Financial services without institutions.
WHAT IT PROVIDES
Lending and borrowing Exchange between assets Derivatives Yield generation
WHAT MAKES IT DISTINCTIVE
Access without permission, and composability between services.
WHAT AN AUTOMATED MARKET MAKER IS
A contract holding reserves of two assets, pricing trades by a formula.
WHAT LIQUIDITY PROVIDERS DO
Deposit assets, earning a share of trading fees.
WHAT IMPERMANENT LOSS IS
The difference between holding assets and providing them as liquidity, when prices diverge.
WHY THE NAME MISLEADS
It becomes permanent on withdrawal.
WHAT LENDING PROTOCOLS REQUIRE
Collateral exceeding the loan.
WHY
There is no recourse against a borrower.
WHAT LIQUIDATION IS
Collateral sold when its value falls below a threshold.
WHAT THAT MEANS FOR BORROWERS
Positions can be closed automatically during sharp movements.
WHAT ADVERTISED RETURNS FREQUENTLY OMIT
Risk of contract failure Risk of the assets themselves Impermanent loss That returns are paid in tokens whose value may fall
WHAT UNUSUALLY HIGH RETURNS INDICATE
Risk, subsidy from token issuance, or fraud.
WHAT TO ASSUME
That returns far above ordinary finance are compensation for risk you have not identified.
WHAT TO NEVER DO
Commit funds you do not understand the risk of.
