DeFi: The New Frontier of Finance — Advanced DeFi Models
Introduction: Beyond the Basics of Decentralized Finance
In our previous article, we explored the core models of DeFi (Decentralized Finance), including DEXs, lending platforms, and yield farming. Now, let’s dive into more advanced DeFi models that are transforming finance even further.
From liquid staking to synthetic assets, these innovations offer even more ways for users to leverage the power of decentralized finance. As we move into this new era, understanding these models is crucial to navigating and optimizing your engagement with the DeFi ecosystem.4
Liquid Staking: Maximizing Staked Assets
Liquid staking is emerging as one of the most innovative DeFi models, particularly relevant for those looking to maximize the utility of their staked assets.
How it works: Users stake their tokens (e.g., ETH) and receive liquid tokens (e.g., stETH) in return, which can be used in other DeFi applications while continuing to earn staking rewards.
Main protocols: Rocket Pool and Stader (particularly active on BASE L2, a layer-2 blockchain optimized for cost and speed)
Practical analogy: It's like parking your car in a paid parking lot (staking) but receiving a replacement vehicle (liquid token) that you can use while your original vehicle continues to earn income.
This model helps users to maintain liquidity while still benefiting from staking rewards, offering more flexibility and opportunities in the DeFi space.
Synthetic Assets: Exposure to Real-World Assets on the Blockchain
Synthetic assets allow users to gain exposure to real-world assets (stocks, commodities, currencies) via tokens on the blockchain.
How it works: Synthetic assets use oracles to track the prices of real-world assets and smart contracts to create tokens that replicate their value.
Key benefits:
24/7 access to global markets
Fractional investment in real-world assets
No need for traditional intermediaries
Synthetic assets enable users to diversify their portfolios by gaining exposure to assets that were previously only available in traditional markets.
DeFi Insurance: Protecting Against Risks in the Ecosystem
With the increasing value locked in DeFi protocols, DeFi insurance has emerged as a vital tool to protect users from hacks, smart contract failures, and other risks.
How it works: Users can purchase coverage against specific risks, while others provide capital to underwrite these policies and earn premiums in return.
Main protocols: Nexus Mutual, InsurAce
DeFi insurance plays an important role in providing security and peace of mind to those engaging with this new financial ecosystem, encouraging more users to participate without fear of potential losses.
DeFi Aggregators: Simplifying Access to DeFi Protocols
DeFi aggregators represent the latest evolution of the ecosystem, simplifying users’ access to multiple DeFi protocols through a single interface.
How it works: These platforms compare and automatically optimize the available opportunities across various protocols, maximizing yields or minimizing costs for the user.
Examples: Yearn Finance, Zapper, DeFi Italy
Aggregators help users to easily navigate the complexities of the DeFi space, making it simpler to engage with multiple platforms, while ensuring optimal returns.