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Defi - Some Tips and Tricks by ocupation

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· @ocupation ·
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Defi - Some Tips and Tricks
# Decentralized Finance

The aim of this article is to provide a broader perspective of how disruptive Defi actually is, without any bias, and to give an idea of why I, among many others find it intrinsically valuable. 

Before we dive into Defi and its practical use-cases I would like to make some things straight.

The idea of getting rich quickly is retarded and unsustainable.

The market can stay irrational longer then you can stay solvent.

Trading is a zero-sum game and the ability to outsmart the market requires a lot of learning and practice.

Even the most successful traders sometimes lose.

Not having risk management makes you vulnerable.

Knowing the fundamentals will help you understand the background.


I could write this stuff all day but I would kill the notion of this article, LOL.


![image.png](https://files.peakd.com/file/peakd-hive/ocupation/zvjYRwnx-image.png)

# Defi

> The term Decentralized Finance may refer to a movement that aims to create an open-source, permissionless, and transparent financial service ecosystem that is available to everyone and operates without any central authority. The users would maintain full control over their assets and interact with this ecosystem through peer-to-peer (P2P), decentralized applications (dapps).



It can also be seen as a tool in which the community formes their own set of rules and backed 'em up with open-source code, publically available for everyone to confirm or review. The idea is to mitigate the need for third parties while providing permissionless access to global markets. 



There are several reasons why Defi is considered superior over traditional markets. 


-  It's permissionless, meaning that no one can unilaterally decide who gets to participate. 

- It doesn't require you to reveal your identity.

- Everyone is allowed to build their own token or Dapp.

- It banks the unbanked.

 

For the sake of argument, there are around 1,7 billion people in the world who don't have access to financial services. We are talking about 25% of the world population. 

> *While more than two-thirds of the adult population has access to banking and mobile money accounts, 1.7 billion adults remain unbanked.*


<center>[source](https://www.devex.com/news/insights-from-the-world-bank-s-2017-global-findex-database-92589#:~:text=Unbanked%20populations,1.7%20billion%20adults%20remain%20unbanked.)</center>

You can easily get an idea of how disruptive Decentralized Finance is and how impactful it may get. 

![image.png](https://files.peakd.com/file/peakd-hive/ocupation/0ftpZuNh-image.png)





The final goal is to create fully transparent, immutable software that will operate exactly how it's programmed to, without a central point of failure. Stakeholders are those who maintain the network, change governance, or improve the system in technical terms. Therefore, it should be in their best interest to increase the value of tokens they hold as they will directly profit from it. 

 
It is important noting that Defi is still in its early stage, highly volatile, subject to high speculations, driven mostly by greed and FOMO.


# Functions

There are mainly three functions Defi enables;

- Creating Monetary banking services by issuing stablecoins collateralized by Digital assets.
- Enabling Lending and Borrowing
- Providing liquidity pools

There is more to it, but let's try to stay on track. 

Through the use of smart contracts and distributed systems, deploying a financial product becomes more secure and robust.

To give you a practical idea of how it actually works let's begin with a premise you have an idea of how to improve the way insurance works. Now, assuming you have a product ready, there is actually no authority that could disable your work and deny your entry to the free market. 

To make things more radical, the founder doesn't even have to reveal his name. Of course, there are downsides to it but let's stick to the good parts.



# Downsides.
 
 I'm personally enthusiastic about Defi but we need more time to mature and would be retarded to claim otherwise. Crypto is not an oasis in which you milk the profits. Now, let's explore the downsides.


There is no one you can call or appeal to in case you lose your keys, transfer tokens to the wrong wallet, expose your keys on a phishing site... So, your keys are your responsibility and no one will cover your losses if you make a mistake. 
I think that's the main reason masses are struggling to get in, no one likes feeling helpless when it comes to capital.

Poor performance and High fees. This obviously refers to Ethereum which is the biggest ecosystem for decentralized applications. Like who would build a business on a platform that takes 10$ per single transaction, regardless of how small that transaction is. 


The thing is that I haven't even mentioned scams, ponzies, and highly centralized projects claiming to be decentralized. The sentiment changes once you see 1 Entity holding 70% of the overall supply. 

There are a lot of attack vectors that we need to be aware of. 

<center>(https://images.hive.blog/DQmbTtysi8m1ffqd1G2fyd88LmKA3gPieRf5aNSth4bFe5a/Capture3.JPG)</center>

The picture above is proof that the developer who made sushi protocol, which is basically a copy of Uniswap with few improvements, dumped development funds on the community, pushing price down to 90% at one point.

Now, you can imagine the surprise...

And it's not the only case.

<center>https://images.hive.blog/DQmRBFdb1yDX1VfEv1ny7gyLCUBt44gqDzn4wiDMPButCtw/image.png</center>

Should I even comment on this one? Suite yourself. 


The point I'm trying to make is that there are a lot of attack vectors for a random person to confront. So before making any investment move, do your own research and then decide. 

Remember, no one is coming to save you.

Posted Using [LeoFinance](https://leofinance.io/@ocupation/decentralized-finance-explained)

Posted Using [LeoFinance <sup>Beta</sup>](https://leofinance.io/hive-167922/@ocupation/defi-some-thoughts-on-how-to-stay-carefull)
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