What is DeFi lending and how to earn on it: review

defi lending review

A centralised financial system has many disadvantages. One of them is a monopoly existence probability that is gladly exploited by banks. This schema allows credit institutions to overprice their services in the absence of alternatives. DeFi emergence changes this situation. Let’s discover how a new movement challenged a traditional financial system and how to profit from it.

What is DeFi and wherein its power lies?

DeFi is short for decentralised finance. It is a general term for a decentralised and generally accessible ecosystem of financial services built on public blockchains.

The goal of the DeFi sector is to make traditional financial services offered by classic banks, like lending, accessible to everyone. Decentralised approach to operations and process automation with smart contracts and blockchain allow eliminating the need for middlemen.

Let’s discuss the main DeFi advantages over the traditional financial system.

1) Decentralised approach and process automation

Projects in the decentralised finance segment have no single control centre. All operations, be it providing services or registering operations on blockchain, are performed automatically. This approach rules out the possibility of fraud or human error. 

Usually, control over the project is in the hands of its users while governance is carried out by using special governance tokens. These tokens are distributed during various rounds of social programs and as a reward for activities. Users vote with tokens on accepting changes in the platform or service operations. This allows “hearing” the voice of each and every user, which means reflecting the interests of the users.

In classic banks, as a rule, control over the organisation is in the hands of a group of managers. They set tariffs, lay down service terms and control users’ assets. 

In the history of the financial market, there have been many incidents when client’s assets are missing in the centralised organisations reserves. To be certain of how easy it is for classic companies to manipulate money and reporting, google the story of the German Wirecard AG. If the organisation were decentralised, this scenario would not be possible.

2) Favourable terms of service

Process automation in the DeFi market allows creating autonomous financial systems. This approach implies no need for a huge workforce that helps the project with lowering operational expenses. These advantages of decentralised systems combined allow offering competitive prices.

Centralised financial organisations are forced to maintain workforce and eventually include personnel costs in the final service price. Also, top management bonuses are usually included in the price management calculations in classic banks.

3) Capabilities to retain anonymity

In the DeFi market, it is possible to get a service without revealing an identity. In traditional banks, these capabilities for users are cut to a minimum. For example, requesting a loan in a classic credit organisation takes a whole package of identification documents.

4) Available 24/7

The DeFi market is always available. To get into a classic bank, it has to be open. And if you need a loan during the weekend, it may as well be necessary to wait for the start of the working week.

5) Opportunities to get passive income

Yet another advantage of the DeFi market over the traditional financial system is the wide raw of opportunities to organise passive income. For example, it is possible to earn on loan granting. Of course, classic banks also have their offers, like deposits, but instruments of traditional credit organisations fall behind DeFi offers in profitability.

What is DeFi lending?

The decentralised finance market offers an alternative approach to lending that implies absence of middlemen and full process automation. This is a big part of why the popularity of DeFi is constantly growing. This is shown, among other things, in a positive dynamic of total value locked in the decentralised finance projects:

DeFi Pulse

The graph showing the total value locked in the DeFi projects. Source: DeFi Pulse

Lending terms in the decentralised finance segment can significantly vary. What remains unchanged is low interest rate, high accessibility and security level.

How to start earning on DeFi lending

As discussed previously, DeFi projects focused on lending need liquidity. The source of liquidity is the market participants. In exchange for providing assets, DeFi projects are ready to share part of their income. Therefore, to start earning, it is needed to:

  • Choose DeFi protocol;
  • Unlock assets for the need of the project.

This being said, a user on its journey towards passive income in the DeFi market can face several difficulties. For example, decentralised protocols often have confusing interfaces that are not easy to use. The solution was offered by BaksDAO developers. It is the second generation DeFi protocol with an intuitive interface and suggestions system accessible even to new entrants with no experience in crypto industry that wish to get passive income.

DeFi lending

The BaksDAO platform screen

The BaksDAO system offers opportunities to get open-ended crypto-backed loans and earn on depositing assets. Here are the steps to follow for earning with the project:

  • Link cryptocurrency wallet, for example, MetaMask.
  • Deposit cryptocurrency to BaksDAO with interest rate accrual function. The system supports ВТСВ, ETH, BNB, WBNB, BAKS и USDT. User’s crypto assets are locked in the platform’s smart contract.

Backed by the deposited cryptocurrencies, BaksDAO emits stablecoins BAKS the exchange rate of which is pegged to the US dollar 1:1. The platform is granting users loans in BAKS with an annual rate of 11%.

Here is how BaksDAO offering differentiates from alternatives:

  • The platform has an easy-to-use and yet very functional interface. BaksDAO is well suited for new entrants and experienced market participants;
  • Platform’s user can withdraw their assets including accrued interest at any moment;
  • The project successfully passed the security audit Solid Proof. In contrast with many alternative DeFi protocols, BaksDAO guarantees the safeguard of the users’ assets.

To sum up, the BaksDAO team solved several problems that users faced in the DeFi market. For example, the project offers market participants an intuitive interface thanks to which earning on a decentralised finance market has never been easier. Also, Baksdao.Finance differentiates among competitors by offering high yields.

Information for investors and those who would like to earn! In April 2022, BaksDAO project launches IDO. It is a great opportunity to stock up on tokens of the promising project that can potentially bring manifold profits. History has proven that investors of the platforms that solve current market problems get good opportunities for profits.

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