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DeFi in-depth analysis - lending, DEX, stable currency, income aggregator - web3 series Section 16

2025-08-295 Minute

In traditional finance, the banks, securities companies, and fund management institutions we are familiar with all play different roles. In the blockchain world, DeFi (decentralized finance) attempts to reconstruct these functions using smart contracts and token economies. Today we will talk in depth about the four core sectors of DeFi: lending, decentralized exchanges (DEX), stablecoins, and revenue aggregators.

Lending agreement: a “bank” without an intermediary

Borrowing is one of the core needs of finance. In DeFi, lending protocols directly match funds through smart contracts without banks as intermediaries.

Working principle

Users deposit assets into the protocol pool and earn interest.
Borrowers pledge digital assets and lend other tokens from the pool.
Interest rates fluctuate in real time based on supply and demand.

👉Case 1: AaveAave is currently one of the leading decentralized lending protocols, with TVL (Locked Volume) remaining at the tens of billions of dollars level for a long time. Its characteristics areFlash Loan, allowing users to lend and return funds in the same transaction, without collateral. This is widely used in arbitrage and complex operations.

Inspire: Lending agreements lower the threshold for using funds, but they also come with liquidation risks. Ordinary users are more suitable to "deposit coins and earn interest" rather than frequently borrowing money.

DEX (Decentralized Exchange): Permissionless “Exchange Market”

In traditional finance, exchanges require licenses, matching engines and clearing systems. DEX writes all these functions into smart contracts.

Mainstream model

AMM (Automated Market Maker): Such as Uniswap, based on the liquidity pool, through the formulax*y=kPricing.
order book model: Such as dYdX, which is closer to the experience of a centralized exchange.
blend mode: Combines the advantages of AMM and order book.

👉Case 2: UniswapUniswap's daily trading volume once exceeded Coinbase in 2021, showing the huge potential of DEX. Through the liquidity pool, anyone can become a "market maker" and earn transaction fees.

Inspire: DEX breaks the threshold, but it also brings new risks such as "impermanent loss", which liquidity providers need to evaluate carefully.

Stablecoins: the “cornerstone currency” of DeFi

If Bitcoin is “digital gold,” then stablecoins are “digital dollars.” They provide DeFi with a relatively stable pricing and trading medium.

Types of Stablecoins

Legal currency mortgage type: U.S. dollar assets are managed by centralized institutions, such as USDT and USDC.
Crypto asset mortgage type: Generated with over-collateralization of crypto assets, such as DAI.
Algorithmic Stablecoin: Relying on algorithms to regulate supply and demand, such as the failed UST.

👉Case 3: DAI’s over-collateralization mechanismDAI is issued by MakerDAO, and users mortgage ETH and other assets to generate DAI at a certain ratio. If the price of the collateral drops too quickly, the position will be liquidated. This mechanism ensures the stability of DAI.

Inspire: Stablecoins are the blood of DeFi. Legal currency mortgages are more stable, but centralized; cryptographic mortgages are more decentralized, but volatile; algorithmic stablecoins have great potential but high risks.

Revenue aggregator: a robot that helps you “move bricks”

The income aggregator is the “financial assistant” in DeFi. It will automatically find the optimal revenue strategy and help users switch between different protocols.

Working principle

Users deposit assets into the aggregator.
The smart contract automatically selects the lending protocol or liquidity pool with the highest yield.
Some agreements will compound interest returns, increasing overall returns.

👉Case 4: Yearn FinanceYearn Finance is one of the earliest yield aggregators, helping users automatically switch to protocols with better interest rates such as Aave and Compound. A cross-border e-commerce seller friend tried depositing idle USDC into Yearn. The rate of return after one year was about 8%, which is much higher than traditional bank financial management.

Inspire: Revenue aggregators lower the threshold for ordinary users to participate in DeFi, but they need to pay attention to contract security risks.

Frequently Asked Questions (FAQ)

Q: Will there be a "run" on the lending agreement?

A: It is possible, but the general agreement reduces risks through over-collateralization and dynamic interest rates. However, there is still a risk of liquidation in extreme market conditions.

Q: Are DEX transactions safe?

A: The transaction process is transparent, but contract loopholes and phishing websites are the main risks. Use audited mainstream protocols.

Q: Will stablecoins lose their anchor?

A: The legal currency-collateralized type is relatively stable; the crypto-collateralized type and algorithmic type are more likely to be unanchored, especially in extreme market environments.

Q: Is the income aggregator guaranteed to make money without losing money?

A: No. Revenue comes from other protocols. Once there is a problem with the underlying protocol, the revenue aggregator cannot be immune.

Summarize

The four core modules of DeFi—lending, DEX, stablecoins, and income aggregators—jointly build a decentralized financial ecosystem. From capital flow, to asset trading, to pricing and financial management, it almost covers the main functions of traditional finance.

I personally believe that the significance of DeFi is not to replace traditional finance, but to provide a new financial option to make capital flows more open and transparent. For ordinary users, only by understanding the risks and mechanisms can they truly enjoy the opportunities brought by DeFi.

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