An Intermediate Guide to DeFi

In our Beginner’s Guide to DeFi, we covered essential DeFi subjects like wallets, stablecoins, DEXes, lending and staking — everything you need to get started on your Solana journey. Now that you’ve explored the Solana network and gotten comfortable with how it works, it’s time to expand your knowledge to include some of the more advanced practices that make up the world of decentralized finance today. 

Before we begin, here’s a quick refresher: DeFi — short for decentralized finance — allows anyone, anywhere in the world, to access financial services without the need for traditional intermediaries like banks and brokers. But DeFi platforms don’t just replicate conventional financial services like investing and lending, but also introduce a spectrum of increasingly innovative products that far surpass what's available in traditional finance. 

New to crypto? Make sure to read the Beginners Guide to DeFi

Decentralized exchanges allow users to trade or swap tokens, but they also offer other opportunities to earn. Most DEXes also offer users the opportunity to contribute your tokens to the platform — referred to as providing liquidity — in exchange for a share of the platform’s trading fees and rewards. These are usually paid out in the form of that platform’s own token. Liquidity providers can maximize their earnings by moving tokens between different platforms that offer the best rewards. There are even products that automate the process for you, or follow more complex algorithms to achieve the best yields throughout DeFi markets. This practice of yield farming is sometimes also called liquidity mining, and is a popular way to earn passive or additional income on your crypto investments. 

Here are some Solana apps and platforms that offer yield farming opportunities: 

• Raydium — A DEX that offers yield farming opportunities through liquidity pools and staking.
• Orca — A DEX that provides yield farming through its CLMM
• Marinade Finance — A liquid staking protocol that also offers through  its mSOL token.
• Kamino:  A lending platform that also offers automated CLMM vaults for users to provide liquidity

While staking refers to the practice of earning rewards for contributing your tokens to support the Solana network, liquid staking takes things one step further. Here’s how it works: When you stake your SOL via liquid staking, you receive a token in return that represents the value of your staked tokens. These are called liquid staking tokens (or LSTs). You’re able to use them throughout various DeFi applications while your original tokens are staked on the network. 

The following platforms are great options for liquid staking: 

• Marinade Finance — A non-custodial, automated Solana staking and liquid staking platform 
• Jito — A Solana staking platform that offers innovative ways to boost yield
• SolBlaze — A Solana staking platform
  
  

Learn everything you need to know about staking in our explainer: How to Stake SOL.

Lending and borrowing on Solana involves decentralized protocols that allow users to lend their crypto assets to earn interest or borrow assets by providing collateral. Lenders deposit their tokens into liquidity pools, earning yields from borrowers' interest payments. Borrowers can access these pools by over-collateralizing their loans, typically with other cryptocurrencies. The process is automated through smart contracts, enabling users to interact directly with the protocol.

Here are some great options for lending and borrowing on Solana: 

• MarginFi — Decentralized lending and borrowing on Solana.
• Kamino — Lending, borrowing, liquidity, and leverage trading.
• Mango Markets — A decentralized margin trading platform that also provides lending and borrowing services.
• Drift — Decentralized money markets that include borrowing and lending
• Lulo — peer-to-peer decentralized lending 
  
  

Want to learn more about lending and borrowing on Solana? We’ve got you covered. Check out our guide to Lending on Solana.

Margin trading is a practice that’s common in traditional markets, but has been superpowered by DeFi. It’s when traders borrow funds to increase their trading position — potentially amplifying both profits and losses. Margin trading allows for more complex trading strategies and exposure to market trends without having to commit additional funds to a trade. Think of it like taking a loan out to invest, but one that will automatically liquidate your collateral — sometimes your entire position — if your trade does not pan out successfully. That’s why margin trading can be very risky in volatile crypto markets,  and is generally a practice best left to experienced investors. 

Solana offers some of the most user-friendly and advanced margin trading options in all of web3:

• Kamino — Lending, borrowing, liquidity, and leverage trading on Solana 
  
• Mango Markets —  A decentralized trading platform with up to 20x leverage on various crypto assets.
  
• Drift — A trading platform that offers up to 10x leverage on perpetual swaps
• Zeta Markets — A decentralized derivatives platform offering futures trading with leverage.

Real World Assets — often shortened to RWAs — are digital tokens that represent assets in the real world or that exist already in traditional markets. By bringing these assets onchain, they become RWAs, plugged into everything DeFi can offer. Similarly, synthetic assets are tokens that mirror the value of other assets. You can think of them as a tokenized version of a derivative, which is another kind of asset very common in today’s traditional financial markets. Both RWAs and synthetic assets allow exposure to traditional financial instruments and real-world items that normally aren’t accessible to everyday people. 

Real World Assets — often shortened to RWAs — are digital tokens that represent assets in the real world or that exist already in traditional markets. By bringing these assets onchain, they become RWAs, plugged into everything DeFi can offer. Similarly, synthetic assets are tokens that mirror the value of other assets. You can think of them as a tokenized version of a derivative, which is another kind of asset very common in today’s traditional financial markets. Both RWAs and synthetic assets allow exposure to traditional financial instruments and real-world items that normally aren’t accessible to everyday people. 

Here are some of the top platforms for RWAs and synthetic asset on Solana today:

• Parcl — a decentralized real estate trading platform
  
• Ondo Finance — A cross-chain DeFi platform for the tokenization of real-world assets
  
• Clone — A platform that brings assets and tokens to Solana from all over web3.