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Introduction of Defi, the contrast between fungible and nonfungible tokens

What is Defi?
Defi is a financial mechanism that creates transactions without intermediaries like middlemen, brokers, banks, or exchanges. Defi is an open system built on the internet age that uses blockchain technology smart contracts. The platform allows users to transact funds with an opposite party on continuous price fluctuation. The basics go back to 2017 when Ethereum blockchain popularised smart contracts, which mentioned Defi in implementing. Defi is single-layered with compact building blocks that allow users with the end-to-end transaction in cryptocurrencies.

As the crypto market is on a roll, users can lend/borrow or earn interest using MarketDAO.Now MarketDAO is among the first to implement the Defi platform for their users without any intermediaries. A policy implemented by Marketdao was brilliant in the early days; it allows users to borrow Dai, a token attached to Us dollar. Through a smart contract which continues a process of liquidation, repayment, and loan. Market emphasizes letting the Dai token stabilize decentralized and autonomous like a bot.

This process was picked up by many people involved in cryptocurrencies, for, e.g., lenders earn a huge chunk of interest they earn by lending millions of dollars. A lot of people followed the steps of this process as the control button was in the hands of users and not intermediaries.

Users found that the security of their assets was in their hands rather than depending on others was the key factor.

Some of the benefits were the transfer of funds quickly rather than waiting for confirmation from the middleman. Markets are running 24 hours a day. You can easily transfer millions without any credit checks, and the confirmations are quick. Easily getting in and getting out policy instead of locking the funds for a specific time being. Transparency of the funds, where they are held, and the interest users get without hidden cost.

If we look at another side of the coin as a traditional financial institution, all users don’t have access or are granted permission. Funds that get a stuck or limited percentage from the investment can be withdrawn. There are many hidden charges on the profit and investment. Centralized financial institutions can cut the interest rate at their own convenience. Some of the basic hurdles were addressed, and due to this dissatisfaction, many investors diverted to Defi.

There are a lot of decentralized applications like the dapps, which is the first of all who let’s perform financial ledgers called the blockchain. Which everyone knows is made of popular bitcoin. These smart contracts, also known as Defi protocols, are often implemented using open-source software that is developed and maintained by a communal of developers and other stakeholders. Metamask is one of the popular to introduce this system through browser extension with beef security to use Ethereum through a digital wallet. Defi has been compared to both the initial coin offering craze of 2017 and the cryptocurrency bubble. As per the data, more than $100 billion is being invested in this platform.

As everyone knows, transactions are untraceable, and it could lead to hacking or not knowing where and how inexperienced investors are using the asset. The person or entity behind a Defi etiquette may be unknown and disappear with investors’ money by showing flashy APR percentage on investment. Proper research is needed before investing because the code of the smart contracts are open source which can show the info on the amount invested, which could create instability, and investors’ fund can hop from one platform to another without knowing. It is a surprise that half of the crypto crimes were related to Defi. This happens due to poorly framed regulations, or both the developing party and the marketing influencers are playing the same hand. They can use the old pump and dump trick to lure initial investors on a high price note and get out of the project early on.

In our view, Defi has shown positive and negative aspects of its kind; many investors follow proper channels and do a lot of research before investing their chunk of money. In this modern-day age, nothing is foolproof in advance trading. Yes, the security and filtering ponzi schemes are at their highest level, and I hope they will improve in the coming days.

Fungible token:
Tokens are a form of value that could be decided among the community or by the centralized institution. For many years, the token being used as a barter system, which is equivalent to a certain amount of money or goods. Basically, tokens are considered as a currency to exchange money or goods. In modern days, a token means a digital pass used as a currency to pay for anything online. A token could be a mix of 16 digit/alphabet numbers to be redeemed for any item purchased online is also called a token.

The fungible token being used by the world in any form or shape only recognizes the token means the value is recognized at any means. It is interchangeable and can be traded openly, and no one is its owner. Its common token is used for trading or giving according to the sum purchased.

Nonfungible token:
A nonfungible token means a limited-edition token of any collection and its ownership. The collection’s popularity decides the value, and each NFT is a single owner before its traded. Importantly, there will be only one owner every time it’s traded, and that’s why it’s called the nonfungible token.NFT’s are one of their kind, meaning there will be only one owner created by limited edition, which is not separable or changeable. It’s one of its kind and only to be found with the proof of ownership and ultimately one owner. The value of the NFT is decided by the rare phenomena and how popular it is.

Nonfungible tokens can be of digital art, games, music, films, etc. Overall, nonfungible tokens cannot be traded openly like fungible because the concept of ownership and digital print is involved, making it special for the owner as there are no others like that of any collection.
The market has the value of being on top is because of ownership, and it’s only one owner at a time, and it can be traded to another owner with an increase in price and profit. The market is booming at the moment because the scenario is set to all the parties involved, like creators, the marketplace, and buyers. Each of the parties has their share, and they are getting decent returns

 

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