The decentralized finance (DeFi) market presents a wealth of opportunities. We are sharing how to safely use niche tools to increase profits.
How to make money on DeFi
The key concept of decentralized finance is that there is no need for intermediaries. In the DeFi space, there is no room for traditional banks with high fees and rates that financial institutions can hold as market monopolists.
In addition, decentralized finance allows users to remain anonymous and effectively "make money".
The growth in popularity of DeFi can be observed in the K-line chart, which shows the total value of assets locked in the segment.
Total value of DeFi program lock-in (USD). Source: DeFi Pulse
There are two ways to make money on DeFi. Let's discuss these two options.
1. Provide liquidity
Most DeFi protocols require assets for operational activity. The easiest and fastest way to launch a product is to attract liquidity from market participants. Let's explore it with an example of a DeFi application focused on providing loans. Here's how it works.
- Developers provide market participants with lock-in assets to meet the needs of new DeFi applications.
- With locked-in assets, the program’s founders began to disburse interest-bearing loans.
- The developer shares the profit earned from the interest on the loan with the liquidity provider.
Decentralized cryptocurrency exchanges that require liquidity to meet the needs of market participants use a similar mechanism.
Interestingly, among liquidity providers, income farming communities have emerged. The goal of "farmers" is to quickly transfer assets between agreements to maximize profits.
2. DeFi Project Token Investment
Many decentralized protocols have their native tokens. Cryptocurrency price movements often reflect the project's position in the market. This unique feature helps investors to profit from the tokens of the DeFi protocol.
For example, users who purchased UMI coins from the decentralized cryptocurrency exchange Uniswap managed to earn 10 times their initial investment in just 4 months.
Price chart of UNI, the cryptocurrency of the Uniswap project. Source: TradingView
There are many other tokens in the decentralized finance space that can help their investors make a profit.
The top 5 cryptocurrencies in the DeFi space by capitalization. Source: CoinMarketCap
Unfortunately, investments in DeFi often run into some difficulties. Let's dive into them for a detailed review.
Decentralized Marketplace Issues
Most of the most popular DeFi protocols do not yet support all languages. For example, of the top 5 decentralized protocols, only one – Uniswap – is truly multilingual. This may reduce the number of active users of the platform.
The top 5 DeFi protocols in terms of transaction volume, targeted by project demand. Source: DeFi Pulse
There are other hidden pitfalls that prevent potential investors from entering the DeFi market. Among the pitfalls are the following issues.
- Complex technical components. For non-tech-savvy users, entering the DeFi market can be difficult.
- Lack of technical support in the local language. If an investor needs support, they must handle the request in the native language of the project. In addition, the language barrier can lead to potential losses if the investor does not understand all the information correctly.
- Limited functionality. Users often must use third-party resources and tools that incur additional operational costs.
As the impact of these problems grew, the DeFi market began to produce projects that offered solutions. BaksDAO is one of these projects. The project team is dedicated to solving the main pain points that users face when entering the decentralized financial market.
How BaksDAO helps avoid the pitfalls in DeFi
BaksDAO is a versatile decentralized financial platform with its own stable coin BAKS and governance token BDV. The project aims to be a global player, committed to providing high traffic and low commissions on the Coin Smartchain (BSC) blockchain. Solid Proof experts confirmed the security of the platform during the audit.
Among the advantages of BaksDAO are the following.
- With an intuitive and user-friendly interface, even new players can enter the DeFi market and start making money.
- Transparent asset management tool. The developers of BaksDAO emphasize the possibility of earning profits on the platform while controlling the assets in their hands.
- BaksDAO offers a great number of opportunities for its users. Among its features is the possibility to earn money by granting loans. In addition, users can get open payday credit in BAKS with low interest rates and exchange assets.
That said, the BaksDAO developers have shaped the project development platform in advance through a carefully designed investment plan and social outreach. For example, the team allocated about a quarter of the project's profits to the eco-program. This fact places the project in the category of socially significant projects.
BaksDAO simplifies market access by breaking down language barriers and unifying services under the roof of a versatile platform with an intuitive and user-friendly interface.