It is no longer news that decentralized finance provides crypto holders with a myriad of opportunities to earn passive income. While this is a known fact, I believe that it does not tell the whole story.
Although DeFi’s narrative has successfully captured the attention of crypto investors, there are not enough educational materials out there that encapsulate the workings of the growing horde of protocols responsible for DeFi’s astronomical rise as the new “poster child” of the crypto market.
Some argue that the fast-paced nature of this emerging sector makes it almost impossible to identify and track income-generating opportunities. Conversely, others blame the intricate concepts associated with DeFi.
I recently had the opportunity to talk to Viktor Radchenko, founder of Binance’s Trust Wallet, and while exploring the intricacies of some of the quality protocols in this sphere, he agreed that DeFi offers unique profit-generating capabilities. According to Radchenko, the simplest way to identify the market dynamics of protocols with the potential of generating passive income is to track metrics on DeFi Pulse.
As a result of DeFi’s landscape evolution and changes, there’s no one way to quantify the rate at which the technology is altering conventional financial services. However, the most lucrative DeFi-optimized sectors at the moment are decentralized exchanges, lending and borrowing, derivatives, and assets.
Uniswap, which falls under the decentralized exchange category, enables relatively cheap, flexible trades by providing liquidity pools for various crypto pairs. Since the protocol is fully decentralized, users are also tasked with the responsibility of providing liquidity. In turn, they automatically receive a share of the transaction fees generated from such liquidity pools. As Radchenko explained:
“So, what happens once you have staked these funds is that you will receive LP tokens, which allows you to have a share of the pool, and this