a has over $0 billion dollar in value secured in their smart contracts so when you hear the word defi they're the biggest lending project no longer do you need to use a bank to take out a loan you can do it easily through a all you need is some collateral so in this video I'm going to cover everything from the basics of decentralized Finance or defi to exactly what a is and how it works plus we'll take a look at some of the tokenomics of the a token by the end you'll have a complete understanding of what a is and how huge it can be in the future of Finance first things first defy or decentralized Finance is all about taking those core financial services that we're used to like lending borrowing and earning interest and running them on decentralized blockchain networks big banks no longer have complete control over everything Financial instead you can transact directly with anyone around the world with a smart contract replacing the middlemen and the best part it's all transparent because defi eliminates third parties you keep full control over your assets and decisions so you can repay or expand the lending or loan at any time that's the basics of defi now let's talk about a the word a actually means ghost in Finnish which fits perfectly well if you think about how it works behind the scenes there's no Central Authority watching over everything a is one of the dii blue chips and for good reason it's made an incredible name for itself in defi as of December 2024 the protocol's total value locked or tvl soared to around $22 billion which is huge this growth isn't just about the raw numbers it's about how a keeps innovating features like flash loans let you borrow funds instantly and pay them within the same transaction there's also multi-chain support to give access to anyone who wants it remember with defi everything is verifiable you can see exactly how much liquidity is available where it's coming from and how it's being used that's a huge contrast to the traditional Financial system where everything is hidden behind layers of bureaucracy so let's explore a in more detail at its core a is a decentralized protocol that gives you the power to lend and borrow cryptocurrencies all without going through a Traditional Bank it runs mainly on ethereum and has exposure to other blockchains as well it uses smart contracts to automate the transactions and keep them transparent if you want to lend you can deposit your crypto into A's liquidity pools and earn interest on your deposits on the other hand if you need funds you can borrow against the collateral that you've already deposited so you don't have to sell your existing assets to free up cash sometimes this can be a tax-free way to use gains from your crypto Investments but obviously that all depends on where your own tax liabilities are anyway permissionless access is a key part of what makes a unique anyone with a crypto wallet can get started there are no credit checks or piles of paperwork involved this is decentralization in action you have complete control over your own assets at all times a also supports a wide range of tokens from ethereum and stable coins like usdc and D to many other cryptocurrencies giving users plenty of options and at the moment if you deposit your usdc you'd earn around 7% a year another benefit to using a is its efficiency if you're a lender you can earn passive income by simply depositing your cryptocurrency if you're a borrower you can tap into liquidity quickly without parting ways with your Holdings when you deposit your assets into a you'll receive what are known as a tokens such as AF for ethereum deposits which accumulate interest over time these are known as liquid tokens and you can also sell these for the value they're worth it should be noted though that the liquidity pools for these tokens tend to be a lot more volatile because they are smaller borrowers on a must provide collateral based on a loone to Value Ratio or LTV this determines how much you can borrow for instance if the LTV is 75% that means you borrow up to $750 if you put up $11,000 in collateral now you can adjust how much you want to borrow depending on your risk tolerance just be careful if you try any of this because it is complex and you definitely need to understand the risks first if the value of your collateral dips below a certain threshold part of it can be liquidated to ensure the protocol remains solvent borrowers can also choose between variable interest rates which fluctuates with market conditions or fixed rates for a bit more stability all right now let's take a quick trip back in time to see how a came to be the platform that we know it is today it all started in 2017 when Stan kulicha founded a project called eth lend back then the decentralized lending scene was virtually non-existent and ethland set out to solve that problem by directly matching borrowers and lenders it was a peer-to-peer system that gave people an alternative to traditional loans but it definitely wasn't going to be easy first off manually matching lenders and borrowers was inefficient and didn't scale well as more people tried to use the platform there was also a liquidity issue if you needed a loan you had to wait for an individual lender willing to fund you which sometimes meant slim pickings or high interest rates and if you are new to crypto the interface and complexities of the peer-to-peer model often felt overwhelming even today we still face that issue slightly but it's definitely getting much better by 2018 it became clear that ethland had to evolve to meet the needs of the growing defi Community that's when the platform was rebranded as a now the name as I mentioned earlier is Finnish for Ghost and that really captures the vision of becoming a kind of transparent backbone for decentralized finance it wasn't just a superficial name change it was reflective of the overall change happening with the platform itself instead of directly matching individuals a moved to a liquidity pool model depositors would Place their assets into large shared pools and borrowers could then access those pools whenever they needed liquidity this solved a big chunk of the scalability and liquidity issues because you no longer had to rely on finding a single lender who was willing to fund your loan automation through smart contracts also sped every up making the system more efficient and secure now from there a hit some major milestones in 2020 they launched a V1 which introduced core lending and borrowing functionalities in a more streamlined userfriendly package in that same year the platform reached $1 billion in total value locked it was a clear signal that this was something