In today's digital era, DeFi mining has become a hot topic in the financial field. DeFi, or decentralized finance, is a financial service model based on blockchain technology, and DeFi mining is an important part of it. So, what is DeFi mining? Why is it so popular? This article will delve into the definition of DeFi mining, popular explanations, and its importance in the field of digital finance.

 The Essence of DeFi Mining

DeFi mining, as the name suggests, refers to the act of participating in the maintenance and verification process of a blockchain network in order to obtain rewards from it. In the traditional financial system, centralized institutions such as banks and payment institutions control the issuance and management of financial services, while DeFi mining breaks this centralized model and achieves decentralized financial services. Individuals participating in DeFi mining maintain the security and stability of the blockchain network by contributing computing power, funds and other resources, thereby receiving corresponding rewards and promoting the operation of the entire DeFi ecosystem.

 Popular explanation: Behind the popularity of DeFi mining

With the booming development of the digital currency market, DeFi mining has gradually become the focus of investors. The popular explanation for DeFi mining is that it is highly decentralized, transparent and secure, attracting more and more people to participate in it. The rise of cryptocurrencies represented by Bitcoin has provided a solid foundation for DeFi mining. Investors are not only interested in the economic benefits brought by DeFi mining, but more importantly, the trust and value behind it.

 Key Technologies for DeFi Mining

To understand the nature of DeFi mining, you must understand the key technologies behind it. The development of smart contracts, decentralized exchanges, liquidity mining and other technologies has provided solid technical support for DeFi mining. As one of the core technologies of DeFi mining, smart contracts realize the automation and trustless characteristics of financial services, greatly improving the efficiency and security of DeFi mining. Decentralized exchanges provide trading venues for DeFi mining, allowing participants to freely trade various digital assets and achieve liquidity of funds.

 Risks and Challenges of DeFi Mining

However, DeFi mining, as an emerging financial activity, also faces many challenges and risks. Although the decentralized nature of DeFi mining ensures the asset security of participants, there are also risks in smart contract vulnerabilities and fund security. In addition, with the popularity of DeFi mining, some criminals have emerged in the market, obtaining improper benefits through market manipulation, fraud and other means, which has brought certain negative impacts to the DeFi mining market.

 Future Outlook: New Opportunities in the Digital Finance Era

Although DeFi mining faces many challenges, as a new thing in the digital financial era, it also brings us unprecedented opportunities. With the continuous development and improvement of blockchain technology, DeFi mining will become more secure and efficient, bringing revolutionary changes to financial services. In the future, we have reason to believe that DeFi mining will become an important part of the digital financial field and inject new vitality into the development of the global financial system.

 Conclusion

DeFi mining, as a major innovation in the field of digital finance, is changing our knowledge and understanding of financial services. Through the discussion in this article, we have an in-depth understanding of the nature of DeFi mining, popular explanations, key technologies, risks and challenges, and future prospects. In the era of digital finance, DeFi mining will continue to evolve and improve, bringing us more new opportunities and challenges. Let us look forward to witnessing the development and growth of DeFi mining in the future!

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DeFi mining is liquidity mining. We know that the DeFi field that exploded last year has provided investors with a lot of money-making opportunities. The development of DeFi can be said to be very rapid and brutal. The current main uses of DeFi are leveraged currency speculation, altcoin trading, and insider trading. DeFi attracts users in the currency circle by encouraging users to use its own platform and providing mining rewards. Simply put, this means that the problem solved by DeFi projects is how to speculate better and more conveniently. Many investors still don’t know what exactly DeFi mining is? Let the editor of the currency circle explain DeFi mining in a popular way.

 What is DeFi mining?

DeFi is an important direction for the implementation of blockchain in the near future. After the development in the past few years and the explosion last year, it has become one of the most cutting-edge and hottest fields in the encryption ecosystem. However, the entire DeFi field is still in its early stages of development. Various issues such as high handling fees, complex projects, and security risks have raised the participation threshold for ordinary retail investors.

