Decentralized Finance: The next must-have accessory for Investing
When you hear the word decentralized finance, the first thought that comes to your mind is, “What is that?” How is it used? What is its purpose? And why do I need to know about it? How is it promoting the next era of finance?
DeFi is a financial system without banks. These are cryptocurrency exchanges that allow users to trade without giving up control of their funds to an intermediary. Anyone who has an internet connection can use Ethereum. With DeFi, the markets are always open and there are no centralized authorities who can block payments or deny you access to anything. Services that were previously slow and at risk of human error are now automatic and safer now that they’re handled by code that anyone can inspect and scrutinize.
According to statistical data, investment in cryptocurrency has exploded in recent months. As of July 2020, an estimated $9.1 billion of value was locked in decentralized finance. By December 2020, this figure had risen sharply to $25.2 billion. As of July 2022, $38.1 billion of value is locked in decentralized finance. 5% of the crypto space is occupied by DeFi. In just three years, the market increased from 4 billion to 93 billion.
DeFi uses smart contracts or computer code that automates the process. The transactions taking place are direct, i.e., no third party is involved. Decentralized exchanges, lending platforms, asset management, and derivatives. Bitcoin, in many ways, was the first DeFi application. Bitcoin lets you really own and control value and send it anywhere around the world. It does this by providing a way for a large number of people, who don’t trust each other, to agree on a ledger of accounts without the need for a trusted intermediary. Bitcoin is open to anyone, and no one has the authority to change its rules. There’s more than one way that people are attempting to capitalize on the growth of DeFi. One strategy is generating passive income using Ethereum-based lending apps. Essentially, users loan out their money and generate interest from the loans.
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It is becoming increasingly popular among Millenials and becoming the next must-have accessory for investing. With a low-risk environment for its users.