Advantages That Decentralised FInance Has Over Traditional Finance - Defi FTW

Defi is blowing up at the moment and although there is a lot of craze right now that will probably pass (and a good chance you will see a lot of coins plummet in value like what happened with ICOs in 2017) there is a reason to get excited about the tech. It is not all hype and good solid products can add a new function to cryptocurrency, a function that can compete with the way the traditional markets used to do things.

DIVIDENDS WEEKLY, DAILY, HOURLY

Compound interest is one of the best ways to build wealth. Well winning the lottery is better but the odds are not in your favour. If you take the dividends you make on an investment and reinvest it into the same investment you can grow that investment faster. The APR of the dividend is very important for how fast you can grow but the interval of how often you compound is a big factor as well. If you compound 12 times a year instead of one, you will have more money at the end of the year. The reason is you are getting the dividends on the new number that has the previous divs added to it. It might not seem like much but it can add up quiet fast.

When it comes to traditional markets you will get divs, at best, monthly if not quarterly. That is a long time in the crypto world. But in defi you can get your dividends every day or even every couple of hours if the contract is set up right. The reason is that smart contracts can be set to automatically pay people on whatever time frame you choose and this really builds an investment faster than a site that is taking months to send you your dividend check.

GET A BONUS

The other big advantage of defi is the ability to earn a coin on top of your interest. This is really where crypto shines as you can earn something for doing something you are doing anyways. The more coins you lend out the more of this coin you can earn and thus you are earning from 2 ways instead of one.

Now it is important to note this new coin HAS to have functions if it is going to have any value. If it doesn't you might as well give people a t-shirt when they invest and that's all. This new coin needs to have value so people will buy it on the market. For example if you lock up this new coin you get a percentage of the money from fees that are generated. If this happens you are now getting money from your dividends and from fees from a new coin plus you can sell your new coin. IT can really make a difference on your wallet.

LOCK UP YOUR COINS

There is also the advantage of coins being locked up which increases the demand of coins and lowers the supply. This is turn helps the entire market for that particular coin and can really attract investors.

The space is still young and there is a lot of growth that needs to happen. Please be careful with your investments as there will be a lot of pitfalls along the way and companies/coins that go under but I do think we can make some products in this space that can really help investors and bring in more attention to the crypto space.

Posted Using LeoFinance