Top 5 Questions Most Asked By The DeFi Community

Bitcoin introduced mining for cryptocurrencies or tokens in 2008, 10 years down the line, we see new trends where mining for liquidity is the new Eureka moment. To start with, that sounds a little Algebra to you but we are here to simplify it. DeFi or Decentralized Financing is exploding in the last three months with the introduction of governance tokens making Yield Farmer’s prodigy for CeFi  investors to follow for milking this golden cow. Why not? They have raked millions in just 90 days with Compound’s Comp Tokens raising $668 million & $497 million for liquidity mining and governance tokens sales on DEXes. But before you get swayed or blown off your seat seeing a 200x exponential rise across multiple protocols in DeFi tempting you to pool your funds, a quick prep read makes sense. That’s why we have poured in 5 of the top questions that the community is asking about DeFi these days.

What is DeFi?

DeFi or Decentralized Financing is a financial system that acts like banks sans the intervention of any governing or regulatory body. It is built on a public blockchain network like Etherum and Bitcoin. That said, you expect: (i) Permission-less Operations or Open To Everyone platform to Issue financial products or mint tokens (ii) Decentralization of Record-Keeping (iii) Transparency since everything is open-source and verifiable on a public blockchain network. (iv) rust Dependency or Lack of Endorser for Trust Governance (v) Powered by smart contracts to automatically perform operations like interest transfer, loan processing, collateralization, lending and derivative trading.

How Can You Use DeFi?

Anyone on the planet with an Internet connection and mobile phones can use DeFi by installing Dapps in their phones. The Dapps allow you to trade, lend & earn interest, invest in derivatives, earn by providing liquidity in the market. XACO Tokens, an ERC 20 newly minted token or base exchange medium of DeFiMe Finance or Decentralizing Financial Medium allows investors, new-age startups, Kickstarter ideas to be backed using the XACO Tokens. These tokens allow Yield Farmers to get a significant return on their investment by investing in DeFiMe. Finance liquidity pool to pledge for consumer goods and back DeFi and Kickstarter projects.

What You Can Earn in the DeFi Market?

You can earn interest on your investment that is straightway credited to your wallet when you are issued the LP Tokens by the protocols. The market of DeFi has grown from a $4 in 2017 to over $8 Billion in TVL or Total Value Locked in 2020, as we write this. In the market, there are multiple protocols based on which the platform functions. For example, in the Synthetic protocols, you can mint new tokens known as Synths by collateralizing your Ethereum or Bitcoin in the network. There is a 75:25 ration where by collateralizing 75% of your stable tokens, you can mint new tokens and give loans using those tokens to earn interest. Miners are responsible for the security of the network and the processing of transactions.  Investors can participate in the platform by vising DEXes like UNISWAP, BANCOR, KYBER to participate in an asset or derivative trading to earn profits by market fluctuations along with a consistent interest they get on liquidity.

Is There a Risk Investing in DeFi Market?

No system is full-proof and so is DeFi but they have specific protocols that safeguard investors like the collateralization value of the asset mustn’t fall below a specific threshold.  Meaning, if collateralization asset value falls below a specific threshold, the tokens backed for seeking loans will be liquidated to pay off the loans. That said, it is always safe and secure for the investors when they bring in the funding in the liquidity pools that rewards them with compounding interest rates. Some of the platforms take insurance premium as well like DefiMe.Finance or Decentralizing  Financial Medium that takes 10% decentralized insurance funding  whenever investors, pledgers, startups, or corporations back their ideas and innovations on the platform. Such insurance premium can be purchased using the XACO Tokens and with fluctuation of XACO Tokens with stable tokens like sUSD or USDT, you get a consistent return on investment. Since the platform uses the law of moving average, the investors always end up on a profitable note.