Decentralized Finance (DeFi) | Economipedia

Decentralized finance (DeFi) are a series of applications that use blockchain technology and do not require intermediaries to operate.

Therefore, they consist of a series of protocols that are used to invest in cryptocurrencies through investor deposits. Its peculiarity is that they do it automatically, so there is no traditional entity that mediates and centralizes the operations.

Origin of decentralized finance (DeFi)

The MakerDAO platform, which manages stable coin loans, was the first to apply the DeFi system. In this way, through its native token Dai (pegged to the USD dollar), it allows its users to operate in a decentralized manner.

On the other hand, in July 2020, the Washington Post echoed this type of decentralized finance (DeFi) platform. Thus, in September 2020, Bloomberg reported that this type of exchange accounted for two-thirds of the cryptocurrency market.

Recommendations for investing in DeFi

Let’s see some recommendations to invest in DeFi.

  • First of all, the cryptocurrency market is very volatile. Therefore, we must advise ourselves and train ourselves well before investing.
  • You have to invest what you are willing to lose. This maxim is important. If we cannot do without that money or, at least, delay its collection through sales, it is best not to invest. Selling early usually means losses.
  • Diversify whenever you can. This is an unwritten rule in investments. When some go wrong, others tend to go well and compensate the first.
  • Last but not least, the access keys to our accounts are our responsibility. Therefore, we must take good care of them.
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Regulation in decentralized finance (DeFi)

Traditional investment markets are regulated. Monetary funds through central banks, stock exchanges or the investment fund market through specific regulatory bodies, to give a few examples

However, decentralized finance (DeFI) is an eminently innovative activity and what does not exist cannot be regulated. For this reason, it is very complicated to do so because, in the end, when we want to regulate something, it may already be obsolete.

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