DeFi is a world apart that brought us this world of cryptocurrencies. Why is it important to understand it?
DeFi, as I explained in this post, is named after Decentralized Finance. It entered the big scene last year, 2020, and it’s here to stay. The DeFi world is based within smart contracts primarily. That’s why Ethereum, blockchain based on smart contracts, was key in getting this industry off the ground.
First, what is a smart contract? It’s a contract that has to be thought of in a conditional way. There is a condition, and if the condition is met, the execution of the contract is done automatically through an algorithm. That’s how easy it is. While Ethereum was the first network to bring this concept to the digital world, later other blockchains joined the challenge, allowing to further decentralize the world. Some examples of them are Binance Smart Chain, Polygon, Cardano, which helped the community not to be so dependent on ETH, due to its high commission fees.
Now, what does DeFI consist of? DeFi is a world, almost separate but integrated to the cryptocurrency world, where there are buyers, sellers, borrowers, lenders, people who contribute liquidity to a pool and receive rewards in return, people who play the lottery, people who do arbitrage operations. DeFI is a bunch of platforms that encompasses much more than a single cryptocurrency, where privacy is guaranteed, and speculation, obviously, too. Participating is not that difficult. On DeFi platforms it is possible to see returns of up to 1000% API, which in a traditional financial structure system is not seen for years. Of course, the risks are higher, but in general, the platforms pay well, and one can dispose of the assets whenever one prefers. On the platforms, you can also exchange currencies between people without having to go to a centralized exchange (a company that manages an exchange), which is why DEX, which stands for Decentralized Exchanges, were born.
DeFi platforms are characterized by not needing any kind of user or password, connecting a virtual wallet to the platform, one can simply provide liquidity to pools, farm, lend money or borrow to buy other things. It is undoubtedly for me, the revelation of recent times, and the place where more innovation is being seen in the crypto world.
What do I need to participate?
I recommend a MetaMask wallet, you can download it here.
With the Metamask wallet you will have access to many of the networks that DeFi uses to make its investments.
DeFI Platforms
ETH
https://aave.com/
Binance
https://www.beefy.finance/
https://exchange.biswap.org/#/swap
Polygon
https://polycat.finance/
In another post I will explain step by step how to invest, always at your own risk!
