What is DeFi?

Since the launch of Ethereum in 2015, we have seen a revolution in creativity from developers around the world. Building a variety of applications and use cases for cryptocurrencies, the one that has taken the world by storm over the last few years is Decentralized Finance (also known as ‘DeFi’).

The concept of DeFi is both very similar and very different from the types of financial solutions people around the world have adopted and used for hundreds of years. With traditional banks and custodians, you are able to earn interest on your assets, borrow, lend, interact with derivatives, trade, and purchase insurance on your funds. Then the advent of Bitcoin introduced peer-to-peer transactions. Sending and receiving assets without requiring any intermediary just as you do with cash transactions.

We are now at the next stage in evolution with blockchains like Ethereum bringing new innovations to the financial industry. Innovations that allow anyone around the world to access peer-to-peer financial tooling. Innovations that give you similar tools to those that you receive from a traditional bank, but in a permissionless and pseudonymous manner.

Why is this important, and why should you care about DeFi?

Because of how these solutions are built DeFi unlocks significant advantages over their traditional banking counterparts.

• Permissionless: In order to access and use an application, you don’t need to ask anyone’s permission. You are free to do as you wish.
• Transparent: All transactions are on chain, meaning it is impossible to hide what is going on “behind the scenes”; something that is all too common in many corporations.
• Reliable: You are able to use your funds as you please, at any point in time. Send, receive and trade 24/7, 365 days a year.
• Privacy: You can interact with DeFi pseudonymously, so you can keep your personal information private.

How does this work?

In applications like Numio, our goal is to offer these types of services to anyone, anywhere around the world, regardless of your background. We enable you to buy, sell, trade, invest, and interact with all forms of DeFi in a simple mobile application.

• Trading: You can trade between virtually any asset without ever going through an intermediary or brokerage.
• Lending: deposit into protocols like Aave, and earn interest after every block is confirmed on a blockchain, as opposed to once a month, or once a week.*
• Borrowing: There are two ways to take out a loan. One is a “Flash Loan” through protocols like Aave, where you don’t need any collateral. The other is a fully collateralized loan, where you pay back interest over time. Except you don’t need to do any paperwork*
• Savings Accounts: You can earn higher interest by depositing your funds into solutions whose primary goal is to offer you the highest possible APR- significantly higher than any bank account around the world.*

*coming soon to the Numio app

What are the risks?

As with anything, there are pros and cons to any approach.

• Smart Contracts: This is generally a risk you face when interacting with smaller projects and earlier stage smart contracts that haven’t been battle tested. In some cases, this can lead to a loss of funds.
• Volatility: If you are taking out a loan, for example, if your collateral falls in value, your loan could get liquidated and you can receive a penalty.
• Cost: For Ethereum mainnet costs can get expensive when using these technologies. This is why Numio is focused on building a Layer 2 Ethereum mobile wallet to help to solve this problem for users.