Defi products

Most and professional Defi products are built on the Ethereum network. However, it can be noted that other block chains also offer more and more Defi products, this can be a copy-paste from the Ethereum network, but this can also be new projects where innovation takes place. Examples of other emerging block chains on which more and more Defi products are being built are Avalanche, Fantom and Solana. By now there are already many different Defi products and applications on the blockchain. These can best be compared to the financial services how we know them from the traditional world.

The most commonly used and much emerging financial service in Defi is characterized by lending credit, whereby money can be borrowed peer-to-peer, whereby a certain interest is immediately issued to the lender. These Borrow and Lend platforms often use the so -called Stablecoin. A stablecoin is, as the name already says, stable. A mechanism is used for this which ensures that a stablecoin is always 1: 1 with the US dollar, fluctuation between 0.95 $ and 1.05 $ can prevent. Because of these innovative stablecoins there is a possibility to receive relatively stable interest on your parked assets, something that is currently excluded at the traditional bank.

Risks

Efficiency is often always accompanied by the corresponding risk. This is no different with decentralized finance. Decentralized Finance has different risks. Defi is in principle dependent on blockchain technology and the associated smart contracts. These smart contracts are sometimes changed/adapted by Defi Developers due to the innovative nature of Defi. Because these smart contracts are not always and everywhere checked for incorrect code, it sometimes happens that there is a bug in the code of the protocol. This can have major consequences for the users of the platform. It has happened more than once that Defi projects have been hacked, where the funds of the users of a platform have disappeared like snow in the sun. Another risk may be that the expected return will turn out completely different than was predicted in advance. The chances in the emerging Defi are huge, but the risks must be clear from the start for anyone participating in Defi services.