The world of finance is being disrupted by a new technology called decentralized finance. In this article, we seek to explain DeFi to absolute beginners, using everyday grammar.
The world of finance is being disrupted by a new technology called decentralized finance. In this article, we seek to explain DeFi to absolute beginners, using everyday grammar.
In March of 2021, a friend of mine called me to ask for my views on an investment opportunity. He explained that the platform was asking him to deposit some crypto assets for 3 months, in return for 300% returns.
I decided to look at the platform critically, to see if it was a scam or if it was a gem. After 2 hours of research I called him back. “Ed, it is not a ponzi platform. It is a DeFi Staking Pool. I can’t guarantee the safety of the platform, but from all looks it is worth a try.”
Ed made 500% profit from his investment in the staking pool. He used the profits to invest in other DeFi pools. Some returned huge rewards and others failed.
DeFi is a financial system that uses the blockchain to enable and facilitate financial transactions. It stands for Decentralized Finance, and is powered by Blockchain technology. This removes the third parties involved in financial transactions such as banks and other institutions.
The currency used in decentralised finance is cryptocurrency. This is because blockchain technology has the supportive structure required for DeFi transactions. Decentralized apps (or Dapps) and smart contracts are used to carry out DeFi transactions.
DeFi offers a better way to carry out financial transactions. Among the several usecases of DeFi, these are the most prominent:
There are also other applications of DeFi such as exchanges, lottos, tokenization, fundraising, audits and lots more.
DeFi has a lot of compelling benefits that have led to thousands of investors putting their money in DeFi platforms. These benefits are for entrepreneurs building defi products, for users of these platforms and for the society at large. . Here are some benefits of DeFi:
Despite being a very useful tool, Decentralized Finance comes with risks. These risks are real and can lead to loss of funds for investors. Great DeFi projects find ways to mitigate the risks and make DeFi safer for retail investors.
However, we would be enumerating the risks in the DeFi space, so you can be fully informed.
DeFi offers new and exciting financial freedoms, but these come with risks. These risks include:
ZinaX brings the benefits of DeFi to the everyday man. We advise you use the ZinaX platform to save your assets in DeFi, at a juicy rate.
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4 Comments
annabrown
Wow, cool post, thanks for sharing.
cmsmasters
Happy to be of service.
Paul
Learnt alot. THANKS
Ankit kumar
Great Article , Thanks for sharing 👌