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HOW TO LEARN ABOUT AND INVEST IN DEFI

  1. DeFi overview
  2. Why is DeFi important
  3. DeFi use cases
  4. Benefits of DeFi
  5. Purchase DeFi coins/tokens with 3S Wallet
  6. Summary

From 2021 until now, decentralized finance (DeFi) has gradually become familiar to crypto market lovers. DeFi is an area that has the potential to disrupt the traditional financial industry with blockchain-based financial services and applications. In this article, BHO Network will provide you with basic information about DeFi, the potential of the market and how to trade DeFi coins / tokens simply and effectively.

DeFi overview

DeFi stands for decentralized finance. In the DeFi space, developers build financial applications on blockchain networks. Through the use of coins/tokens and smart contracts, DeFi provides users with more transparent financial services and can operate without any central authority.

Anyone can join DeFi simply by connecting to a crypto wallet and some suitable coins/tokens for exchange and transaction. Currently, most DeFi ecosystems have their own coin/token issuance for dApps. These coins/tokens have an automated, decentralized platform and are created from smart contracts. Besides, the coins/tokens will have many different use cases such as: governance token, granting voting rights to holders, reward for staking coin/token into the system, etc.

Why is DeFi important

DeFi has the potential to create financial markets that are open source, license-free, and fair, accessible to anyone with an internet connection. Transactions on DeFi are transparent and verified by other users on the network. In addition, the data on the blockchain is tamper-proof, secure, and verifiable by anyone.

Users can maintain full control of their assets and interact with the DeFi ecosystem through peer-to-peer (P2P) and decentralized applications (DApps).

DeFi use cases

  • Decentralized Exchanges (DEX): These platforms allow you to trade digital assets without the need for a trusted intermediary. Advantages of DEX include lower fees and users having full control over their assets.
  • Borrowing and lending: Open lending protocols make borrowing and lending cheaper, faster, and available to more people. Moreover, decentralized borrowing and lending has more advantages; for example, you can settle transactions instantly, collateralize digital assets, and no credit check is required.
  • Asset Management: Many DeFi protocols provide tools to help users manage their assets. As a result, you can earn interest and rewards. Furthermore, DeFi allows you to keep your personal data private.
  • Stablecoin: A coin/token pegged to a real-world asset to reduce price volatility. Stablecoins are intimately incorporated into the DeFi space. Since a coin/token prices can fluctuate rapidly at times, stablecoins allow users to protect assets and avoid losses during times of increased market volatility. To minimize risk, always use a 1:1 backed stablecoin with a fiat equivalent.
  • GameFi: As one of the popular applications in the DeFi space. The boom of the GameFi industry took place rapidly towards the end of 2021. However, the GameFi models in the market now are mostly unsustainable due to the in-game business model being unreasonable. Therefore, GameFi needs more improvement to avoid inflation and maintain players for a longer time.

Benefits of DeFi

  • Flexible and fast: In the DeFI space, you can make transactions and move your assets anywhere you want. Unlike traditional bank transactions, you have to make a bank transfer through the supervision of the banks. Furthermore, transactions take place in real time and interest rates are updated multiple times every few minutes.

  • Diverse connectivity: One of the key benefits of DeFi is easy access to financial services. Anyone with a crypto wallet and an internet connection can access DeFi services.

  • Transparency: Thanks to blockchain technology, DeFi data is tamper-proof, secure, and verifiable. Every transaction on the blockchain can be seen and verified by other users on the network.

  • You can control your assets: DeFi apps don't need any third party. Users can maintain control of their coins at all times in the ecosystem through their crypto wallets.

Purchase DeFi coins/tokens with 3S Wallet

Want to buy coins/tokens to diversify your crypto portfolio? You can do so quickly on 3S Wallet - a decentralized crypto wallet that supports multi-chain.

  • With popular coins / tokens, you can use the Swap feature right in the wallet without connecting to external dApps.
  • 3S Wallet also integrates popular dApps for easy access, connection and use. This will prevent you from accessing fake dApps, making your transactions safer, simpler and more secure.

3S Wallet now supports both Android and iOS, you can access and download the app here.

Summary

For the most part, the use cases in the DeFi space are designed like the traditional financial system but enhanced by blockchain technology. This helps create more open, free and fair financial markets that can be accessed by anyone with Internet access.

With ongoing innovations in the crypto market, DeFi applications will continue to grow and improve their financial structure, offering new potential products and services.

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Published on December 30, 2022

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