated using Annual Percentage Rate or Annual Percentage Yield.

Annual percentage rate(APR)
Annual percentage yield (APY)

Annual Percentage Rate is simply the yearly interest rates a person earns for lending out his or her token to the liquidity pool.
For example I want to stake 100 Tron tokens in a pool that offer 10% APR.
At the end of the year

what I will get will be.

100 + (100 x 10%)

APR = 110

So every month I will be getting

10รท12 = 0.833% reward of Tron

And everyday I will be getting;

10รท365 = 0.027% reward of Tron

Annual Percentage Yiel is the compounding interest or reward investors earn yearly. By compounding interest.

It is calculated using the formula

APY = (1 + r/n)n -1

 r = interest rate
 n = the subsequent period

So if I supply 100 Tron to liquidity pool that offers 50% APY

for example.

r = 50%
n = 365

Inputting the parameters into the the formula (1 + r/n)n -1

r = 50% = 0.5
n = 365

APY = (1 + 0.5/365)365 -1

(1 + 0.00137)365 -1

(1.00137)365 -1

1.648 - 1

0.648

APY = 0.648 ร— 100

APY = 64.8

Total APY = My Initial Stake + APY

100 + 64.8 = 164.8 Tron

164.8 Tron at the end of the year.

QUESTION NO.9

ADVANTAGES AND DISADVANTAGES OF YIELD FARMING.

ADVANTAGES OF YIELD FARMING.

Yield farming provides you with the opportunity to earn passive income. Instead of keeping your asset in the wallet where it do not add any value it you can decide to earn some passive income by becoming a liquidity provider.
As seen above in calculation of APY.it implies that you are eligible for reinvestment and this gives more reward than the initial usual APR.Unlike other financial institutions that offer loan services in yield farming you earn better reward than the one you earn in the other financial institution.There is no protocol follow before locking up your asset earning your reward all you need to do just to provide the tokens to the pool and then sit back and watch.

DISADVANTAGES OF YIELD FARMING.

There is no short term locking of an asset as the yield farming always calculate and its interest yearlyImpermant loss is one problem that is faced by yield farming because we can not completely the price of an asset for a whole year. all we do here is risk.Price instability most  affects the yield farming and that has prompted theft in the decentralized system because people now produce a look coins which buyers and seelers the price being suitable for them can horrible purchase it.Yield farming is a way most people earn their passive income
this platform is offer this services are open to hacking and hence asset are not to serve in the platform of any longer.

QUESTION NO.10

CONCLUSION.

Defi has brought so much revolution to the financial world. Everyone love the idea being complete control of  fund. they own so they decide when to use it and do they wish without anyone being a custodian and deciding for them when to take out their fund and when not to. Defi has made it really possible for crypto holders to even use their crypto and make more crypto.This indeed is a great revolution in the financial world. Defi has also made it possible for investors to lend their asset anytime. they want to even during public holidays and  investment still goes on as opposed to cefi systems like banks.Yield farming is another rewarding system where crypto traders send in their asset to pool known as yield pool and get good annual returns. It makes more sense that most yield farms allow users to manage the liquidity pool and also have their eyes.how much interest their staked assets has generated for them. Yield farm is a good project for cryto traders.Even though there are some coins associated with but a lot of cryto traders have made good profits from yield farming.

Thanku everyone.

 special thanks to professor @stream4u
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@massachussets ·
Bro sorry to say but your rep and SP is very low. You need an SP of 500 before you can participate in the advance. Maybe you should read the guideline post on steemitblog
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@stream4u ·
$2.16
Hi @aliimrankamboh

Thank you for joining [The Steemit Crypto Academy Courses](https://steemit.com/trending/hive-108451) and participated in the Homework Task.  

|<center>Review Visit Level</center>|<center>Task Remark</center>|<center>Comment </center>|<center>Guidance, Feedback, Suggestions</center>|<center>Grade</center>|<center>Verification (Done, Hold)</center>|
|--|--|--|--|--|--|
|<center>First</center>|<center>Completed</center>|<center>Provided information are explained well but expecting more details in the DeFi Products like what is the concept behind these products, what is the important/special in this, their current use cases, background mechanism/technical, positive & negative side.</center>|<center>Try to be more informative and provide all possible details.</center>|<center> Not Applicable due to insufficient SP and Reputation, also Powering down. [Guidelines](https://steemit.com/hive-108451/@stream4u/crypto-academy-season-3-or-advanced-course-cefi-defi-yield)</center>|<center>Done</center>|

Your Homework Task verification has been done by @Stream4u, hope you have enjoyed and learned something new.

Thank You.
@stream4u
[*Crypto Professors : Steemit Crypto Academy*](https://steemit.com/cryptoprofessor/@steemitblog/the-steemit-crypto-academy-the-first-crypto-professors)
#affable

<center>https://cdn.steemitimages.com/DQmdUh4X5gNtnPTAvgeu1Dvjvnh2zWk6KaqEKvzUYLqBnAf/image.png</center>
๐Ÿ‘  
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@aliimrankamboh ·
@stream4u thank you so much professor
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