the defi Community had been waiting for over the following years a introduced flash loans multi-chain support and even cross-chain features each Innovation pushed the boundaries of what decentralized lending could look like A's Vision remains focused on creating a decentralized inclusive Financial system where anyone anywhere can access the tools they need to manage and grow their assets by focusing on transparency scalability and cuttingedge Technology a continues to redefine what we expect from Financial Services in the crypto space so that's the story of how ethland evolved into a a Journey marked by Big Ideas real world challenges and a whole lot of innovation now that we've explored A's Origins and the basics of lending and borrowing let's take a look at some of the more complicated features of a and how they work one of the standout features a pioneered is the concept of flash loans these are uncollateralized loans that have to be repaid within a single blockchain transaction if you don't repay it instantly meaning in the same block the loan loan simply reversed as if it never happened this makes flash loans an incredibly powerful tool for Arbitrage refinancing or swapping collateral on the fly all without requiring any upfront Capital but this is not for the average User it's quite complicated from a technical and financial perspective but anyway what's under the hood for all of these functions are the liquidity pools they aggregate assets supplied by lenders so that borrowers can tap into to them whenever needed and if a particular asset is in high demand its interest rate will rise to incentivize more lenders to deposit that asset and vice versa it's a real supply and demand based protocol at the heart of it all are the smart contracts they govern every transaction securely and transparently and ensure nobody can access it unless there's an exploit of course but these contracts are audited to minimize vulnerabilities and include built-in liqu liquidation mechanisms to protect the protocol solvency so that means there should never be a repeat like the centralized Finance platforms like Celsius blockfi or anything similar as all the assets are there for everyone to see that's the beauty of Defi and decentralized platforms it's also worth it to note that because there's no centralized Authority standing between you and these Financial Services a is able to cut down on the overhead cost and streamline the entire process now a doesn't just limit itself to ethereum either it's expanded to other networks such as polygon Avalanche Arbitron and more recently the a V3 token has taken things a step further with cross-chain functionality making the platform more accessible and cost effective as of late 2024 a supports over 30 different cryptocurrencies for Lending and borrowing handling billions of dollars in transactions on a daily basis now the sheer size and scope of its smart contract ecosystem underline the trust that users place in A's model so now that we've covered A's mechanics and standout features let's talk about the backbone of the entire ecosystem the a token this native token serves dual purposes as both a governance tool and a utility token underpinning the protocol's operations and aligning the incentives of its Community the a token grants holders the power to vote on key protocol decisions from adding new assets to shifting risk parameters now because a is governed by the people who use it owning a token essentially gives you a seat at the table where critical updates like moving from V2 to V3 are discussed and decided on the Utility side a is scarce with a maximum supply of 16 million tokens a significant chunk of these tokens is in circulation but it has mechanisms to help maintain scarcity and potentially boost its value over time for example with the new Tok economics the protocol will use part of its Revenue to buy back tokens and redistribute them to the people staking a holders can also stake their tokens in the safety module which acts like an insurance reserve for the protocol so if something goes wrong say a liquidation failure stake tokens can be used to cover losses in return for taking on this risk stakers earn passive income that typically ranges between 6 and 8% annually offering an enticing reward for those willing to really directly secure that Network beyond the safety module a tokens also come in handy for borrowers looking to reduce their fees if you use a token itself as collateral you can get discounted borrowing rates on some things which is a nice perk for those of you who want to keep your cost down but one of the most pivotal aspects of a is its governance role a token holders aren't just passive investors they shape the protocol by voting on proposals that can expand a to new chains add new assets or tweak the core parameters that Define how lending and borrowing works on the platform this community-driven approach keeps the protocol resilient responsive and it's truly what defi is about there's also people that say a is leading when it comes to decentralization too now performance-wise a often mirrors the broader defi Market when decentralized Finance as a whole booms like it did in 2020 and 2021 a tends to follow suit at its peak in May of 2021 the token s to around $667 as the protocol has introduced new features and expanded to more chains the token is also adapted now usable on multiple networks for a operates and what's interesting I guess if you're into this stuff Donald Trump is heavily buying a right now through his world Liberty 5 project which essentially is supposed to just be a fork of a itself now if you want to know if a is in our portfolio and what other cryptocurrencies we're holding then check check out learningc crypto.com where we also have a ton of information and guides to help you get up to speed with this fast changing Market all in all the a token actually has a lot of utility to it so it's a pretty good one to hold if you're interested in Defi and lending it's considered a blue chip by many but do your own research as it's obviously still a high-risk asset and you need to understand exactly what you're getting yourself into but when you look at A's achievements like having over 22 billion in the total value locked in the smart contracts and developing features like again flash loans it's pretty clear this isn't just your average crypto project it's actually a platform trying to build out the future in decentralized finance anyone from around the world can tap into A's liquidity pools take a tokens for rewards and even help shape the protocol's future through governance votes all of that without needing permission it is a beautiful thing