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19 April 2021

DeFi’s money markets are finally luring in institutional investors

DeFi’s money markets are finally luring in institutional investors


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With near-zero interest rates expected for the foreseeable future, investors are gearing up to move their funds into alternative locations for securing wealth.

Since money market investments are virtually risk-free, they often come with meager interest rates as well.

However, while much of the supply of the world’s first cryptocurrency remains in storage, the DeFi industry is constantly producing alternative platforms for interest-bearing payments through smart contracts, which increases transparency by allowing investors to view and track on-chain funds.

The average return for DeFi products is also much higher than in traditional money markets, with some platforms even offering double-digit annual percentage yields on deposits.

From asset management to auditing smart contracts, the DeFi space is creating decentralized infrastructure for scalable money markets.

According to Stani Kulechov, co-founder of the Aave DeFi protocol, rates are high during bull markets because the funds are used to leverage more capital, with the cost of margin pushing up the yield.

Of the many trends DeFi has set into motion over the last few years, yield farming has attracted quite a lot of attention.

Yield farming is when the network rewards liquidity providers with tokens that can be further invested into other platforms to generate more liquidity tokens.

Decentralization is the next frontier for finance, and as prominent investors continue to engage with the DeFi space, a decentralized economy seems all but inevitable

Participating in the burgeoning environment may be a risky bet today, but what decentralized finance platforms learn now will be the foundation of the robust DeFi applications of the future

According to Bukov, the higher interest rates of DeFi platforms are “absolutely sustainable.” He added:

From smart contract malfunctions to the unauthorized withdrawal of community funds, the DeFi space is a place of both miracles and nightmares

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