How about quitting your bank regards and enabling your tech-savvy mind to find easy secure ways to protect and earn money?
Eliminate the need for financial services restricted to some authority and scrutiny!
Here is DeFi at your rescue.
The total value locked in DeFi as of 17th Jan 2022 is around 96B USD with having more than 130 applications providing the access to DeFi.
What Is DeFi?
DeFi is just an abbreviation for the word decentralised finance often called “Open Finance”. As the name suggests decentralised, accomodating full autonomy of your money and finances.
DeFi is a blockchain technology-based token platform that is neither in the hands of any central authority nor can any authority access it without the security key.
Any person having an account over DeFi is the only bearer of all controls, like transactions, history of transactions and mode of transactions.
The main job of DeFi is to eliminate intermediaries by giving people, merchants and businesses a cost-effective substitute for financial transactions through technology.
How Do DeFi Works?
DeFi is made easily available and accessible to all the users of technology even like simple smartphones.
Decentralized Applications (Dapps) are applications that enable users to access DeFi via the simplest software that is blockchain equipped.
The user just needs to create an account and go to the open market for fintech tokens to deposit into the account.
The transactions in DeFi take place via algorithms and computer codes called smart contracts that eliminate the purpose of banks and financial institutions.
Ways To Make Money
As a user of DeFi, you can earn interest on your cryptocurrency just like you get interest income on bank deposits in traditional financing.
However, this interest in DeFi is much higher than that in the traditional financial structure.
The DeFi gives you the opportunity to lend your cryptocurrency tokens to the borrowers in the market. These borrowers arise due to the demand for cryptocurrency tokens and the lenders act as suppliers to them.
The platform enables you to earn higher interest rates by lending out cryptocurrency tokens on DeFi that range from 30% to sometimes 100%. The reason for such high rates is the current boom in the amount flowing into the cryptocurrency markets.
This hedges against the risk of volatility. Being the easiest way to control transactions, you have full autonomy to pull your lent tokens back anytime you want.
The system of DeFi is such that lender earns from the fees that borrowers pay during the transaction.
The best feature of lending at DeFi is that it is backed by collateral. The backing can be leveraged position or margin position. Collateral can be in any type of token for borrowing in other types of tokens.
For example to buy $50 ETH you have to first deposit $80ETH or any of the other tokens for equivalent value to the system. This way the initial amount of lender is safe and the scope of earning is already high.
Providing liquidity is just like providing money in the traditional market, this can be done by depositing the money or tokens in the case of DeFi to the market agreements.
This use of DeFi is a bit riskier depending upon the nature of deposits. Higher the risk higher the returns.
Here there is a pool of cryptocurrencies often called pooled money. You can ask the system to give you a certain value of cryptocurrency depending upon your initial sum deposits.
The system will then calculate the feasible cryptocurrency amount and ask you for buying or cancel the deal.
Anyone can deposit cryptocurrencies and anyone can asks for a specific cryptocurrency in return for money.
This way it provides liquidity in the system. The people depositing currencies into the pool earn returns based on transaction fees that traders pay into the system while making deals.
One top risk associated with the liquidity earning method is the risk of impermanent loss. This loss as the name suggests is not permanent but might cause you anxiety about losing enough money.
If your deposited tokens get a steep high point or low point in the market, you may not make as much money via fees as you could have made if holding them in the market only.
These conditions as speculative but have lower chances of happening. Generally, a transaction fee is more than impermanent losses.
To prevent this loss, a person can provide liquidity to more stable coins that are backed up by markets.
These stable coins possess the initial value and protect your initial amount in such impermanent loss conditions.
Companies that newly stepped into this industry , issues tokens for free to the people who try and spread their platform. This works as a part of marketing strategy.
They give out free tokens for using their platform. Now, this can be an opportunity for you to earn free tokens just by using a simply a new platform.
Recently Avalanche blockchain launched its Avalanche rush incentive program where they gave out free cryptocurrency tokens for using their platform to the users.
At launch, the amount given out was $180,000,000 which now is about $720,000,000 as per the markets.
Airdrops simply mean giving out tokens to the existing users. The companies that hold blockchain platforms or the token providers, when launching new tokens provide giveaways of some amount to the existing users of the platform. These, when launched in the open market get a skyrocketed price impact and here you can gain immensely.
No doubt DeFi is one of the most essential tech innovations of gen-z but it still needs to be worked upon.
The best feature of DeFi for being an unregulated place is also sometimes a bane. No authority is responsible for scams and losses which makes it prone to risk.
The current trends in cryptocurrencies do give a strong signal that the cryptocurrency boom can be a potential boom for DeFi as well as eliminate the traditional financial infrastructure.
Future holds a lot more demand for Dapps and financial services equipped with technology that is easy to access with affordability and enables the keys to the cryptocurrency world.
DeFi is widely used by cryptocurrency enthusiasts to expand their reach and earn from their tokens.
The lending, liquidity and incentives programs provide wider scope to attract more people into the DeFi world.
The features of highly personalized control and with no regulations make it easier to access as well as gives a fair chance to everyone for making entry and exit.
This gives traditional financial services a back seat and can force them to enter the new era of blockchain DeFi.