PolyCrystal Educational Series 1: Introduction to DeFi
Are you new to the space of Decentralized Finance (DeFi)? Lost and have no idea where to start 😰? Do not fear! With the PolyCrystal Educational Series our aim is to give you all the right knowledge and tools to get started and succeed in this space 😯. Keep on reading! 🤓📕
⚠️Disclaimer: The information on this article should not be interpreted as financial advice.⚠️
What is DeFi?
Decentralized Finance, or DeFi is a sector in the cryptocurrency space that is full of opportunities. Indeed many users see DeFi as a means to financial freedom and an escape from low interest rates offered in Centralized Finance (CeFi) by banks 🏦 and traditional investments 📈.
The biggest difference between DeFi and CeFi is in the concept of Decentralization. In traditional finance, you give your funds to be held or managed by some governing entity i.e. a bank or an investment firm. This entity provides you financial services — usually for a fee — and in return you get the benefits of these services. In this case the services are considered Centralized, because your finances are controlled by a single entity and the people working for it. At the end of the day — Centralized services are able to succeed and operate because people trust other people, and because there are measures in place such as legal agreements 🤝 and law enforcement to provide assurance to users of the security of their funds.
However, in DeFi the need for this sort of trust is significantly reduced. Rather than trusting other people to handle your finances, DeFi makes it possible for you to trust computer protocols and a network operated by a community of people such as yourself from all over the world 🌎 who share the same goals i.e. growing financial wealth! Decentralized applications make use of blockchain technology to provide financial services based on public protocols and smart contracts, the code for which can be analyzed for malice or security by anyone in the world with an internet connection 🌐. Of course — not everyone is a code expert nor has the time to read every smart contract. Luckily, trustworthy audit companies exist in this space and work in the business of identifying malicious smart contracts. We will dig further into the concept of DeFi security in a later <article>.
Decentralized finance applications are services which allow you to manage and invest in cryptocurrencies. There are many DeFi applications, and truly it is a world of endless possibilities. Here are a few application use-cases frequently found throughout DeFi today:
- Crypto Lending & Borrowing: These protocols allow users to lend their idle cryptocurrencies to earn a passive interest paid by borrowers. Borrowers on the other hand are able to take advantage of financial leverage. Aave is one example.
- Decentralized Exchanges: Where users are able to buy or sell their crypto tokens for other crypto tokens through liquidity that is provided entirely by the global community of people using the protocol. Liquidity providers earn a small fee from users swapping cryptocurrencies, while swappers are ensured a fair market price for all token exchanges. ApeSwap.Finance is an example.
- Yield Farming: A way to earn cryptocurrency rewards with existing cryptocurrency holdings. Yield farming protocols reward users for providing liquidity or staking their crypto holdings in the protocol. PolyCrystal.Finance 💎 is a perfect example of a yield farming protocol!
Why Invest in DeFi?
Now that you have some idea about what sort of space DeFi is and the kinds of DeFi applications that are available — the obvious question you will ask yourself is “Why would I invest in DeFi?”. Here are a few reasons for you to consider 🤔:
- You like being in possession of your own funds
- You welcome the challenge and responsibility of managing your own finances
- You believe in the future of cryptocurrency
- You enjoy the concepts behind decentralization
- You are willing to seek and work for your own financial freedom
- You are comfortable taking risks and investing what you can afford to lose
- You want to take advantage of the opportunities in the DeFi space
If you find yourself agreeing with at least some of the above points, then perhaps DeFi is for you!
Thinking of trying out DeFi or learning more? Then please consider following our Medium page for future articles in which we will introduce you to DeFi through our own platform PolyCrystal.Finance, and get you started with a cryptocurrency wallet which you may use to store your cryptocurrency and interact with DeFi applications on the Polygon network!
How to Stay Updated
For the latest information and updates from PolyCrystal, please check out the below social media pages:
- Main Twitter Account: https://twitter.com/PolyCrystal_
- Main Telegram: https://t.me/polycrystalfin
- Announcement Telegram: https://t.me/polycrystal_ann
Community Manager, JimmyTheHypnotist:
- TG: @jimmythehypnotist
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