Lately, I have made some publications referring to Yield Farming, Staking, or Liquidity pools, all of them are investment options that are offered to us within the blockchain environment, through decentralized finance portals (De Fi). However, I realized that to go much deeper into the characteristics of these investment projects, it was necessary to take a few steps back and start from the beginning, with a much more precise and analytical perspective.
That is why, this time, I will start from the beginning by analyzing the characteristics of the platforms that are currently setting the tone and capturing the attention of many large investors: the De Fi. What are they and why are they created? What benefits do they have? What investment opportunities do they offer us? I hope you will join me in this analysis and together we can learn a little more about this type of project.
Los De Fi an alternative for financial growth
When we talk about financial systems, within the blockchain environment, we immediately think of platforms such as Coinbase, Binance, Bittrex, Poloniex, or Kraken, these platforms offer us a series of investment opportunities that range from carrying out trading operations, cryptocurrency swap, futures trading, cryptocurrency staking and a long, etc. However, Nick Szabo and his proposal for smart contracts would facilitate the creation of a type of financial service more in line with the decentralized philosophy of cryptocurrencies, the Decentralized Finance (De Fi).
Decentralized Finance (De Fi) are financial platforms, managed through smart contracts, that facilitate financial operations with cryptocurrencies, although it is true that the services they offer are increasingly expanded, De Fi focuses its attention on the following investment alternatives: Liquidity Pool, Cryptocurrency Staking and Yield Farming.
Unlike what happens in a centralized platform, the De Fi does not depend on a central authority that makes decisions or establishes requirements to carry out operations within it, that because thanks to smart contracts these operations are already regulated, which makes The operations carried out in this way are more transparent and secure, it also offers the opportunity for small or medium investors to obtain rewards for the operations carried out within the platform, by becoming liquidity providers for it.
Why is De Fi needed?
As we commented previously, one of the characteristic elements of cryptocurrencies is that they are decentralized financial mechanisms, the fact that they are traded in centralized environments raises a certain irony in this particular, however, beyond the philosophical solutions that De Fi solves, they propose a much more practical within the cryptographic environment: serving as an enhancer for the development of blockchain projects.
For a cryptocurrency to be listed and therefore traded within a Centralized Exchange (CEX), it must meet certain characteristics and attributes, which generally, unless there is a strong investment of money behind, emerging projects do not have. How to obtain financing or be able to exchange crypto active if the necessary conditions to be listed are not met? Through the De Fi!
Within a De Fi it will be possible to carry out operations with tokens that will not be found in centralized DEX, in the same way for users who wish to maintain their privacy, by not operating under a KYC scheme, the De Fi is presented as a financial alternative for being able to perform operations, which, otherwise, could not perform.
Benefits of the De Fi?
One of the most interesting benefits of this type of platform is that it allows the distribution of the income that they generate, unlike DEX, this type of environment rewards liquidity providers with a good part of the income that it generates. as well as granting them, in many cases, governance tokens that allow them to be a participant in decisions about the development of policies of De Fi.
In addition to the above, we can also identify other benefits such as:
1.- It allows the access of a greater number of users to the blockchain environment, providing financial tools to people who do not have the possibility of being able to comply with the requirements established by the DEX to be able to carry out operations within them.
2.- It facilitates the financing and development of emerging blockchain projects, the best thing is that they can be adjusted to the particular needs of each project and eliminate the bureaucratic obstacles that can be generated in centralized environments.
3.- Create an ideal environment for the development of new financial services. The autonomy of this type of platform makes it easier for the user to develop new and increasingly interesting investment proposals.
In the next installment, I will be delving into the services and main investment opportunities offered by De Fi, their characteristics, advantages, and disadvantages. Now I would like to know your opinion: What do you think of this type of platform? Have you had the opportunity to meet or market within a De Fi? Would you like to be able to participate in one?
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DeFi is needed in our financial world of today, it offers better yield, more interesting applications of money, and other things that are not available on TradFi. With so many DeFi applications in the space now, the difficult thing is navigating the best, most secure protocol with long term building in mind, I’ve found quite a few which I’m sticking with come what May and they are Cubdefi and Thorchain.
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I completely agree with you @miskili, the De Fi platforms came to offer a very wide variety of financial instruments, in some cases, even more profitable than traditional trading operations and mitigating your risks a bit.
At the moment I have tried robiniaswap, tronswap and I also plan to start performing operations within the hive environment
Thank you very much for your valuable comment
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