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In the previous tutorial, we went over the basics of DeFiChain and how to get DFI.

==What you can do with DFI==
While you can simply hold your DFI, you have opportunities to use that DFI to make a greater return on your investment. There are multiple ways you can generate more income on your DFI:
*Staking
**Masternodes
**Centralized Delegation
*Liquidity Mining
**Tokenized Cryptocurrencies
**Tokenized Stocks
**Tokenized ETFs on bonds and various markets and commodities
*Collateral for Vaults (Loans)
*Bidding on Liquidated Vaults
===Staking===

==== Introduction ====
Every blockchain has to make sure it is secure. If not, people will be able to write transactions sending money to themselves, spending their money twice. (Side note: this is best explained as having 1 euro, and then when you spend it you then can print another one and spend it again. This does not happen in the real world since money cannot be printed and made in such a way.)

-- verify --

So, DeFiChain is secured by thousands of what we call [[Masternode|masternodes]] from around the world. Masternodes work to make sure there are no bad actors trying to do anything malicious such as mint new DFI. Masternodes are randomly chosen to help verify the transactions, so about every 30 seconds a random masternode looks at all the transactions people want to make and confirm them, and then tell the other masternodes about this, and everything is then verified, and the transactions go through. So when a masternode completes this process it creates a block (why it is called a '''block'''chain.) There are nearly 10,900 masternodes right now, so it would take a lot of masternodes to gain a majority to mess up the network. In exchange for verifying the transactions, they receive a reward for every block that they make, and the fees that people pay to make the transaction. So when you are staking, you are creating your own masternode or giving your DFI to a centralized entity to make a masternode.

-- verify --
====Advantages====
*You are helping to operate the network and make the network more decentralized
*The only price volatility risk you incur is in the price of DFI, unlike with liquidity mining, where you have the price volatility of multiple coins
*When making a masternode, you are given the option to freeze the masternode (you may not withdraw) for 5 years, to gain 1.5x the rewards, or 10 years, to receive 2x the normal rewards
*DFI staking has existed since the very beginning of DFI, and is the oldest form of gaining a return on your investment
====Disadvantages====
*You must stake (put) a minimum of 20,000 DFI, the minimum required to make a masternode. Otherwise, you will have to give, or delegate, your DFI to a centralized entity such as Cake
*The average APY (rewards per year) may be lower than with liquidity mining or other options
*Rewards are not guaranteed when staking, as it depends on your masternode's luck to find a block. Please read the masternodes section below to get a better understanding. The APY listed when creating your masternode may be lower or higher; the APY only shows the theoretical rewards you will receive. This may not apply to centralized delegation.
*APY decreases over time as block rewards decrease and more investors enter the network, although this occurs to all methods of gaining a return on DFI.
*If you are creating your own masternode, you can only compound your rewards when you gain another 20,000 DFI (meaning that you cannot simply compound once you get a block reward, as you are only allowed to invest 20,000 DFI at a time. This does not apply to centralized delegation.
====Masternodes====
On DeFiChain, masternodes secure the network. Every masternode gets a couple chances every second to find a new block (hashes per second). Every unfrozen masternode gets 2 hashes per second, every 5-year frozen masternode gets 3 hashes per second, and 10-year frozen masternodes get 4 hashes per second. The system automatically adjusts so that all of the masternodes together find approximately 1 block every 30 seconds.

So, if the total hash rate is 50 hashes per second, the network would adjust the difficulty of finding a block so it takes about 1,500 hashes to find a new block.

