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Getting to know all the ways to earn money through DeFi

Getting to know all the ways to earn money through DeFi


The word DeFi is short for Decentralized Finance and is a new vision of banking and financial services that is based on peer-to-peer payments and uses blockchain technology in this way. In this article, we will learn about investment methods in this platform.

The wild west of Wall Street in the virtual world. It can be said that the developers of digital currencies are building a virtual version of Wall Street in the blockchain space. Difai!!!!! If you are interested in Bitcoin and other digital currencies, it is not difficult to know Defay. Defi technology creates and manages capital (money) in a decentralized manner. This eliminates the need for government-controlled central banks to issue and regulate currency. But DeFi services are not limited to these things. DeFi is also able to provide blockchain-based solutions for financial services. Financial technology (FinTech) companies use DeFi to provide savings accounts, make loans, enable securities transactions, and provide insurance.

What is DeFi?

DeFi is a financial system based on peer-to-peer payments that uses blockchain-based technologies to implement smart contracts in financial transactions. Blockchain is a type of ledger technology that tracks all transactions on a specific financial platform. The purpose of DeFi is to provide services such as lending, depositing interest, creating payment networks and other financial services that are done in a decentralized manner. Defy will actually change how services are done. David Malka, CEO of YieldFarming, which helps investors monetize cryptocurrencies, says DeFi allows smart contracts on the blockchain to replace trusted intermediaries — such as banks or brokerage firms — for peer-to-peer transactions. take In today's world, digital currency will gradually replace real currency in financial affairs. Malka says: DeFi is a continuation of the vision that Bitcoin created for us when it emerged. In order to make the audience more familiar with DiFi technology, in the rest of this section, we will introduce some of its advantages.

  • Opening an account: There is no need to submit an application or open an account. Users can access the world of DeFi by having a digital wallet.
  • Authentication: No need to provide name, email address or personal information.
  • Flexibility: Users can transfer their assets at any time, without asking permission from a specific authority, with high speed and low costs.
  • Constant network updates: interest rates and bonuses are often updated very quickly (every 15 seconds), which is significantly faster than traditional Wall Street.
  • Transparency: Everyone on the DeFi financial platform can see the complete set of transactions along with details. (Private companies rarely provide such transparency.)

Introducing the methods of earning income and profit in DiFi

With the entry of DeFi into the world of cryptocurrency, new methods of making money were born. Defay offers favorable offers to earn money to all users who are active in this financial ecosystem. Users can pledge their crypto assets to decentralized protocols in exchange for passive income. In recent years, many cryptocurrency investors have turned to techniques for generating passive income from their holdings. In fact, many types of passive income methods have emerged since the birth of DeFi. This financial ecosystem offers many decentralized protocols and smart contracts as ways to earn money. The purpose of the following discussion is to introduce four common methods of earning money in DeFi.

Yield Farming

Profit farming is a general and broad term for generating profits with crypto-assets. Lending, investing and extracting liquidity are all included in this definition. Yield Farming is based on paying interest on loaned assets. In DeFi you have to lend your digital or crypto assets to a platform by locking them in a smart contract. Subsequently, borrowers can access the assets deposited as loans by placing their assets as collateral. Borrowers must repay the loan to the platform with interest. The smart contracts then divide the profits among the lenders according to the proportion of assets locked on the platform. In simple terms, in the same proportion as a user invests his assets in liquidity pools, he earns the same proportion of passive income. Some of the advantages and disadvantages of the profit method are:

Advantages:

  • It is a high yield passive income source.
  • Available to all investors.

Disadvantages

  • Crypto market volatility.
  • Transaction fees.
  • Fraud and fraud.

One of the best investment platforms with profit cultivation method is BeefyFinance. The platform works on multiple chains and maximizes the available returns with smart contracts. It then receives the income from the returns and reinvests them to maximize profits.

Staking

Buying shares is still a great way to make money in DeFi. Networks pay investors for security. The biggest advantage of investing in stocks is that you only need one asset. Investment is ideal for people who believe in a particular digital currency and intend to hold it for the long term. Users can Stake on all blockchain networks that use the Proof of Stake (PoS) consensus mechanism. The PoS consensus model is an agreed upon rule for adding blocks to the network. The basic process of staking involves locking digital assets, and said assets are used to validate transactions. Every time a new block is added to the network, the network transfers additional tokens to the relevant sector for validation. In exchange for providing security services, shareholders receive profits from the network. Some of the advantages and disadvantages of the stock method are:

Advantages

  • It is a passive income source that is not particularly complicated.
  • Participants contribute to network security.

