You may be new in the world of cryptocurrencies or an experienced investor who has a considerable amount of knowledge under your belt, but you can always learn more. If you’re planning on becoming a serious cryptocurrency investor, one thing you need to be well-versed in is DFI tokens.
Even though decentralized finance, or DeFi for short, is just one part of the entire cryptocurrency market, they’re still an important part. It’s one of the fastest-growing sectors in the entire cryptocurrency industry, and if you don’t know much about DeFi and the DFI token, it’s time to change that.
What is DeFi?
Before we get into the topic of DFI tokens, let’s take a minute to explain what DeFi is. Short of “decentralized finance”, DeFi is a term used to describe a class of financial products that are governed by smart contracts and created on the blockchain.
DeFi includes a class of financial products such as protocols and applications that aim to transform the financial industry into non-custodial and decentralized. This means that anyone who owns DeFi/DFI coins maintains control over them and is their owner.
Currently, most DeFi applications and protocols are built on Ethereum, which is a global, decentralized cryptocurrency network.
What are DFI tokens?
To explain what DFI tokens are, we’re going to have to talk about DeFi coins as well, as these two terms are often used interchangeably.
While they do have many similarities, the DeFi coin and DFI token have some differences that are important to mention.
DeFi coins are basically the digital versions of flat coins. You can transfer the value of the coin during a financial transaction. DeFi coins are built on native blockchain networks and are often named after them.
DFI tokens, on the other hand, also transfer value, but not strictly in a financial sense. For example, you can use asset tokens as a representation of a physical asset or utility tokens as a password. And let’s not forget about NFTs that represent unique items such as, for example, digital art.
DFI tokens are made up of a diverse set of cryptocurrencies that are native to decentralized, automated platforms that work by using smart contacts. With this token, users can gain access to a variety of financial services and applications that were created on the blockchain.
Anyone who knows anything about the blockchain knows that blockchain-based services and apps have a lot of potential in them. And since global blockchain spending is expected to hit $19 billion by 2024, it’s easy to see that this isn’t some passing trend.
How to invest in DeFi tokens
A lot of people are under the misconception that the only way you can invest in DeFi tokens or coins is to do it in DeFi protocols. However, that isn’t the case because most centralized cryptocurrency exchanges list popular DeFi tokens.
If you know how to buy cryptocurrency, you probably already know the basics of investing in DeFi tokens. But just in case, let’s go through all the steps:
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- Create a crypto wallet. If you’ve invested in cryptocurrencies before, you probably already have a crypto wallet. But if you didn’t, you need to create one because you will use it to store, receive, and send DeFi tokens. Some wallets are also integrated with the exchanges where you purchase tokens.
- Purchase your tokens. Once you have your wallet, you need to connect it to the governance platform which is used by the protocol of your choosing. From there, you can simply purchase the DeFi token you want and it will be transferred to your wallet.
- Borrow or lend assets if you want. One feature DeFi coins have that other crypto coins don’t is that you can borrow and lend assets if you want without losing the custody of these assets. For example, if you lend your tokens out, you will have the chance to earn interest.
Final thoughts
Unless you’ve been living under a rock for the past couple of years, you have heard of cryptocurrency. And if you don’t know about anything other than Bitcoin or Ethereum, it’s good to educate yourself further on topics such as this one.
DeFi tokens are the future of digital currency and the Blockchain market, so if you want to be smart about your digital investments, don’t think about them too much. You can be sure that DeFi tokens are a smart choice.
