Introduction to DeFI
A Layman Introduction to Decentralized Finance (DeFI)
When people talk about DeFI, usually it means they’re playing around with a chrome browser extension called MetaMask. MetaMask is a cryptocurrency wallet for EVM compatible blockchain like Ethereum, Binance smart chain, polygon and etc.
There’s also a dedicated Binance chain wallet,
With easier integration to your Binance account though it doesn’t yet have a mobile app version, so if you plan to interact mostly from your phone, stick to Metamask. Both wallets let’s you interact with smart contracts in the blockchain via frontend websites called Dapps/WEB3.0. You can do a lot of things in those Dapps like making bets, trading, saving/lending , staking and providing liquidity.
Providing Liquidity in DeFI
In a DeFI Decentralized Exchange (DEX) like Ethereum’s Uniswap or their BSC counterpart, Pancakeswap, there are no order books instead every trade you make happens against a liquidity pool provided by liquidity providers (LP). The mechanism is called Automated Market Makers (AMM), in which liquidity providers stake an equal value of paired tokens, ETH-USDT for example, and in return for facilitating trade receives a LP/Flip token and ~ 0.17-0.25% of the trade volume that occurs in that pool.
Introducing Binance Smart Chain (BSC), the 2nd most popular destination for LPs
As Ethereum gas fees (the cost to make a transaction in the blockchain) has risen to hundreds of dollars per Tx, it has driven a lot of retail investors to BSC. BSC currently holds the top position in number of transactions per day and wins in ease of use due to the smooth integration of it’s bsc wallet with binance.com. Being a much younger ecosystem compared to ETH there are still plenty of opportunities in BSC to get high passive income returns measured in annualized percentage yield (APY). These BSC APYs are what Hippo optimize for you using state of the art industry leading algorithms.
For further reading take a look at Binance's Academy DeFI introduction
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