A bridge between CeFi & DeFi, a $182M robbery, and EPNS’s series A round.

When things started to heat up for DeFi..

Apr 22, 2022

101 today:

A topic we explain —
Lending & Borrowing in DeFi.
Major happenings in the DeFi ecosystem —
A bridge between CeFi & DeFi, a $182M robbery, and EPNS’s series A round.
Twitter threads that sum it all up —
The story of DeFi summer and recap on DeFi, liquidity pools, Stablecoins, and more.
A peek behind the doors —
We’ve got a little reminder for you!🎅

One Topic:

In our last newsletter, we tried to paint a contrast between banks & DeFi and explained stablecoins and liquidity pools as a prerequisite to understanding lending & borrowing in DeFi.

Today, we’ll take a step ahead:

Let’s uncover:

What are Automated Money Markets (AMMs)?
Understanding lending & borrowing in simple terms.

What are AMMs?

Automated Money Markets are decentralized asset trading pools that enable users to lend or borrow cryptocurrencies.

The buying and selling of assets in traditional money markets are done through order books available on centralized exchanges. What makes AMMs decentralized are the mathematical formulas that replace order books. For example, Uniswap uses x * y = k, where x is the amount of one token in the liquidity pool, and y is the amount of the other. In this formula, k is a fixed constant, meaning the pool’s total liquidity always has to remain the same.

Understand more here.

Check out this video on why AMMs are important.

Understanding Borrowing & Lending in DeFi:

Borrowing:

You can get a loan using your crypto assets as collateral in a just few minutes on different DeFi Lending protocols such as Aave and Compound.

How?

All loans in DeFi are overcollaterized, i.e., if you need 1000$ worth of DAI, you need to put up around $150 worth of Eth as collateral. All of this can be done without any manual intervention. Even better, few protocols provide incentives to borrowers in their native tokens for taking loans from them, bringing down the effective interest rate you have to pay.

Lending:

Lending isn’t much different from traditional lending. You deposit cryptocurrencies on a protocol, and they offer you interest on it. Only, interest rates are much higher in crypto than it is in traditional finance.

Have a look at the Borrow & Supply APY on Aave V2:

On Aave, you get 3.57% APY and 1% Aave tokens to borrow DAI. At the same time, you get 2.26% APY and 0.35% Aave tokens to supply (deposit) DAI.

News that made people go 🤯:

👀DeFi Project Beanstalk Robbed of $182 Million in Flash Loan Attack!😢

On Sunday, 18th April 2022, DeFi project Beanstalk suffered a flash loan attack in which the attacker got away with $80 million worth of crypto tokens. As a result, the protocol's price plummeted, and the protocol's creators revealed their identities and stated they were not involved. However, it remains whether the investors who lost their funds will be reimbursed. Read more about it here.

👀$3.7 Million Raised by Solana Lending Protocol Hedge to lend interest-free 💸

Hedge is a DeFi protocol housed on the Solana Blockchain that enables instant, interest-free loans. This protocol will allow users to borrow by depositing only 10% of the desired value to receive the loan. The seed funding will go towards launching Hedge on the Solana mainnet soon (its beta version is currently live on a devnet). Read more about it here.

👀 Binance Bridge 2.0 bridged CeFi and DeFi 🤝

Cannot pick between CeFi and DeFi? Binance Bridge 2.0 has got your back with their latest launch! It brings to the table inter-blockchain connectivity. One can connect Ethereum-based tokens to BTokens on the BNB chain - these wrapped BTokens can be further used to explore the metaverse, DeFi, and more. Read more about it here.

👀 Ethereum Push Notification Service's Series A Raises $10.1 Million 📌

EPNS, now valued at $131 million, is a decentralized protocol for notifications on iOS, Android, and web browsers like Chrome and Firefox. The Series A funding round led by Jump Crypto raised $10.1 million. EPNS delivers notifications from on-chain and off-chain Web3 platforms - one can track crypto price fluctuations, NFT prices, etc. Users can vote on future protocol decisions and participate in staking using EPNS's governance token, PUSH. Read more about it here.