In three weeks, the Convex protocol attracted over $3 billion in deposits, while becoming the largest 🐳 whale of CRV, today and probably forever. Luck is never a negligible factor, but with such a smashing entry into DeFi top protocols, we must look much further.
On this blog, I frequently discuss about money markets and assets market in DeFi. Basically, they allow you to loan and borrow tokens. These two actions have become like deFi verbs: they are used directly or indirectly in almost every strategy.
So while it is crucial to understand the protocols you are using and especially the different money market risks, Today, I would like to focus on the why and the how:
Money markets like Aave, Compound or Maker are the heart of the DeFi ecosystem. For the final user, these protocols have the same function than a classic bank : borrowing or putting sleepy money at work by lendind it.
Nevertheless, the analogy stops immediately at this functional comparison.
Non-fungible tokens are attracting a lot of attention lately. On the one hand, the general public is scratching its head about the ever-rising records observed on flagship sales, now covered in the mainstream press1. On the other hand, artists still not initiated to blockchains realize the potential offered by disintermediation as well as the possibilities offered by the programmable nature of this new art form.
Today, I want to cover an essential topic for Ethereum and other blockchains and often misunderstood: “stable” assets, which track the price of a reference asset. Before looking at the different approaches to producing such an asset, we’ll first start with a higher level of analysis:
Money markets are at the heart of DeFi. From a high-level perspective, yes, they simply enable the borrowing and lending of various assets. Yet those functions are like the two primitive verbs of DeFi at the base of pretty much all use cases.