Crypto. Now understandable with AI

Here we go again…

Since last year, crypto seems to be back again in many people’s mouth.

Recently I was writing about hashing and encryption tools here

What I want to cover here:

1. Crypto 101 Analytics with Dune and a look to PolyMarket
2. Crypto Resources to explore further some concepts: dex, lending
3. Skin in the game: testing some DeFi protocols to understand them better

What this post is not about: a solidity 101

Some time ago I was having a look to this amazing BlockChain/Solidity FreeCodeCamp course:

And this can be much easier thanks to vibe coding! a Practical Blockchain:

• Parties that do not know each other can exchange value without a central authority

If there are no clear laws, we will be enslaved by the wishes of men - Cicero

My point is: I dont have any idea about Solidity, Smart Contracts or whatever code goberns crypto.

But…I think many of us know how to use AI already (particularly LLMs) - to get some ideas of what are we interacting with.

Let’s try to get clarification on some Smart Contract

Understanding SC’s with LLMs: these are are some interesting protocols as per dappradar

Crypto Analytics

There are of course some platforms already for this.

But as this is all public, how about…exploring a BTC wallet?

Like the one offered for donations at duckdns:

• https://btcscan.org/address/16gHnv3NTjpF5ZavMi9QYBFxUkNchdicUS

And that exploration of a wallet can be done with Python!

Exploring Protocols

Solidity is not the only language you can use with Polygon.

While it’s the most popular language for developing smart contracts on Polygon due to its compatibility with the Ethereum Virtual Machine (EVM), other languages can be used indirectly.

So if the Analytics part is clear…

…and blockchain data is public?

How about exploring one protocol as an example?

Let’s give it a try to PolyMarket

PolyMarket

• Its kind of a prediction market…place? Lets find out how many transactions are happening
  • https://defillama.com/protocol/polymarket#information
  • Transactions - https://polygonscan.com/txs?a=0x4bfb41d5b3570defd03c39a9a4d8de6bd8b8982e

Polymarket Overview: A decentralized application on the Polygon blockchain for predicting real-world events like elections and sports.

People have created what?

The Code - BlockChain Transaction Analyzer

How about taking the best of 2 worlds?

Lets use AI (LLMs and vibe coding techniques) to see how good are they at understanding the code of some public DeFi Protocols.

Because…why not!

Crypto Resources

• BlockChain Scanners

  • ETHScan
  • Solscan
  • PolygonScan
  • https://btcscan.org/
  • https://aavescan.com/ethereum-v3/usdc

• Blockchain explorer for Ethereum based network and a tool for inspecting and analyzing EVM based blockchains.

  • https://github.com/blockscout/blockscout
  • https://defillama.com
  • https://dappradar.com/rankings/defi
  • https://dune.com
  • See what you have in your defi wallet: https://app.metalend.tech/

• If you are having a business and want to set crypto payment, you can have a look to https://btcpayserver.org/

Interesting Crypto Stuff I found lately

More Web3 Stuff?

I was writing about web3 here.

I was testing Astro Bento Portfolio + Github Pages + Github CI/CD with the resulting Web3/Crypto related microblog here.

Web3 Astro Bento Template

Source Code of a sample blog were I chatted with LLMs about few crypto concepts.

• https://www.reddit.com/r/defi/comments/1dl9ecu/most_reputable_respected_and_definitive_guides_on/

• Full-Stack DApp Boilerplate for Substrate and ink! Smart Contracts https://github.com/scio-labs/inkathon?ref=statichunt.com

• Top Protocols per Chain (for example Ethereum) - https://defillama.com/top-protocols

• AAVE v3 is the most popular lending protocol for ETH at this moment - https://defillama.com/protocol/aave-v3?medianApy=true

Lending Protocols

I mean Lending&Borrowing Protocols: *which I could not resist to try on these examples

• https://de.fi/explore/borrow-lending/cat/stablecoin

As of now, some popular ones are Compound, AAve v3 or Spark

I got some interesting ideas from about them at:

• https://www.reddit.com/r/CryptoCurrency/comments/mnzv1c/defi_explained_lending_borrowing/
• https://www.reddit.com/r/CryptoCurrency/comments/nletmi/defi_explained_the_full_guide/#:~:text=Decentralized%20Finance%20(DeFi)%20is%20a,protocols%20that%20work%20without%20intermediaries.

