What is DefiLlama and how does it work? - Coinnav.io

In our ongoing series of educational articles about decentralized finance (DeFi), today we'll delve into a particular solution that could serve as your compass towards establishing an additional income stream.

Our focus will be on DeFi Llama, the foremost DeFi aggregator, as we examine its functions and explore how it can enhance your investment approach.

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What is DeFi LIama?

DeFi Llama stands as a platform designed to synthesize data gathered from various blockchain networks, encompassing Ethereum, Cardano, Terra, and their associated decentralized applications (Dapps). The creation of DeFi Llama was spurred by the challenge faced by users in the DeFi realm, where monitoring individual blockchain projects proved to be an arduous task. This platform efficiently addresses the need to gauge the growth pace of DeFi chains and identify the dominant players within the sector. DeFi Llama stands as a prominent aggregator of Total Value Locked (TVL).

Decentralized finance extends its reach across diverse blockchains, with each blockchain functioning as an isolated financial protocol hub. Navigating the multitude of financial protocols and data within the realm of Decentralized finance (Defi) presents a formidable challenge, thereby underscoring the necessity for Defi data aggregators. These aggregators consolidate various transactions and insights from the DeFi space into a unified interface, streamlining efficiency and saving valuable time.

A distinctive facet of DeFi Llama emerges from its comprehensive approach, amalgamating the TVL metrics spanning numerous blockchains, as opposed to being tethered to a singular blockchain. Notably, DeFi Llama serves as a monitoring tool for Defi applications, chains, oracles, forks, and airdrops, offering a holistic perspective on the dynamic DeFi landscape.

 

What is TVL?

TVL, short for Total Locked Volume, represents the value of assets that are secured within the smart contract of a project or protocol. Typically denoted in USD, ETH, or the native token of the project, these funds are locked through user participation in staking. Staking enhances token liquidity, resulting in profit generation in return. The earnings from staking are determined by the quantity of coins locked and the duration of the staking period.

To access the TVL information for the DeFi LIama project, you can visit the project's official website: https://defillama.com/

 

What is APY?

APY, which stands for Annual Percentage Yield, encompasses the total return on an asset, factoring in compound interest or reinvested income from deposits. APY serves as a universal metric for predicting earnings and comparing yields across different token pairs in staking or liquidity pools. It's important to note that financial yields may fluctuate over the course of a year.

It's worth mentioning that there's often an inverse relationship between TVL and APY. When more assets are locked, the APY tends to decrease.

 

How does DefiLlama work

DefiLlama functions as a decentralized finance (DeFi) Total Locked Volume (TVL) aggregator, built on an open protocol. It compiles a comprehensive list of DeFi projects across various blockchains and presents reliable data sourced directly from DeFi protocols. This data is gathered by integrating with different blockchain endpoints. The accuracy and upkeep of the data collected by DefiLlama are overseen by a team of experts, utilizing DefiLlama Adapters for correlation.

DefiLlama offers users convenient access to the performance metrics of various DeFi protocols by providing market capitalization data for these projects. By assessing their TVL ratios, users can evaluate the efficacy of these protocols. Moreover, DefiLlama meticulously tracks and archives TVL data spanning numerous blockchains. The platform streamlines data collection and aggregation into a single interface, facilitating effortless and precise monitoring of the overall growth within the DeFi ecosystem. Additionally, it gauges the aggregate liquidity available in the DeFi landscape.

Blockchain oracles play a pivotal role in DefiLlama, enabling the seamless connection between data feeds, servers, and blockchains via smart contracts. It's noteworthy that while Ethereum supports smart contracts and is integral to Defi applications, Bitcoin does not offer these capabilities, rendering it absent from the DefiLlama platform.

 

Defi Llama's Primary Objective