DreamAnalysis | What Is DeFi? EP01
2024-09-21

✨ Welcome to the first DeFi educational content! 

📅 Today, we have prepared the first DeFi lesson for you, and we want to present this sweet topic completely and comprehensively in this channel. In this lesson, we want to cover the basic and fundamental concepts of DeFi, review DeFi in general, and assess the risks and how to generate income from this space.

🧩 To better understand DeFi, it is better to first become familiar with the concept of "Passive Income." The income we have in life is divided into two types: active and passive.

 ⚡️ Active Income 
Active income means the income that a person must earn every day to receive a salary in exchange for the work they do. For example, an employee who earns $10 per hour has active income because they only earn money as long as they work, and if they don’t work for an hour, they won’t receive that hour's wage. In the crypto market, active income can be exemplified by futures trading. Although you don’t get paid hourly, the money you earn depends on market conditions. However, if you stay away from the market for a week and don’t make any trades, you won’t make any profit. Most jobs and most of the population have active income.

 🔄 Passive income 
Passive income means the income that a person doesn’t need to work every day and hour to receive in return. For example, if a person deposits $100,000 in the bank and the bank gives them a 5% annual interest, after a year, they will have $105,000, and they didn’t do anything for the $5,000 they earned. Of course, we must consider that this person took on a risk and put their money at risk because the bank might go bankrupt, and all their capital could be lost. In the crypto space, DeFi acts as a passive income where the individual earns profit not based on time spent but by taking on risks.

🌱 Now that we understand the difference between active and passive income, we will better understand the concept of DeFi.

 🔑 What is DeFi? 
DeFi (Decentralized Finance) in English means "decentralized finance." In fact, the DeFi space is a kind of decentralized bank where you can do things like lending, borrowing, creating liquidity, staking, etc., completely decentralized. Given its decentralized nature, all the money exchanged in between is moved by the platform's users, and the profit and loss of this process are also in the hands of the users.

💵 For example, you can create liquidity in decentralized exchanges and receive transaction fees when other users make trades, or you can lend the money you have and earn interest in return for lending it to another user. All your contracts and transactions are recorded on the blockchain and can be tracked. In future lessons, we will examine all DeFi income generation methods and cover all methods step by step and practically.

✅ So far, we have mentioned the good parts and advantages of DeFi, such as DeFi being a passive income that doesn’t require daily work and is completely decentralized. But there are also risks that may keep many people away from this space. Let’s go over the risks of the DeFi space.

 ❗️ DeFi Risks 
Let’s move on to the risks you must accept when entering the DeFi space. First, let’s start with the market trend. In DeFi, we buy various coins based on their use cases, and it is possible that these coins may lose their value over time and be worth less than when they were purchased. So, if the market is bearish, the likelihood of losing money in the DeFi space increases significantly. Of course, in future lessons and when we reach advanced training, we will teach you how to profit in a bear market. However, if the market is bearish, the chances of losing money increase.

🔔 The next risk you must accept when entering DeFi is related to device and wallet security. There are always hackers trying to seize your assets in any way possible, and since DeFi is completely decentralized, there is no way to pursue it if your wallet gets hacked. So, by entering DeFi, you must also consider the possibility of being hacked, in which case all the capital you have invested will be lost.

📍 The last risk is the platforms and websites to which we connect our wallets. By connecting your wallet and signing digitally, which is stored on the blockchain, the platform in question will have limited access to your wallet. If you sign the wrong contract or the site gets hacked, the assets in your wallet may be lost.

📚 These three risks are the most important in DeFi. But how can we reduce and control these risks? First of all, you must manage your capital. Given the risks of DeFi, the maximum amount of capital that I think can be invested in DeFi is 10% of your crypto capital. For example, if you have $100,000 in the market, invest a maximum of $10,000 in DeFi so that if your investment is lost, only 10% of your total capital is destroyed. The second solution is that you can increase security by creating several wallets and distributing the 10% of the capital you want to enter the market between them so that if one of the wallets is hacked, only a small part of your capital is lost.

🤝 I hope this lesson has helped you. DeFi training will be provided every Saturday so you can learn this skill without any cost. Next week, we will have training on the initial steps and prerequisites for entering DeFi, so I recommend continuing with us.

 ❌ Disclaimer 
The information provided in this lesson is for educational purposes only and should not be considered financial advice. DeFi is a highly volatile and risky market. It is essential to conduct thorough research and consult with a financial advisor before making any investment decisions. The channel and its creators are not responsible for any financial losses incurred.