I was always confused by staking vs lending, but here is the difference

DEX AMM

DEX are the defi counterparts of CEX like binance, OKX…

You will hear about quickswap (also uniswap as is very popular into the ETH network) for exchanging tokens pairs.

• https://defillama.com/dexs
  • https://defillama.com/protocol/uniswap?tvl=false&events=false&dexVolume=true
  • https://defillama.com/yields?project=Uniswap%20V3&project=Uniswap%20V2&project=Uniswap%20V4&project=Uniswap%20V1

QuickSwap falls primarily under the category of a Decentralized Exchange (DEX) and, more specifically, an Automated Market Maker (AMM).

• https://docs.quickswap.exchange/technical-reference/core-concepts/pools
• https://quickswap.exchange/
• See some sample pools: https://dapp.quickswap.exchange/farm/0xefFA9E5e63ba18160Ee26BdA56b42F3368719615

QuickSwap is famously a fork of Uniswap, meaning its foundational code is derived from Uniswap’s open-source code.

In essence, QuickSwap can be thought of as Uniswap for Polygon.

It brings the familiar and successful AMM model of Uniswap to a Layer 2 network, addressing the scalability and high gas fee issues that can plague Ethereum mainnet DEXs, making decentralized trading more accessible and affordable for a broader range of users.

Quickswap-core repository contains the core smart contracts, and interface-v2 houses the code for their web interface.

There is a key distinction in how you earn as a liquidity provider in many DeFi protocols, especially with the introduction of V3 concentrated liquidity:

1. Pool APR (e.g., 39%):

   • Source: This comes from the trading fees generated by swaps that happen within the USDC/USDT liquidity pool.
   • Reward Token: Since these are trading fees from the USDC/USDT pair, your “reward” comes in the form of an increase in the value of your underlying USDC and USDT tokens within your liquidity position. If you deposit $1000 USDC and $1000 USDT, and you earn fees, your share of the pool effectively grows, meaning when you eventually withdraw, you’ll get back more than $1000 USDC and $1000 USDT (assuming the price stays within your range and no impermanent loss).
   • How to access: These fees accrue directly to your LP position and might need to be “claimed” or simply increase the value of your LP tokens/NFT. To compound them, you’d typically withdraw them and then re-deposit them back into your LP position.

2. Rewards API (e.g., 4%):

   • Source: This comes from liquidity mining or farm programs set up by QuickSwap or partner projects to incentivize liquidity to certain pools.
   • Reward Token: These are usually paid out in the native token of the platform (QUICK), or sometimes in tokens of the project that is incentivizing the pool. In QuickSwap’s case, it’s typically QUICK.
   • How to access: To earn these, you usually have to take an extra step: stake your LP position (which is an NFT in V3) into a designated “farm” on QuickSwap. The reward tokens (e.g., QUICK) will then accumulate in that farm, and you’ll need to manually “harvest” or “claim” them.

So, in your scenario:

• 39% Pool APR means you are earning more USDC and USDT proportional to your liquidity’s contribution to trades.
• 4% Rewards API means you are earning QUICK tokens (or another specific reward token, but most commonly QUICK for QuickSwap farms) for staking your USDC/USDT LP position.

This dual-earning structure is common in DeFi and is designed to provide both a share of the protocol’s revenue (fees) and additional incentives (farm rewards) to attract and retain liquidity.

Some dApps

Open Source, Permissionless & privacy conscious DeFi portfolio tracker

• https://llamafolio.com/

Start visualising and tracking 434 protocols across 17 blockchains.

Stable Coins

Example stable coins are: USDT, USDC, DAI, USDS…

• https://defillama.com/stablecoins
• https://defillama.com/stablecoin/dai
• https://defillama.com/stablecoins/Polygon
• https://aavescan.com/ethereum-v3/usdc

ERC20

You might have read about ERC20 compatible Tokens…well:

For example, the aave token is ERC20:

• https://eth.blockscout.com/token/0x7fc66500c84a76ad7e9c93437bfc5ac33e2ddae9

Conclusions

I got to know this defi app called MetaLend that consolidates what you have in a wallet: https://app.metalend.tech/#earn

Its a Defi Aggregator, as seen in Reddit.

