Cryptobtcbrowser reported based on market research, information security, and digital media with extensive sales track records in various software industries to discuss DeFi.
Financial investments are based on loans and interest payments, as a relationship between creditor and debtor. In the traditional market, this relationship is mediated by a third party.
Although, with decentralized finance (DeFi), this third party is not necessary. This is possible because the execution of this service is now done through code. This growing industry has ramifications for your services, both financially and legally.
For example, the activity of Money Legos is to allocate your money to several that generate income, not to be subject to a single investment. So, I can move my money in different places to expand my strategy, giving the investor the role of banker.
In the DeFi world, staking is the token deposit in the utility exchange. Then you can hold these tokens in a contract where you can get more tokens or tokens from other projects. Proof of Stake, for example, is earning this reward for holding your cryptocurrencies idle for validation of other transactions.
In addition, it is highlighted that “Liquidity Stake” is to maintain cryptocurrencies and, as mentioned, receive income by making the market more liquid, which means that the investor provides money to the market in exchange for market fees, maintaining their money in a liquidity fund. The more people provide liquidity, the more secure and independent the market becomes from centralized exchanges. Farming is closely related to liquidity as it is the act of farming your profits by providing the liquidity of a specific pair.
Decentralized lending platforms work like a decentralized bank, where the user can be that bank. In order to obtain a loan, it is necessary to leave collateral there, which can be an unstable cryptocurrency. These financial activities, in turn, have inherent risks, such as permanent loss.
For example, there is a possibility that, by providing liquidity, other liquidity providers will leave the group. It should be noted that providing liquidity for a cryptocurrency can bring benefits such as earning more with this cryptocurrency, however, when withdrawing your money, you are susceptible to price fluctuations of stablecoins. One way to mitigate risk is stablecoin pools. However, through IRAIC, decentralized transactions with cryptocurrencies are much safer, as they are based on real businesses that give credibility to the investor, which has led to an increase in new users over the last year.