The futuristic, neon-drenched Blade Runner-style imagery of smart gadgets accomplishing mundane tasks for humans is not that far from becoming a reality.
Penetrating our lives slowly, such dystopian technology, in fact, is already partially available to many sectors, finance especially. While words like blockchain, cryptocurrency, decentralization, and others sound like slang or the next buzzwords, in actuality, given the up-tempo rhythm of our lives, those are already the extension of something bigger, bolder, and smarter. Something that falls somewhere between the lines of ‘Can I get a loan without a middleman?’, ‘Is it safer to save in crypto?’ , or ‘Can I really have a currency of my own? With my face on it?’. You might as well take a look into that future right now.
P.S. The answer to all is yes.
For a longer answer, you need to explore Decentralized Finance or DeFi in more detail. Decentralized, as the word suggests, removes the center of financial operation, which traditionally is the bank or any other intermediaries. DeFi is an alternative to banks or any other institution dealing with finances, distribution, exchange, saving, etc. It operates globally and runs on smart contract blockchains, a sophisticated software that registers, executes, and controls all transactions.
The key phrase is ‘technology that controls,’ which means any operation, be it a purchase, loan, insurance, lending, etc., is now between you, the software, and the other party involved in this exchange.
For the sake of trust and transparency, but also pseudonymity, the actions are encrypted and presented as codes on the blockchain. The principles and sequences are open, accessible, and understandable to users. No bank, no government, no hidden fees.
How can you benefit from DeFi today?
Adults of legal age complete a considerable amount of financial procedures daily. Transfers, all sorts of exchanges, purchases, billings. The list goes on and, believe it or not, for every point, DeFi solutions offer a special benefit. If in doubt, however, you can simply have DeFi savings. Let’s see a few advantages of that.
A simple internet connection is enough to begin a DeFi journey. The global nature of decentralized systems liberates users from the sway of traditional banking systems and welcomes everyone who is ready to tap into crypto. Sending and receiving money from all over the globe is perhaps the smallest of all benefits. The simplicity of any DeFi platform attracts users to make the best of many other benefits that come with the system. You don’t need a finance degree. YouTube has guidelines for all things crypto that can help grasp the gist of it all. And following a few influencers on Twitter like ETH creator, Binance's CEO, or, why not, Elon Musk, can give you ideas on what’s trending right now to back your decisions with the expertise of pros.
Decentralization suggests this system has no central figure such as a banker, a patron, or an advocate. The only center of DeFi is the comfort and security of all sides of the transaction. Oh, and smart contracts which are essentially advanced programs that run the system without any human errors! A public encrypted blockchain platform brings the much-required trust and openness to the financial sector making all - and only - the involved parties aware of the transactions taking place.
First of all, you have your wallet account. It can be on Binance, MetaMask, CoinBase - the options are plenty, and you can choose based on the coins that a platform supports, the transaction fees, or just go with the layout colors that you prefer.
Savings account is a little bit different yet very similar to traditional banking systems. While your wallet is yours only, the traditional savings account is linked to the bigger system. Your every deposit suggests that you give the bank permission to use your money as a loan for other parties. What you get from this symbiosis is a percentage of interest, monthly or annually. In the same way, you can earn interest with cryptocurrency.
But there is a small but. Crypto is unpredictable. That is to say, your savings can decrease in value, depending on the current trend. Or increase! That is one of the risks. Others can be more specific, the industry is vast, it's always good to DYOR - do your own research. There are no guarantees or financial insurances applied to DeFi by the government. So, to stay in the loop, the best way is to consider such savings as an investment.
High interest rates, however, are a pleasant perk for you while saving in crypto. Platforms like Hodlnaut, CoinLoan, or BlockFi provide you with such opportunities and even more. Apart from annual percentages, additional bonuses like tokens and special deals are widely available too, helping newcomers get into DeFi savings faster.
Apart from platforms placing focus on user-friendliness, there are plenty of additional helping sources like Discord or YouTube where experienced users share tutorials and know-hows. Live support seems to be the number one pick, but, if they are overwhelmed with requests, the response might come a little later than necessary. Look into thriving communities, reach out to active users and ask for their first-hand opinions. Crypto-smart people are usually very welcoming and eager to share information with newcomers. That's how you know the crypto world doesn’t want to let you down, make you doubt the system, or feel cheated on.
To get a clear picture of how this everything works, let’s go case by case. Whether you are in crypto for major investments or purely out of nerdiness, you still need to do your research. There are plenty of trusted platforms now working on blockchain and removing all sorts of middlemen in the processes of savings, transactions, or conversion. You can check their reviews and ratings; the overwhelming majority of users are more than content with their experience.
The choice of cryptocurrency is totally up to you; however, in most cases, users go for fluctuation rates and hype around the coin as the main indicators of its success. If you succumb to the appeal of juggernauts like ETH or BTC, pretty much all savings platforms give good annual percentage yield (APY), sometimes up to 8% depending on certain factors.
You can look at some other features, like the security of the platform. Take Gemini, a less popular option, where rates go up to 7%. But, according to their website, they are the safest crypto exchange, all thanks to their hacker-proof cold storage system that keeps your assets offline.
For those who are more skeptical of cryptocurrency but still want to tap into it, BlockFi is a good option with more traditional banking features that make newcomers’ experience and dive into crypto more smooth and seamless. Although there are only eight coins available for trade, BlockFi compensates for the lack of alternatives with good security, no minimum savings deposits, no trading fees, but up to 9% interest for stablecoins and around 5% APY on BTC.
If you still have second thoughts about crypto investments, there is another profitable option for you too. Let’s say you have a few bucks and you want to earn interest. You can easily convert dollars into USDC, where C stands for coin, and essentially, it's your well-known and beloved US dollar in the form of a digital asset. Since it’s tied to the fiat currency, you face fewer risks with it, unlike other cryptos, which are not stable. Try storing your USDC savings on Nexo, a secure savings platform for all sorts of digital assets. The APY for USDC may pleasantly surprise you (no spoilers here, Google it).
Can your bank offer better options?
In this case, while operating with fiat currency, you still contribute to the growth of a decentralized platform like Nexo. In the long run, your contribution to the DeFi sector is very much appreciated and highly valued.
Transparency and no hidden fees
Credit or debit card procedures are reported directly to your card network or bank. You even pay some hidden fees for the act of transaction, oversight, storage, and security. DeFi operations are fundamentally different as intermediaries like bank or card issuers are removed together with the fees.
The transaction is completely peer-to-peer, coded, and only both parties are aware of the details. Ironically, this DeFi looks much like ye olde cash payments. You simply hand over the exact amount of money that needs to be taken, and that’s it.
Build it like Lego
DeFi apps which make all the decentralized financing magic come true are highly malleable. The interface, the extensions, the third-party integrations, tokens, coins, exchanges, and prediction markets - all pieces are addable, removable, and interchangeable. It’s like loving the shop, the quality of products, but hating the staff. Or vice versa. In dApps, you can mix and match it all.
These key takeaways are just enough to convince interested users to choose DeFi for investment and saving purposes, but the list of advantages doesn't stop there. A more in-depth knowledge of the technology allows for earning interest on crypto, trading, buying insurance, funding and borrowing funds, and more. As you can see from our examples, you can also operate with fiat-backed currencies and still make the most from DeFi platforms. The opportunities are massive. And so is the room for creativity. The market grows and booms, that is for sure, but who knows what’s coming next and what will be the next sensation in the sphere of crypto and decentralized solutions. Maybe you are the one who fosters it.