DeFi Cryptocurrency: Everything You Need to Know
A new alternative to traditional banking has recently gained popularity -called decentralized finance (DeFi). DeFi refers to financial platforms built on blockchain technology that facilitate digital transactions between multiple parties. The blockchain is a public ledger for digital assets, including asset tokens and cryptocurrencies.
DeFi can involve borrowing and lending cryptocurrency. The main USP of DeFi is that it works without a central authority or other traditional financial organizations, hence "decentralized." As a result, the DeFi finance market, nonexistent just a few years ago, has grown into an industry worth hundreds of billions.
UFUND is a DeFi crowdfunding platform that connects investors with small & medium-size businesses. They tokenize illiquid assets to generate cash, which can be used for P2P trading between investors and campaigners on the UFUND platform.
How is DeFi different from banking?
The traditional banking sector (TradFi) depends on KYC—know your customer—which refers to procedures used by financial organizations to verify a client's identity and legitimacy before conducting business with them.
If you need to borrow money from a bank, you need a credit score check, proof of identity, and multiple ways to verify your income source.
But with DeFi, a customer can skip some of the steps from TradFI.The most important is to reveal its digital asset value as the main resource.
In addition, DeFi participants are enabled to enter into a "smart contract," a computer code that intermediates to make sure everyone fulfills their obligations under specific terms.
Many traditional banks ask for a minimum deposit when opening a savings account—usually $250 to $5000. And most savings accounts require a minimum balance or monthly maintenance fee.
Unlike the traditional banking process, DeFi has few barriers to entry. To use a DeFi application, like UFUND, which focuses on lending and trading through asset tokenization and P2P trading, you need a wallet and an internet access. Once your KYC and registration is completed, you can access your UFUND account freely.
From your UFUND account, you will be able to invest and trade on various opportunities on the UFUND platform. It provides tokens backed by illiquid assets to get started.
Is DeFi a good investment?
DeFi is a tech-based alternative to relying on centralized financial institutions such as banks, exchanges, and insurance companies. Instead, DeFi systems achieve distributed consensus by using "smart contracts" on blockchains such as Polygon. Developers write intelligent contracts to perform specific actions only when certain conditions are met.
As a simple example - the UFUND platform brings business solutions and alternative investment opportunities for investors. The Polygon blockchain powers the UFUND tokenizer. The platform promotes tokenization as a new solution in the finance industry.
DeFi allows any two parties to directly and securely undertake transactions without the fees of an intermediary or the regulations of a central authority. Therefore, many more people can access financial services at lower costs or receive better interest rates than those offered by traditional financial institutions.
Borrowing and Lending with DeFi
Probably the most generic functions enabled by DeFi are borrowing and lending services. Those who own a lot of cryptocurrencies but want liquidity in other currencies can borrow money against their cryptocurrency holdings.
The apps that facilitate decentralized borrowing and lending are designed to adjust the interest rates as per the fluctuating supply and demand of the cryptocurrency.
As a decentralized crowdfunding platform, UFUND aims to tap into the U.S crowdfunding market worth $574.3 million by 2027.
Why use DeFi?
Using a DeFi platform instead of a traditional financial institution has several benefits. People use DeFi for these primary reasons:
- Accessibility: Some people want alternative financing and investment products or others simply do not meet all criteria from TraFi.Therefore, DeFi offers a true solution for most people wishing to access finance and investment opportunities. Additionally, UFUND allows small and medium-size businesses to reach a larger population of investors for their products through DeFi.
- Low fees and high-interest rates: DeFi enables any two parties to transact directly. With no intermediary, transaction fees are significantly reduced, and the parties directly negotiate interest rates. People who lend money via DeFi platforms usually enjoy higher interest rates than those offered by other financial institutions.
- Increased transparency and security: Smart contracts are published on a blockchain with all recorded transactions, like a public ledger, they are available as proof and verification. Such information found on the blockchain cannot be tampered. UFUND users benefit from the security and transparency enabled by the Polygon blockchain technology, and the smart contracts preserve everyone’s privacy.
- Functional autonomy: With no reliance on any centralized financial institutions, DeFi platforms avoid the risk of hardship or corruption normally seen with traditional financial institutions.
Is DeFi safe?
The newness of DeFi technology means that adverse outcomes can unexpectedly occur. For example, new companies using DeFi technology may fail - as most startups do, and errors by programmers can leave it vulnerable to hacking. In addition, investing in or storing money with a failed DeFi project can result in the total loss of your funds.
With risk in mind, UFUND is taking security seriously when it comes to user’s sensitive data and investment opportunities.
How can you invest in DeFi platforms?
There are various ways to invest in DeFi platforms. The simplest option, which provides only broad exposure to DeFi, is to buy Ethereum or other coins that use DeFi technology.
You can deposit cryptocurrency with a DeFi platform and earn interest on them. You may enjoy higher interest rates if you are willing to deposit funds for longer periods of time, and the interest rate paid on your deposit can be either fixed or variable and change with the market.
UFUND is a DeFi platform for small business campaigners and investors, with mitigation of risk through third-party escrow accounts to secure users deposited funds, smart contracts, sales contracts of tokens backed by real-world assets, transparency, and security with user data that support long and short-term investments.
0 Comments