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Decentralized Finance: A Beginner’s Guide

Gone are the days when individuals had to rely on a single financial institution for all their banking needs. With the development of decentralized finance, consumers now have multiple options for depositing and lending money.

This has made it possible for small businesses and entrepreneurs to get easy access to finance, without having to go through a traditional bank.

In this article, we dive deeper into the world of Decentralized finance, we explore how you can take advantage of this new system to fund and grow your business through lending and borrowing etc.

What’s Decentralized Finance?

DeFi or Decentralized Finance — is a cryptocurrency and digital asset service that allows users to borrow money against their cryptocurrency holdings.

It is a great option for those who want to buy goods and services but don’t have the money upfront. Simply upload your cryptocurrency holdings, provide your loan information, and Defi Finance will start to lend you money against your holdings. – You can also leverage the power of decentralized applications to finance your day-to-day expenses.

Beside lending and borrowing, Defi also offers a variety of other services, such as margin trading, margin lending, and short selling. So, whether you’re looking to borrow money against your cryptocurrency holdings or just want to explore the world of cryptocurrency, Defi is the perfect service for you!

Why are people so intrested in DeFi?

People are interested for this following reason:

With a decentralized economy, individuals and organizations can trade without the need for a third-party such as a bank. This eliminates the risk of fraud, money laundering, and other illegal activities.

Additionally, the financial system is more efficient because it is not restricted by geographical boundaries.

Lastly, Decentralized finance has the potential to improve the world’s economy by making it more resilient to shocks.

DeFi vs traditional finance

Defi is a newer and more innovative type of finance that is based on the blockchain technology. This allows for more efficient and secure transactions, as well as faster processing times. In addition, Defi provides a platform for entrepreneurs to raise capital and start their businesses.

Traditional finance, on the other hand, is the system that is currently in use. It is based on the centralized model, and banks are the main players in this system. This system is slow and expensive, and it can be difficult to get loans or access capital.

Additionally, traditional finance is often opaque and difficult to trust. Defi offers a better solution for entrepreneurs who want to raise capital and start their businesses, without the hassles of traditional finance.

What can you do with DeFi applications?

Defi is a new kind of financial services that uses blockchain technology to create a decentralized lending market. This platform allows borrowers and lenders to trade loans without the need for a third party.

Most Defi applications are built on Solana and Ethereum blockchain, which offers security and transparency and good compliance to AML (Anti-Money Laundering) regulations.
Here is what you can do with Defi applications:

  •  Move money around the globe with ease
  • Stream money around the globe
  • Access stable currencies
  • Borrow funds with collateral
  • Borrow money with no collateral
  • Start crypto savings
  • Trade tokens
  • Grow your portfolio
  • Get fund for your ideas
  • Buy insurance
  • Manage your portfolio

How does DeFi work?

Decentralized finance uses cryptocurrencies and smart contracts to provide services that do not require middle man. Unlike in the current financial world, where financial institutions act as guarantors of transactions, which gives the institutions involved too much power because your money flows through them.

In Defi, it’s a different case, as smart contract replaces the middle man [financial institution] in the transaction.

What’s a smart contract?

A smart contract is a type of Ethereum or Solana account that can hold funds and can send/refund them based on specified criteria for execution. No one can change that smart contract when it’s live – it will always run as programmed.

Defi FAQ

Can you buy Defi crypto?

Yes! You can buy Defi coins like ETH and Solana, in Defi provide users with a secure, fast, and convenient way to buy crypto, and also pay for goods and services beside lending and borrowing.
Most Defi app allows for peer-to-peer transactions, which makes it possible to buy Defi cryptocurrencies in Decentralized or centralized exchanges.

What is the difference between DeFi and crypto?

Defi is a system that allows for the trading and settlement of crypto assets. It also provides a suite of services that include margin trading, short selling, borrowing and lending.

Crypto, on the other hand, is a digital or virtual currency which is primarily traded in Decentralized, centralized exchanges or used in peer-to-peer transactions.

With DeFi, the process of buying, selling, and trading crypto assets is easier and more accessible to the public.

What are the best Defi coins to buy now?

With the current issue of scalability and high gas fee with Ethereum and several layer 2 blockchains, different Defi projects are being created on weekly basics. And the best time to buy Defi coins is before they start to experience price volatility.

Here are a few Defi cryptocurrencies you can buy.

  • Solana [Sol]
  • Cardano [Ada]
  • Aave
  • Ooki
  • Comp and cake

Note: if you are new to cryptocurrency, using decentralized exchanges to buy coins and tokens could be a difficult task for you; in that case sticking with centralized exchange like Binance will be the best option.

Again, the good news is that, most of these Defi coins are already listed in the Binance exchange; you can sign up here and start your investment.— see our cryptocurrency beginners guide

Is Defi a good investment?

Because of the buzz and utilities around decentralized finance, investment in Defi project is a good and smart move. Especially if you spot and get in on a potential project earlier before it becomes mainstream.

At this point, we need not remind you that there are lots of fake projects out there, so do your due diligence [DYOR].

Before you invest in a project, make sure you research properly before investing money this will prevent you from losing fund to scammers.

How safe is Decentralize finance?

The source code of Decentralised blockchain are publicly visible to everyone, technically-savvy people can spot and exploit vulnerabilities in the code and run away with huge sums of money.

How do you make money with Defi?

Defi is a unique financial service that allows you to earn money by lending your money to others. You can lend your money to people who need it to cover short-term financial needs, such as in the form of a loan or a loan installment.

You can also take flash loans and fund a business idea, or start arbitrage trading. Here you take advantage of price difference of different lending and borrowing platforms.

Should I invest in Defi coins?

Investing in cryptocurrencies carries a high degree of risk, thus the decision to invest in any coin is entirely yours to make, and it should come when you are better prepared to withstand price fluctuation of whatever coin you would love to invest in.

Also, as with every other financial instrument, don’t invest more than you are willing to lose and when it’s time to invest, make sure you do thorough research about the coin or project before throwing in funds.

What are the best Defi projects?

Since the advent of decentralize platforms like Ethereum, there is being a surge in the development of Defi blockchain. All racing to bring solution to many issues with layer II blockchain, new projects like Solana and Bitgert seems to be making the news, so they are worth keeping an eye on.

Bottom line

With Decentralize finance, the process of lending and borrowing money has become very convenient and hassle-free, as there is no need to leave your home to go out in search of a financial investor to fund/lend you money to finance your business. All that you need to get started is a reliable computer or mobile phone with an internet connection.

Useful resource: Decentralized finance

Solana blockchain

Bitgert blockchain


Ogedi is the Co-founder of CryptoBasics. He writes on a number of topics related to Blockchain technology but focuses mostly on Cryptocurrency, NFTs, and Decentralized Finance.

This Post Has One Comment

  1. Incible

    I just stumbled on this great piece.

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