The conventional finance system often limits the passive income opportunity. When it comes to options, banks and financial institutions control the ecosystem – from savings accounts to investment portfolios. And, there are always fees, restrictions, and low returns. As a result, many are seeking alternatives that don’t need them to invest too much effort into managing their wealth.
DeFi is a cool way of taking away the middlemen and controlling things on one’s own. When it comes to DeFi, there are many ways you can earn passive income these days, whether staking, yield farming, lending, or more – without a middleman.
Let’s take a look at what is DeFi and what are the best strategies to earn passive income in the DeFi space:
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DeFi is a decentralized finance that uses blockchain technology to allow people to lend, borrow, and trade without banks and other intermediaries. DeFi utilizes smart contracts, residing on a blockchain, for self-executing contracts without human logic.
DeFi, unlike conventional finance which is controlled by central institutions, operates via decentralized platforms, removing barriers and offering greater access. The idea first took off with Bitcoin, but it really geared up once Ethereum launched in 2015, allowing developers to set up DApps that automate finance.
DeFi consists of three major components: smart contracts, DApps, and blockchain. Transactions are enforced by smart contracts, user interfaces are provided by DApps, and all above is recorded on the blockchain (Ethereum). What distinguishes it from other systems? It is open and clear. Anyone with an internet connection and a crypto wallet can access various financial services. This inclusive action opens up many passive income-earning opportunities through various DeFi protocols.
