The past few weeks have seen an incredible rise in decentralized finance (DeFi). Starting can be daunting, but there is much to gain from engaging in the DeFi ecosystem.
The surge started in late May 2020 when the DeFi market cap hit a milestone and crossed the $1 billion mark. This created a wave of excitement throughout the crypto-economy and the traditional finance space. Since then, the DeFi sector has seen an even higher level of passion and innovation.
One of the biggest draws is that DeFi can offer and quickly create higher yield return opportunities for users compared to traditional financial markets. For example, Compound and Aave unlock attractive yield potential for those willing to use their platform. At the same time, DeFi uses the Ethereum blockchain, which provides transparency and trust through its open-source, immutable code.
The same decentralized technology that powers Bitcoin also enables Ethereum to open up opportunities. Decentralized exchanges such as Uniswap allow users to buy and sell tokens without middlemen involved. And decentralized lending protocols such as MakerDAO and Dharma Protocol extend users access to credit and loans.
But before you can begin engaging in the DeFi space, it is important to understand the risks involved. Of course, some of these risks are no different than with traditional finance, but the DeFi community has its own unique complexities. A thorough understanding of smart contracts and their interactions is critical. As is knowing how to leverage blockchain technology to maximize your returns.
Fortunately, there is ample resources, articles, and guides available to help get you up to speed.
The DeFi space is gaining traction for good reason, making it an exciting opportunity for those willing to be part of the new decentralized economy. As DeFi continues to grow and evolve, the potential for higher yield returns, access to credit and transactions without intermediaries is likely to increase.
If you’re looking for an interesting investment opportunity, now is the time to learn more about the DeFi space. Follow us for more updates, guides and opportunities available with decentralized finance!