What is Defi staking in crypto?
What is Defi staking in crypto? We call it decentralized Finance; before we understand Defi, let’s know how Centralized Finance works. Let’s take a simple example here to understand that Mr A. has more money than he needs and wants to use that money somewhere to invest and make a profit. So, he will invest this money in a bank or a company that will take his money and give him a sure profit, which will be fixed.
What is Defi staking in crypto? And now there’s a Mr B. on the other side; he doesn’t have money. But he wants to do business; he will borrow a certain amount from a bank or company by fixing an investor. Now the bank or company in the middle will give Mr A’s money to Mr B and receive more Interest than Mr B. And give Mr A. less Interest and keep his profit in the middle.
The bank or company in all these processes is centralized; we call it Centralize Finance. We assume there is no bank or company in between. Both Mr A and Mr B can benefit because the profits that banks hold can be divided between them. So here the question arises: why is there a need for a Decentralized Party? The reason for this is trust.
What is Defi staking in crypto? People do business or transactions because of the trust people have developed in centralized Parties. The money banks took from Mr A and invested in the industry, and how much did they earn? Mr A doesn’t know the profit; he only takes his fixed profit.
Decentralized Finance (DeFi)
We understand what Defi is; the Decentralized Finance System is called Defi in the cryptocurrency world. How it works; the bank is replaced by Smart contrast, and Mr A’s investment is replaced by Crypto Assets, such as BTC and ETH, etc. Mr A can get some money on monthly or annual Interest by depositing his Crypto Assets, and Mr B will also have Crypto Assets that work in intelligent contract coding.
What is Defi staking in crypto? And both Parties can also track their Assets in the Smart Contract. In the beginning, people did not trust Defi, but now Defi is being used a lot over time. And Defi market capital in September has reached about $45B by 2022. You can click on this link to see a list of Current Market Capital and Defi Top Coins. Whenever Mr A or B pledge their crypto Assets to Smart Contract or does Deposit, explain the process in Smart Contract is also called Staking.
What is Defi staking in crypto? You can do centralized Finance only to the rules and regulations of the bank and its country. You live in India and cannot borrow money from a bank in the United States, but in Defi, you can do that from any country. You can take some Stable Coins from any other country by mortgaging your crypto Assets in a Smart Contract.
There are some limitations in centralized Finance, but there are no limitations in decentralized Finance. When you deposit your money in centralized Finance, you cannot track it. You can track your crypto assets where your money is parked to invest and in Defi. You can work globally in Defi and transparently treat your Assets. That’s why Defi has a future, and it’s called Finance 2.0.
What is Defi staking in crypto? The point we haven’t discussed yet. That is, the price of Bitcoin, ETH, etc., keeps increasing. That’s why when you mortgage your Assets now; you need a coin whose cost must be stable so that Transaction and Calculation are more straightforward and transacted. So that’s why Stablecoins were created.
USDT and USDC were first launched by a company called Maker, and they also gave us the concept of Defi. The need for Stable Coins has been felt over time. So, many stablecoins have launched in the market, due to which Defi is getting a lot of Booms. To understand crypto more deeply and quickly, you can read all our blogs which are as follows: