Harnessing The Power Of DeFi

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9 Sept 2024

Saving & Investing In An Inflationary World
Risk is at the heart of truly profitable ventures. There can be no reward unless risk is present. This is however contrary to the mindset of newcomers. For many, investing means deploying capital for a continuous yet stable return. This has been indoctrinated through banking institutions that offer stable and ongoing returns. The only problem is these returns are actually useless. You may wonder why I would make such a statement.
If the ROI of an investment underperforms true inflation, not the nonsense suggested to be the inflation rate, it serves no purpose. The inflation rate can vary depending on what you use as the basket to measure it. Fuel and other important commodities reveal where true inflation lies. Look at housing in the US, which is up 100% since the pandemic. Housing accounts for the majority of an individual’s monthly expenses. This is where the rubber meets the road.
Despite this alarming reality, politicians and other voices within the economic world continue to reference “inflationary-based” statistics that hold very little relevance to the average American, or global citizen, for that matter. This reality has caused many to become a lot more adventurous regarding their saving and investment strategies. This can be a good thing as well as a bad idea. Entering the world of DeFi without significant knowledge and experience can be even more damaging than a poor ROI.
DeFi Diligence
Harnessing the power of any idea or dynamic requires strength, which in this particular scenario is knowledge and experience. Without it, you are likely to be floored by the weight of its power. Anything in the finance world that can reward can also bring destruction. DeFi investors must be wise, informed, and diligent in every other way. Diligence is the way of the DeFi investor. This cannot be compromised, especially by newer participants.
Monitoring rewards, developments, and news regarding the protocols utilized is all part of the diligence required to partake in the DeFi economy. Furthermore, initial research and study need to be at the foundational level. Even with these practices in place, it can be a dangerous road. For this reason, many seasoned DeFi investors choose to build up their “businesses” before utilizing them. In other words, yields are compounded over an extended period.
This provides growth regarding collateral and yield, which is the equivalent of revenue. I have mentioned that the current prices in the altcoin market are attractive for DeFi investors. Purchasing DeFi assets now could cause a surge in collateral valuations within months. This too will increase yield. Many altcoins have returned to bear market lows. Anything can happen. However, purchasing assets at multi-year lows is statistically a good move.
Harnessing DeFi is a way for many to wage war against the true dynamic of inflation and its destructive effects. Many relate only to their own experiences… and so are ignorant of how many are being battered by an ever increasing cost of living, void of the means to conquer it. DeFi can help. However, it can also cause additional pressure if incorrectly implemented. Building a DeFi-based income model is best accomplished over many years. Ideally, shifting to stablecoin models at the appropriate times.

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Final Thoughts
I have often referred to a DeFi business strategy as a seasoned one. This needs to be understood and adjustments need to be made at appropriate points in the journey. Taking your time by slowly growing and compounding collateral is imperative if you are looking to mitigate the risks involved with DeFi. SocialFi is another way to build with little to no risk. All the best! See you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.