Todays post is a beginners guide to DEFI AND DEX and its important to understand as they are a big part of the crypto space.
The content I put out with DUFFMONEY is to help investors. And I believe it’s so important to understand what you are investing in.
My first few years of investing in crypto was me FOMO ing in without understanding what I was investing in. This was until 2021 when I finally got it. The penny finally dropped after 4 years of investing.
Me not learning about crypto when I first heard about it has meant I missed out on some huge opportunities. Like being told about BTC in 2015. If I’d have understood the fundamentals I would have invested and would have at least 10 BTC to my name.
The positive is that we are still early. Crypto is the fastest adopted technology in history but we are still very early. Only 2% of the world’s population own any crypto. In my opinion, there are still some very big opportunities to make life changing returns.
So let’s learn some fundamentals and build the foundations. If we learn now, we can then invest with skill. Then we can put ourselves in a good position to make good money and fully understand what we are investing in. This will help us move with the times and move away from the current broken and well and truly dated financial system.
DeFi is short for decentralised finance. It is peer-to-peer (no middleman) financial services on public blockchains. DeFi is mainly found on the Ethereum network but there are other networks that have DeFi like Binance Smart Chain.
DeFi only exists because of BTC. And BTC exists because the current financial system is broken. Satoshi Nakamoto created BTC because governments and central banks had caused the financial crisis of 2008.
The fact that DeFi is peer-to-peer removes the middleman and that means it removes the banker. You can do the things that you can with banks like earn interest, borrow, lend, buy insurance, trade etc. The bonus is that it’s faster, cheaper and isn’t manipulated by the intermediaries.
You get access to DeFi by creating a wallet. To access DeFi, I got myself a Metamask wallet and then I was able to connect to Pancake Swap (DEX). DeFi is flexible like the fact that you can remove your money quickly and without paying expensive fees.
It’s fast as I’ve already mentioned and this type of convenience is what we are all looking for in modern society.
There are various things you can do with DeFi like getting a loan. The way that I use DeFi is by staking my crypto tokens. I basically lend out my tokens and earn interest and this is called staking.
You can earn a lot of interest by staking your crypto tokens. Just be aware that the markets are volatile and the price can go up and down regularly. This is partly because it’s still so early with this new technology.
DEX is a decentralised exchange. It is a peer-to-peer marketplace where transactions take place between traders. DEX is part of the DeFi ecosystem.
Just to avoid confusion I want to go over the difference between DEX and DEFI. DEFI is a movement or concept if you like, where software developers create decentralised alternatives of traditional financial institutions and products. DEX is the decentralised version of a crypto exchange.
To use an analogy, we’ll go back to traditional banking. DEFI is something you do like how you do your banking. DEX is where you do your banking like if you use Barclays for example. But doing DEFI and using DEX is done on a blockchain and it’s peer-to-peer bypassing the middleman.
LEARNING ABOUT CRYPTO
Before investing in crypto it might be a good idea to learn about it. There are some excellent books that will help you with the fundamentals. There are other ways to learn like listening to podcasts or watching YouTube videos.
One of the best ways to learn is on the exchanges. An exchange like Coinbase has an excellent section for learning. You can learn everything you need to know to get you started. Like Bitcoin and Ethereum basics or other altcoins. Or learning about the blockchain, DeFi or DEX.
Get your head into understanding crypto and it will help you to make better investing decisions. Like investing in legitimate crypto’s that have a good chance of being around in 10 years. Don’t just rush in and expect to make quick easy money with the latest hyped up crypto.