Onboarding on DeFi composability & primitive strategies

Onboarding on DeFi composability & primitive strategies

May 17, 2023·

2 min read

Decentralized finance primitives to understand the market and

"Smart Contracts" use case.

Ethereum has $26 billion USD Locked Value

Contract Positions

Contract Positions are investment positions that are not represented by a token standard. These positions may be used to represent positions like: Farming pool token positions in SushiSwap Master Chef staking contracts, Bonds in Olympus or other apps that aim to own their liquidity, leveraged positions in isolated markets like Abracadabra cauldrons or Alchemix alchemists between others.

Reference: Zapper Finance at zapper.xyz


Tokens are investment positions that are represented by a token standard like ERC20. These are transferrable and fungible positions that maybe considered as a receipt for an investment transaction. These receipts may be used to represent:

  • Liquidity pool positions in a decentralized exchange like Uniswap, SushiSwap, or Curve

  • Autocompounding "vaults" like in a yield aggregator like Pickle or Yearn

  • Supply and borrow positions in a lending app like Aave

  • Or even more obscure primitives like options in Opyn or prize savings accounts in PoolTogether

Common Strategies

  • Automated Market Maker (AMM) Platforms: AMM platforms like Uniswap and SushiSwap allow users to trade tokens and provide liquidity to liquidity pools. By creating a bearing token and listing it on these platforms, users can provide liquidity and earn yield from trading fees.

  • Yield Farming Protocols: Yield farming involves staking or lending tokens to earn additional tokens as rewards. Protocols like Aave, Compound, and Yearn.finance allow users to deposit bearing tokens and generate yield by lending or leveraging them.

DeFi strategies require traders to navigate the composability of different protocols in the network. Easily tap in to the concept of the compound the interest.

  • Liquidity Mining: Liquidity mining programs incentivize users to provide liquidity to specific pools by rewarding them with additional tokens. Platforms like Balancer and Curve Finance offer liquidity mining opportunities, allowing bearing token holders to earn yield.

  • Staking Protocols: Staking protocols enable users to lock up their tokens to secure a network or participate in governance and earn staking rewards. Examples include Ethereum 2.0's Beacon Chain staking and projects like Synthetix and Staked.

  • Derivatives: DeFi derivatives allow users to trade or hedge against the price movements of underlying assets without owning them directly. Projects like Synthetix and dYdX offer decentralized derivative trading platforms.

If you would like to explore more about different RISKY composable strategies, take a look at this youtube channel where traders compete and rank the top performant strategies.