Staking is a bit like playing the lottery. Every hash is a lottery ticket, and masternodes get a couple of tickets every second. If you have the correct numbers, you get to write the next block. This means that there may be a masternode that gets lucky and their "lottery tickets" keep winning, while other masternodes are not having any luck at all getting the right numbers. This is why above, it is written that rewards are not guaranteed. Your masternode may be lucky and receive lots of rewards in a period, and in the next it may receive close to nothing. The APY is just an estimate, just as buying fifty lottery tickets where the chance of winning on any ticket is 1 in 25 does not mean you will win exactly twice. All fifty may be winners, all fifty could be losers.
=====Advantages=====
*All rewards you receive go straight to yourself. There is no centralized entity involved and you will not need to pay fees, and you are helping the network become decentralized
*Non-custodial, ''you'' run your masternode, which can be done on your personal laptop. You control your keys, and no one needs to have control of them
=====Disadvantages=====
*Staking becomes less profitable the less you leave your device open to write blocks. Cake leaves their servers on 24 hours a day, every day of the year, so rewards can be earned at any time.
*20,000 DFI must be staked, and it can only be compounded when you have another 20,000 DFI.
*Rewards cannot be guaranteed, there may be periods where little rewards are found.
====Centralized Delegation====
Many people do not have the capital available to create their own masternode, or cannot run it for long enough to keep it more profitable than simply delegating it. This is where entities like DFX.Swiss, Cake, and KuCoin come in. You can stake any amount of DFI and earn rewards on it, while also being able to compound it. However, these entities run the masternodes, and you are not in control of how much rewards you receive or your DFI.
=====Advantages=====
*You can often "set it and forget it," meaning that you can stake your DFI and not have to check back on it, as rewards will continue to accrue in your account
*No minimum to stake
=====Disadvantages=====
*You are making the network more centralized by allowing centralized entities to control your DFI
*Fees can be significant. Exchanges such as KuCoin can take more than half of your staking profits
===Liquidity Mining===
Liquidity Mining is the process of adding liquidity to a "liquidity pool." Everyone places their holdings here, and receives tokens to represent their share of the pool, and users can swap from one token to another. In exchange, everyone who has put their tokens here gets a commission.

A simpler example of liquidity mining is listed below:

Alice is looking for a return on her DFI. Bob is a crypto investor. Currently, she sees a pool called dBTC-DFI. This means that the two assets in this pool are dBTC and DFI. Since Alice has no DFI, and she must deposit both dBTC and DFI at the rate of the pool (you cannot simply add to one side of the pool, it will imbalance it.), she will swap half of her DFI to dBTC at the current rate of the pool. She then adds both the DFI and the dBTC to the pool, and she has a 1% share of the pool. In return, the pool (system) gives her liquidity pool tokens that show that she is entitled to, or owns, 1% of the pool, whatever that might be.

Bob is anticipating that dBTC will perform worse than DFI, and he has dBTC after atomic swapping his bitcoin. He would like to own DFI instead. Luckily for him, he can swap in the dBTC-DFI pool and receive DFI instead. Bob will give the liquidity pool his bitcoin and take an equivalent DFI amount minus a fee, which is divided proportionally to each liquidity provider. Bob is now happy with his DFI, and Alice is as well, as she received a commission on her funds.
====Advantages====
*Help reduce slippage to users who are swapping. Slippage is the difference in tokens you should get when swapping and the amount of tokens you actually receive
*APYs are higher than staking (as of 01 March 2022)
*Small price changes on one side of the pool is reduced due to the other side of the pool (risk is more diversified)
====Disadvantages====
*[[Impermanent Loss]] (read the article for more information)
*Severe crashes in either token's price compared to the other will lead to significant losses
===Collateral for Vaults===
It is not recommended to try this option as a beginner, but it is a helpful topic to understand.

A new feature that was recently introduced to DeFiChain is the ability to create a vault from which you can take out a loan and mint new tokens. A vault is similar to a bank, but it is decentralized and anyone can make their own. Users may deposit DFI, dBTC, DUSD, dUSDT, and dUSDC to their vault, and 50% of the vault must be collateralized with DFI. Depending on which option a borrower chose for their vault, they can take out between $10.00 (for a vault that has a ratio of 1,000%, or $1 in loans for every $10 in collateral) to $66.66 (a vault with a ratio of 150%, or $6.66 in loans for every $10) in loans for every $100 of collateral. If the ratio of the vault falls below the ratio they chose, their vault is automatically sent to be liquidated, and people bid to take the collateral from the vault (there is more information in the section below).

Users can take out DUSD stablecoins, or various stock tokens and ETF tokens. This allows an investor to go short on a token; as the value of the borrowed token decreases, the less money needed to pay back the loan. You also could leverage any crypto positions you have with the extra borrowed money.
====Advantages====
*Hedging against stocks
*Leveraging crypto positions
*Increasing supply of borrowed token (when you "borrow a token," you are actually minting new tokens, increasing the supply, which is good for DeFiChain)
====Disadvantages====
*Risk of liquidation
*Interest must be paid on borrowed tokens
===Bidding on Liquidated Vaults===
Like the section above, it is not recommended for beginners to experiment with bidding and auctions, but it is still important for an investor to understand them.

