20 February 2024
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1 min read
navigating the way to invest in defi ecosystem
> defi today.
in recent years, defi has experienced a remarkable surge in users, with approximately 50 million unique addresses currently engaged in the ecosystem. remarkably, 2021 witnessed the highest monthly unique user count, highlighting the growing interest in decentralised finance. the total value locked (tvl) in defi is $63.9 billion, with steady growth since its peak of around $200 billion in 2021. while ethereum remains a primary hub, emerging platforms like arbitrum contribute to a diverse and dynamic defi landscape. by eliminating geographical barriers and requiring only internet access and a crypto wallet for participation, defi offers many financial opportunities. through automated processes that replace conventional intermediaries, defi significantly reduces the costs associated with financial services while enabling seamless peer-to-peer transactions globally.
> defi over cefi currently, centralised authorities control all our assets and investments, and concerns regarding manipulation and transparency have become increasingly noticeable. traditional banking systems often offer poor returns to depositors while retaining significant control over their assets, and we must go through several intermediaries for any financial need, from home loans to bonds. however, emerging technologies are reshaping the financial sector, offering a viable alternative: decentralised finance (defi). defi runs on peer-to-peer relationships; within defi, users can engage in the same activities offered by traditional banks, such as lending, borrowing, obtaining insurance, and earning interest, all without intermediaries, significantly accelerating the speed of financial transactions. defi leverages blockchain technology to create an open and transparent financial ecosystem, giving power to individuals with complete control over their finances. through platforms like ethereum and innovative smart contracts, defi extends beyond conventional cryptocurrency transactions to include a wide variety of financial services such as lending, insurance, and asset tokenisation on a global scale.
> advantages of defi. decentralised finance (defi) dapps work without intermediaries, using automated rules in smart contracts on the blockchain to ensure safety and fairness. these smart contracts execute autonomously, so there is no need for manual intervention. defi is transparent, meaning everyone can see what's happening with transactions. moreover, defi services are available worldwide, using public blockchains that anyone can join, and transactions go straight to users' crypto wallets. different defi apps can work well together, enhancing their ability to complement each other securely. additionally, because the blockchain can't be changed or messed with, it keeps everything secure and reliable when using defi apps for financial transactions.
> how does the defi work? defi relies on smart contracts that are self-executing contracts with terms written into code, enabling automatic execution without intermediaries. transactions are recorded across a network of computers securely and transparently. offering users competitive, customisable, and decentralised services without relying on central authorities. users have direct control over their assets, and protocols can be combined for enhanced functionality. defi systems comprise settlement, application, and interface layers: the settlement layer ensures transaction completion and obligation fulfilment through blockchain consensus protocols, the application layer manages crypto assets and offers financial services like lending and trading via smart contracts, and the interface layer provides user-friendly front-ends accessible through web or mobile platforms. defi allows for the tokenisation of real-world assets, enabling them to be represented as digital tokens on the blockchain and traded, lent, borrowed, or used as collateral. users can engage in peer-to-peer lending and borrowing, participate in decentralised exchanges (dexs) for trading digital assets directly, and utilise protocols for staking and yield farming to earn rewards. defi aims to democratise access to financial services by leveraging blockchain technology to create transparent, efficient, and censorship-resistant economic infrastructure.
know more about defi: https://www.aarna.finance/understanding-defi-the-future-of-finance
> how to invest in defi. investing in defi can offer various opportunities, but it also comes with different levels of risk and reward. for instance, yield farming lets investors lock their crypto assets in defi protocols and earn interest. staking requires investors to lock their tokens in smart contracts to get rewards and have a say in governance. tokenisation is another feature of defi, which enables any asset, such as real estate, art, stocks, bonds, intellectual property, identity, or data, to be converted into digital tokens on the blockchain. these tokens can then be traded, lent, borrowed, or used as collateral on defi platforms. moreover, liquidity provision involves supplying assets to defi platforms and receiving fees and rewards. these are ways to invest in defi and potentially generate high returns. still, they also entail risks, such as impermanent loss and smart contract flaws, that must be carefully assessed and researched before investing.
> risks involved. you can invest in defi to get a lucrative way to generate passive income and diversify your portfolio, but it also comes with risks. you may encounter market volatility, smart contract bugs, and regulatory uncertainties when you invest in defi platforms and protocols. however, these risks can be reduced by doing homework, spreading your investments, and keeping up with the latest trends in the defi space. by doing so, you can maximise your returns and benefit from the innovation and growth of decentralised finance. with the right strategies and a clear understanding of the defi landscape, you can invest in defi confidently and take advantage of its opportunities.
know more about risk management strategies: https://www.aarna.finance/risk-management-strategies-for-defi
> navigating defi safely: how to avoid mistakes? when you invest in defi, you should avoid common pitfalls that could jeopardise your returns. don’t fall for platforms or projects that promise unrealistically high yields, as they may be unsustainable or fraudulent. instead, do your due diligence to verify their credibility and compare them with other options. also, don’t let greed or fear cloud your judgment when taking profits and cutting expenses; have clear exit plans for every investment; and track their performance using trustworthy tools. moreover, be careful when interacting with new platforms or projects, and make sure reputable security firms audit them to reduce smart contract risks. finally, protect yourself from scams, such as phishing or fake websites, by using secure browser and wallet solutions and not sharing personal information with unverified entities. by being informed and cautious, you can invest in defi more safely and effectively.
> aarnâ offers an opportunity to invest in defi for both newcomers and seasoned investors; leveraging human expertise and ai-driven intelligence, aarnâ simplifies access to the defi ecosystem's complexities. the protocol's commitment to decentralisation, composability, on-chain provenance, and tokenisation ensures transparency and trust within its ecosystem. through its multi-sided platform, aarnâ enables collaboration between crypto fund managers and data scientists to design well-defined investment strategies tokenised into structured products called â_fi vaults. these vaults will utilise various techniques, using machine learning and artificial intelligence, offering users customised investment options, thereby maximising returns.
about aarnâ
aarnâ is an advanced DeFi asset management platform, designed at the intersection of AI and DeFi, to help users manage their digital assets lifecycle.