Last Sunday, April 24, the Rodrix Digital channel received two experts to talk about the DeFi sector. Thus, the conversation was held with Lucas Coutinho Schnitman, from the ConsultorCripto channel, and Daniel Niero, Information Security manager with extensive experience in sales in various software industries.
Channel host Rodrix Digital explained: “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”.
“However, with decentralized finance (DeFi), this third party is no longer necessary. This is possible because the execution of this service is now done through code. This growing industry has ramifications on your services, both financially and legally,” he added later.
“For example, the activity of Money Legos is to allocate your money to several that provide you with income, not depending on a single investment. Therefore, I can move my money in different environments to diversify my strategy, giving the individual the role of ‘banker’”, she added.
In the DeFi world, staking is the token deposit in the profit 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.
It should also be noted that “Liquidity Stake” is to hold cryptocurrencies and, as mentioned, receive income for making the market more liquid. Liquidity, is when the investor provides money to the market in exchange for trading fees, keeping his money in a liquidity fund. The more people provide liquidity, the market arguably becomes more secure and independent from centralized exchanges.
According to Rodríx Digital, “Farming is closely related to liquidity, as it is the act of cultivating 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.
The CEX, or “Centralized Exchanges”, are important in order to reduce the barrier to entry for new users, however, this entry will lead to the inevitable Decentralized Exchange, mainly due to its democratic nature. It should be noted that DEXs provide users with access to cryptocurrencies that a CEX, being passive to government orders, cannot provide.
To learn more about staking, you can watch the full video below:
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