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Understanding a Yield Generator
Spool builds on existing Yield Generators, therefore it's important to understand Yield Generation and how Spool uses it.

Lending and borrowing

Aave and Compound are prime examples of DeFi Protocols that serve a user their borrowing and lending needs. For example, a user can borrow USDC after depositing ETH for a fixed collateral ratio. The user earns yield on their ETH while paying to borrow the USDC. Participants who seek reduced risk can lend out their stablecoins via Compound, Aave, or other lending protocols to earn interest.
The process of lending and borrowing.

Providing liquidity

Another way of generating yield is via trading fees accrued by Automated Market Makers (AMMs), which power decentralized exchanges (DEX) like Uniswap, Curve, Balancer, and Sushiswap. For example, if a user wants to exchange their DAI for USDC, they can do so through a DEX. In order for the DEX’s AMM to facilitate this trade, liquidity (which is provided by third parties) is required. AMMs deduct fees from each trade passed onto liquidity providers to incentivize these third parties to lock up their capital.
Earning trading fees.

Staking

One of the simplest ways of generating yield is through staking. Staking describes the process of temporarily locking up capital in a smart contract and in exchange receiving tokens as a reward. These rewarded tokens can be sold or accumulated.
The concept of staking for Governance tokens.

Governance Tokens

Some protocols incentivize use of their products with additional governance tokens that are emitted to users over time. These rewards often serve as a method for bootstrapping liquidity and as a way to distribute governance to the actual users of the protocol. This method of earning yield often goes hand in hand with the aforementioned ways of generating yield. For example, users providing liquidity on Curve will receive CRV governance tokens in addition to the AMM trading fees.
Distribution of Governance Tokens.