DeFi - banking redefined

2개월 전

Every now and then a there is a few words which becomes a buzz word in an everyday conversation. Few years ago, we start hearing about Blockchain and Bitcoin and Cryptos. Before that was 4G, Internet Of Things and before that was everything dot.com !

These are all buzz words which is used so frequently that a lot of people talk about it without actually knowing what they are talking about.

I remembered a conversation I had among a few friends 2 years ago where I asked openly as to what the hell is MakerDAO and what DeFi was. One of my friend quickly googled it and just repeated everything he read on Google. When asked more information, he tried to give an "intelligent" answer which didn't make much sense as he just heard about it and googled it. However from there, he actually started to researched more and understood what DeFi and DAO is ..

So ... instead of trying to explain what DeFi is to you let me instead share with you what my experience of DeFi or Decentralized Finance is to me in this short post.

From my point of view, DeFi is literally making all the function which involves a 3rd party to handle your "Crypto Funds" obsolete.

For example, you want to take out a loan today, you would need to get to a bank, fill out forms .. show the bank you have income to be able to pay back that loan and then find a guarantor ... then wait for the bank to tell you YES or NO and how much interest you need to pay them.

wki7ud.jpg

With DeFi, you are able to take out a loan based on the total amount of crypto that you have and then all you have to do is to pay back when you feel like it. And this is ALL automated thru smart contracts.

WHAT ??? Why should I take a loan if I already have the fund ????

Well, its like this. If you have 2 BTC and the for example the price of BTC was at $5k and you sold 2 BTC, you would get $10k total. If BTC price goes up to $10k, you would not have anymore BTC assets to sell.

Now if you took a loan of $5k, you would still have 2 BTC plus the $5K loan bringing your total value to $15k. If you took that $5k loan to buy 1 more BTC and then the price of BTC goes up to $10k, you would have a total value of $30k minus the $5k loan you took earlier.

Thats one way of doing it, or you could buy something which you really need but do not want to sell all your BTC because you know the price of BTC is going up. When it actually goes up, you would use less BTC to pay back the value of the loan which is normally in USD value.

What else is there ?

5wkllf.jpg

Well, if taking loans is not your thing and want a safer return on your cashflow, you could opt to be the banker and collaterize your money. As you can see the image above, the returns are about 7.31% on DAI which is pegged to the USD.

I do know that this seems extremly lucrative for some, however the rate changes almost everyday depending on the market situation.

How staking DAI can earn you interest ? Well best visit this website to understand a little bit more. https://compound.finance/

I myself is still learning all of these and have dabbled my feet into it just to try it out. You should too, perhaps with $100 of DAI ? This is not a financial advise =D

What tools can I use to get all these done ?

Well, here are a few tools that I personally use to manage my assets and try out these Defi functions.

https://defipulse.com/defi-lending - great place to start learning more
https://compound.finance/ - see how you can start earning by staking
https://zerion.io/ - a really easy to use interface to try out DeFi

There are many apps out there and more stuff coming out with DeFI. Its truly going to change how you would look at "banking" in the future, so I do suggest you try it out and understand it better.

This is not a financial advise and if you do want to invest, make sure you start off with what you can afford to loose until you are 100% sure then you invest a little bit more.

Cheers and have a brilliant day ahead !

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I notice that interest rates are realistic and high compared to the artificially low or even zero interest loans being offered by banks.
How does DiFi compete in these circumstances?

·

the interest rates changes based on the supply and demand, as and when more ppl want to take loans in DAI and less supply the interest goes up to incentify more people to lend out dai. this is from what I understand. I'm currently in the "supply" market and these rates are pretty lucrative at the moment for me

you could check this out for some info as well https://defirate.com/dai/

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