Understanding the landscape of decentralised finance

There are great ways to generate additional income by participating in the DeFI market and blocking assets in its decentralised protocols.


It is no longer a novelty that decentralised finance offers cryptomoney holders endless opportunities to generate passive income. While this is a known fact, I believe it does not tell the whole story.

While DeFi’s stories have succeeded in capturing the attention of cryptomoney investors, there is not enough educational material to encapsulate the operation of the growing horde of protocols responsible for the astronomical rise of the DeFi ecosystem as the new „poster child“ of the cryptomoney market.

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Some believe that the accelerated nature of this emerging sector makes it almost impossible to identify and track opportunities for income generation. Conversely, others blame the intricate concepts associated with the DeFi ecosystem.

I recently had the opportunity to speak with Viktor Radchenko, founder of Binance’s Trust Wallet, and while exploring the complexities of some of the quality protocols in this area, he agreed that DeFi offers unique capabilities in terms of revenue generation. According to Radchenko, the simplest way to identify the dynamics of the protocol market with the potential to generate passive income is to track the metrics in DeFi Pulse.

As a result of the evolution and changes in the DeFi landscape, there is no single way to quantify the average to which technology is altering conventional financial services. However, the most lucrative sectors for DeFi at the moment are decentralised exchanges, loans and borrowing, derivatives and assets.

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Uniswap, which falls into the category of a decentralised exchange, allows relatively cheap and flexible transactions by providing liquidity pools for various crypt pairs. As the protocol is fully decentralised, users also have the responsibility to provide liquidity. In turn, they automatically receive a share of the transaction fees generated by these liquidity groups. As Radchenko explained:

„So what happens once you have bet on these funds is that you will receive LP tokens, this allows you to have a share of the group, and that’s how you get all the rewards based on the amount of transactions that are made.
Like Uniswap, protocols targeting the lending industry such as MakerDAO, Kava, Curve, Aave and Compound developed unique models that allow users to earn rewards. The basic principle of these platforms is to allow borrowers to collateralise digital assets and borrow in other cryptosystems at better rates than the returns of traditional lending services and banks.

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Decentralised derivatives systems create virtual assets that can represent the value of real financial assets. The aim here is to expose people who hold cryptosystems to a wide range of markets. When asked how plausible it is to trade Tesla in decentralised derivatives protocols in the near future, Radchenko replied that he believes this will happen sooner rather than later. He stated:

„Yes, you can do it. Perhaps in the future. I think we are very close to making it a reality, although you won’t be able to trade Tesla’s shares or shorts themselves. But you will be able to speculate on Tesla’s stock price.
Finally, Yearn.finance is another good addition to the DeFi scene, as it increases the income of its participants. Instead of going through a plethora of processes to participate in more than one yield farming or other income generating opportunity, you can optimise your earnings with the less complicated protocol offered by Yearn.finance.