DeFi for Dummies?

in LeoFinancelast month


Just to be clear, this is more of a fact finding post versus an informative one. Like many of you, I am quite new to this whole DeFi thing and I am trying to find my way through it all. I know a lot of you are in the same boat, and I am hoping that some people can chime in on the comments of this post to maybe answer some of the questions I have.

As I wrote in my post yesterday, I have been digging into DeFi a bit more lately. I have some passive income streams that are currently paying off pretty well for me and that has given me the freedom to explore this (not so new) trend in crypto.

Again, like many of you, I got my start with our very own Cub DeFi. It has been a great learning too, but there are still some things that I don't quite understand. It almost doesn't feel risky enough because we are so familiar with the team behind it and the great work that they have been doing for us.

From Cub DeFi, I found my way in to PancakeSwap which I also mentioned yesterday. The price of the CAKE token is pretty attractive right now, so I have been trying to stack that through some of the farms though the going is slow.

Finally, yesterday I read someone's post and they mentioned PantherSwap. I figured, "no risk no reward right", so I moved some of my BNB into a couple of swaps and then pooled some liquidity in to the farms there. At the time, some of the farms were pulling in like 5000% APR, so why would you not. With my small amount invested, I think I pulled in about 30 tokens just over night.

Of course since then, the APR has dropped to the 3000% range (listen to me complaining about 3000%!) and the price of the token has dropped from about $3.20 to $2.20 or so.


This whole dive into PantherSwap got me thinking... I know about rug pulls, I think we all know about those. They get the biggest headlines and the rekt the most people, but what are the other hazards of DeFi?

What are the less severe things that can really hurt you if you have money invested in a farm or a pool. I am assuming if you are dealing with a pool/den, the native token price dropping could be a really bad thing.

What about farms though? This is where my knowledge is lacking. As I said, I am hoping someone can fill in the gaps for me in the comments. Preferably in a clear/concise way. Think DeFi for Dummies.

I know I read something at one point where the author was talking about the price of one token in a liquidity pair going up and the other going down and how that can hurt your investment. I don't quite understand how though.

Are there any other pitfalls to entering into DeFi that I or anyone reading this should know about?

With so many platforms popping up all over the place, it is hard to know which ones to trust. I think we are all so worried about the big rug pull that we might miss some of the smaller warning signs of a bad DeFi platform.

I look forward to seeing the replies to this and I hope that the comments on this post will serve to educate both myself and any others who stumble upon it.

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Providing liquidity in farms is good if the token is consistently growling or else it's gonna eat all your BNB. 😴

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I moved most of my stuff to BUSD.

Hmm sounds to me that you should look at it as in an investor/trader terms of view but that you're earning interest that's what it sounds to me I really keep my interest simple should try the pool things I thought about moving my ada to a pool on their chain

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Yeah, pools are nice because you don't need to deal with as many moving parts.

yup and you're still making crypto work for you

I hate to be this guy, but I think you know how difficult searching can be around here..

Do you off hand know of any super beginner posts about getting started on Cub? Most of my crypto experience has been through interfaces such as coinbase haha. I'm a bit lost as to how exactly to deposit into cub...

If that's too annoying a question, feel free to ignore! haha

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No worries. Have you checked out their documentation. It is pretty robust and that is what I followed to get started. If you are on discord you can try to find me there and maybe I can help a little too.

I have a little bit, but I kind of just skimmed it to see if it directly addressed any of my questions. I will give it a better look today. Thanks! If I strike out I may end up trying to find you on Discord.. haha

For sure!

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Indeed rug pulls are just the worst outcome but many platforms just go to 0 because developers and users just leave it and the tokens become penniless (Pizza, Kimchi...).

Not to mention the Impairment losses which take newbies off guard most of the time.

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Excellent points! Thanks for that insight!

Can I ask you...

of my BNB

Are these regular BNB or the BNB on the Binance Smart Chain and are they interchangeable and if so, how? You're a few steps in front of me so I thought I could change your post into a knowledge chain post...obviously with me at the bottom lol ;-)

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They are BNB over on the Binance Smart Chain. You can move them but the fees can be hefty. I think Leo has a bridge in beta right now to do this with just a couple clicks.

Thanks for that, I was actually having a fanny about on your Pantherswap today and got a litle return before trying to reverse the operation to see if I could. I was unable to swap the Panther-bnb (cake?) back to BNB though because it said there were no swaps available so I put them back and let them tick over again!
It was only a small amount to test the water os no matter, but quite proud of myself so I have to say thanks for the inspiration mate!
Hope you and the good lady are doing ok :-)

Thanks, yeah, we are doing good. That sucks about Panther. I think I was able to get mine out in time. I ended up moving it all over to CUB. The APY isn't as good, but I think it is more stable, secure, and reliable.

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It's OK! I managed to swap the Panther themselves back into BNB. Just a learning curve for me but I'm not convinced yet about the Defi space!

It is a good idea to be cautious!

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Risk/reward is the key as others have mentioned. If you want to explore donut with small amounts of you think the porky is risky. If I don’t trust the team or audits I’d recommend only putting what you are willing to lose. It’s more of gamble than an investment.

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Thanks for the insight!

I have thought to spread more out. Right now I have been using cub. I got some in Binance liquid swap to compare returns.

I wish cub would get on defistation and market better but maybe that will come after v2🤔

Yeah, it would be nice to see the price go back up. Hopefully we will see it sooner rather than later. Until then, I still think it is a really solid bet!

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Yeah I think it will be. I can see once it's listed to some defi places it will gain much more traction.

I mean not like 18m is small money an all 🤣

For sure!

They have an application in to get on there.

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Nice, That is great news.

Hey @bozz, DeFi is not so easy!!! Just put your money in and reap rewards. Sounds simple but it's not.

