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Decentralized finance gives anyone access to basic financial tools that a bank can offer. DeFi allows people to earn interest, take out loans, and manage keep their money secure.
Top DeFi offers (June, 2020)
DeFi is still in its infincany. However, being an early an adopter can have many benefits. Right now platforms like Tezos (XTZ) offer fantastic staking rewards.
Binance Interest Rate: 6 - 7% APR
Binance supports staking of several other coins. Some offer up to 15% APR!
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Top Post of the week
Being Bearish About DeFi
The hype surrounding DeFi projects has gained massive momentum this past month. As always, crypto influencers have begun prophesying its take over and the mooning of DeFi coins. I am not here to say that DeFi has no potential. I think it is great technological progression and has lots of value. However, lets examine the bearish side of DeFi
The Power of Central Banks
Banks have trillions of dollars worth of assets and thousands of employees. Lets compare the assets of the 2nd largest financial firm in the U.S. (JP Morgan) and all of DeFi
As you can see, DeFi is a little baby compared to traditional finance firms. Why does this matter? All DeFi loans require some form of collateral. Large banks like JPMorgan do not require collateral and rather they rely on credit scores. The option of not having to put down collateral is a preferable feature for the majority of people taking out loans. Also, the assets these firms possess (stocks, bonds, etc.) will likely have a significantly greater return than any DeFi project. They can guarantee interest rates on loans whereas DeFi interest rates (much like all of crypto) are much more volatile. Until there is much higher volume, this volatility will continue to be an issue.
One of the main advantages of DeFi is that interest rates are completely detached from government interest rates. Right now this is not that big of an advantage considering the federal interest rate is practically zero. This allows banks to loan money at very small interest rates. Historically, interest rates are somewhat cyclical. In the future if interest rates increased greatly it could give DeFi the opportunity to really grow. Right now I just don't see enough incentive for the majority of people to use DeFi
Large institutions or companies are generally risk adverse with their finances (don't hold volatile assets). They also acquire assets that are insured. All major financial firms in the U.S. are FDIC insured. The only thing securing DeFi is the protocol its built on. While this (from an encryption point of view) is extremely secure it is susceptible to user error. If you lose your keys or send coins to the wrong address there is nothing you can do to get your coins back.
I kept this article short and simple. These are the main points that I wanted to touch on. DeFi has continued to progress into very powerful technology. But saying that it is going to take over the financial world is a big stretch.