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Introduction to DeFi

What DeFi is, how DEXs work, and why liquidity matters for traders.

What is DeFi?

DeFi (Decentralized Finance) uses blockchain smart contracts instead of banks and brokerages. No intermediaries. No gatekeepers. Anyone with a wallet can trade, lend, or provide liquidity.

Smart contracts are programs that execute automatically when conditions are met. They replace the trust you'd normally place in a bank or exchange.

CLOBr focuses on Solana. Transactions settle in seconds and cost fractions of a cent.

Core Components of DeFi

Decentralized Exchanges (DEXs)

DEXs let you trade without an intermediary holding your funds. Instead of matching buyers and sellers through an order book, most DEXs use liquidity pools. On Solana: Raydium, Orca, Meteora.

Liquidity Pools

Pools are smart contracts holding pairs of tokens. When you swap Token A for Token B, you're trading with the pool, not another person. People who deposit tokens into pools (liquidity providers, LPs) earn a cut of every swap.

Smart Contracts

Programs on the blockchain that execute automatically. No human approval needed. This is how limit orders, DCA schedules, and concentrated liquidity positions work on Solana.

Benefits and Risks of DeFi Trading

Benefits

  • Your keys, your coins. No exchange holding your funds.
  • Anyone can participate. No KYC for basic swaps.
  • Everything's on-chain. Verify any transaction yourself.
  • 24/7 markets. No trading hours, no holidays.

Risks

  • Smart contract bugs can drain funds. Audits help but don't guarantee safety.
  • Crypto is volatile. 50% moves in a week are normal for smaller tokens.
  • Impermanent loss hits LPs when prices move. More on this in the LP section.
  • Regulation is unclear. Rules vary by jurisdiction and change frequently.

Example: Swapping SOL for USDC

  1. Connect Phantom (or any Solana wallet) to a DEX like Raydium or Jupiter.
  2. Select SOL → USDC.
  3. Enter amount. DEX shows expected output and price impact.
  4. Approve the transaction. Pay a small SOL network fee (base fee + priority fee).
  5. Done in seconds. USDC appears in your wallet.

Where CLOBr fits in

DeFi liquidity is fragmented. One token might have pools on Raydium, Orca, and Meteora, plus limit orders on Jupiter. Good luck checking all of that manually.

CLOBr aggregates liquidity across sources and shows where the real support and resistance is. More on this in the CLOBr section.