DeFi is one of the primary factors that has driven interest and capital that caused the greater crypto bull run and the Bitcoin and Ethereum breakouts that resulted in new all-time highs.
Decentralized finance, as it is called, is a disruptive technology aimed at replacing traditional banking services such as lending, borrowing, and much more. DeFi goes much deeper than that, however, and is regularly introducing new ways for crypto holders to do more with their money.
Here’s more about the advantages of DeFi explained and how future technologies will pave the way for more adoption of the growing sector and make DeFi accessible to all.
What Is DeFi? All About Decentralized Finance
DeFi stands for decentralized finance for short, and lets anyone with crypto tokens leverage them for various financial services and within decentralized applications.
These decentralized applications take on all shapes and forms, with some allowing users to provide liquidity in exchange for an APY, while others allow for decentralized trading, and permissionless lending and borrowing.
In traditional finance, an individual or business must apply for a loan application and be approved based on credit score, income, and more. It doesn’t matter at all if you actually have the money to cover off on the loan, it only matters what the numbers on paper say you can afford. If the bank determines you aren’t eligible, well then you are out of luck and without the loan.
With DeFi, the protocol itself allows for permissionless lending. So long as the token holder has the coins to cover off any collateral requirements, anyone can take out a flash loan without the need for an invasive credit check, lengthy approval processes, or worse.
In the event a user cannot pay back the loan, rather than ruining their credit for years on end, the protocol simply liquidates the collateral coins to pay back the value of the loan.
What Is An APY? Explaining Annual Percentage Yields
Among the more popular aspects of DeFi is yield farming. Yield farming involves shopping around for the highest APY rates in order to get the most money from your capital. However, this has become less effective as industry APYs have cooled off and it is better to keep capital in a safer protocol such as Uniswap. New protocols have suffered all kinds of security breaches, hacks, and rug pulls.
An APY stands for annual percentage yield and represents the variable interest earned by staking cryptocurrencies or providing liquidity to platforms such as Uniswap. Centralized platforms provide liquidity for users to access and trade, while decentralized platforms rely on liquidity provided by users themselves.
In exchange for staking coins to use as liquidity, these users will earn an APY. When interest in trading is high, APYs are more lucrative. When interest cools off, so do the interest rates.
There are risks associated with liquidity provisioning so be sure to be careful and pay close attention to prices. The risk is associated with the price difference from when the coins are staked until when they are unlocked, but this can be managed effectively with expertise.
The greater challenges are through the accessibility issues that the platform and DeFi itself faces. For example, a user must connect to Uniswap through a self-custody Ethereum wallet over the blockchain. Many new crypto users aren’t able yet to move coins to a wallet they manage, and can make mistakes along the way.
This makes DeFi interesting to mostly those with technical expertise, and limits the rate of adoption in the sector. But like most other aspects of crypto, innovation is taking place and improving the situation.
What Are Covesting Yield Accounts?
For example, Covesting Yield Accounts are coming in Q3 2021, and act as a gateway interface for users to easily access top DeFi protocols to access industry best APYs but do so without having to connect a wallet to the blockchain or jump through other hoops.
Covesting Yield Accounts will debut on PrimeXBT later this year, and let users connect to Uniswap and Pancakeswap without having to also connect via a blockchain wallet. Simply deposit coins in the secure PrimeXBT trading account, and visit the Covesting section to join an active waitlist.
The waitlist will net users a 1% APY boost during the launch month, and staking COV tokens, another popular factor in DeFi, can unlock more features and a 2x APY boost. Up to a 35% APY is possible when staking the coins offered through PrimeXBT and Covesting Yield Accounts.
What Is Covesting Copy Trading?
COV tokens and the rest of the Covesting ecosystem, such as the Covestign copy trading module can also be found in the PrimeXBT account dashboard. A copy trading account lets anyone become a follower or a strategy manager, and can profit alongside one another.
Strategy managers all battle to rise the ranks of the global Covesting leaderboards. Strategies are ranked by ROI, which helps followers recognize which to follow and who to avoid. When the right strategy is selected, followers can put capital behind the strategy and copy any successful trades and grow their capital using a more skilled trader’s experience and talent.
COV token staking improves conditions for both followers and strategy managers, by discounting trading fees, improving the profit share, and much more. COV token staking is the key factor in bringing the gap between copy trading and DeFi like features, and the Covesting Yield Account system is the next major leap in that goal.
What The Future Of DeFi Entails
The cryptocurrency industry is always changing and innovation is around every corner. It is solutions like the ones mentioned above that will usher in the future of finance and bring the age of traditional finance to its bitter end.
Already, DeFi is doing so much to disrupt the way finance does things today, and with adoption and steady innovation from the likes of Covesting, DeFi will in no time become as common as writing a check or using a debit or credit card.
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