August 29, 2020 / trading

Unprecedented Growth: How To Invest In The DeFi Market


DeFi market deposits have grown 300% since the end of Q2 2020. According to DeFi Puls, it reached $ 7 billion. Some experts compare this rise with the ICO boom in 2017. The former market leaders – MakerDAO and Compound – have been replaced by the new Aave protocol specializing in loans. Defi Dapp Review estimates that this is the main category of services, accounting for over 70% of locked funds. It became known that the project received an electronic money issuer (EMI) license a few days ago. For example, one of the most popular fintech unicorns, Revolut, has a similar status.

defi pulse

DeFi services declare advantages characteristic of the cryptocurrency industry: decentralization, anonymity, security, lack of regulatory influence, accessibility. They are also one of the newer investment vehicles.

The Ways To Invest In DeFi Market

The most common ways to participate in the market: invest in the tokens of the DeFi projects themselves, as well as make a deposit through the project sites, or get a loan directly.

Many DeFi protocols issue their own tokens. For example, MakerDao issues MKR, Synthetix – SNX, Kyber Network – KNC, Compound Finance – COMP, etc. Due to this, several goals can be achieved:

  • to minimize the risks of the main coin (as, for example, the Dai stablecoin in the MakerDao project);
  • to create a community of holders for making decisions and innovations on the platform;
  • to attract new users and interest in the website.

Along with intangible rights, the “holders” of the DeFi project tokens have the opportunity to receive speculative income as a result of an increase in their price in the future. For example, in August, the MakerDao token (MKR) increased in price by 54% compared to May of this year. At the time of this writing, the capitalization of the top 100 projects of the decentralized finance market exceeded $ 13 billion. Growth in a month is more than 30%.

You can make money on DeFi tokens if you buy them for storage in anticipation of an increase in price.

A more common model for investing in DeFi is depositing crypto assets at interest for a specific period. The system works in the opposite direction: a user can get a loan by leaving collateral in digital currency. Specific conditions for saving or obtaining loans, rates, terms are spelled out in smart contracts of each of the projects. These conditions are usually public and can be verified by users.

Compound has long been one of the most famous websites. It provides a high percentage of stablecoin deposits. But, to deposit or receive assets from the DeFi website, it is not enough just to go to the project website or download the application.

The smart contracts of most DeFi projects run on the Ethereum blockchain, and the Metamask plugin is the most convenient way to access these smart contracts. It can be thought of as a gateway for transferring assets to smart contracts. This application is installed in the Google Chrome browser to transfer Ethereum (ETH) or ERC 20 tokens to the Ethereum blockchain. That is, in order to deposit crypto assets into the smart contract of a DeFi project, you must first add them to the Metamask balance.

Interest rates on deposits and loans are different, the list of available assets also varies. Interfaces can contain different names, but the logic and procedure are the same. And since the Metamask wallet is already synced, it becomes possible to invest or receive loans on any DeFi platforms using the assets that are on the wallet.

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