Decentralized Finance (DeFi) is often characterized as a bunch of rug-pulls and Ponzi schemes. It is true using blockchains comes with risk, but you’re probably already familiar with many DeFi investing concepts. This is because DeFi didn’t invent Finance. It’s just Finance on a decentralized blockchain. Whether you’re lending, borrowing, providing liquidity or trading, there’s a real-world version of everything you see in DeFi. You probably us them in your daily life.
DeFi is Banking and Investing on the Blockchain
Right now, it’s likely you hold your cash in a bank account. If you have investments, they’re likely in a retirement account or a brokerage. If you want to send money, trade, or purchase property, you pay these middlemen fees. Decentralized Finance is trying to build an alternative to the current financial system using Blockchain technology. Removing these middlemen allows you to be your own bank and take control of your financial future.
Yield and growth are at the core of DeFi, just like traditional investments. When you purchase a stock, it’s because you expect them to grow or pay you a consistent dividend. As a result, you make money over time. The same is true for lending. If you purchase a bond or lend money, you expect to be rewarded with interest payments. DeFi makes use of these same time tested investment concepts, except on the blockchain. That’s it. If you have a limited understanding of how to invest, then you have what you need to understand the basics of DeFi. Understanding is different than actually investing, but you don’t have to be afraid of exploring DeFi just because it’s on a Blockchain.
Conclusion: Changing the ballpark doesn’t change the game
Defi is new, and new things may seem scary. But behind the mystery and intrigue are financial practices hundreds of years old. It may feel overwhelming at first, but if you already take responsibility for your finances, you are ready to experiment with DeFi. Start small, Play around and build up your comfort level. Eventually, you’ll realize parallels to how you’ve managed your personal finances your whole life. If you ever feel lost or overwhelmed feel free to join our discord. We’d be elated to answer any of your questions.