We've been in the cryptospace for a long while now. The technology, to this day, still blows my mind every day. The DeFi space is an area that can add tremendous value to whatever position in life your in. I'd like to touch on some of the most popular DeFi plays below. Please also visit our "Plat to Earn" section for a look at what some are calling the future of gaming.
Staking is a major play here in defi. I wont overwhelm you with terms and verbiage that are difficult to pick up but, think of staking as being rewarded for contributing or "delegating" your tokens to a pool with a bunch of people. In simplest terms, your just staking your tokens and being rewarded for doing so. Of course other factors are involved. A simplified example would be, take a blockchain like Cardano or Solana when you stake your token via exchange or wallet, your tokens will be assigned to a validator of your choosing who then uses them in addition with other stakers tokens. This creates a better chance for the validator to create the next block on the blockchain. Your then rewarded in the same token you've contributed. Reward periods are always the same but the amount can fluctuate depending on how much you stake, the nodes ability ( a computers computing power) to complete transactions and other network specifics. It's a relatively easy way to earn while you own your assets. The price of your crypto can be going up on the open market simultaneously as your earning staking rewards making the act of staking your crypto potentially very lucrative. You can even set up your own node and become a validator to run your own pool.
Possibly one of the widely recognized features of DeFi, the ability to lend tokens and earn interests or to borrow against your crypto assets for loans. Trusted platforms like BlockFi and Celsius have allowed folks to unlock more potential from their holdings. You can use your tokens as collateral to get loans in fiat (cash), or just hold your tokens on their platform and lend them out to garner interest from other people taking out loans.
Unlike traditional lending, crypto lending requires no credit score, and the terms are flexible. Since there’s no third party per se, the duration for receiving the loans is shortened, and verifications dont take forever before users can get the loans. Ah the beauty of blockchain and cryptography.
How can NFT's be utilized in DeFi? A non-fungible token cannot be replicated or exchanged. Unlike fiat currency these tokens are not fungible. The NFT is a relatively new concept in the DeFi space and it looks like its here to stay with possibly a few iterations. It's important to realize that NFT's look to appreciate value and recognize creative minds for their work. They've also been tried in real estate, gaming and sports with considerable success in their relatively short existence.
You can earn passively by providing liquidity to pools. Automated market makers allow you to use your liquidity to trade illiquid trading pairs. Illiquid pairs are often subjected to high slippage, and the liquidity providers are seen as facilitators of such trades. Liquidity providers can fall victim to Impermanent loss, but sometimes, trading fees earned offset impermanent losses.