They can tell you some ideas on where to lend (sorted by %).

Similarly, to what you can learn at DefiLLama: https://defillama.com/protocols/lending

Which is where I got to know about Fluid: https://defillama.com/protocol/fluid

• https://github.com/Instadapp/fluid-contracts-public
• https://defillama.com/protocol/fluid-lending

Within fluid UI, you can see your total assets and how their value changed overtime

I also got to learn about another lending protocol called Morpho and Lulo:

• https://app.morpho.org/ethereum/migrate
• https://app.lulo.fi/

From where it can detect what I have lended via Aave, my open positions.

• https://chainlist.org/

ChainList is a list of EVM networks. Users can use the information to connect their wallets and Web3 middleware providers to the appropriate Chain ID and Network ID to connect to the correct chain.

I could not resist to try few protocols (under my own risk).

So…does the code explanations match what happened in reality?

Crypto Example 1

Lending with Aave: https://aavescan.com/ethereum-v3/usdc

I lended ETH, which gave me aEthWETH mapped 1:1 with the amount deposited.

After some time, i started getting new ETH (TBC?)

The AAve ETH Staking smart contract: https://etherscan.io/address/0xd01607c3c5ecaba394d8be377a08590149325722#code

See how the interest floats freely between supply and demand:

Crypto Example 2

This relates with: https://instadapp.io/

The Unified Platform for Everything DeFi

Lending with FLuid: https://fluid.io/lending/1

I tested it with lending USDT.

See USDT https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c13d831ec7?a=0x52aa899454998be5b000ad077a46bbe360f4e497 with ~8M holders

Placed 40$ in, and the transaction cost me some gas (2.11$ in USDT or 1.29$ in ETH == 2.363828823 Gwei)

You can pay in different tokens: because the transactions has some expenses, ofc!

I got 34.684249 fUSDT mapped to it, in theory to a ~7% interest: compared with the 2% you get on USD on xtb and the ~4% the FED stablishes

And now it appears:

NetAPR examples with Fluid and USDT:

To recover your initial investment of $40 after it dropped by 13% and then grew at an annual rate of 7%:

Value after the drop: Your investment of $40 dropped by 13%, meaning it became $40 \times (1 - 0.13) = 34.80.

Required growth to recover: To get back to $40 from $34.80, your investment needs to grow by a factor of 40/34.80 approx1.1494.

Time to recover: With an annual growth rate of 7% (0.07), it would take approximately 2.06 years to recover your initial investment.

See fUSDT: https://etherscan.io/token/0x5c20b550819128074fd538edf79791733ccedd18 with ~1k holders

See in your wallet transaction details

But I really didnt get the drop to 34 (-13,3%), despite showing 40$ value on the UI…

As we are here for the code and how AI can interprete it, this is the fluid Smart Contract: https://etherscan.io/address/0x5C20B550819128074FD538Edf79791733ccEdd18#code

Crypto Example 3

I could not resist to go back to aave v3 and lend the rest of USDT for comparison: Here with a ~3.26% interest.

8 USDT supplied, ~0.44$ usd paid in gas fees via eth (2461719711 wei)

But something went wrong, and the gas was spent, yet the 8 USDT werte still at my wallet.

So i tried again with 5USDT (and slow speed to safe some gas, as i have to pay again 0.456722383 Gwei)

Then, I got aEthUSDT https://etherscan.io/token/0x23878914efe38d27c4d67ab83ed1b93a74d4086a with a ~3,26% interest

If someone borrow, it will do 4,72%

After spending some eth in these transactions, this is how the asset looks like:

Crypto Example 4

Testing the Liquidity providing into a Dex.

Because people like to change token pairs and you can provide such tokens.

Basically, just be in between people exchanging the pairs, for example this one.

This has some risks, like IP!

So again, be mindful about all the things that can go very wrong with these operations.

