Five (5) Things Decentralized Finance Enthusiast Should Know.

NFT has become the talk of the town lately. But amidst that, the decentralized finance sector of the crypto industry is still growing. As a DeFi enthusiast, there are things you should note. Some of these include;

Impermanent Loss

Impermanent loss seemingly represents the “REKT” term in crypto. It has shut out several conventional and institutional users from being a liquidity provider in a pool.

Impermanent loss refers to the difference between hodling assets in an Automated market maker and hodling them in your private wallet.

Impermanent loss is the loss suffered when a token’s value in a pool differs from the value of the same asset in an open crypto market.

Transactions Can Fail in Defi

A DeFi enthusiast needs to know that not all transactions are approved. When things go wrong on a DEX, you tend to lose the fees paid. Transactions carried out on DEX  are through smart contracts, and users have the privilege to set their transaction fees even though the default option is available.

Read also: Top Three NFT Marketplaces You Can Mint NFTs

IFOs are the New IDOs

Every Decentralized Finance enthusiast knows the term IDO “Initial DEX Offering.” It is a project’s native token launching on a Decentralized Exchange like pancakeswap.

“Initial Farm Offering” is an asset sale event promoted by Decentralized Exchanges. Looming DeFi projects uses IFO for fundraising events. It also involves liquidity providers locking funds in a liquidity pool to earn.

Uniswap not being the Only Decentralized Exchange

Though Uniswap is the largest DEX, there are other decentralized exchanges like Sushiswap, pancakeswap among others.

Code Is Not Always Complete in Decentralized Finance

Finally, Most DeFi protocols are relatively experimental even when they are available for use.

As an expert in the DeFi aspect of the crypto industry, it is imperative to know that you are part of an unfinished experiment, and anything can happen, even though there is an excellent audit carried out.

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