Check this out, this post has the answers you are looking for:

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Thanks! I will definitely check that out! Now that I see who wrote it how much you want to bet I already read it and probably commented on it. I will have to look and see!

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Your post was promoted by @bozz

Impermanent loss over time can be a large risk in DeFi farms. If CUB goes up to $50 over time (totally possible), and you have all of $1000 in the CUB/BUSD ($500/$500) farm (with CUB at $2.50). You would end up with $2236 BUSD and 44 CUB. So the value of your pool went up, your pool is now worth $4472. However, if you held CUB in the Den, The 200 Cub you had in that pool would be worth $10,000. This is an extreme example to show that impermanent loss can make you lose. There are plenty of impermanent loss calculators online. I used this one to calculate this example.

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Hmm, that is interesting. I think I am still having trouble wrapping my head around parts of it. So in your example I started out with 500 BUSD and 200 CUB. Would it not be such a huge loss if it was something besides BUSD? Is the break even price so low simply because it is a stable coin and there isn't as much volatility as CUB has?

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There's a lot of AMM's out there, probably too many right now and they wont all innovate. Rug pulls are a threat so it's good to look for project that have had their contracts audited independently.

The risk you're speaking of is impermanent loss, I liked this video:

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Thanks for the share, I will check it out!

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For me it is real simple:

As an investor I dont mind risk. That is something I am not averse to. However, I am not willing to take on the risk of having things stolen from me. That is not investing risk.

Hence I stick with CubFinance since I know the team is not going to pull the rug on that one. Do I miss some other crazy returns? Yes. But then I am getting excellent returns from Cub PLUS the more money in there, the better it is for all holding the tokens.

Thus, my fracturing my money by going into different pools across BSC is not helping CUB. That is a high objective of mine. Yes I want my return but I want the entire project to grow and succeed. While I am not playing with the cash to make a huge difference, every little bit helps.

As for the space in general, it is still very young with a lot of development required. We are not even to the point where we have a viable financial system. Wait until there is insurance and things of that nature.

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That is a good point about not spreading yourself too thin. It can be hard to think that way when you see the price of CUB compared to some of the other DeFi tokens as well as the TVL of some of the platforms. Perhaps I would be better off just keeping everything in Cub, accepting it is a long term hold and just riding it out.

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Perhaps I would be better off just keeping everything in Cub, accepting it is a long term hold and just riding it out.

That is my view. I dont have the time to judge the risk/reward of other projects. Sure if you want to put a bit of play money into something and try to earn 6,000% in a week, go for it.

But for me, when it comes to the main stake, I am Cub all the way. I feel that there is more benefitting than just my personal account when there. The bigger Cub gets, the better it is for all of us on Hive who are invested.

And I think, long term, that will help Hive.

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That is a fair assessment. I think part of my plan was to find something outside of Hive that I could invest in. Since this is still on the BSC, I think that might fit the bill even though it has tendrils connected to Hive in some way. I am working on removing some of my liquidity now. That Panther would have been a nice win if the token price hadn't dropped. Watching the numbers move based on 5000% APR was nuts!

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Watching the numbers move based on 5000% APR was nuts!

It is enticing there is no doubt about that.

However, we need to be ever mindful of all that is taking place. But then we all have our levels of risk we are willing to take on.

For me, with my time locked up, I just trust CubFinance and have that as my outside exposure to Hive. I still hold BTC, ETH, and LTC as long term plays.

Plus Hive based stuff is giving more options than I can take advantage of.

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Yes, Hive is expanding rapidly. I guess if I really was worried about having some outside investments, WAX would have me covered.

That's how I think too. I'm still not a very experienced investor and not a full-time investor yet so I just try to rely on projects that I know I can trust even though I could be missing out on other stuff

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Even the most experienced investor is going to have a tough time determining which projects are rug pulls. That will make things tougher on anyone.

So I just focus upon CubFinance on that end. As they add more, if I want to change what I am doing, I will embark upon different aspects of that platform.

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You are also talking about impermanent loss when you ask about price variations in liquidity pools. Not long ago I wrote an article on the subject, not self promoting but for your info, here's the link:

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Perfect, I will check it out. This is just the kind of stuff I need. No worries about self promoting, you are heling me out a ton!

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Its a great topic. I know that LPs and Farms can cause some lost. From what I have heard I guess I am part of the FOMO since I entered the bLEO/BNB pool without doing too much research as I think it should be fairly stable. I may have to rebalance my LPs in the future but I don't know too much besides that.

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Yeah, see the whole rebalancing thing is another topic that I don't understand too much about. I guess I need more of a comprehensive guide than I thought!

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I know I read something at one point where the author was talking about the price of one token in a liquidity pair going up and the other going down and how that can hurt your investment. I don't quite understand how though.

That's what people call "Impermanent loss" if I'm not mistaken. I'm also a beginner in the world of DeFi but I hear that term a lot.

I wouldn't dare to try and explain it myself, but this article might help

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Thanks, I will definitely check that out. I have heard that term as well. Thanks again for the info!

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It’s good to be conservative but take some risk at the same time. We are sticking with CubFinance and GooseFinance which is what they formed off of. I take some of my rewards and go into goose with BUSD and BTCB until the kingdoms are out, only because the rates are better for the pools instead of having to put it into a farm.

May look into taking the BUSD from goose and going to panther swap and test it out to get some gains.

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Panther got nerfed really hard and after that I kind of dropped out. That is cool about Goose. I have heard of it but never really checked it out. I am pretty happy with how Cub is going for me, so I will likely just stick with that and see what I can do when Kingdoms are available.

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Yeah I am waiting on Kingdoms for sure! But until then I have my BUSD and BTCP sitting in panther earning over 420% until then, lol.

I gave up on panther. Cub felt safer.