Occasionally investors default in their vaults as there may be a sudden swift drop in prices, resulting in a vault to have too low of a collateralization ratio. Although users are protected from a 30% swing in prices in an hour, as vaults are halted during this time to allow users to deposit additional collateral, vaults may simply fall below the collateralization ratio. Since there is no "liquidation engine" or such, DeFiChain must think of a way to liquidate these investors' vaults.

Vaults are liquidated by the community. An auction with a six-hour time limit is held for every liquidated vault, with a minimum bid amount decided by the system. Users bid in the borrowed token, and in exchange receive the collateral inside the vault if they win. The vault owner receives the winning bid, minus a 5% fee, which is burned. (verify)

@@ Line 1: / Line 1: @@
 ''Part of a series for [[DeFiChain Tutorials]]''
-In the previous [[DeFiChain Basics Tutorial|tutorial]], we went over the basics of DeFiChain and how to get DFI. We now would like to discuss DeFiChain's decentralized exchange (DEX) and getting cashflow with DFI.
+This is the second tutorial in the series. If you have not read the previous tutorial, you should read it [[DeFiChain Basics Tutorial|here]] before reading this tutorial. In this tutorial, we will talk about DeFiChain's decentralized exchange (often just called the DEX). We also will go over staking and liquidity mining, which are two different ways of getting cashflow on your crypto.
 == The DEX ==
-Embedded in DeFiChain is a decentralized exchange, which is called the DeFiChain DEX or just DEX by DeFiChain investors. All of the dTokens are listed on the DEX and paired with either DFI or DUSD, DeFiChain's stablecoin. The DEX works almost like a traditional exchange, but there are no orderbooks and no current way to buy or sell tokens except for what would be called a market order. All the information about the DEX can be found on the wallet being used or on [https://defiscan.live defiscan.live], which aggregates DeFiChain's data and puts it on one website. You can find data about transactions, wallet balances, and more on defiscan.live as well.
+Embedded in DeFiChain is a decentralized exchange. All of the dTokens are listed on the DEX and paired with either DFI or DUSD, DeFiChain's stablecoin. The DEX works almost like a traditional exchange, but there are no orderbooks and no current way to buy or sell tokens except for what would be called a market order. All the information about the DEX can be found on the wallet being used or on [https://defiscan.live defiscan.live], which aggregates DeFiChain's data and puts it on one website. You can find data about transactions, wallet balances, and more on defiscan.live as well.
-In DeFiChain's DEX you will be able to exchange for various assets and/or provide liquidity to the exchange for great rewards. The DEX offers DFI pairs such as dBTC to DFI (read previous tutorial for reason why the asset is called dBTC instead of BTC), also written as dBTC-DFI, and DUSD pairs (DUSD is DeFiChain's stablecoin, backed with $1.50 per stablecoin [they are worth $1 each]). DUSD pairs are found with stock tokens such as dSPY-DUSD.
+In DeFiChain's DEX you will be able to exchange for various assets and/or provide liquidity to the exchange for great rewards. The DEX offers DFI pairs such as dBTC to DFI (read previous tutorial for reason why the asset is called dBTC instead of BTC), also written as dBTC-DFI, and DUSD pairs (DUSD is DeFiChain's stablecoin, backed with $1.50 or more per stablecoin [they are worth $1 each]). DUSD pairs are found with stock tokens such as dSPY-DUSD.
 Using the DEX, users can build their own portfolio in an almost completely decentralized manner, while earning rewards.
@@ Line 121: / Line 121: @@
 *Small price changes on one side of the pool is reduced due to the other side of the pool (risk is more diversified)
 ====Disadvantages====
-*[[Impermanent Loss]] (read the article for more information)
+*[[Impermanent Loss]] (also called IL, read the article for more information)
 *Severe crashes in either token's price compared to the other will lead to significant losses
-In our next [[DeFiChain Advanced Tutorial|tutorial]], we will go over vaults and auctions, two new features in DeFiChain.
+''Read the next tutorial [[DeFiChain Advanced Tutorial|here]].''

