Mark Cuban highlights the primary benefits decentralized finance (DeFi) enterprises have over traditional financial institutions and the main things to look out for when investing in DeFi initiatives in a blog post published on June 13, 2021.
Taking Advantage of DeFi
Decentralized Finance (DeFi) has been hailed as the cryptocurrency’s future, and the multibillion-dollar business is enriching the pockets of knowledgeable users every day. However, there are hazards associated with the lucrative industry, and Mark Cuban, the owner of the NBA’s Dallas Mavericks, has outlined the crucial factors to consider while investing in DeFi.
While there are hundreds of decentralized financial initiatives now in existence, with more popping up daily, Cuban advises that before investing your hard-earned money in any of these platforms, you should first learn about their business model.
“Yes, every single DeFi project is at its core, just another business. They may or may not know what business they are in, but they are just another business that happens to be using a blockchain and smart contracts to host and program their operations,”he wrote.
The Benefits of DeFi
Cuban went on to list some of the DeFi ventures in which he is now investing, including Polygon (MATIC), Zapper.fi, and Bancor (BNT) and the significant benefits that these DeFi protocols have over their traditional financial equivalents.
Cuban has argued that the decentralized governance model used by DeFi (where miners, validators, liquidity providers, and others control the ecosystem) businesses saves money because these platforms don’t need to spend as much money on cloud computing infrastructure like Amazon Web Service (AWS) as their traditional finance counterparts do.
He went on to say that any other firm would have to raise a lot of money to run their own servers, or pay for cloud computing, which may be prohibitively expensive for compute-intensive applications and equally as expensive for scaling high-volume apps. You also need to recruit everyone, have the capital to sustain them, and so on.
According to Coinopsy, there are presently over 2,000 defunct cryptocurrency projects, and Cuban predicts that additional DeFi platforms will follow suit in the near future as larger rivals smother them.
According to Defi Llama, the DeFi sector has a total TVL of $121.88 billion at press time, with AAVE holding a 10.68 percent market share.