Bitcoin was the pioneer of the decentralized space which promised high lucrative returns but with higher risks involved. Bitcoin price is highly volatile where its prices have fluctuated more than 40% in a single day this year itself, so investing in cryptocurrency requires a lot of market knowledge and knowledge in reading trade patterns.
Even though Bitcoin is a decentralized digital currency in itself, the mediums through which these are transacted are not decentralized which leads to cases of price manipulation as well. However, a new form of a financial platform called decentralized finances (de-fi) has gained a lot of popularity in the past year.
TokenAnalyst a crypto market analyst firm recently tweeted about the gains made on the investment in Bitcoin, Ethereum and a couple of defi platforms. The analysis found that if a person would have invested $1,000 at the start of the year in Bitcoin they would have made a 133% gain, while investment in Ethereum would have got them a 36% return. On the contrary, the two de-fi platforms taken into consideration would have returned just 5% and 22%.
If you had $1000 on Jan 1st 2019 and:
– Invested in $BTC, you'd have $2,333 (+133%)
– Invested in $ETH, you'd have $1,364 (+36%)
– Lent on @dydxdigital, you'd have $1,060 (+6%)
– Lent on @compoundfinance, you'd have $1051 (+5%)
– Lent on @UniswapExchange, you'd have $1219 (+22%) pic.twitter.com/0wPty1Nv6J
— TokenAnalyst (@thetokenanalyst) November 13, 2019
These de-fi platforms usually act as a lending and borrowing platform where users can lock in their Ethereum to either borrow a loan against it or earn a reward based on the amount and time of ethereum locked in the smart contracts. However, the most important aspect of these platforms is that they involve a minimum amount of risks which is negligible when compared to the likes of Bitcoin and Ethereum whose prices are bound to move either way depending on the market sentiment.
The Growing Market or De-Fi
De-Fi platforms have seen a 140% rise in investment since the start of 2019 where at present about $660 million worth of cryptocurrencies are locked in different de-fi platforms. The stats are a clear indication that people have started to understand the de-fi ecosystem and its benefits.
Another thing to note here is that de-fi platforms are only a year old while Bitcoin has been there for a decade. Given the worsening condition of the traditional financial ecosystem where several banks have gone on to offer negative interest rates, as this situation worsens, people would start looking for alternatives. With de-fi platforms offering 5-20 percent interest rates on the locked digital assets, it would prove to be a lucrative alternative.