DeFi Probably Won't Be as Big as People Think
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
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.
June 20, 2020
The Best DeFi Coin for Staking and earning interest
Unless you have been under a rock for the past few months, you have noticed the extreme rise of DeFi cryptocurrencies. DeFi is still certainly in its infancy but there are already dozens of coins competing to provide the best financial services. Lets focus on interest rates and compare the best of the best!
DefiPulse.com has a great database of Defi Rankings if you want to check it out. These rankings cover all aspects of DeFi (lending, dex's, etc), so the stats you will see are not specific to interest rate.
Look how similar the Tezos chart is to overall locked DeFi value
Interest Rate: 5 - 7%
Coin Price: $2.65
Market Cap Rank: #12
Right now the best place to stake Tezos is on Binance. All you have to do to stake is purchase Tezos on your Binance account and you will automatically start earning interest for holding Tezos on your Binance wallet. The average monthly interest rate is currently 6% (beating 5% on Coinbase). You can find other coins there that you can stake for an even higher interest rate. However, these coins are much smaller in market capitalization and more susceptible to crashes in price. Mitigating risk is extremely important when staking coins and Tezos is currently the best option.