Everything You Need to Know About Decentralized Finance (DeFi)
For many years, we have had to rely on banks to access financial services. However, the emergence of blockchain technology has led to the growth of a new concept called Decentralized Finance (DeFi), which allows anyone to access financial services without dealing with intermediaries like banks.
Do you wish to learn more about DeFi? Well, keep reading this article.
Major Difference Between Fintech and DeFi
It is easy to mistake DeFi for Fintech. That’s because they both operate online and offer financial services with no banks involved. However, there is a huge difference between the two. Fintech uses the Web2 technology, which is largely centralized, to provide access to traditional financial services. On the other hand, DeFi relies on blockchain technology, which is decentralized.
Decentralized Finance Use Cases
Borrowing and Lending
Several decentralized protocols have been built to offer borrowing and lending services to crypto users. Unlike banks, DeFi service providers let anybody borrow or lend loans. While hundreds of blockchains have been developed in recent years, most DeFi protocols have opted for Ethereum. Some of the popular lending platforms include:
Try GPT Definity AI today, the #1 crypto trading robot! Click here to learn more. Artificial intelligence trading robots are taking over the trading eco-system, you can join this revolution and profit from daily revenues! Get ahead of the trading game with Artificial Intelligence crypto trading software today!
Compound
With Compound, you can borrow and lend multiple tokens, including USDC, ZRX, REP, ETH, DAI, and BAT. Interest collected is usually distributed to lenders using the protocol’s native token, cBAT. Moreover, interest rates on the Compound platform are flexible, unlike most of its competitors that charge fixed rates.
Dharma
This Ethereum-based lending and borrowing protocol allows you to deposit ETH, USDC, and DAI as collateral. You can also lock the same tokens to lend them in exchange for interest. Note that interest rates imposed differ from one token to another.
Maker
The issuer of the DAI stablecoin, Maker, also offers access to lending and borrowing services. The protocol provides loans in the form of DAI. To get a loan from Maker, you are required to deposit Ether as collateral.
DeFi Asset Management
In DeFi, asset management apps offer users tools that help them to manage their cryptocurrencies effectively. Such apps are useful, especially for newbies who find it challenging to set up crypto wallets or navigate the DeFi space.
Asset management apps include:
Melon
This a decentralized crypto asset management app that helps users manage their Ether and ERC-20 tokens.
InstaDApp
InstaDapp is compatible with the MakerDAO platform. You can use the app to manage your ERC-20 tokens, DAI, and Ether.
Decentralized Exchanges (DEXes)
Most newbies prefer using centralized exchanges to buy their first crypto. That’s because these platforms are easy to use. The downside is that they must submit personal data to purchase digital currencies. This makes centralized exchanges inconvenient for people who prefer privacy. If you are one of them, don’t worry; You can use the many decentralized exchanges available to buy crypto assets without providing personal information. Some of these exchanges are:
Uniswap: It runs on the Ethereum blockchain, letting users swap ERC-20 tokens fast and at cheap fees.
PancakeSwap: It operated on the BNB Smart Chain, allowing users to exchange tokens on various chains, including Ethereum, Base, and Aptos.
Venture Capital
Securing funding in the traditional finance sector is not easy for many startups. Decentralized Finance aims to make access to financing as convenient as possible. There are already numerous Investment DAOs consisting of investors who are willing to offer startup founders the funds required to run the projects as long as they have the potential.
One of the Investment DAOs is Gitcoin. It allows entrepreneurs to pitch their business ideas to investors, who then vote on which project to grant funds.
Risks in DeFi
Smart Contract Risks
DeFi protocols have been targeted the most by cybercriminals, who are always looking for vulnerabilities to exploit in smart contracts. That said, ensure the platform you inject your funds into has completed an external audit of its code.
Scam Risks
The decentralized finance sector is highly unregulated. This makes it a perfect space for scammers to execute their ill intentions. So, remember to do your due diligence before using any platform.
Disclaimer: Mining Plus Crypto specializes in amplifying content for dozens of cryptocurrency and blockchain firms, and your company could be next on the list! For inquiries, please reach out to us through or Telegram Chat. Given the unpredictable nature of cryptocurrencies, we advise you to thoroughly research before investing. A portion of the content available on our website, including broker reviews, is paid content or content contributed by guest writers and does not necessarily represent the opinions of Mining Plus Crypto. We claim no liability for the accuracy, quality, and content of advertisements, products, or any other materials, including ad spaces displayed on our site. For a comprehensive understanding, please review our full terms and conditions, and disclaimer.