@@ Line 6: / Line 6: @@
 Embedded in DeFiChain is a decentralized exchange, which is called the DeFiChain DEX or just DEX by DeFiChain investors. All of the dTokens are listed on the DEX and paired with either DFI or DUSD, DeFiChain's stablecoin. The DEX works almost like a traditional exchange, but there are no orderbooks and no current way to buy or sell tokens except for what would be called a market order. All the information about the DEX can be found on the wallet being used or on [https://defiscan.live defiscan.live], which aggregates DeFiChain's data and puts it on one website. You can find data about transactions, wallet balances, and more on defiscan.live as well.
-In DeFiChain's DEX you will be able to exchange for various assets and/or provide liquidity to the exchange for great rewards. The DEX offers DFI pairs such as dBTC to DFI (read previous tutorial for reason why the asset is called dBTC instead of BTC), also written as dBTC-DFI, and DUSD pairs (DUSD is DeFiChain's stablecoin, backed with $1.50 per $1.00 stablecoin). DUSD pairs are found with stock tokens such as dSPY-DUSD.
+In DeFiChain's DEX you will be able to exchange for various assets and/or provide liquidity to the exchange for great rewards. The DEX offers DFI pairs such as dBTC to DFI (read previous tutorial for reason why the asset is called dBTC instead of BTC), also written as dBTC-DFI, and DUSD pairs (DUSD is DeFiChain's stablecoin, backed with $1.50 per stablecoin [they are worth $1 each]). DUSD pairs are found with stock tokens such as dSPY-DUSD.
 Using the DEX, users can build their own portfolio in an almost completely decentralized manner, while earning rewards.

@@ Line 1: / Line 1: @@
 ''Part of a series for [[DeFiChain Tutorials]]''
-In the previous [[DeFiChain Basics Tutorial|tutorial]], we went over the basics of DeFiChain and how to get DFI.
+In the previous [[DeFiChain Basics Tutorial|tutorial]], we went over the basics of DeFiChain and how to get DFI. We now would like to discuss DeFiChain's decentralized exchange (DEX) and getting cashflow with DFI
-==What you can do with DFI==
+== The DEX ==
 While you can simply hold your DFI, you have opportunities to use that DFI to make a greater return on your investment. There are multiple ways you can generate more income on your DFI:
 *Staking

@@ Line 71: / Line 71: @@
 *[[Impermanent Loss]] (read the article for more information)
 *Severe crashes in either token's price compared to the other will lead to significant losses
-In our next [[DeFiChain Advanced Tutorial|tutorial]], we will go over vaults and auctions.
+In our next [[DeFiChain Advanced Tutorial|tutorial]], we will go over vaults and auctions, two new features in DeFiChain.

