How can I start investing in DeFi?

Do you ever get the feeling that you exist to serve bankers, and not the other way round? Watching the world for the last few decades, it’s difficult to avoid the conclusion that the financial interests of most of us are not a priority for the high-powered, politician-heavy, over-entitled traditional financial industry.

DeFi (“Decentralised Finance”) grew out of Bitcoin and Blockchain, which themselves were an expression of dissatisfaction with an out-of-control traditional finance sector that almost destroyed itself in 2008 with its own greed – and which then made sure taxpayers were wiped out instead.

In its purest form, the vision for DeFi was an alternative banking system for the common man: incorruptible, transparent, and controlled not by greedy bankers or voracious middlemen, but by predictable, transparent sets of rules.

Of course, pure visions never last too long when a system gets actual people in it. However, even in its current imperfect form, DeFi is still a viable (and possibly the only) alternative for wealth building to the tilted playing field of the rich that makes up the stagnating world of traditional finance.

And after all, you’re here to learn how to build your wealth, right? Right.

DeFi and Traditional Finance

Fun fact: did you know that at 7% interest, with interest paid daily and compounded, it will take five years, nine months and nine days for your investment to double? And at 0.2%, a standard rate found in traditional finance, that would take you 235 years?

It’s a much more level playing field in DeFi than in traditional finance, where everything is tilted against the individual investor and in favour of the institutional investor. Their systems can see your share purchases and get in faster to screw you over. The gap between borrower/credit card interest rates and savings interest rates is just ludicrously large. The banks can turf you out of your house and deny you enough money to live. And, it turns out, they can also exclude you from the financial system entirely on a political whim.

Not so with DeFi. Regulatory issues and uncertainty about Crypto have so far prevented the banks from taking a major role in DeFi, so the gaps have been filled by individuals and small companies.

There’s a downside, of course – not all individuals and small companies have your best interests at heart either. Even if the technology is incorruptible, there’s no shortage of scams at the human end of Crypto – whether it be fake coins launched to make a mint, pump and dump scams that exploit human desperation, or hackers determined to steal it all by exploiting poorly designed code.

What this means is that to start investing in DeFi, it would be advisable to take a safety-first approach: in fact, that applies to all investing. Don’t invest more than you could afford to lose, and especially not the money you’ll need in the short-to-medium term.

What’s the Future of DeFi?

It depends on which part of DeFi you’re talking about: it’s a wide area, and there are some aspects that make politicians and regulators nervous: DEX in particular.

Technologically, Blockchain is the future and will invade traditional finance which has an infrastructure far more clumsy than it would appear from using it. Political meddling in the financial system might well drive entire countries to participate far more in DeFi.

Cryptocurrencies and Stablecoins will be joined by more CBDCs (“Central Bank Digital Currency”): China’s launch of its digital Yuan was a game-changer, and the US and UK are also discussing their own.

In general, regulatory pressure has increased on companies in the ecosystem and much closer attention is being paid to the parts of the ecosystem that have the most value: centralised exchanges and off-ramps to fiat currency. Exchanges and tokens that don’t pass regulatory approval will either close entirely or become close to worthless.

Major Cryptocurrencies, being safe from securities law, should continue unaffected, and approved tokens and Crypto might well increase in value substantially.

Making your Future Safer

The sure way to avoid regulatory problems later is to invest your funds with a trustworthy, secure and stable company that deals in more established Cryptocurrencies. Bitcoin and its derivatives like Bitcoin Cash, Ethereum, and a range of other properly decentralised Crypto, and Stablecoins that are properly backed.

Join GCISL today!