Decentralized finance (DeFI) is a sector driven by blockchain technology and focused on offering financial services in a different way from how we know it today. It consists of multiple financial services designed to make it easy for everyone, including those outside the conventional banking ecosystem, to access and enjoy the finance services.
Today, DeFi has become the ultimate field of innovation with new services getting added every week. As more people, businesses and governments take advantage of blockchain technology to enhance their operations, you too can also use this latest technology, but where do you start? Here is all that you need to know to get started with DeFi.
What is DeFi?
DeFi is a collective term referring to a system that completes financial transactions without using a centralized authority, such as a bank or credit card company. Instead, DeFi uses neutral third parties spread in the respective blockchain networks to confirm transactions instantly/ near-instantly and at a very small cost. They also use smart contracts, which are self-executing, implying that they are implemented directly without involving third parties.
In 2020 and 2021, the use of DeFi has intensified so much. Assets attached to different DeFi contracts, also referred to as total locked value, shot from approximately $697 million at the start of 2020 to over $85 billion by August 2021. The uptrend is expected to continue, and you should also be part of it.
How to Use DeFi Protocol
Today, most DeFi protocols are established on top of the leading blockchain networks, especially Ethereum and are supported by smart contracts. Therefore, you need to identify an appropriate network and pick the right wallet to store the main crypto coins.
To make the process of accessing and managing your portfolio easier, consider the platform that also comes with a mobile app. This means that it will be easy to check balance, follow on upcoming products, and get the latest updates.
Once you have selected the preferred DeFi platform, such as MantraDao, go ahead and buy the crypto coins supported by the platform. For example, if you want to stake or take a loan using the selected DeFi platform, a good coin to consider is ETH.
Take Advantage of Different DeFi Services
There are numerous products and services that you can get on a DeFi platform. The lovely thing about DeFi is that there are no trusted parties because they are run by decentralized autonomous organizations (DAO) and nodes in the respective blockchain. Here are the main services that you need to take advantage of:
- Crypto Lending: If you have some crypto coins, you can use a DeFi platform to get a loan. The coins act as collateral and will be returned to your wallet when you pay the loan.
- Staking: Once you acquire some crypto coins, especially those that are based on a network that uses proof of stake (PoS), you can use DeFi to stake them. This means that you commit the coins so that they are used to help secure the respective crypto network and confirm transactions. In return, you get some reward from the transaction charges paid by the platform users.
- Buying cryptocurrencies: Another awesome method of using a DeFi platform is for buying cryptocurrencies. If the coins you buy increase in value over time, it will be a huge gain for you. So, keep an eye on the coins to note when the price is at its peak and sell to get maximum return investment.
If you are new to the crypto world and blockchain technology, know that you are on the right track because the future is crypto. To take advantage of this high-potential sector, make sure to identify and use a good DeFi platform. Remember to always take care, especially with the crypto coins to avoid falling into the hands of scammers.