What is DeFi, Decentralized Finance? It is a non-custodial door to a financial world that included more profit and less on middleman disturbance. Current financeial sytem forces people to pay high fees and interest for loans and less interest for investments. This is because of custodial platforms, banks or such institutions, take the biggest piece of the cake themselves. Here is cryptography and is product decentralized store of information and asset, blockchain, brings a phenomenal solution, DeFi.
DeFi has been profitable since you could hodl and still earn farming rewards. For example, CRV and MKR have been quite profitable. Yield Farming can have a future to alter the way of HODL in more profitable way. Why keep your trusted assets and not make any interest over time, right? Lastly, DeFi, has brought farming feature as well. For example, Yearn sounds like the best run when everything is more stable.
And also DeFi, decentralized finance, is more like opposite of Bitcoin dominance trend. That means that if Bitcoin dominance decrease over time, without any abrupt dump, then moved volume will transfer into DeFi area.
Advantages and Disadvantages of DeFi
The most important advantage of DeFi which is allowing you to earn money while holding your crypto assets. This way you keep (HODL) your assets and still earn interest (mining rewards) plus a unique token that depends on the platform you stake/farm.
DeFi is good if you are dealing with large amount of value in crypto, say like more than $10K. This bring us to the disadvantages of DeFi, high fees. Fees pn ethereum blockchain can go over $50 easily when market is in rush and loaded. That is bad if you just got a good deal to sell the tokens or a low-cap investor. However, if you are in good financial situation and playing with thousands or millions of dollars in crypto, then this is, again, not going to be a burden on you. DeFi is, from its name, a financial arena to play in, so you budget and the take-risk level must lead you while you are in it. DeFi is always a risk. To minimize possible and unwanted risk of loosing everything is working with multiple platforms.
Click here to check our other posts.