Digital assets unlock many new possibilities. As legal clarity continues to develop, individuals and institutions that are interested in legal risks may begin to soak their toes into blockchain assets for the first time.
Providing market data and all apps with many apps show the price of the token you have at a given moment. The digital asset market does not close, so you can check the price measures of digital assets 24 hours a day and 7 days a week.
But the promise of blockchain technology is much more broader than simply buying tokens and hoping to turn it over for higher prices. Digital asset holders can use assets in a way that only asset managers can use.
Simple review
In my previous Blog“Are you preparing to the tokenization of everything?” I can help digital assets for the first time to raise their assets in history. Through this, individuals can inherently act as their own bank or financial intermediary, eliminating market entry barriers and the profits of the assets can be introduced back to investors instead of managers.
The manager is simply an intermediary, such as a bank or an intermediary company, and is a broker who holds assets on behalf of customers and trades on behalf of themselves. This manager collects fees for providing this service, often reserves the rise in capital or assets and shares only a part with the owner of the asset.
Decentralization opportunity
Suppose you have researched and accumulated token portfolios. There are many types of tokens, but let’s easily use Ethereum as an execution example.
Ether Lee is tracking Bitcoin only with its second largest digital asset with its market cap. If you have Ether Leeum in the blockchain wallet, there is something you can do.
Of course, the simplest thing is to keep it in the wallet to increase the price of Etherrium and sell for profit. But maybe you are not a big merchant like me. Perhaps you will have a long time and want to hold Ether Leeum. The problem is then an option for long -term retention of digital assets.
It is easy to draw here to traditional finance. You say that you are a long -term strength of stocks. You have a lot of stocks, but you think it will take more than a year for your hypothesis to play. In the meantime, your liquidity is tied to this stock, so if a new fund cannot be invested, you are trapped between long -term guilty rulings and relief in the market for a long time.
Investors who are familiar with stocks know that there is an opportunity to create additional cash flow for portfolios using these long -term holdings. One way to do this is to sell the phone for a larger long -term position in the portfolio. There is a risk of throwing away stocks and losing stocks, but there is also an opportunity to pay a fee to loan the stock to the option market participants. In general, a manager of such assets has a fee structure for processing these transactions on behalf of you, but it can generate imports of portfolios while waiting for long -term papers to be played using stocks.
As with traditional finance examples, there is also an opportunity to make profits without using digital assets to sell their assets.
Welcome to distributed finance
The world of distributed financing, known as Defi, can be overwhelming at first. Especially when an individual with digital assets can explore and participate in it to guide them without external entities.
But the complex picture of Defi can be separated more easily by drawing parallel to the existing practices of traditional finance. Many of the participants of Defi can use the financial brokers today. The difference is that the customer raises these activities from the customer and pays only a part of the profits generated using the assets they have on behalf of their customers.
Let’s go back to our examples and review some activities that can be taken to generate profits for the assets that digital asset owners will have a longer time.
Digital asset loan
Most people in the lucky world that can access the world economy are familiar with loans. The loan has been longer than the Fiat currency, and it goes back to most economic transactions until it is carried out by bartering.
You may have been borrowed at least once in your life as an individual. Go to the bank to provide evidence of financial photography and to ask the bank that it is a good idea to generate profits for banks through interest. After this meeting, assuming that the loan is approved, the bank will be paid again during the loan period.
By providing this money on the front, the bank depends on repaying the loan and repaying interest. Interest is worth it for a bank to tie up with you throughout the loan. This creates the cash flow of the bank.
Many people are used to the recipient’s end of the loan, but there are a lot more people who provide loan liquidity. Ironically, if you have money to banks, brokers or other traditional financial brokers, your funds may have been used for loan practices, but this is not required of your participation, and you generally receive interest payments for your capital with your manager.
Digital assets can be used as an individual as a loan protocol as a loan protocol. Like traditional managers, protocols reduce the generated profits by borrowing tokens, but unlike the existing models, the more large percentage of the yield flows back to you as an asset owner.
Other assets provide a variety of profits for loans, and in general, the loan protocol posts the expected return on each type of assets. It is an excellent activity for Stablecoins because it does not generate a yield due to the 1: 1 Fiat currency with this token, but if you rent it to others who want to trade in the blockchain, it can lead to income generation.
Provided by liquidity
In traditional financing, the method of remaining asset markets such as stocks is made through market manufacturers. Tied in liquidity tones, these companies suggest that they will provide the other side of the transaction. This minimizes the risk of opponents and guarantees the liquid market. In return, brokerage companies will often compensate for market manufacturers as operating order documents.
Digital assets can contribute directly to market production as an individual as an individual as an individual. Distributed exchanges (aka A DEX), an online trading market for encryption, should contribute to the liquidity funding of the exchange. Unlike centralized exchange such as Coinbase, you need to use yourself to use Dex.
As a digital asset holder, you can take the token to Dex and sign a wise contract with DEX to provide tokens with fluidity in the liquidity pool (aka LP).
In general, DEX provides a token (NFT) without any swearing that shows your contribution to the liquidity pool. Then you can use the funds to provide liquidity to a trader of a particular token pair to exchange NFTs for tokens in addition to the fees obtained from the exchange.
In the past, we had to provide both sides of LP, but recently, cross -section LPs have begun to be available. This is easier to participate, but there is also a risk of providing one side of the trade and a pair of funds whenever Dex uses funds.
In addition, you need to set the range that can be used for trading in DEX. If you select a concentration range, the return is better because the exchange is at the top of the list when the exchange is needed. However, if you start trading outside the range provided by the token pair, you will not use the token, so you will not receive a fee. Setting a wide range of scope increases the chance of liquidity in the pool, but the total compensation per transaction is reduced by spreading the funds to the larger price pairs of the token.
Staying evidence
Now we have experienced some examples of Defi activities similar to the activities that arise in traditional financial systems, so we hope to get a better idea of what it means to participate in distributed finance.
There is one more basic Defi activity that is worth reviewing, but it is not directly connected directly to traditional financial products.
If you have Ether Leeum, you may have known that you have to pay an enemy to trade on Etherrium Block Chain. This fee is called a gas fee and is paid in Ether Leeum. Token in Ether Leeum is used to pay a trading fee in Etherrium Block Chain, so Ether Lee Rium creates what we call it native tokens.
Ether Leeum exists as evidence of the steak block chain. In other words, the user can issue the default token to the valid tester.
work. Like providing liquidity, the validity test that steaks Ether Riium generates profits from the gas fee paid by the participant to use the blockchain. The validity test then shares the commissions they generate with users who vowed to the valid tester for the staying of their basic tokens.
Staying has no direct correlation with traditional financial activities. The closest similar point in existence is how the company pays dividends to stock owners as a reward for business support. In this concept, the steak network proof pays Starker to support the network. If the user steaks Ether Reeum, there will be no tokens to be in charge of the transaction approval. This will not function with the blockchain.
Defi- Finance for everyone
They are only part of the methods of digital assets to allow extensive participation and fairness in the market. Although there is a unique risk to all these activities, each has the ability to be rewarded to rotate on the wheels of distributed financing.
As the blockchain continues to develop, more Defi activities will emerge, and the concept of Defi will continue to develop. Therefore, if this is an area you want to explore with assets, it is a good time to practice some of the basics reviewed in this article.