Oct 14, 2022 02:54 AM 0 Answers
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Users typically engage with DeFi via software called dapps (“decentralized apps”), most of which currently run on the Ethereum blockchain. Unlike a conventional bank, there is no application to fill out or account to open.

Here are some of the ways people are engaging with DeFi today:

  • Lending: Lend out your crypto and earn interest and rewards every minute - not once per month.

  • Getting a loan: Obtain a loan instantly without filling in paperwork, including extremely short-term “flash loans” that traditional financial institutions don’t offer.

  • Trading: Make peer-to-peer trades of certain crypto assets — as if you could buy and sell stocks without any kind of brokerage.

  • Saving for the future: Put some of your crypto into savings account alternatives and earn better interest rates than you’d typically get from a bank.

  • Buying derivatives: Make long or short bets on certain assets. Think of these as the crypto version of stock options or futures contracts

What are the downsides?
  • Fluctuating transaction rates on the Ethereum blockchain mean that active trading can get expensive.

  • Depending on which dapps you use and how you use them, your investment could experience high volatility – this is, after all, new tech.

  • You have to maintain your own records for tax purposes. Regulations can vary from region to region.

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