Key Concepts of DeFi

Decentralized Finance (DeFi) is reshaping how financial services work. Instead of relying on banks or brokers, users interact directly with blockchain-based protocols to borrow, lend, trade, or even create tokens.

To understand DeFi, let’s explore some of its key building blocks.

Lending Pools

In DeFi, a liquidity pool is a smart contract that holds at least two tokens (for example, SOL and USDC) and allows users to trade between them without a traditional order book.
Liquidity providers (LPs) deposit their tokens into the pool and earn a share of the trading fees.

In traditional pools (like Uniswap v2), liquidity is spread evenly across all possible prices.
In modern designs (like Valiant on Fogo), LPs can also choose a price range where their liquidity is active.
This is called concentrated liquidity.

• LPs deposit two tokens into the pool.
• They set a price range where they want to provide liquidity.
• If the market trades inside that range, they earn fees.
• If the market moves outside, their liquidity becomes inactive until price returns.

This model makes liquidity provision more capital-efficient, as LPs can concentrate their funds around the prices where most trading happens.

Example: This screen show you a list of LP positions on Valiant.

Borrowing

Borrowing in DeFi works differently from traditional loans. Instead of a credit score, you provide collateral — another asset you own — to secure your loan.

• Deposit one asset as collateral.
• Borrow another token against it.
• If collateral value drops too low, it may be liquidated.

Example: On Fogo, Pyron enables borrowing and lending.

Token Creation

One of the unique superpowers of DeFi is the ability to create new tokens directly on-chain.

• Deploy a token with a name, symbol, and supply.
• Create a liquidity pool so others can trade it.
• Tokens can represent governance, memes, or utility in a dApp.

Example: On Fogo, Valiant lets users launch tokens and liquidity pools.

Staking

Staking is when users lock up tokens to support a network or a protocol, earning rewards in return.

• Network staking: securing the blockchain itself (validators).
• Protocol staking: locking assets into DeFi protocols for rewards or governance power.

Staking on Fogo will be available on Brasa

Stablecoins

Stablecoins are tokens designed to maintain a stable value, usually pegged to the US dollar.
They reduce volatility and act as a bridge between crypto and traditional finance.

• Enable stable trading pairs.
• Support borrowing and lending without price swings.
• Provide predictability in DeFi strategies.

Example: On Fogo, the native stablecoin is fUSD, powering lending, borrowing, and trading.

In Summary

• Lending pools turn deposits into yield.
• Borrowing unlocks liquidity against collateral.
• Token creation enables anyone to launch new assets.
• Staking secures networks and protocols while rewarding users.
• Stablecoins bring stability to volatile crypto markets.

Together, these building blocks form the foundation of decentralized finance and explain why DeFi is the future of open, global financial systems.

Watch: FogeesHub — The easy way to learn

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