DeFi: Application Continued

“Decentralized Finance (DeFi) provides the solid foundation for new financial services that are so powerful and advantageous that we will soon look back on them and question how we ever operated without them.” -Ilia Maksimenka

Jumping back into applications and examples of DeFi technologies, it’s easy to emphasize the above statement when we begin to see the potential which lies behind DeFi and other Decentralized technologies. We’ve talked about dApps, DeFi insurance and Stablecoins, now the focus of this piece will briefly cover the uses of Yield Farming and Staking protocols. Let’s Dive in!

Yield Farming is a rather basic concept with great benefits for the individual investor. In a nutshell, Yield Farming is basically collecting interest on digital assets in the DeFi realm. Much like a savings account accumulating interest in a bank, users can invest/ lend their crypto currencies on these DeFi protocol’s “liquidity pools” which pay returns based on the investment and the protocol’s rules. The more liquidity or assets one offers to a protocol, the more one is likely to be rewarded with interest and the native token of the blockchain used. The predominant benefit to this is extra income!

Proof of Stake, or PoS, is a mechanism within certain protocols which allows users to stake their crypto and participate in transaction validation through said staking. Staking is basically locking one’s currency in a stored location to participate in transaction validation and support whatever blockchain you may be trading in. Similar to Yield Farming, staking builds assets and growth to a protocol by allowing it to create new blocks to add to the chain against the value or volume of your stake and pays out in rewards, again, like putting money in an interest building savings account. These staking protocols which happen through either crypto assets, or nodes have proven to be a great deal more efficient and resourceful, cutting labor needed for mining and transferring assets. It is an essential factor in the security of networks in that it decentralizes, validates more with more users and like any blockchain, is not easy to tamper with, with it’s spread out, effortless verification. Staking is risky in certain aspects, and cannot be withdrawn in certain cases, so it should always be done through your trusted staking platform, as rules and risks vary from platform to platform. The main benefit to staking is, like yield farming, the passive income, though it also brings security, growth and inexpensive opportunity to all.

In the links provided, there is more information on what these terms are and info about the available assets and resources to participate in the DeFi marketplace. The possibilities for these technologies, as we’ve continuously emphasized, only continue to expand as this world gains attention. Look for more on DeFi and other innovations in the market and leave us some feedback! Thanks for reading, stay informed! 

Written by SMH from on February 10, 2021

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