Cryptocurrencies are a trillion dollar industry causing global financial disruption. Bitcoin.
The first cryptocurrency was introduced in 2009, since then a series of events
have shaped the crypto space. Even after a 13 year meteoric rise, financial services
for Bitcoin have been slow to emerge a, to its inherent instability and low adoption.
Mainstream lenders won't approve a Bitcoin loan due to its high price volatility,
making it difficult to plan an investment. Defi is a current trend in the crypto world.
And it's an exciting place to be. If you are still not familiar with defi,
you should watch this video till the end end. Disclaimer, I'm not a financial advisor. The video
is for informational and educational purposes only. Hey everyone, welcome to crypto trends
In today's video, we'll talk about the defi. We'll be discussing about what exactly is defi and
how to make money from it. So make sure to subscribe to the channel so you don't miss out on
any of our videos. So without further ado, let's get into it. What is decentralized finance or defi
defi presents itself as a promising alternative to traditional finance as a successful implementing
of blockchain technology. Defi as the name implies is a catch all term for a wide range of financial
products and services based on decentralized blockchain technology, decentralized financial
applications or DAS aimed to cut out the intermediary in financial transactions, a
goal long pushed for by true traditional financial institutions like banks. This is accomplished by
implementing a blockchain based trust mechanism that enables secure peer-to-peer or P to P
transactions to take place without the need for a financial institution to charge a commission.
Growing applications of decentralized finance have created new opportunities for decentralized
finance investors to generate passive income. In order to generate passive income from defi
investors must commit their defi assets as resources to confirm transactions and
execute processes using the proof of stake or POS consensus mechanism, how to make money from defi.
Here's a look at the different options for defi based passive income that are currently available
to you. Way. Number one, defi yield farming or liquidity mining yield farming also known as
liquidity mining in defi is the process of earning more cryptocurrencies by mining existing crypto
assets yield for arming as an investment strategy requires investors to stake or delegate crypto
assets in a smart contract based liquidity pool. The pool repurpose the invested cryptocurrencies
to provide liquidity in defi protocols and distributes a portion of the obtained fees
as rewards to the user defi yield farms accept ERC 20 tokens like ether for investments and rewards.
Yield farming is designed to generate the highest possible yield or return,
and is one of the riskier investments in the world of defi based asset of income,
liquidity pools are used to facilitate crypto trading on decentralized exchanges
in exchange for a yield or payment for completing tasks, such as transaction confirmation. Each
pool's yield success will be determined by the strategies implemented on the smart contracts.
Furthermore, the payout will be determined by the monitor are a value of tokens invested in the
liquidity pool by the user when a user deposits or lends cryptocurrency to a liquidity pool,
the operator or farmer intends to redistribute the assets in order to achieve the highest
annual percentage yield or PPY the annual percentage yield PPY is a unit of measure for
the yearly returns on investments, including compounding interest. Traditional banks
typically offer an average savings rate of 0.06% PPY whereas defi has a much higher potential way.
Number two, defi staking staking in defi is similar to yield farming and thus
serves as an incentive for users to keep their crypto for a longer period. Users must deputize or
lock up their crypto holdings in order to become blockchain validators. Similar to yield farming
users can earn rewards by staking their tokens for a set period, depending on the plants offered
by the operator. Every blockchain will rec acquire a certain number of tokens before
allowing a user to become a validator, which in the case of the Ethereum, blockchain is 32 ether.
Furthermore, the estimated earning potential from defi staking will be determined by two factors,
the network's reward plan and the length of the staking staking directly contributes to other
securing blockchain projects while improving performance. In addition to monetary benefits
way number three, defi lending lending is a catch all term for a variety of investment
strategies involving passive income generated by cryptocurrencies investors in decentralized or
defi lending can act directly with borrowers through pre-programmed smart contracts.
In other words, defi lending platforms enable investors to list their crypto tokens,
which can then be launched to borrowers and repaid with interest over a set period, smart contracts,
not only help to eliminate the risks associated with lending in traditional finance, but they also
eliminate the need for collateral most lending applications. However, do not require background
checks, which are necessary to mitigate credit and fraud risks. Defi lending is a peer-to-peer or
P two P service that enables borrowers to borrow cryptocurrency directly from other investors
in exchange for timely interest payments. Unlike traditional lending smart contracts enable users
all over the world to pool and distribute crypto assets without the use of an intermediary.
Furthermore, the underlying blockchain technology ensures that trends actions are transparent
and imutable for all parties involved risks of defi based passive incomes risks associated with
each type of investment vary in severity, but they are always balanced by the prospect of a similarly
lucrative return on the initial investment scams hacking attacks and flawed or over promised
smart contracts are among the most serious risks associated with defi based earning opportunities
because defi based earnings are proportional to the number of tokens earned.
The price volatility of cryptocurrencies may result in a loss in terms of profit. During
periods of bear market. In such cases, investors are morally to hold on their tokens until the
market price surges resulting in unrealized gains for them. Furthermore, the risk associated with
the defi investment strategy can be influenced by the intentions of the pool owners. As a result,
it is crucial to investigate the credibility of service providers based on their past payouts and
performance, tracking your portfolios with so many different ways to earn passive income in defi.
It can be difficult to keep track of all of your multiple wallets across various platforms
as a result, many defi traders. Now use portfolio trackers or aggregators, which connect to various
protocols and wallets and enable you to evaluate and manage your entire portfolio from a single
dashboard yield aggregators, maximize efficiency by optimizing profit generating methods that could
make up of hundreds of farms and vaults that profit from a variety of decentralized services
with different business models, other aggregators even offer cross chain integrations and multiple
wallet connections allowing you to access real time chart views that analyze data
from multiple aggregators cross chain is a technology that allows information and value
to be exchanged between blockchain networks, thereby increasing their interconnectivity.
As a result, the wallet nature of chains is broken, resulting in a dispersed, but linked
ecosystem, cross chain interactions also help you identify potential API returns across pools and
track portfolios across wallets. Furthermore, any user can use any of these strategies to
generate passive income from their digital assets. They provide a crucial service to the
cryptocurrency markets by providing much needed capital and liquidity in exchange for rewards
all without the use of intermediaries, be wary of scammers and Rugers as well as projects that
simply want to steal your locked tokens and redeem them at liquidity pools, draining your
funds. Check to see if the farms and platforms you are using. Have a good reputation and have
published externally audited smart contracts. As a result before committing to liquidity pools,
staking or lending one should conduct extensive research on and the parties involved.
Do you believe defi is the future of finance. Let us know in the comment section down below
with that being said, here we come to the end of our video. I hope you like this video. And if so,
then don't forget to subscribe to the channel. So you never miss any video.
See you in the next video till then take care. The S for watching.