DeFI Diaries#1- AAVE: Why is it Getting so Popular?

Recently I had been focusing a lot on the different CeFI (Centralized Finance) platforms like Nexo, Crypto.com and Celsius. I found several advantages that these CeFI platforms offered compared to DeFI ones.


Advantages of CeFI over DeFI


#1 Steady Interest Rates


All CeFI platforms offer a fixed interest rate so you can be very clear about what is the reward you can expect at the end of a particular period whether you plan to invest for a few months or for a full year. DeFI on the other hand is highly volatile and the rate fluctuates everyday. This makes the expected interest you will receive highly volatile and uncertain.


 


#2 Wide Range of Coins you can Lend


DeFI is mostly concentrated around ERC20 tokens with a big bulk of the market being driven around DAI. This makes CeFI more appealing for people who are planning to lend non ERC20 coins like BTC, LTC, XRP, XLM etc.


 


#3 Additional Benefits on Staking Native Tokens 


If you stake a particular amount of native tokens like NEXO or CRO then the interest rate you get is further enhanced which gives you incentive to invest more in developing the platform.


 


Despite these clear benefits DeFI has been growing at a much bigger rate than CeFI and for people who give a high priority to security DeFI is a clear winner due to the following reasons.


Why is DeFI Getting so Popular?


#1 Not Your Keys Not Your Coins


DeFI platforms are non custodial so you never lose control of your coins. This means you can lend out the tokens while keeping them locked safely in your Metamask or Ledger. Earlier Metamask was the only wallet that could be linked to DeFI platforms but to ensure higher safety most DeFI platforms now allow lending through Coinbase wallet and Ledger. In my opinion lending through Ledger is the best option specially if you are dealing in large amounts.


 


#2 True Blockchain


DeFI is true adoption of Blockchain philosophy of building a trustless economy which can not be manipulated by individuals. This ensures the rates are driven by actual market demand. This also avoids control measures like KYC and other regulations. This is specially important in countries with a government that like to control it’s population tightly and in the future they can pressurize CeFI companies to divulge all data about their customers.


 


#3 Huge Growth Potential


DeFI is evolving and growing each day. Biggest constraint is lack of coins on offer which should be addressed by the next batch of DeFI platforms like Kava which are planning to include non ERC20 tokens for lending.


 


AAVE will drive DeFI Adoption


During my initial investigation I found that AAVE is the best platform for people who don’t have prior experience in DeFI as it is very easy to navigate and use and also it offers the best lending rate for DAI compared to it’s competitors. 


Check out the short video below to see how straightforward and intuitive the AAVE interface is.


https://www.youtube.com/watch?v=kPMPRXgPchg 


 




Cheers,


SamBTC


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My Youtube Channel: https://www.youtube.com/channel/UCzVmB63Uy85-Wg9e0IeNIzA


 


 


 

COMMENT

17

Chesatochi .
04 Aug

I mix of both it is important to have. Custodial versus non-custodial is the question! 

17

Sam BTC
04 Aug

Agreed! Considering the very few coins currently being supported by DeFI it makes sense to balance with CeFI. I prefer Nexo in the CeFI space, which one is your favourite?

21

Idea Clipper
04 Aug

Thanks Sam.. For this well explained comparison

17

Sam BTC
04 Aug

Glad you liked it.

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