What is DeFi Yield Farming in Nigeria (☑️ Updated 2023)

The history of DeFi for Nigerians

Where everything began

👉 There is no set date for the birth of decentralized finance, although many momentous events have made it possible. The first of these was Satoshi Nakamoto’s creation of Bitcoin in 2009.

👉 Regardless of whether Bitcoin could be categorized as DeFi, its emergence was the catalyst for the entire cryptocurrency business, which is a component of decentralized finance.

👉 Bitcoin also enables decentralized transmission of global payments, which is one of the financial disciplines. Additionally, Bitcoin facilitated the development of Ethereum, the default blockchain for all leading DeFi protocols.

👉 While Bitcoin is amazing to move across the globe, there is more to money than that. Any healthy financial system requires various other essential services such as lending, borrowing, trading, financing and derivatives.

👉 Its simple and limited scripting language made Bitcoin unsuitable for these applications. The restrictions imposed by the script have significantly influenced Vitalik Buterin’s construction of Ethereum.

👉 Ethereum debuted in 2015 and quickly attracted a growing number of developers looking to create a variety of decentralized apps, from games like CryptoKitties to financial applications.

👉 Ethereum quickly became the platform of choice for smart contract development with its Turing-complete programming language Solidity and the ERC20 standard for generating new currencies.

The first DeFi projects

MakerDAO

👉 That brings us to Maker, one of the first DeFi initiatives on Ethereum. Maker is a technology that facilitates the creation of DAI, a decentralized stable currency. The project was founded in 2014 by Rune Christensen, motivated by Dan Larimer’s Bitshares blockchain project.

👉 Maker development started in late 2017 with venture capital funding. The first version of the protocol, Single Collateral DAI, only accepted ETH as collateral. This was then expanded into Multi Collateral DAI, which launched in late 2019.

👉 Maker remains one of the most significant DeFi initiatives and one of the first pioneers of the entire decentralized finance industry.

EtherDelta

👉 EtherDelta was a notable initiative that was very popular in 2017. One of the first permissionless exchanges for ERC20 tokens was EtherDelta, based on the Ethereum blockchain. Trading was based on an order book.

👉 Building order book exchanges on Layer 1 is difficult and often results in poor user experience. EtherDelta was nonetheless one of the most popular exchanges for trading ERC20 tokens, especially during the ICO period.

Pre-Compound Protocol

👉 The first version of Uniswap was released on November 2nd, 2018 on the Ethereum mainnet. This was the culmination of over a year of work by its creator, Hayden Adams.

👉 Uniswap is one of the most significant developments in the DeFi space. Unlike EtherDelta, Uniswap was constructed using liquidity pools and automated market makers. The first version of Uniswap was fully sponsored by a grant from the Ethereum Foundation.

👉 In July 2019, another significant incident occurred. As a result, Synthetix initiated the first liquidity incentive program. This technique would eventually become one of the main drivers of the DeFi summer of 2020.

👉 Between 2018 and 2019, numerous other DeFi projects published their protocols on the Ethereum mainnet. Among them were Compound, REN, Kyber and 0x.

DeFi summer

👉 Compound’s liquidity mining program for COMP coins, released in May 2020, was the main reason behind the DeFi summer. Additionally, DeFi clients are now being compensated for lending and borrowing on the Compound platform.

👉 The additional incentives in the form of COMP tokens significantly increased the supply and lending of APYs for various tokens.

👉 This also facilitated the growth of yield farming as users were incentivized to continuously switch between borrowing and lending different tokens to get the highest potential yield.

👉 This incident also spawned a wave of new protocols that distributed their tokens through liquidity mining and created more options for yield farming.

👉 It also introduced compound governance, allowing COMP token holders to vote on proposed protocol improvements. As a result, several other DeFi initiatives eventually adopted Compound’s governance model.

👉 This brings us to another important DeFi protocol: Yearn Finance. In 2020, Andre Cronje created Yearn, a yield optimizer that maximizes DeFi potential by automatically switching between lending protocols.

👉 Andre offered YFI, a governance token, to the Yearn community in July 2020 to further decentralize Yearn.

👉 The currency was fully allocated through liquidity reduction; There were no VCs, funder awards, or developer awards involved. This strategy garnered much support from the DeFi community, with funds in excess of $600 million in locked value pouring into the incentivized liquidity pools.

👉 Less than two months after its initial listing on Uniswap, the token’s price started a parabolic increase from around $6 to more than $30,000 per token.

👉 As with most innovative DeFi efforts, numerous other teams launched similar initiatives with minor modifications after Yearn’s breakthrough. Ampleforth was another initiative that gained popularity due to its unique elastic care concept.

👉 Another DeFi protocol, Yam, immediately adopted and modified this design. Then we have SushiSwap. Launched in late August 2020 by an unidentified team, the protocol presented a novel vampire attack idea aimed at draining liquidity from Uniswap.

👉 By offering Sushi tokens as an incentive for Uniswap liquidity providers, SushiSwap could attract up to $1 billion in liquidity.

👉 ChefNomi, the main creator of SushiSwap, sold his entire investment in SUSHI tokens, causing some turmoil. Eventually, the protocol moved a significant portion of Uniswap’s liquidity to its new platform.

👉 Several more projects of varying caliber have been released throughout the DeFi summer. Most, however, were just variations on existing open source projects that attempted to capitalize on the industry’s overconfidence.

👉 Following the debut of Yam and Sushi, several new projects with food-related names have been unveiled. Finally, one of the last notable events of the DeFi summer was the launch of Uniswap token UNI.

👉 All former Uniswap users and liquidity providers have been rewarded with an airdrop worth over $1000. In addition, Uniswap launched its liquidity reduction program in four different liquidity pools and amassed over $2 billion in liquidity. Most of it was returned to SushiSwap.

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