Perhaps one of the blockchain sector’s most significant successes has been the decentralized finance (DeFi) sector. With billions of dollars locked on various protocols, it has been one of the most potent avenues to explore the capabilities of the technology. With all this in mind, it comes as no surprise that so many consumers want to take advantage of the space.
But to do this effectively, you’ll first need to know what exactly you can do on various DeFi protocols. In this article, we’ll highlight some of these and how you can go about taking advantage of them:
One of the first options is token swapping. For a lot of consumers, trading tokens is an integral part of the cryptocurrency experience. But usually, this is done on centralized exchanges, which are custodial in nature. This means that when you deposit your tokens onto the exchange, you relinquish complete control over them until they are withdrawn. This is where the phrase, “not your keys, not your coins.” comes from. For consumers who are more particular about retaining ownership of their tokens, DeFi protocols for token swapping are a better option.
To use these, you first need a non-custodial DeFi wallet to store your tokens. Then, you can connect to a decentralized exchange and have tokens withdrawn and deposited into the wallet as needed. In all of these, you retain final control over your tokens, thus enhancing your experience.
You can also opt for lending. Because cryptocurrency is more widely used these days, many more people seek to borrow them for various purposes. This has led to the rise of decentralized lending, which sees tokens listed for specific interest rates and then borrowed by others. DeFi lending is unique in that it is governed by smart contracts. This means that the transfer of tokens, how much is charged in interest, and the collection of collateral are done automatically without room for human error. For those who have tokens lying about that they want to earn some money from, DeFi-based lending will prove to be a very valuable option.
DeFi protocols are also good for liquidity farming. Because the DeFi space is a billion-dollar sector at this point, various platforms will need a significant amount of liquidity to operate from day to day. This is where liquidity farming comes in. This sees everyday users pool together their token resources to create a liquidity base for various platforms. This facilitates the swapping of tokens, lending of assets, and much more. In return for providing liquidity, you get a certain amount of interest back, and just like lending, can be yet another way to make money off tokens that would otherwise be lying about. There’s a ton of liquidity pools you could join, with options available for virtually every type of token.
Then there is insurance, which is an important financial service, whether you’re conducting business or simply going about life. But as many of us know, insurance can be hard to access in the material world for various reasons. This is another gap that decentralized finance addresses through decentralized insurance. This sees users able to access insurance services without traditional gatekeepers. It also means that they can receive payouts faster thanks to smart contracts. If an insurance package is purchased for a token collapse, for example, the smart contract automatically detects this happening and pays out. No long forms or extended waiting period.
Decentralized finance has also revolutionized the concept of lotteries by offering no-loss options to players. As the name implies, these are lotteries in which no one actually loses. This works by players depositing a certain amount of money as a buy-in. These funds are then pooled together and staked for interest. Whoever is selected as a winner gets both their initial deposit and the money that was earned through interest. Those who don’t win simply get their initial deposit back. The DeFi sector has been lauded for its innovation, and this is certainly one of its best examples.
It is also famous for tokenization. Many of us want to invest in various opportunities, but often can’t come up with the money for an initial buy-in. But for those who don’t have hundreds of thousands, if not millions, of dollars to invest in things like real estate and art, tokenization offers an alternative. These essentially see ownership in traditional assets divided into smaller pieces and then bought into. Once these assets begin to turn a profit, users receive their share based on their ownership percentage, and this makes the investment more accessible.
To Wrap It Up
If you’ve ever wondered about what the DeFi space has to offer, look no further. In this article, we’ve listed some of the most innovative things you can do with the space, and you should certainly consider these. Whether you want to lend your tokens, access insurance, or simply swap one asset for the other, the DeFi space is practically unlimited.
