If you have stayed up to date on the latest happenings in the massively budding world of decentralized finance, you have certainly noticed the massive returns on investment that so many early investors got to benefit from. But fear not, it is not too late for you to delve into this huge market, all you have to do is do your research to ensure that you are making bets that are both safe and profitable.
First let us discuss, what are the benefits of investing in DeFi? Decentralized Finance is an ambitious attempt to decentralize the traditional finance market and overturn it by revolutionizing things like trading, lending, investing, and wealth management, all by leveraging blockchain technology. Benefits of the five projects include real decentralization, censorship resistance, and lowering the barrier of entry for most investors. One of the many things to keep in mind when investing in DeFi is to ensure that the project you are partaking in has high utility (meaning: use), and that it works to improve on existing systems or provides a solution to a rampant problem. By ensuring that these two conditions are met, you can rest assured that the project you invest in will remain relevant down the line thus keeping your investment safe.
So how can you ensure that you get a healthy return on your investment in DeFi? Simply by doing the research. Here are some DeFi protocols that could generate healthy returns on your investment, and make for profitable projects.
One sure fire way to invest in DeFi without worrying too much is to invest a limited amount of money in 10 or more DeFi protocols. This will generate passive income and not have you fixated on one specific project’s outcome.
Another way to ensure that your investment is a profitable one is to select a DeFi project that has a decent amount of backing, and to check who these backers are. Large scale funds and venture capitalists are currently scouring the market for budding DeFi projects, they also tend to do a lot of homework and research on a given project before they invest in it, thus doing the work for you. If a reputable and wealthy company is investing in a DeFi protocol, you can feel comfortable putting your two proverbial cents in as well.
On to more specific examples of how you can invest in Decentralized Finance for a high return on your investment, let us scan through some of the most profitable DeFi protocols that have emerged over the past few years. One of the simplest and most straightforward ways to invest in DeFi and gain exposure to this vast world is to buy DeFi powered coins, thus gaining exposure to the entire industry. For example, Uniswap’s token UNI is a very powerful DeFi token with high utility, and it has experienced an astronomical growth of over 750% in just one year. It is expected to continue to surge.
Another way to get a return on investment from DeFi is through some of the most popular executions of DeFi which come in the form of decentralized applications (dApps). Mostly hosted on the Ethereum blockchain, these protocols can be virtually anything ranging from a decentralized exchange to a game. Yes, you read that correctly — decentralized apps are hosting games that are played to earn or just for sheer fun! With huge growth in consumption, these games are now boasting massive earnings and returns. One such game is Axie Infinity, the Ethereum based NFT game Infinity has now made headlines by hitting a record $1.1 billion in sales, becoming the world’s highest-grossing non-fungible token (NFT) project. The online virtual game allows players to buy, breed, and raise monsters named Axies and pit them against each other. With millions of users logging on daily, the protocol has drawn a ton of attention to the DeFi gaming economy.
Lastly, passive income and yield farming are massive in the world of DeFi, and for good reason. For very little effort, investors can generate a decent amount of profit by doing little to nothing. Yield farming is a crypto investment strategy that aims to generate as high returns as possible on investments. By investing in various liquidity pools, you can be pitching in to provide liquidity to some emerging DeFi projects all the while earning interest on your passive contribution.
An extremely profitable space with a tonne of potential, the world of decentralized finance is vast and it is just getting started. Though it may be extremely exciting, always be sure to do ample research before you delve into any new project or investment opportunity. If you are armed with knowledge and facts, you can make balanced decisions that will grow your returns and keep your investments safe.