Yield Primitives

Since the advent of DeFi there are several new ways to generate value on the blockchain. Such as in the existing centralized financial system there are several business models. For example an exchange like Nasdaq/Binance could be programmed with smart contracts and executed in an decentralized fashion. These DEXes already exist (e.g. Uniswap/Sushiswap) where they facilitate decentralized trades and capture a small trading fee. Those profits could be redistributed to users. But beside that there are other crypto-native yield-generating primitives on DeFi.

DeFi	Description	Example DeFi	Example Traditional Finance
DEX/AMM Decentralized Exchanges / Automated Market Making	Generating profits through trading fees. In addition the model of automated market making (AMM) enables anyone to be a market maker (also called liquidity provider) and capture fees from this activity	Uniswap/Sushiswap/Pancakeswap	Nasdaq / Virtu Financial
Lending	Lending out money for a fixed/variable interest rate	Aave/Compound	Chase
Yield Farming	Distributing tokens to early liquidity providers in order to attract liquidity for the protocol	Alchemix	<new primitive>
Staking	Staking the native protocol token to get a cut from the rewards generated	xRuler	Dividend distribution in stocks
Vaults/Yield Aggregators	Automating Yield Farming activities through compounding/selling/combining of farms based on smart contacts	Yearn.Finance	Actively Managed Funds
Retroactive Airdrop	Rewarding early users with a governance token in hindsight	Uniswap	<new primitive>
Yield Bearing Tokens	Tokens which accrue value through underlying mechanisms	cETH	<new primitive>

In addition there are constantly new primitives generated in the space of asset management (e.g. Index Coop, Enzyme), Layer 1 Staking (e.g. Stake ETH2, Stake Pokdadot), Options (e.g. Hegic, Opyn), MEV (e.g. KeeperDAO), Algorithmic Stablecoins (e.g. Ampleforth) etc.

We expect an explosion in DeFi activity in the coming months. As the ecosystem growths and the activity gets distributed across various chains, it also gets increasingly difficult to get an overview on what's going on. Especially since there are constantly new yield-primitives generated, it's really hard to know where to find the best rates.

There are currently 100bln USD locked in DeFi. We expect this number to 10x in the coming month (Source Defillama).