DeFi is also tied to the concept of yield farming for advanced traders who are into high-risk investments by scanning different tokens for potential ROIs. A very popular form of yield farming is liquidity mining where free tokens are given to attract new users.
DeFi is also called lego money because decentralized apps, or dApps, can be stacked together like legos to build financial products for a maximized ROI. Since the codes of DeFi apps are open and public, anybody can access them and build new apps from their codes.
Aside from the above-mentioned advantages of using DeFi that are causes of its surge in popularity, is the seriously growing participation of institutional investors that is leading to further trust and confidence in this nascent technology.
What’s more, it will be able to reach out to the unbanked and underserved and help them finally open accounts that were denied due to stifling banking requirements.
As many believe in DeFi’s potential to disrupt present systems, skeptics are not yet sold to the idea it proposes. First, smart contracts stand the risk of hacks. Brilliant as it is from a technological standpoint, smart contracts, once verified, cannot be undone and undetected bugs can be a constant risk due to that immutability.