DeFi – or decentralized finance, is a fast-growing sector that aims to revolutionize traditional banking and lending methods.
More specifically, DeFi enables you to earn interest on your idle crypto tokens, borrow funds, secure insurance, and more without needing to go through a third-party entity.
In this guide, we explore what DeFi crypto is and how you can benefit from this investment space from the comfort of your home. DeFi Crypto Explained
In a nutshell, DeFi is a relatively new segment of the cryptocurrency and blockchain technology arena. The overarching objective of DeFi is to replace conventional banks and financial institutions with decentralized smart contracts. For example, let’s suppose that you wish to earn interest on your savings.
When putting your capital into a traditional savings account, you will likely earn in the region of 0.1% per year.
In comparison, when depositing crypto tokens into a DeFi platform, you can earn double or even triple-digit APYs.
Moreover, there is no requirement to go through a centralized body, as DeFi platforms are decentralized.
Therefore, you do not need to trust that your money is being well looked after, as the tokens are held by a smart contract that is immutable.
The above example can be achieved in a number of different ways – such as through a crypto interest account, staking, or yield farming. We explore these terms in great detail throughout this guide on DeFi crypto.
Another segment of the DeFi sector centers on borrowing capital. Ordinarily, if you wish to take out a loan, you would go through a bank or online lender.
The provider in question would ask you to fill out an application form that details specifics surrounding your financial profile and credit history. At the other end of the scale, you have DeFi crypto loan platforms.
These are decentralized providers that allow you to borrow funds without needing to provide any personal information or have a credit check run on you.
No documents need to be uploaded to support your loan application either.
Instead, DeFi crypto lending sites simply require you to put up a security deposit in the form of crypto – and your loan will be approved instantly.
All in all, DeFi crypto platforms put everyday financial services back into the hands of ordinary citizens. As a result, you can retain full control over your financial needs rather than needing to go through a third-party institution. How DeFi Works
So now that we have covered the basics, this section of our beginner’s guide on DeFi crypto will break down the core fundamentals of this sector.
To begin, we will explore some of the most common ways that DeFi allows you to generate an attractive yield on your money. DeFi Crypto Interest Accounts
The first niche market that DeFi is all but certain to replace in the near future is that of conventional interest accounts. In the US, retail banks are still paying less than 0.10% per year to savers. Although this might increase slightly in response to the Federal Reserve hiking interest rates, don’t expect this to surpass an APY of 1% any time soon.
You might also look at CD accounts, which offer a higher rate of interest when you agree to lock your funds for a minimum number of months or years. Nonetheless, CD accounts still pay a pittance, so you’ll be lucky to get more than 2-3% annually.In comparison, the best DeFi crypto platforms in the market will offer much higher returns.For example: You could deposit USD, EUR, or GBP into leading crypto interest account provider Aqru You can then convert your deposit into a stablecoin like USD Coin (USDC) – which is pegged to the US dollar In doing so, you will earn an APY of 12% Best of all, unlike CD accounts, there are no lock-up terms to meet when using Aqru In addition to being able to earn 12% annually on stablecoins, Aqru offers an APY of 7% on both Bitcoin and Ethereum. DeFi Crypto Staking Putting funds into a DeFi interest account is not the only way that you can generate a yield in the decentralized finance sphere. On the contrary, you might also consider staking.Staking allows you to earn an attractive APY simply for locking your tokens away for a certain number of days or months. You can do this directly with the respective blockchain, but yields are much higher when going through a specialist DEX (decentralized exchange).For […]
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