DEFI or Decentralized Finance is Decentral Finance which is at the center of the 2020 Ethereum ecosystem boom. Great innovations have been made and a large amount of money and opportunities have been created. So what exactly is it? Is it still alive and can you make money with it? We'll explain everything in this episode. Let's start! Hi everyone, welcome back to the Republic of Rupiah. Don't forget to like and subscribe for all the incredible information about the financial revolution. And remember … We are not your financial advisors, so never invest any money without doing your own research. In 2020 a great fun begins. Which is Decentral Finance or DEFI for short. Maybe you guys are thinking … what the hell is DEFI trying to do. Yes, to understand this you need to understand the system it replaces and that is Central Finance, sometimes known as the 'legacy' financial system or the financial system we now experience. At this time when you have money or your savings go to the bank, open a savings account and save your money where you can earn some interest.
When you want to borrow money from the bank, you need to take it to them and prove why they need to lend you money. You show me your savings records and your salary or income and expenses and prove they can trust you. This is also controlled by something known as a credit rating where all the banks share information about you and how reliable you are to lend money. This is the situation now and the world we live in. Decentralized finance completely destroys this system. It is all powered by Ethereum and occurs via dApps built on the Ethereum blockchain. To fully understand this you need to understand Ethereum, MetaMask, Stablecoins, and dApps. We have videos that cover all of this, so if you haven't watched this video first pause, watch the video then come back here.
So in essence, DEFI is all about using crypto and being your own bank. Become separate from the traditional financial system. That includes using your crypto as collateral or savings and using dApps on most of the Ethereum blockchain to be able to make that money work. You can see the main applications used on one great website called defipulse.com This website displays all of the most widely used Defi dApps, are ranked in the order of how much value their website or dApp contains. Most of them have features which involve depositing your crypto for a specific purpose, with their own trademark. As an example: MakerDAO uses their Oasis platform to allow users to deposit their crypto into a 'vault' and then take out a loan against the stored value.
The loan is in the form of Dai, which is a stablecoin tied to a price in US Dollars. So basically you are storing your Ethereum (or whatever other coin they allow) and you can borrow up to a certain percentage of this value in US Dollars for you to spend in the real world, or buy other types of crypto, or even buy more Ethereum. Basically, it allows you to take out a loan without the need for documents or asking for permission from the bank. The next biggest Defi site is AAVE Aave is also a loan platform, but it is a site where you can deposit crypto for other people to borrow and get very good interest rates.
At this recording time, you can get more than 10% on stablecoins and over 6% on most other cryptocurrencies. A great way to hold onto crypto and wait for its value to rise .. while still earning interest on your wealth Compound Finance works almost the same, allows you to earn interest on the loan. What is starting to get really interesting is with dApps like Uniswap. This is an exchange market where you can exchange Ethereum based coins without the need to create / enter the market account, but not only that ..
You can also provide coins to the 'Liquidity Pool' (name) and receive tokens as a reward for lending your money. So the point is obtaining one cryptocurrency by maintaining and lending another cryptocurrency. Another world exists with dApps like Synthetix. This app is amazing because it lets you use your crypto to trade synthetic versions of gold, silver, Bitcoin, and soon things like Tesla stock. All of them allow you to become master investors without leaving the crypto world. There are countless Defi tools and other very popular sites like .. SushiSwap, yearn.finance, Balancer, and Curve.finance. All of this gives great freedom to those who hold crypto and are willing to explore financial markets. All without the use of a bank, stockbroker or intermediary.
There are clearly risks associated with using these platforms. All of these dApps are run by smart contracts and not guaranteed to be 100% free from bugs or glitches so you have to do your own research and never invest more than you can afford to give up. The world of Defi is very interesting and exciting, more and more decentralized applications are always being built. It also boosts the opportunities for Ethereum and its network. With more and more people using the platform earlier, they're just going to get much more mainstream. So let us know what you think in the comments. Have you / have you used these platforms and where do you think the future of decentral finance is headed? Don't forget to like and subscribe and come back here for more important information about being your own bank or being a finance master. Cheers!.