DeFi stands for ‘decentralized finance’. It’s a broad terminology for a whole bunch of activities that involve crypto-money and exclude a metaphorical middleman.
With DeFi you can lend or borrow money at interest, make transactions, start a savings account, and even earn profits from the price movement of digital money. (Similar to what fiat Forex does).
The trick is that DeFi invest doesn’t need an armada of bank clerks, costly office buildings, and other expenses that go with all that “old-world paradigm”.
Plus, decentralized finance is pretty much independent. No license issued by the government or any other official validation is required to perform operations like authorizing a loan.
All these benefits make DeFi transactions quicker than a peregrine falcon: starting at about 14 seconds and up to a few minutes. At the same time, a standard bank transaction can be as long as 5 working days.
Plus, whenever you lend someone money, you can count on earning a much bigger revenue.
While a bank entity needs to pay its employees and cover electricity bills, DeFi keeps the loan between just you and its recipient, mano e mano, so to say. As a result, the commission charged by the system is dramatically lower.
Finally, investors appreciate a greater privacy, which goes with investments in cryptocurrency. DeFi you gives you the freedom of control over your own funds, and there’s no one to freeze or block them.
Every coin has two sides, and DeFi is no exception. Here are the downsides of the decentralized system:
• Locking. When you deposit funds in the DeFi system, they will be locked for a fixed period, according to the protocol. While they are locked, the price of your token may nose down.
• More risk. While having no regulation makes things go faster, it also brings more risk. Banks offer FDIC insurance, but cryptos don’t. An important nuance is to make sure that a platform you trust has cold storage. (Cold wallet).
• Hacking. Almost half a billion worth of dollars have been stolen from DeFi up to August 2021. Naturally, it’s next to impossible to track this money and get it back. It’s important to research the app you’re going to use for investing and check its repute.
• Fluctuations. By now, DeFi shows slower growth — about 11% down. At the same time, the blockchain industry showed an impressive 25% going up quarter-over-quarter .
• Possible regulation. It appears DeFi will be regulated after all, at least in the US. SEC keeps an eye on DeFi, voicing concerns that it’s becoming a safe haven for money laundering, tax evasion, and so on.
At the same time, risk is an “evil twin” of every crypto-token. Even stable coins that are directly linked to the real-life assets like Swiss frank or gold pose a certain degree of risk.
With all that, DeFi investment is still a promising opportunity. The whole project started merely three years ago. And now decentralized finance is worth roughly $90 billion.
So far we can say that it’s too big to collapse. Yet, it’s recommended to invest only money that you’re not afraid to lose in DeFi.
But at the same time, this riskiness can yield much higher profits than a standard investing tool like stock trading.
You just need to be clever about picking a right platform, on which:
• You can easily withdraw cryptocurrencies 24/7.
• Your money can be kept in cold storage, e.g. offline.
• You can earn money from the rental cryptocurrency and the borrowers must deposit a collateral to get them.
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We can also help you with investing in DeFi — one of the most promising crypto-segments in 2021. Contact us now to secure your future!