• https://dapp.quickswap.exchange/farm
• https://app.uniswap.org/explore/pools

FAQ

Chain Comparison

Bitcoin, Ethereum, Solana, and Polkadot: A Comparative Overview

Programming

• Solidity is primarily used for developing smart contracts on the Ethereum blockchain.
• Other blockchains, like Solana, have their own programming languages (e.g., Rust for Solana).
• Polkadot, being a network of interconnected blockchains (parachains), allows for diverse programming languages depending on the specific parachain.

Open-Source Wallets

• Bitcoin: Electrum, Bitcoin Core, Mycelium. You also have Proton Wallet

#flatpak install flathub org.electrum.electrum

• Ethereum: MetaMask, MyEtherWallet, Trust Wallet
• Solana: Phantom, Sollet, Solflare
• Polkadot: Polkadot.js, Talisman

Crypto Concepts

1. Impermanent Loss (IL)

This can happen when the value of 2 assets deposited in a pool diverse: https://app.beefy.com/vault/nuri-cow-scroll-wbtc-weth-vault

beefy is a Multichain Yield Optimizer

2. You can Stake using Smart Contract Protocols like Aave: https://app.aave.com/

• https://etherscan.io/address/0xd01607c3c5ecaba394d8be377a08590149325722

And you receive some tokens while your assets are staked: https://etherscan.io/token/0x4d5f47fa6a74757f35c14fd3a6ef8e3c9bc514e8

3. Sample wallet: metamask is quite popular, but there are many OSS wallets

• https://portfolio.metamask.io/stake?tab=pooled
• For other currencies you can have a look to feather wallet or electrum.

You can find your wallet address / transactions and so on at https://etherscan.io/address/

4. DeFi space is huge and full of information

• https://app.extrafi.io/farm
• https://defillama.com/yields/stablecoins?token=USDT

Lending vs Dex

• When you lend one token only (e.g., just USDC) on Aave or Compound, you are NOT providing to a DEX’s liquidity pool in the same way you would on Uniswap or QuickSwap.

Let’s clarify the categories and their mechanisms:

Lending Protocols (Aave, Compound)

• Category: Decentralized Lending and Borrowing Protocols.

• Purpose: To enable users to lend out their crypto assets to earn interest, and to borrow crypto assets by providing collateral.

• Mechanism:

  • Lending Pools (Supply Side): Lenders deposit their single asset (e.g., USDC) into a lending pool (also known as a “money market” or “liquidity market”). These pools are managed by smart contracts. The funds in this pool are then available for borrowers to take out. Lenders earn interest, which is paid by the borrowers.
  • Borrowing (Demand Side): Borrowers deposit collateral (often a different crypto asset, and usually more than the amount they want to borrow, i.e., “overcollateralized”) into a separate smart contract, and then they can borrow a single asset from the lending pool.
  • Interest Rates: Interest rates for both lenders and borrowers are typically determined algorithmically based on the supply and demand within that specific lending pool (i.e., how much is being supplied vs. how much is being borrowed).
  • Tokens Received: When you lend on Aave, you receive “aTokens” (e.g., aUSDC for USDC). On Compound, you receive “cTokens” (e.g., cUSDC for USDC). These tokens represent your deposit plus accrued interest and can often be used as collateral in other DeFi protocols.

• Your Action: You provide a single asset (e.g., 1000 USDC) to earn interest on that specific asset. You are not pairing it with another asset to facilitate swaps.

DEXs (Decentralized Exchanges) with AMMs (Uniswap, QuickSwap)

• Category: Decentralized Exchanges (DEXs), specifically using the Automated Market Maker (AMM) model.

• Purpose: To facilitate permissionless and automated swaps/exchanges between different crypto assets.

• Mechanism:

  • Liquidity Pools: As discussed, these require LPs to deposit two (or sometimes more) different tokens in equivalent value into a pool (e.g., 1000 USDC and 1000 USDT). This pair forms the “market” for users to swap between those two assets.
  • Trading Fees: LPs earn a portion of the trading fees generated when users swap against their provided liquidity.
  • Impermanent Loss: A risk unique to AMM liquidity pools, where the price ratio of the paired assets changes, potentially leading to a loss compared to simply holding the assets.
  • Tokens Received: When you provide liquidity, you receive LP tokens (or an LP NFT in V3), which represent your share of the pool and accrue the trading fees.