Disadvantages

  • Lockout times may be extended. (lack of liquidity)
  • Crypto market volatility

One of the best platforms for investing in stocks is Lido. Lido has solved the problem of lack of liquidity in investing. This platform supports staking method in Ethereum, Solana, Polygon, PolkaDot and Kusama networks.

Liquidity Mining

Liquidity mining is an essential component to the functioning of decentralized exchanges and a great way to earn passive income in DeFi. Investors inject their cryptocurrencies into decentralized liquidity pools to facilitate permissionless exchanges. In exchange for providing this liquidity, a percentage of the trading fees collected by the pool is awarded to investors as a reward. To understand liquidity mining, participants need to understand how decentralized exchanges work. Centralized exchanges use an order book model that matches buyers and sellers based on certain criteria. In contrast, decentralized exchanges use an Automated Market Maker (AMM) model that enables live transactions. In this method, traders directly interact with the liquidity pool. The more liquidity in the pool, the less slippage and the better the trading experience. Therefore, decentralized exchanges encourage investors to provide liquidity. Liquidity mining is categorized on a spectrum from low risk to extreme risk depending on the pair used to create the LP (Liquidity Provider) token. Naturally, increased risk corresponds to increased potential returns. Some of the advantages and disadvantages of the liquidity extraction method are:

Advantages:

  • Considerable source of passive income.
  • Easy access for investors.

Disadvantages

  • The existence of cryptocurrency market fluctuations
  • High transaction fees
  • Fraud and fraud.

One of the best platforms related to investing in liquidity mining is called Nansen. Investors looking for liquidity mining options can search among hundreds of decentralized exchanges or use Paradise Nansen's DeFi dashboard. This dashboard aggregates the most active liquidity pools from on-chain data and provides unparalleled market insight.

What are the risks of making money from DeFi?

Investment of any kind carries a percentage of risk. In the case of investing in the DeFi platform, hacking attacks, fake and incomplete smart contracts, fraud and money laundering are among the risks that threaten users' capital. Considering that the income obtained in the DeFi platform is related to the number of digital tokens, price fluctuations are among other risks that threaten investors.

Why is the return on investment in DiFi so high?

DeFi eliminates the fees that banks and other financial companies charge for using their services. Holders of digital wallets can transfer money and invest in various activities within minutes. Anyone connected to the internet can use DeFi. DeFi uses emerging technologies to remove third parties and centralized institutions from financial transactions. The infrastructure of this financial platform and its regulations are constantly changing and updating. The removal of commissions received by intermediaries, along with the great demand for this financial market, has provided significant rewards for investors.

DeFi monetization: a double-win deal

The world of cryptocurrency in 2022 is more than just digital money. In today's world, the use of digital currencies is so wide that it is not possible to describe it in one article. Now, by using digital currencies, we can borrow and lend to others and get high profits by investing in various fields. In this article, we learned about three of the best ways to earn passive income in the world of DeFi. If you are active in the field of digital currency, we recommend that you enter the investment field with sufficient research and preparation.

Frequently asked questions about how to make money from DiFi

In this section, we will answer the common questions of users about the decentralized financial system (DiFi).

What are the methods of making money and profit in Defay?

Cultivating profit, investing and extracting liquidity are three of the best methods of investing and earning profit in the world of DeFi.
final word

The DeFi ecosystem is full of interesting possibilities. Lending to earn passive income, participating in decentralized exchanges to avoid central authority, full control of your digital assets without the need for intermediaries are among the things that can be mentioned. As the digital world continues to grow, the DeFi space is only getting more exciting. Decentralized applications and DeFi products offer new and innovative ways to earn more profits that traditional investments cannot compete with. Moreover, what makes investing in the DeFi world more interesting is not only the profitability, but also the decentralized exchange of assets through blockchain technology. There is still a lot to learn about DeFi that you can delve deeper into. However, we tried to create a general picture of investment in the world of DeFi for you in this article. If you have any questions or doubts, ask in the comments section.

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