Blockchain and The Future of Investing
While Bitcoin experiences its rollercoaster ride and drags the altcoins up and down, and its utility as anything other than a tool for speculation comes into question, there is an area of the blockchain that serves real utility to consumers and investors, and that is DeFi or Decentralized Finance.
The benefits of this area of the blockchain are undeniable. Decentralization, as per Satoshi Nakomoto’s original dream, is ahead of its time. Or maybe in a world of data harvesting, with only a few major internet players, where the user has become the product, it is just in time.
This is why participants in the blockchain realm are so excited about Web3, the version of the internet which sees all of its users as the keyholders and governors, to decide what and where it can go. A dream of anonymity and privacy, where you hold the keys to your own personal user data. That is a powerful thing, and could rival, if not knock our current version of the internet into oblivion.
But there’s another area of the blockchain that is quietly growing into a powerful tool for its users. That is DeFi, and whether you have heard of it or not, it’s important to understand that it is already massive and growing fast. DeFi currently has a total value of over $72 billion locked in, that means the value of assets already being invested inside this sector.
It’s even seen institutions sit and pay attention with more institutions and venture capital firms investing privately inside this arena than ever before.
Why is DeFi so Powerful?
It offers banking to the unbanked, it brings financial inclusion to those that need it the most, over 8 billion people and all that they need is just a mobile phone to be able to start paying, sending transfers, saving and even investing in the financial markets.
Those are the basic propositions of DeFi, but other use cases bring the ability to trade the global markets, both crypto and traditional assets, through TradFi, to gaming through the Metaverse using NFTs in the play-to-earn model, and perhaps most importantly, to be able to access investing opportunities that are unparalleled in the conventional investing markets. These include areas like staking, yield farming, vaults, AMMs and more.
Let’s look at some of these models. With staking, users can place their holdings inside exchanges and applications in return for passive yield (APY). This gives benefit to all parties, not least the investor who can enjoy unparalleled returns for simply putting his idle tokens to work. Some projects offer returns in the double digits and that’s even when the crypto markets are falling. Yield farming works much in the same way, but then vaults take this to the next level by deploying smart contracts to actively seek and find the best yield farming and staking opportunities automatically. There are so many opportunities out there and some projects like Revault take this to the next level by actually alerting users when a better opportunity becomes available, so they may take advantage of this with one single click.
Another project, called HyperDex, builds trading strategies that can run automatically on a client’s behalf. Each strategy suits a different investor profile and comes with varying risks and returns. These include lower risk, lower return strategies like fixed income, which enable users to earn a fixed return on stablecoins and other crypto assets, medium risk, medium return algo trading, which enable users to earn a variable return on their crypto assets by using arbitrage, and the Race strategy, which offers higher risk and high rewards, through its more aggressive approach to investing via speculating in asset futures.
The Bottom Line
Tools like this which can actually do the work on behalf of the investor are excellent as they incorporate cutting edge technology to seek the very best investing opportunities out there. So set aside your qualms about the future of Bitcoin and its merits as a digital currency and start looking deeper at the real possibilities of the blockchain and perhaps most importantly at its merits for the future of investing through DeFi.