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MakerDAO is behind the popular stablecoin Dai. Stablecoins are a type of cryptocurrency whose value remains stable over time. It achieves this stability by being pegged to another currency. The peg obviously presents major advantages for a lending protocol. Pegging allows users to take out loans without the fear of getting liquidated due to price volatility in the crypto market. Unlike other stablecoins—which are pegged to the almighty U.

These supposedly U. Treasuries" in the case of USDC, and commercial papers in the case Tether, which has drawn scrutiny over its legitimacy. What makes Aave unique is that it sets its interest rates based on the utilization rate of the liquidity pool in question. Let's take a quick example. So, to borrow ETH, Alice would have to pay a high interest rate.

On the lender's side, the high interest rate due to the low liquidity incentivizes ETH holders to provide liquidity to the pool. It's a simple, elegant, and ingenious design solution. What's also cool about it is that you don't have to borrow in kind! So if you deposit ETH, you can borrow another crypto asset. Oh, and AAVE is the native governance token, which you can use to vote on the direction of the protocol. A word of caution: Borrowers should be aware of liquidation risks.

If you borrow via the protocol, you will have to over-collateralize. This means you'll have to put up more than you borrow. And be sure to keep an eye out on the collateral ratio. During periods of high price volatility, should your collateral drop below the set ratio, you'll risk getting liquidated. Unlike other DEXs, it differs on one fundamental level: It favors stability over volatility and uncertainty. Yanno, where degens make most of their money? In other words, Curve Finance is an amazing way to earn a stable and consistent yield on your safe bets.

So if you're into waving buhbye! Curve Finance is something special. It offers the cheapest transaction fees, and the lowest levels of slippage and impermanent loss. And how is Curve able to achieve these feats? Why, by organizing liquidity pools around assets that behave in a similar manner e. This means that the dApp scans DEXs to find the lowest prices for any given cryptocurrency. By doing so, it can provide traders with plenty of cheap entry points, and help them circumvent issues like slippage.

Slippage occurs when a DEX doesn't have sufficient liquidity for the desired crypto for trading. The Metaverse In the future, the metaverse may very well become ubiquitous in everyday life. The question is, which metaverse will win? See, there are many metaverse projects popping up seemingly every day now.

And it's likely that a few of the most popular ones will coexist, sort of like how several giant social media platforms exist today. The two below are the ones that currently have an excellent chance of becoming household names. The Sandbox The Sandbox made headlines last year. Land sales in the Sandbox went through the roof.

But what exactly is it? You can think of the Sandbox like the metaverse-equivalent of MineCraft. That is, in terms of its design and functionality. It's not for everyone, but if it's good enough for Snoop Dogg and Adidas, then it's certainly worth checking out. What's really cool about the Sandbox is that you can build your own games on your land, and then charge people to play them. If you own some land, you can also display your NFT collection.

Pretty NFTy! Decentraland Decentraland is less of a game compared to Sandbox. This has led to the growth of an interesting new fundraising model: quadratic funding. This has the potential to improve the way we fund all types of public goods in the future. Quadratic funding makes sure that the projects that receive the most funding are those with the most unique demand.

In other words, projects that stand to improve the lives of the most people. Here's how it works: There is a matching pool of funds donated. A round of public funding starts. People can signal their demand for a project by donating some money.

Once the round is over, the matching pool is distributed to projects. Those with the most unique demand get the highest amount from the matching pool. This means Project A with its donations of 1 dollar could end up with more funding than Project B with a single donation of 10, dollars dependent on the size of the matching pool. More on quadratic funding Insurance Decentralized insurance aims to make insurance cheaper, faster to pay out, and more transparent.

With more automation, coverage is more affordable and pay-outs are a lot quicker. The data used to decide on your claim is completely transparent. Ethereum products, like any software, can suffer from bugs and exploits. So right now a lot of insurance products in the space focus on protecting their users against loss of funds. However there are projects starting to build out coverage for everything life can throw at us.

A good example of this is Etherisc's Crop cover which aims to protect smallholder farmers in Kenya against droughts and flooding. Decentralized insurance can provide cheaper cover for farmers who are often priced out of traditional insurance. See insurance dapps Aggregators and portfolio managers With so much going on, you'll need a way to keep track of all your investments, loans, and trades.

There are a host of products that let you coordinate all your DeFi activity from one place. This is the beauty of DeFi's open architecture. Teams can build out interfaces where you can't just see your balances across products, you can use their features too. You might find this useful as you explore more of DeFi. See portfolio dapps How does DeFi work? DeFi uses cryptocurrencies and smart contracts to provide services that don't need intermediaries.

In today's financial world, financial institutions act as guarantors of transactions. This gives these institutions immense power because your money flows through them. Plus billions of people around the world can't even access a bank account. In DeFi, a smart contract replaces the financial institution in the transaction. No one can alter that smart contract when it's live — it will always run as programmed.

A contract that's designed to hand out an allowance or pocket money could be programmed to send money from Account A to Account B every Friday. And it will only ever do that as long as Account A has the required funds. No one can change the contract and add Account C as a recipient to steal funds. Contracts are also public for anyone to inspect and audit. This means bad contracts will often come under community scrutiny pretty quickly. This does mean there's currently a need to trust the more technical members of the Ethereum community who can read code.

The open-source based community helps keep developers in check, but this need will diminish over time as smart contracts become easier to read and other ways to prove trustworthiness of code are developed. Ethereum and DeFi Ethereum is the perfect foundation for DeFi for a number of reasons: No one owns Ethereum or the smart contracts that live on it — this gives everyone an opportunity to use DeFi.