@@ Line 29: / Line 29: @@
 ====Disadvantages====
 *You must stake (put) a minimum of 20,000 DFI, the minimum required to make a masternode. Otherwise, you will have to give, or delegate, your DFI to a centralized entity such as Cake
-*The average APY (rewards per year) may be lower than with liquidity mining or other options
+*The average APR (rewards per year) may be lower than with liquidity mining or other options
 *Rewards are not guaranteed when staking, as it depends on your masternode's luck to find a block. Please read the masternodes section below to get a better understanding. The APY listed when creating your masternode may be lower or higher; the APY only shows the theoretical rewards you will receive. This may not apply to centralized delegation.
-*APY decreases over time as block rewards decrease and more investors enter the network, although this occurs to all methods of gaining a return on DFI.
+*APY decreases over time as block rewards decrease and more investors create masternodes and invest their capital, although this occurs to all methods of gaining a return on DFI.
-*If you are creating your own masternode, you can only compound your rewards when you gain another 20,000 DFI (meaning that you cannot simply compound once you get a block reward, as you are only allowed to invest 20,000 DFI at a time. This does not apply to centralized delegation.
+*If you are creating your own masternode, you can only compound your rewards when you gain another 20,000 DFI, meaning that you cannot simply compound once you get a block reward, as you are only allowed to invest 20,000 DFI at a time. This does not apply to centralized delegation.
 ====Masternodes====
-On DeFiChain, masternodes secure the network. Every masternode gets a couple chances every second to find a new block (hashes per second). Every unfrozen masternode gets 2 hashes per second, every 5-year frozen masternode gets 3 hashes per second, and 10-year frozen masternodes get 4 hashes per second. The system automatically adjusts so that all of the masternodes together find approximately 1 block every 30 seconds.
+On DeFiChain, masternodes secure the network. Every masternode gets a couple attempts every second to find a new block (hashes per second). Every unfrozen masternode gets 2 attempts per second, every 5-year frozen masternode gets 3 hashes per second, and 10-year frozen masternodes get 4 hashes per second. The system automatically adjusts so that all of the masternodes together find approximately 1 block every 30 seconds.
 So, if the total hash rate is 50 hashes per second, the network would adjust the difficulty of finding a block so it takes about 1,500 hashes to find a new block.
-Staking is a bit like playing the lottery. Every hash is a lottery ticket, and masternodes get a couple of tickets every second. If you have the correct numbers, you get to write the next block. This means that there may be a masternode that gets lucky and their "lottery tickets" keep winning, while other masternodes are not having any luck at all getting the right numbers. This is why above, it is written that rewards are not guaranteed. Your masternode may be lucky and receive lots of rewards in a period, and in the next it may receive close to nothing. The APY is just an estimate, just as buying fifty lottery tickets where the chance of winning on any ticket is 1 in 25 does not mean you will win exactly twice. All fifty may be winners, all fifty could be losers.
+Staking is based on probability. Every hash has a small chance of being the right one, and masternodes get a couple of hashes every second. If you have an acceptable one, you get to write the next block. This means that there may be a masternode that gets lucky and their hashes are acceptable, while other masternodes are not having any luck at all getting the right hash. This is why above, it is written that rewards are not guaranteed. Your masternode may be lucky and receive lots of rewards in a period, and in the next it may receive close to nothing. The APY is just an estimate, just as flipping fifty coins does not mean you will get heads exactly 25 times. All fifty may be heads, all fifty could be tails.
 =====Advantages=====
 *All rewards you receive go straight to yourself. There is no centralized entity involved and you will not need to pay fees, and you are helping the network become decentralized
@@ Line 59: / Line 59: @@
 A simpler example of liquidity mining is listed below:
-Alice is looking for a return on her DFI. Bob is a crypto investor. Currently, she sees a pool called dBTC-DFI. This means that the two assets in this pool are dBTC and DFI. Since Alice has no DFI, and she must deposit both dBTC and DFI at the rate of the pool (you cannot simply add to one side of the pool, it will imbalance it.), she will swap half of her DFI to dBTC at the current rate of the pool. She then adds both the DFI and the dBTC to the pool, and she has a 1% share of the pool. In return, the pool (system) gives her liquidity pool tokens that show that she is entitled to, or owns, 1% of the pool, whatever that might be.
+Alice is looking for a return on her DFI. Bob is a crypto investor. Currently, she sees a pool called dBTC-DFI (please read previous tutorial as to why the asset is called dBTC instead of BTC). dBTC-DFI means that the two assets in this pool are dBTC and DFI. Since Alice has no DFI, and she must deposit both dBTC and DFI at the rate of the pool (you cannot simply add to one side of the pool, it will imbalance it), she has to swap half of her DFI to dBTC at the current rate of the pool. She then adds both the DFI and the dBTC to the pool, and she has a 1% share of the pool. In return, the pool (system) gives her liquidity pool tokens that show that she is entitled to, or owns, 1% of the pool, whatever that might be.
 Bob is anticipating that dBTC will perform worse than DFI, and he has dBTC after atomic swapping his bitcoin. He would like to own DFI instead. Luckily for him, he can swap in the dBTC-DFI pool and receive DFI instead. Bob will give the liquidity pool his bitcoin and take an equivalent DFI amount minus a fee, which is divided proportionally to each liquidity provider. Bob is now happy with his DFI, and Alice is as well, as she received a commission on her funds.

@@ Line 15: / Line 15: @@
 ==== Introduction ====
-Every blockchain has to make sure it is secure. If not, people will be able to write transactions sending money to themselves, spending their money twice. (Side note: this is best explained as having 1 euro, and then when you spend it you then can print another one and spend it again. This does not happen in the real world since money cannot be printed and made in such a way.)
+Every blockchain must ensure it is secure. If not, people will be able to write transactions sending money to themselves, spending their money twice. (Side note: this is best explained as having 1 euro, and then when you spend it you then can print another one and spend it again. This does not happen in the real world since money cannot be printed and made in such a way.)
 -- verify --
@@ Line 69: / Line 69: @@
 *[[Impermanent Loss]] (read the article for more information)
 *Severe crashes in either token's price compared to the other will lead to significant losses