Defi For Dummies!
Defi Is Complicated!
One of the principle barriers of entry into decentralized finance "Defi" is the knowledge and expertise required to have a profitable experience. There are obscure coins listed on decentralized exchanges "Dex". An example of DEFI listed on a DEX would be MEME Coin listed on UNISWAP.
What has made this space so volatile in the recent weeks is the sheer volume of different projects available on DEX, paired with the insane capital interest flooding in from the rest of the market. It has created quite the explosive combination, but it is still logistically challenging for the average consumer..
Simple Solutions for Exposure:
Defi Index Fund
What makes this such a brilliant solution for the end consumer is you're getting exposure to an entire sector with one purchase. This is a powerful idea for managing risk.
- Less exposure to a single coin if it does perform poorly.
- Weighted average across the best performers so you don't need to constantly pick "the best".
- Rebalanced on a weekly basis by the Binance team.
This product is only available via Binance Futures. You cannot access it via the Margin/Spot exchange. I think that this will become a popular idea in the crypto space, and I can only imagine that other major conglomerates will follow.
Again, this is another product offered by Binance.. I apologize if you do not have access to these opportunities. Lets dive into the next DEFI product that is easy to access!
This is one my favorites recently! Essentially you're putting your equity into a central pool where it is redistributed and loaned by Binance. By doing this, you can get rewarded!
This is comparable to a savings account, but you get paid daily. The amount you get paid per day can be seen with "Yesterdays Flexible APY", and it is deposited every twenty four hours.
The yearly "APY" is subject to fluctuate based on market supply/demand, but the proposal of >10% even is incredible! No effort required. Pure passive income.
There is an inherent risk to owning the assets themselves however. In principle the asset is subject to capital gain, or loss. However, this is where picking quality projects comes into play. I am picking BNB and USDT as my primary options right now. I want to be involved in passive income of assets that are appreciating in value. Don't get greedy chasing high rewards!
This is a similar kind of product but works with a different mechanism. Staking is where you essentially provide a service to the network. Its complicated, but luckily I have written a previous blog exploring the differences.
There are locked and flexible staking options available. Locked will supply a higher reward, but you cannot access the funds until the term is up. This carries a higher risk, so picking quality projects is important! Message Nathan on Discord if you want to discuss the options I am using!
The DEFI world is complicated!