• Your Action: You provide a pair of assets (e.g., USDC/USDT) to enable trading between them and earn trading fees.

Summary of the Difference:

What are Staking Protocols?

“Staking protocols” represent another distinct category within the blockchain and DeFi ecosystem, though there can be some overlap in terms of earning rewards.

Staking Protocols (e.g., Ethereum (PoS), Solana, Cardano, Polkadot)

• Category: Primarily related to blockchain consensus mechanisms, specifically Proof-of-Stake (PoS).

• Purpose: To secure a blockchain network, validate transactions, and create new blocks.

• Mechanism:

  • Locking Assets: In a Proof-of-Stake blockchain, instead of “mining” (like in Proof-of-Work Bitcoin), validators (or users who delegate to validators) “stake” (lock up) a certain amount of the blockchain’s native cryptocurrency as collateral. This stake acts as a financial incentive to behave honestly.
  • Validation: These staked tokens give validators the right to participate in the network’s consensus process (e.g., proposing new blocks, verifying transactions).
  • Rewards: In return for helping to secure the network and validate transactions, stakers earn newly minted tokens from the blockchain or a portion of transaction fees.
  • Slashing: If a validator acts maliciously or goes offline, a portion of their staked tokens can be “slashed” (forfeited) as a penalty.
  • No Pair Required: You typically stake a single asset (the native token of the blockchain, e.g., ETH, SOL, ADA, DOT).
  • Lock-up Periods: Often, tokens staked directly on a blockchain are locked for a specific period (unbonding period) during which they cannot be traded or moved.

• Famous Staking Protocols (Blockchains):

  • Ethereum (since “The Merge”): You can stake ETH directly (requiring 32 ETH to run a full validator node) or through staking pools.
  • Solana (SOL): Users can delegate their SOL to validators.
  • Cardano (ADA): Users can delegate their ADA to stake pools.
  • Polkadot (DOT): Uses a Nominated Proof-of-Stake (NPoS) model where DOT holders nominate validators.
  • Cosmos (ATOM): Known for its “Internet of Blockchains” and allows staking ATOM.
  • Avalanche (AVAX): Allows staking AVAX to secure its network.

Sub-categories of Staking:

• Direct Staking: Staking directly on the blockchain, either by running your own validator node or delegating to one.
• Pooled Staking: Multiple users contribute smaller amounts to reach the minimum required for a validator node, and rewards are shared proportionally.
• Liquid Staking: This is a newer innovation that solves the “lock-up” problem of traditional staking.
  • When you stake ETH (or other assets) with a liquid staking protocol (like Lido Finance or Rocket Pool for Ethereum, Marinade Finance for Solana), you receive a liquid staking token (LST) in return (e.g., stETH for staked ETH).
  • This LST is pegged 1:1 to the value of your staked asset and can be freely traded, used as collateral in lending protocols (like Aave!), or deployed in DEX liquidity pools.
  • You continue to earn staking rewards on your original staked asset while having liquidity with the LST. This effectively “unlocks” the capital that would otherwise be locked.
• Restaking (Emerging Concept): This is even newer, championed by protocols like EigenLayer on Ethereum.
  • Restaking allows users to re-purpose their already staked ETH (or liquid staked ETH like stETH) to simultaneously secure other decentralized applications or “actively validated services” (AVSs) in addition to the Ethereum blockchain itself.
  • In return, restakers earn additional rewards from these AVSs, effectively “stacking” yield. It increases the economic security of the broader ecosystem but also introduces new layers of complexity and slashing risks.

Key Differences Summarized:

While these categories are distinct, DeFi is all about composability (or “money Legos”).

This means these protocols can often be combined: for example, you might take your stETH (from a liquid staking protocol) and deposit it into an Aave lending pool to earn additional interest, or provide it to an stETH/ETH liquidity pool on Uniswap V3.

This layering of protocols is what makes DeFi so powerful and complex.

