A Trusted Resource For All Things DeFi

Common first-time DeFi uses:

Trade on Uniswap – Test out the sector leading DEX to easily swap between any two Ethereum-based assets.

Open a Vault – Head on over to Oasis Borrow to open your very own Vault. By locking collateral such as ETH, users can take out a loan in DAI (a stablecoin) that can be paid off at any time.

Lend on Compound – Got some assets sitting in a wallet collecting dust? Head on over to the Compound Finance app to earn interest by lending them to the DeFi ecosystem at large.

Enter PoolTogether – Feeling lucky? Put some Dai into the PoolTogether pot for a chance to win a prize every week.

Buy a TokenSet – Looking to take advantage of sophisticated trading strategies? Check out Set Protocol’s most recent TokenSets to take part in complex trades all by purchasing a single ERC20 token.

While this list could go on and on, the important thing to note here is that DeFi is largely accessible with a very small amount of capital. Virtually all DeFi transactions are instant, meaning there is no need to wait for a third party to get started.

When it comes to analyzing the DeFi ecosystem at large, we wanted to provide you with a few industry-standard tools to quickly research which projects are gaining the most traction.

DeFi Pulse – A DeFi ranking platform that keeps track of which platforms have the most “locked value”, often signalling the most usage.

DeFi Reddit – Includes an active stream of posts mainly centred around DeFi.

DEX Tracker – An easy to use scanner to keep track of all the DeFi activity any given Ethereum wallet has accumulated.

Want to see your DeFi tool added here? Email [email protected]

Custody

Custody is used to describe who holds (or maintains custody) of your assets. Most services fall into two buckets: custodial or non-custodial.

Custodial solutions can be highlighted by exchanges such as Coinbase or Binance. This means that although there is an “account balance”, the totals seen on the asset overview are merely numbers on a screen, credited by the true owner, the exchange provider.

While custodial solutions often make for fast, visually appealing experiences, in the event of tragedy (like the Mt. Gox hack), assets will be locked in the exchange wallets and most likely, gone forever.

On the opposite side of the spectrum, we have non-custodial solutions – or services in which the provider does not maintain ownership over the assets passing through the platform. Non-custodial solutions like Uniswap or dYdX generally involve the usage of smart contracts, in which assets are locked and transferred using autonomous code rather than by human actors.

While assets may be represented by proxies when using specific non-custodial services, users always retain the ability to redeem or withdraw the original collateral back at their convenience, without human interaction needed.

In practice, non-custodial solutions put the end-user entirely in control of their own destiny. While there is no longer a need to worry about losing funds if an exchange is hacked, if a user loses their private keys, those funds are gone forever.

Most of the popular solutions the average individuals come across on their journey through the blockchain landscape starts with a custodial solution. As users become more advanced, non-custodial solutions unlock niche services that truly inherit the trustless nature that many blockchain solutions were built on.

There’s nothing *wrong* with custodial solutions, but please be sure to take note of who owns the assets in any given solution and as always, be sure to participate at your own risk.

Smart Contract Audits

With the large majority of DeFi applications being heavily reliant on complex smart contracts to function smoothly, audits are crucial. Smart contract audits consist of an unbiased third-party reviewing every line of code to identify bugs, vulnerabilities and bottlenecks.

Famously highlighted by the DAO hack of early 2016, unaudited smart contracts can lead to major setbacks, including the loss of funds, manipulation of the system or the permanent shutdown of a once viable company.

There are many companies built specifically for smart contract auditing. Some of the more well-known providers include OpenZepplin, Quantstamp and Blockgeeks.

While it is important to ensure that the quality of the team auditing a contract is reputable, it’s even more important to check if the smart contracts have been audited at all. Regardless of if a project has the most amazing sales pitch you’ve ever heard, without at least one audit report, it’s difficult to know (as an average user) if the system can be trusted.

When it comes to researching new DeFi products, there are a few key components to keep an eye on and be extra careful if one or more conditions are met:

If the rates are too good to be true, they probably are. Whether this is lending, staking or mining pools, there are general standards for what acceptable rates are. Be sure to use the tools listed below to cross-reference the rates of any given service.

Anonymous or lack of team. Despite the fact that DeFi is entirely built on the assumption of “decentralized” infrastructure, virtually all of the top platforms boast an extremely strong and seasoned team. If you’re viewing a project and can’t find any mention of the team or who’s working on it, this can likely be a flag that something nefarious might be happening behind the scenes.

GitHub Inactivity. One of the easiest ways to check if a team has been delivering on its promises is to view the project’s GitHub. Seeing as the large majority of DeFi project are open-sourced, this means that all changes and updates are made public from the moment they happen. If you stumble across a GitHub and notice that there hasn’t been any activity in months, it may be a sign that the project has been abandoned and that you should utilize the service with extra caution.