What is DeFi Mining (Is DeFi Mining Safe)?
DeFi mining, or \”DeFi mining,\” is a system that aggregates the liquidity of dig
DeFi mining, or “DeFi mining,” is a system that aggregates the liquidity of digital assets through smart contracts and algorithms, using off-chain computational resources to pledge assets and generate profits. Simply put, it involves depositing coins from your wallet into smart contracts to receive corresponding reward tokens and participate in activities such as governance and trading within the system. This allows users to earn fees and interest, and also use them as collateral or loan collateral for various cryptocurrencies and other high-risk investment tools.
Currently, the popular decentralized mining product on the market is defi.finance, developed under the leadership of Robert Leshner, the founder of Compound. He stated, “I think this is a very interesting product.” What is DeFi mining? On January 3, 2017, the project launched an application called “Decentralized Mining,” where users could mine tokens for their assets on the platform (the decentralized Bitcoin network on Ethereum). At the time, the application was still in the testing phase but was later widely used by community members and favored by many projects. “DeFi mining” is actually a very good concept because the mechanism of this product is also very easy to understand. “DeFi mining” allows users to generate income from their investment portfolios. For example, you can make money by mining and choose different mining devices according to your needs. There is also a way similar to traditional internet mining.
First, in traditional mining, the more coins you mine, the greater the profit. Secondly, when you start considering a new coin, you will find that there are many different types of coins and mining methods on the market, with the most typical being sushiswap and Curve. However, because sushi tokens do not have actual value and have no total issuance limit, it is difficult for users to directly invest in mining pools, or even participate in mining, resulting in reduced mining income.
In addition, there is another mining method – liquidity management. As the mining market gradually matures, people will continue to search for new opportunities.
Currently, the mainstream mining products in the market are UNI-V2-USDT, CRV-WBTC, YFI-YFII, SUSHI-SNX, YFII-LINK. And these are all based on decentralized protocols on Ethereum. Currently, most projects dominated by the Ethereum network are trying to expand their mining business to other public chains. However, this approach is not suitable for all user groups who want to engage in DeFi mining because their mining strategies are different.
Is DeFi Mining Safe?
According to data from the PeckShield Situational Awareness Platform, as of 11:00 on September 30th, the mining income of DeFi in the past week was +6%, with Compound accounting for more than 50%.
According to statistics from the PeckShield Security Team, the total value locked in DeFi has reached 114.6 billion US dollars, and the total lock-up amount of COMP, YFI, SUSHI, and YFII in DeFi protocols has exceeded 2 billion US dollars.
So, if we evaluate DeFi mining and security incidents through analysis, we will find that the code security of DeFi projects is very low, and the number of stolen tokens during user participation in mining is relatively high. This indicates that the risks generated by DeFi projects are still significant, and as more and more users enter this field, the security issues of DeFi mining will become increasingly prominent. (peckshield.com)
Therefore, for ordinary investors, how to ensure that they can obtain high returns is also one of the issues to consider. First of all, many DeFi projects currently use contract auditing services, such as Compound’s DAI lending rate based on USDT. In addition, the ERC-20 tokens on Ethereum are all issued on Ethereum through smart contracts that are automatically generated and cannot be modified. Therefore, to participate in these contract transactions, users must first deposit their money into their contracts and then exchange with the US dollars in the liquidity pool to obtain a stable price. Secondly, because the concept of DeFi is very novel, many users may not be familiar with smart contracts, so they must be cautious when investing in unknown or less popular projects.
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