Comparing the Risks

When comparing the risk profiles of staking, lending, and providing liquidity (LPing) into a DEX with stablecoins, it’s essential to understand the unique risks associated with each.

According to Gemini This is a breakdown, generally from lowest to highest relative risk, along with the “why”:

1. Lending Stablecoins (e.g., Aave, Compound with USDC/USDT)

• Risk Level: Generally considered the lowest risk among the three, especially when using well-established, fully-backed stablecoins like USDC and USDT.
• Why:
  • No Impermanent Loss: This is the biggest advantage. Since you’re depositing a single asset, there’s no price divergence between two assets in a pair, thus no impermanent loss.
  • Stablecoin Peg Risk is Minimized (for major ones): While not zero, the risk of major stablecoins like USDC or USDT permanently losing their peg to the USD is relatively low due to their backing and regulatory scrutiny (though temporary de-pegs can occur, as seen with SVB and USDC).
  • Simple Mechanism: You’re simply providing liquidity to a borrowing pool. The smart contracts are typically simpler than those for AMMs or complex staking derivatives.
• Primary Risks:
  • Smart Contract Risk: The most significant risk. Bugs, exploits, or hacks in the Aave or Compound smart contracts could lead to loss of funds. Protocols mitigate this with audits, bug bounties, and sometimes insurance.
  • Liquidity Risk: In extreme market conditions, borrowers might not be able to repay, or there might be high demand for withdrawals, leading to periods where you cannot immediately withdraw your funds from the lending pool. While these protocols have mechanisms (like variable interest rates that increase to incentivize deposits) to balance this, it’s a possibility.
  • Oracle Risk: Lending protocols rely on external price feeds (oracles) to determine collateral values and trigger liquidations. If an oracle is manipulated or provides incorrect data, it could lead to bad debt or unfair liquidations.
  • Centralization Risk of Stablecoin: If the stablecoin itself (USDC or USDT) were to suffer a major, permanent de-peg due to issuer insolvency or regulatory action, the value of your lent assets would decline.

2. LPing into a DEX with Stablecoins (e.g., QuickSwap V3 with USDC/USDT or the Uniswap Equivalent Pool)

• Risk Level: Low to Moderate, slightly higher than simple stablecoin lending due to the introduction of Impermanent Loss, even if minimal.
• Why:
  • Low Impermanent Loss (with stablecoins): As discussed, since both assets in the pair aim for $1, their relative price movement is minimal. This means impermanent loss is significantly reduced compared to volatile pairs (like ETH/MATIC).
  • Earns Trading Fees: You earn fees from every swap, which can be a consistent source of yield.
  • Additional Farm Rewards: Often boosted by liquidity mining incentives (like QUICK tokens), which can enhance overall APR.
• Primary Risks:
  • Residual Impermanent Loss: Even with stablecoins, minor de-pegs can occur. If USDC goes to $0.998 and USDT stays at $1.000 for a period, you will incur a small amount of impermanent loss. If one stablecoin suffers a significant de-peg, your IL could become substantial.
  • Smart Contract Risk: Vulnerabilities in the DEX’s (e.g., QuickSwap’s) smart contracts.
  • Oracle Risk: Less direct than lending protocols, but if a DEX’s internal price discovery mechanism or external oracle (if used) is manipulated, it could lead to issues.
  • Concentrated Liquidity Management (V3 specific): If you set a tight price range and the price moves outside that range, your liquidity becomes inactive and stops earning fees and rewards until the price returns or you adjust your range. This requires active management or reliance on automated tools, adding a layer of complexity and potential for missed earnings.
  • Centralization Risk of Stablecoins: Same as lending, if one of the stablecoins significantly de-pegs.

