So what is a DEX? DEX is short for Decentralized Exchange. What can you do on a DEX? Today I will explain what a DEX is and how you can use a DEX to generate some cash flow so the next time someone asks what is a DEX? You will have the answers.
I have recently installed the DeFi app on my PC, and I provide liquidity to the DEX. The DEX pays me an interest in providing this liquidity. I am currently getting over 200% interest on the funds I have provided. It is a little technical to do this straight on the DeFi app, but it is not really that hard, there is also an alternative easier option to get started that I will cover.
The only downside with the easy version is they charge you 15% for the convenience, but you can still make over 150% returns. OK let’s dive straight in and see what this DEX & DeFi are all about.
Centralized vs Decentralized
DeFi or Decentralized Finance is all about taking the 3rd party out of financial transactions. Example – When you want to send money to someone, you will transfer it from your bank account to theirs. The bank is the 3rd party. This makes it centralized; they keep all the transaction records; they charge the fees and have control of your money.
A bank has a chairman and a board of directors which control the direction of the back they make all the decisions which can affect your money and your account, and they have the control. If you need to borrow from them, you need all sorts of ID and have to meet certain rules which they stipulate. They have the control, and this is centralization.
A Centralized organisation like a bank relies on an individual to make decisions and provide direction for the business.
Decentralization is a systematic delegation of authority at all levels of management and in all of the organization.
On a DEX you could say the 3rd party is the blockchain and the use of smart contracts. This replaces the rules and decisions of a centralized organisation.
See what Wiki says about ===> Decentralized Exchange.
Bitcoin and Decentralization
Bitcoin is decentralized as opposed to fiat money. If the government decides to print more money to boost and get the economy going, they do. This is called quantitative easing. You have no say in this. The decision is centralized. The dollar is centralized. Side note – this also de-values that currency.
On the other hand, Bitcoin is decentralized. Bitcoin can not be manipulated the way Fiat currency can. Bitcoin was designed as a decentralized alternative to government money and therefore doesn’t have any single point of failure, making it more resilient, efficient and democratic.
OK, So What is a DEX
Decentralized Exchange (DEX) explained briefly and simply (Under 2 minutes)
What is DeFiChain
DeFiChain & DFI token explained in 2 minutes.
How can I Take Advantage?
A DEX like the one that runs on the DeFi app needs a pool of liquidity to operate, and you can take advantage of this. If you want to provide liquidity to the DEX, you get rewarded. The DEX will pay you compensation or interest in doing this. Depending on which coin you provide liquidity for depends on the interest rate, but currently, it is around 200%.
Each block on the DeFi chain is created in 30 sec. Rewards are distributed every 30 sec. There are currently 100 DFI distributed for every block. This is then divided up depending on how much of a share you have in that liquidity pool.
With the DeFi App, you can watch all this happen in real-time; you interact with the blockchain. It is 100% transparent & you have Full control, you have the keys.
To take advantage of this, you need to follow a few steps.
- Download the DeFi App
- Fund your account
- Add liquidity to the pool.
- Watch the rewards come in every 30 sec.
It really is that easy, but there is an even easier way to start, and that is at CAKE DeFi, even a complete Noob can get started at CAKE. Even if you plan to go on and interact directly on the DeFi app, I suggest you open an account at CAKE first. You basically need Cake to transfer your coin to the wallet on the DeFi app.
I would suggest starting at CAKE and transferring over to the DeFi app if you want to control yourself and go fully decentralized. Let’s have a look at CAKE.
Pool by CAKE
Cake DeFi – Cashflow from your crypto (3 min)
Cake is a managed way to create Cashflow from Crypto. Cake proved a few ways to generate returns on your crypto apart from liquidity mining. You can also Stake your coin at CAKE or use their Lapis service for a guaranteed return. You can read more about these services on my recent post about CAKE click on the links below.
====> How to Invest with Crypto | CAKE DeFi Lapis <====
====> What is Crypto Staking? <====
====> What is Liquidity Mining | CAKE DeFi Review <====
What are the Risks?
Returns of 200%+ seem absurd but are definitely possible in the DeFi world. I am doing it.
But what are the REAL risk? Let’s talk about them.
There are 3 different kinds of risks with a DEX.
- Smart Contract:
There is always the risk that there is some bug in the Smart Contract code that could be exploited. With a non-turing-complete DEX like DeFiChain this risk is generally lower, simple turing-complete Ethereum DEX like Uniswap however also don’t have such a high risk here.
- Project Risk
Are there any backdoors? Is the project independently audited? Is it open source? In general, everything is fine here for most large projects. For example, Uniswap and DeFiChain are open source. Everyone can check and verify the code themselves, and the projects also regularly contract external security audits.
- Impermanent Loss
The third and most complicated risk is that of an impermanent loss. In short, the risk is that the pool shifts in such a way and the prices of BTC and DFI, for example, also develop so that if you were to withdraw your liquidity from the pool now, you would make a loss. However, because of the arbitrage already mentioned, this always balances out in the long term, and this risk is only a temporary, short-term one.
Final thoughts on DeFi.
I think the world of DeFi is fascinating and will bring BIG things to the financial world. Once you understand what it is about the possibilities are endless. I have chosen to educate myself and get involved. I think it is a great way to earn a passive income from your crypto.
If you want to get started in the world of DeFi, I suggest you start at CAKE it is free to join 100% transparent, and it works. Once you get started, you can educate yourself more on the world of DeFiChain and transfer you liquidity over there for even greater returns than CAKE.
Cryptocurrency, Blockchain & DeFi are the way of the future, why not get involved now and educate yourself and start making Wealth with Crypto today…well what are you waiting for go and get your slice of the CAKE today.
Be the Best you can Be
❗ DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on 2dsirecrypto.com is my opinion only and general in nature. Always do your own research before investing any money. You should always understand the risks involved in trading and investing and seek advice from licensed professionals before undertaking any investments of your own.