Decentralized finance is still considered practically new in the crypto industry. What is DeFi you asked? Well, DeFi stands for decentralized finance which is an ecosystem of financial apps built on a blockchain that operates independently. It does this by cutting off the central authority from the system.
The number of DeFi platforms have skyrocketed due to some investors realizing the benefits of decentralized exchange in the cryptocurrency industry. The popularity really lies in the fact that it creates a stable and transparent financial structure.
There are a number of DeFi apps that have been developed since DeFi made its debut. Some of these apps are Uniswap, Compound, Open Sea, and YIELD which is the one we’ll be focusing on today. DeFi has an ever-growing number of platforms and many more are in development as we speak.
Basics to Yield.App
Yield.app is one out of the many DeFi platforms and its mission is to provide an innovative platform that bridges traditional and decentralized finance. They aim to do that by offering high-return investment funds that don’t rely on unstable national currencies or pure speculation.
YIELD believes that everyone should have the access to the best investment opportunities, regardless of their financial or technical knowledge. The founders also intended Yield to be inclusive, accessible, sustainable, and to simply enhance its clients’ financial freedom and well-being.
As mentioned on YIELD.App’s official whitepaper, decentralized finance has generated a significant amount of excitement about the potential of open-source instruments, and they believe that widespread adoption can only happen through the help of mobile applications that not only provide the benefits offered by DeFi, but also is safe, secure, and convenient.
Yield has been designed in order to accommodate the needs of risk-averse investors who are interested in portfolio diversification in order for it to instill trust in a risky environment. It also allows crypto-literate users to experience DeFi with ease.
What Does Yield Have to Offer?
Yield aims to make DeFi accessible above all else. Thanks to this intuitive app and web platform, a user or a client can just simply deposit both crypto and traditional currencies and then select an investment fund that suits them best. Yield operates under a banking, security, and asset management license that is managed by a team of capital markets, fintech, cybersecurity, and crypto professionals. At Yield’s strategy core is the YLD token which will allow users to boost their APY, earn interest on their tokens, and support Yield’s ecosystem.
Yield has two key components that are not found in most DeFi applications out there. These are the bloomberg-esque terminal on the backend, and a mobile banking application in the frontend. Yield also states that it is constantly monitoring and evaluating the most profitable market-neutral strategies across the DeFi system, such as liquidity mining, arbitrage, liquidations, margin & collateralized lending, and other income-producing strategies. This highly sophisticated risk management process will allow their users to have a better balance between risks and rewards.
Yield has already set its goals and those goals are meant to be achieved. But, DeFi as a whole is not without its flaws. There are still risks when it comes to the industry and having a platform that can go around that can be a game-changer.
1. Human Error – Most of DeFi’s common risks are due to human error itself. There are wide varieties of instruments out there that you can misuse very easily, which can lead to a huge loss.
Yield’s Solution – They minimize those risks by curating a list of well-tested and audited strategies that are assembled by industry professionals. All your activities within Yield’s platform are secured in a safe environment that eliminates the potential for human error when it comes to choosing your DeFi strategy.
2. Smart Contract Risks – This is in regards to the instruments used in DeFi such as lending platforms and decentralized exchanges which are governed by smart contracts. These contracts cannot be stopped once it is released on the blockchain so if you are unfortunately using an unaudited contract, chances are you may be exposed to potential errors.
Yield’s Solution – They give you thoroughly audited contracts and rely on detailed reports by our trusted partners.
3. Fraud Risks – Promises of low-risk high return investments can be tempting thus it allows others to create malicious tools in order to lure unsuspecting users and endanger their funds.
Yield’s Solution – Thorough audits and analysis by Yield’s team eliminates fraud risk almost completely. In short, if the platform does not recognize the workings of a certain tool, it certainly won’t be allowed within the platform.
4. Market Risks – Providing liquidity on decentralized cryptocurrency exchanges can expose you to price swings. The uncertainty of going to absolute zero can be dangerous for your assets.
Yield’s Solution – The platform is conservative and hedged. You’re also allowed to add optional insurance so in case a sudden drop in crypto asset value happens, it will not result in losses on your side.
5. Liquidity Risks – Some DeFi tools that are available require depositors to lock their assets for a specific period. This may result in a situation wherein you’re stuck and can’t exit all of your financial positions immediately.
Yield’s Solution – A run on the bank scenario with Yield is impossible since they rely mostly on liquid positions while securing fiat reserves on illiquid ones. This ensures their client’s freedom of withdrawing anything on their account whenever they please.
6. System Risks – Liquidity mining is the usage of crypto-economic incentive mechanisms to make users behave a certain way to benefit the ecosystem. Most strategies combine these mechanisms, some of which may get too complex, which may result in unpredictable outcomes.
Yield’s Solution – A simple way around it is to use mathematical prediction models to map out edge cases and also employ automated monitoring systems in order for you to track certain indicators that signal their approach.
Having some of the most renowned companies in the industry as Yield’s trusted partners such as BnkToTheFuture, BitGo, Pal Capital, Digital Strategies, etc., is just an example of how well-structured Yield is. Having the platform to be put on the forefront is a statement on how promising Yield can be.
Yield is not just aiming to be another DeFi platform. They aim to deliver an experience to a wider audience to which they put the community in mind at all times in order to achieve this vision. By listening to their users’ feedback, they are able to build an increasingly accessible platform.
The bottom line here is no matter how good a platform can be, you still hold your future. It is encouraged for you to explore more on what is DeFi if you really want to succeed in the crypto industry.
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