The vocabulary is monstrous. The number of real actions is tiny. Absolutely everything in DeFi, every protocol with a strange name and a stranger token, is a variation of four moves. Learn to spot which one you are making and the whole space stops being intimidating.
The four moves
- You lend. You park money somewhere, someone borrows it, you earn interest. That is Aave, Morpho, Euler.
- You borrow. You leave something as a guarantee and get a loan against it. You pay interest, and you risk getting your guarantee seized.
- You provide liquidity. You put two tokens into a shared pot so other people can swap one for the other, and you take a cut of every swap. That is Uniswap.
- You bet. On a price going up or down (perps, on Hyperliquid), on a future yield (Pendle), or on a real-world event (Polymarket).
That is the entire industry. Lending desks, yield tokenizers, ve-token flywheels, points metas: every single one decomposes into lending, borrowing, providing liquidity, or betting. Sometimes two of them stacked. Never a fifth primitive.
The one question to ask in front of any protocol
The question
Every legitimate yield has a payer with a reason. Borrowers pay lenders because they want leverage. Traders pay liquidity providers because they want to swap now. Bettors pay other bettors because someone has to be wrong. If you cannot answer who is paying you and why, the yield is probably token emissions with a countdown, and you are probably the product.
The modern fifth activity: farming points
There is one more thing people do all day, and it grafts onto the other four: farming points in the hope of an airdrop. Protocols that have no token yet count points for users and hint that points will become tokens later. Everyone farms without knowing what a point is worth.
It gets genuinely interesting when a market starts pricing those vague promises, and that happens in one specific place: Pendle. We get there in the Pendle chapter, where points farming becomes a leveraged, priced, expiring position.