Innovating the DeFi ecosystem to generate revenue
Providing liquidity to Decentralised Exchanges (DEXs)
Decentralized exchanges are a type of cryptocurrency exchange which allows for anonymous peer-to-peer cryptocurrency transactions to take place securely and without the need for a central intermediary.
This is achieved by Liquidity Providers adding funds to these decentralised exchanges for the various token swaps that are supported (e.g. ETH / USDC). End users transact against the funds provided by these Liquidity Providers in an anonymous and decentralised fashion. Liquidity providers such as Pluto earn fees for providing crypto assets to these exchanges.
Staking tokens to secure blockchains and protocols
Staking is the process of locking up a certain amount of tokens (i.e. cryptocurrency) to help secure a blockchain network. The basic premise being that those who provide a stake are financially invested in the network and are therefore incentives to protect the integrity of the network. Stakers are rewarded in proportion to the size of their stake and bad actors may have their stake “slashed” for acting against the best interests of the network.
Running proof of stake validator nodes
In addition to staking, Pluto also runs its own validator nodes for a number of proof of stake networks. Nodes are the backbone of any block chain network – they are widely distributed, maintain a copy of the blockchain data and carry out a variety of tasks. Nodes communicate with each other and confirm transactions through a consensus protocol. Each cryptocurrency has its own nodes.
Validator Nodes are responsible for storing data, processing transactions, and adding new blocks to the blockchain. This helps to keep the blockchain secure for everyone and earns the validator nodes income in the process.
Exploring new and emerging Yield Farming opportunities
The term “Yield Farming” has seen massive growth in popularity since mid 2020. At its most basic, Yield Farming is putting crypto assets to work and generating the largest returns possible on those assets. A key facet of Yield Farming is the concept of “Liquidity Mining” which is the process of getting a new token from the DeFi Protocol as well as the usual returns. This was first popularised by the Compound Protocol.
As more and more Protocols emerge, they are competing with each other for the growing, but still finite supply of liquidity available in the DeFi space. New Protocols will typically promise extremely high returns in order to attract investment. Identifying these new Protocols and investing early is the key to maximising profits in the Yield Farming space.