DeFi and TradFi basics
defi and tradfi basics for you

DeFi and TradFi basics

By Makingdigital | makingdigitals | 14 Jan 2021

This article must be recorded on your retina forever. In such a way that you never have to resort to it in an emergency. If you are very excited and excited to invest in Defi platforms and become a millionaire, be very careful dear, you could be in for a surprise.

This usually happens due to a lack of theoretical knowledge. It is important that you understand the difference between DeFi and TradFi before diving into these waters. When you have it clear, at your own risk and expense, investigate and analyze well where you are going to put your money. Don't be fooled by performance percentages and APYs.

It is a hook to hunt down novice investors and thirsty for quick wealth. When we talk about DeFi, we talk about decentralized finance, that is, there is no boss, leader or ruler who controls everything at will and changes things when he wants. Quite the opposite. The operation depends on the users who are inside the blockhain. On the one hand it sounds good but on the other it doesn't. It is fine that no one has control of your money but if there is less control there is also more risk. If the platform runs out of liquidity, you run out of performance, you would start to lose money. If users do not ask for money, you do not receive commissions for your contribution to the pool or for the tokens that you have frozen. It is difficult for this to happen but it can happen.

defi and tradfi

In the DeFi there are no restrictions of any kind, specifically bureaucratic, perhaps capital, but it is not normal since you can contribute almost any amount. The downside is that with very small investments the profit margin is practically non-existent because the withdrawal fees of the Vaults and the tokens that you have frozen would end your profit. Most DeFi's are unaudited and don't insure your funds. You could wake up one day and find yourself with a 404 error or with the total liquidation of your funds due to lack of liquidity in the market. You could not complain because it is decentralized and without regulation of any kind.

Why do you think there are such good returns? Because the only intermediaries are us. Hence the advantage and the risk.

In TradFi, it is totally different. The traditional finance of a lifetime. They are managed and controlled by a bank. They offer you insurance for your funds on some occasions and fixed, minimal but fixed returns. If you have capital and you don't know what to do with it, think about it carefully.

The DeFi are very attractive but if you do not inform yourself well and take these details into account, you will lose money, either in commissions, fees, contract approvals, useless tokens that devalue quickly or you will directly fall into the trap of some scammer or scam.

Among the most competent and solid DeFi you have Aave, Compound or Curve. You can lend money, borrow it, and add liquidity to the platform to earn dividends. If you are braver and looking for more profit you have Pancakeswap or Beefy (the latter is not audited). Cryptocurrencies are bringing in a large newbie audience, with it, hundreds of scammers and thieves willing to keep your funds. Do not trust anyone. Be suspicious and play with a capital that you are willing to lose. Forever.


Entrepeneur, writer and Cryptolover


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