Basic question about how this stuff works


I read this:

" . . users deposit assets to earn a yield, our smart contracts then put those assets to work executing a variety of strategies across DeFi protocols."

  • what does this actually mean? Can someone give me a hypothetical example with some numbers? I am trying to understand how someone who has BTC can get a return on it - is the value of the BTC being loaned to some startup - are the startups devs getting paid somehow? - it is all very opaque . .

Thanks for any clarity - maybe there is already a “DeFi for Dummies” somewhere? - hmm . . I might Google that . .


Hi Phil,

If you want to know about the strategies implemented by the vaults check the apps docs.

What usually happens is a lot of DeFi apps require people to provide liquidity to work (I.e LP tokens or token deposits for loaning). In order to get people to provide this liquidity, these apps offer rewards usually their own token or interest. Vaults take these rewards and repurchase the underlying asset auto-compounding the gains for you.

While you could do this yourself, the vaults save you gas fees by splitting the fee across everyone in the vault and optimising the number of compounds.

Hope this helps.


Thanks for that - I appreciate the response! My other life dramas continue so I have limited time to spend on this stuff ATM unfortunately.

I guess the main thing I have been wondering is if it is possible to make use of BTC that is in Cold Storage (ie a Hardware Wallet) somehow - but I guess keeping the BTC in that way for security does not allow for providing liquidity for some external project . .

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If you want to deposit BTC into a vault with piece of mind you can purchase cover here: Nexus Mutual


Thanks for that! I will check it out . .