Different from PoW public chain mining, mining in the DeFi world does not require computing power. The word "mining" never specifically refers to mining with mining machines. The essence of mining is the original issuance of tokens. It is different from the issuance of Ethereum Tokens in 2017. At that time, most of the Tokens were issued and the project party held the entire amount, then conducted private placements and sold these tokens at a certain price. , and finally find someone to take over the air in the secondary market.

Today’s DeFi projects advocate fair issuance without private placement or pre-mining. In addition to airdrops, mining is generally divided into two types:

1\.
Issuance of incentives. Your funds are needed to contribute to the project, such as providing liquidity and market making on decentralized exchanges; lending platforms for deposits and borrowing; and market making (providing liquidity) for platform coins required by all projects. You have contributed, so you are rewarded with platform tokens, such as UNI, CRV, COMP, etc.

2\.
Simply for fairness and popularity. The initial token issuance of some DeFi projects does not require you to provide liquidity to contribute, just to issue tokens more fairly, so you only need to inject your funds (proof of assets), and the issuance will be based on the size of the funds you injected (with will be limited by address). At the same time, because one of the more important indicators in the DeFi field is TVL (Total Locked Volume), the amount of funds injected also represents the degree of attention this project has received to a certain extent, and will bring popularity to this project. This type is represented by algorithmic stablecoins: the initial token issuance of basis.cash, yam, esd and other projects.

 How to do DeFi mining?

1. Enter defi mining through digital wallet

If your coins are placed on an exchange and you need to withdraw them to a digital wallet, be sure to select the corresponding chain when withdrawing coins. For example, if you go to TP wallet, you can use BSC chain or heco chain, and Ethereum can use ERC20 or ETH chain.

After the tokens are transferred to the wallet, you can choose the corresponding DAPP to start mining. For example, when mining in TP wallet, you can choose the appropriate mining Dapp according to the tokens you hold.

2. Choose a mining project

In the wallet, you can find defi projects on different chains, choose a mining income platform, and a single-coin pledge platform. The annual mining income of different platforms is different.

Choose different chains for mining depending on where the tokens are stored. For example, on the bsc chain, you can choose coinwind, KLend and other staking platforms. Check basic information such as what tokens can be deposited, what tokens can be harvested, and the annualized rate of return, and then you can authorize the pledge of tokens.

After a single currency is pledged, mining income is generated immediately. It can be mined and withdrawn now, or it can be accumulated to a certain amount and withdrawn. Each withdrawal operation requires a certain mining fee. The proposed coins can be directly converted into stable coins such as USDT with less fluctuation, or they can be held for a long time and waited to be sold at a high price later.

3. Risks of defi mining

There may be project platform leaks or hacker attacks.

For example, if you pledge ETH to mine on the platform, you will earn an annual income of 10%. However, if the platform runs away or the project is attacked, the pledged coins cannot be recovered.

For example, the Gainswap exchange incident occurred in early June. In less than 12 hours after it went online, nearly 8 million US dollars in various pledged tokens were taken away. The website was closed and contact was lost. The project has also been recommended and backed up by various platforms before.

It is also possible that the currency price plummets to zero, and the mined coins are worthless.

For example, Butter, which was very popular last week, had a maximum annual income of 4000% from group LP mining, and the first mine amount reached tens of thousands. Project No. 7 had a bug when executing the halving, which resulted in the unlimited issuance of butter coins. The original maximum supply chain of 10 billion became infinite, and the currency price fell directly from the highest of US$0.06 to almost zero.

The above content is the editor’s opinion on what is DeFi mining? The relevant content of this issue is introduced in detail. In fact, relatively speaking, the benefits of liquidity mining are still greater than the risks, otherwise there would not be so many people participating in liquidity mining. If you want to participate now, you must choose a DeFi project that is more suitable for you based on your risk tolerance. At the same time, everyone should continue to improve their cognitive level and continuously strengthen their learning of relevant knowledge, which will be helpful for our investment.