Getting returns by operating your cryptocurrencies is possible thanks to decentralized finance. A complex subject that must be mastered well before you rub shoulders with it.
The world of cryptocurrency is full of terms or acronyms that beginners do not fully understand! DeFi, or decentralized finance, is one of them. A necessary topic to understand if you are intimately interested in crypto assets. ” DeFi enables complex financial operations to be performed without invoking a trusted third party Summarizes Alexander Stachenko, Director of Blockchain and Cryptocurrency at KPMG France. Its goal: to democratize access to financial services by cutting out a bank, an insurance company, or even a market maker!
Its applications are numerous: subscribing to a loan, rewarding for providing liquidity, borrowing crypto assets, etc. ” It is an alternative financial system that is open to allsummarizes Faustin Florett, President of Adan (Association for Digital Asset Development). All you need is internet access and the basics of holding and trading crypto assets. »
This is technically possible thanks to “smart contracts”. Computer programs record these said operations on the blockchain, which is the technology behind bitcoin. The Queen of Cryptocurrencies allows you to transfer value online without an intermediary. ” Bitcoin has some inertia, which is part of its value proposition, and is currently limited to payment and custody. To go further and offer a real alternative to the traditional financial system, other protocols have been developed, such as Ethereum. Alexander Stachenko says.
In about two years, decentralized finance took off. It now represents about $110 billion in blocked assets, according to the decentralized finance data aggregator Defi Llama. This amount has more than halved since the last cryptocurrency crash. True, this is still a largely immature part of crypto assets. There are deviations. The recent Terra Luna disaster is a good example of this. Its borrowing system that offers 19% bonus to lenders has exacerbated it. This rate was partially provided by borrowers (4 to 5%). The supplement was taken directly from the Terra Luna Sanctuaries.
So be very careful. Sure, you can find attractive offers, often in double digits, on DeFI. To invest directly, you will need to be well informed. Look at the protocol used, the resume of the founders, the cryptocurrency in force, the asset custodian… Uniswap or Curve are among the most used protocols. They offer compound returns in exchange for providing liquidity on pairs of digital assets. ” Aave or Atlendis Labs is a decentralized lending platform, or Lido is developing staking says Hugo Bordet, Director of Regulatory Affairs at Adan.
Don’t condone the increasing risks to DeFi. ” Purchasing crypto assets is inherently risky. TheTherefore, using DeFi to improve its returns presents an additional compound risk of significant capital loss which it is essential to be aware of. “Alexander Stachenko warns. To avoid burning your wings, you can subscribe to the products offered by brokers. The ideal is to turn to a representative registered as a PSAN (Digital Asset Service Provider). This is the case of Coinhouse with its own crypto ledger. Mon Livret C should launch its offer In June, however, remember that this alternative funding, like cryptocurrency as a whole, is currently unregulated.