![]() Dozens of tokens tie their names toĬEO Elon Musk and his dog Floki. Talk it up on social media, and try to build a market on a DEX. In theory, anyone with some coding skill can mint a token on a blockchain like PancakeSwap’s motto: “Trade anything, no registration, no hassle.” (Food is a popular crypto meme.) The prevailing ethos is that you can swap any token, assuming you can find a counterparty and drum up some liquidity. The biggest DEX markets include dYdX, Uniswap, PancakeSwap, and SushiSwap. Liquidity pools create the markets and order books, and “smart contracts” set the terms of a trade and settlement. Along with the major cryptos, legions of “alt coins” trade on decentralized exchanges, or DEXes, which are like automated market makers, matching buyers and sellers with algorithms. Traders swap all kinds of digital assets on DeFi markets. They view DeFi as crypto anarchy that needs to be reined in, although no one is sure how to do it. DeFi is also affecting centralized exchanges, which see both threats and opportunity in the technology. Fortunes are being made-or lost-as traders swap tokens that can surge 1,000% overnight, or pledge their coins to liquidity pools in return for high yields. DeFi networks now hold $240 billion, up from $13 billion a year ago. Interest rates can top 10%, depending on the crypto and size of the pool. Users add their crypto to a liquidity pool in exchange for fees paid by borrowers who might trade the tokens. Other DeFi networks consist of giant lending platforms that are like crowdfunded money markets or order books for trading. DeFi encompasses freewheeling marketplaces where thousands of tokens are listed and traded, without any oversight from a central authority. Welcome to decentralized finance, or DeFi-the new frontier of crypto and one of its fastest-growing areas. Cryptocurrency Investors Are a Philanthropic Bunch.Fund Companies Want to Offer Riskier Bitcoin ETFs.How to Buy Bitcoin-and The Pros and Cons of Each Option.Should You Invest in the Bitcoin Futures ETF? Tread Carefully.
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