See the difference in APR (and total value locked)

3. Staking (especially direct PoS staking of volatile assets or complex liquid staking/restaking)

• Risk Level: Generally the highest risk among these three, especially for direct staking of volatile assets or using newer, more complex staking derivatives.
• Why:
  • Price Volatility of Staked Asset: This is the dominant risk. If you stake ETH, and ETH’s price drops significantly, the value of your principal can decrease dramatically, potentially offsetting or even overshadowing any staking rewards.
  • Slashing Risk: Unique to Proof-of-Stake. If the validator you stake with (or if you run your own) acts maliciously, goes offline for extended periods, or makes errors (e.g., double-signing), a portion of your staked assets can be “slashed” (forfeited).
  • Lock-up/Liquidity Risk: Traditional staking often involves unbonding periods (e.g., 7-28 days on many chains). During this time, your assets are locked and cannot be traded or moved, leaving you exposed to price drops without the ability to react. Liquid staking mitigates this but introduces new risks (see below).
• Primary Risks (beyond price volatility):
  • Smart Contract Risk: For staking pools or liquid staking protocols (e.g., Lido, Rocket Pool), bugs in their smart contracts could lead to loss of staked funds.
  • De-peg of Liquid Staking Token (LST): If you’re using liquid staking, there’s a small risk that the LST (e.g., stETH) could temporarily de-peg from the underlying staked asset (ETH), creating arbitrage opportunities but also potential losses if you need to sell the LST at a discount.
  • Centralization Risk (for some staking pools): While the blockchain itself is decentralized, large liquid staking providers can accumulate significant control over the network’s stake, posing a centralization risk to the underlying blockchain’s decentralization.
  • Oracle Risk: Used in liquid staking for redemption rates.
  • Restaking Risks (Emerging): Restaking introduces additional smart contract risks from the “actively validated services” (AVSs) you’re securing, and potential for additional slashing if those AVSs have their own slashing conditions. This is a very new and potentially higher-risk frontier.

Summary (General Ranking of Risk, for the AVERAGE User):

1. Lending Stablecoins: Lowest relative risk. Main concern is smart contract vulnerability and potential stablecoin de-pegging.
2. LPing Stablecoins on a DEX: Low to moderate risk. Adds minor impermanent loss risk compared to lending, plus smart contract risk, and the operational complexity of V3 concentrated liquidity.
3. Staking Volatile Assets (especially direct PoS): Highest risk among these. Dominated by the volatility of the underlying asset, plus slashing risk, smart contract risk, and potential liquidity lock-ups. Liquid staking and restaking add layers of complexity and their own specific risks.

. Always do your own research (DYOR) and understand the specific protocol’s mechanics and audits before committing capital to any DeFi activity!!

Difference Growth Rates KPIs

You will need to understand a very important distinction in finance and especially in crypto!

APR and APY are both ways to express interest rates over a year, but they differ significantly in how they account for compounding.

In traditional Finances, as seen within real estate, it was interesting to get to know the CAGR.

But while you explore Defi Protocols, these will pop up: APR and APY

The Critical Difference:

• APR is the simple annual rate. If compounding occurs more frequently than annually, the actual earnings will be higher than the APR.

• APY is the effective annual rate that already includes the effect of compounding. It tells you the true percentage gain on your initial principal over a year.

Therefore, when you see an “APY” figure on QuickSwap or any other DeFi protocol, it’s designed to give you the most accurate picture of your annual returns, taking all compounding into account.

If they stated an “APR,” it would be a lower number, and you’d need to manually calculate the APY based on the compounding frequency to understand your true annual return.

APR (Annual Percentage Rate)

• What it is: The Annual Percentage Rate (APR) is the simple interest rate for a year, without taking into account the effect of compounding within that year. It represents the annual cost of a loan or the annual earning rate of an investment before considering the “interest on interest.”
• Key Characteristics:
  • Simple Interest: APR is based on simple interest. It’s the periodic interest rate multiplied by the number of periods in a year.
  • No Compounding: It does not account for interest being added to the principal more frequently than annually.
  • Context: Primarily used for loans (mortgages, car loans, credit cards) to show the basic cost of borrowing. A lower APR is better when you’re borrowing. It’s also used in some DeFi contexts to indicate a base rate before any compounding.
  • Example: If you have a loan with a 12% APR compounded monthly, the interest rate per month is 1%. The APR is just 1% * 12 months = 12%.

APY (Annual Percentage Yield)

• What it is: The Annual Percentage Yield (APY) is the actual rate of return on an investment or savings account over a year, taking into account the effect of compounding interest. It shows you how much your money will actually grow over a year if the int