DeFi is innovative, but crypto volatility is a concern
- The DeFi industry has the potential to change our traditional financial ecosystem
- DeFi sector investors worried about volatile cryptocurrency prices
- Following volatility, investors are turning to collateralized tokens
- Guaranteed digital tokens are known to be less volatile because these tokens are tied to real world assets
- When trading such assets, scaling becomes more accessible and, again, the volatility of a single crypto may be too stable.
DeFi or the decentralized finance industry shows that the digital ecosystem can change our traditional financial world. The nascent crypto industry is emerging with consensus-based verification methods. Decentralized lending and the phenomena covered by the blockchain create a new digital monetary system while rendering the traditional system obsolete.
However, in the new ecosystem, volatility is of greater concern to investors. Therefore, these investors are adopting a similar collateral asset system that involves combining public and private data on confidential non-fungible tokens (NFTs).
The volatile nature of the DeFi token is of concern
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The DeFi sector has the potential to change the monetary system. Since the start of this year, the industry has experienced tremendous growth proving its true potential. However, investors remain concerned due to fraudulent activity and the volatility of digital assets. On the other hand, the industry is entirely decentralized, and financial scams are therefore increasing in the sector.
On the other hand, investors are also worried due to the sharp swings in the prices of crypto assets. Notably, every average investor in the crypto market is concerned about these volatilities. In the open market, much of BTC and the value of any crypto is like a downfall depending on changing market factors and the psychology of crypto holders.
Investors look for guaranteed tokens
The volatility factor makes inventors nervous when playing in the digital asset market. These investors try to stay diversified for situations where the roads become stony. Therefore, these investors opt for another route to decentralized financial assets that are backed by real world assets.
The fundamentals behind these assets are that the crypto coins and tokens that individuals hold will value real world assets. These assets include real estate, royalties or intellectual property.
Ethereum as a cryptocurrency finalist
Ethereum is the second largest cryptocurrency after Bitcoin. It is also to be noted that the price of the asset fluctuates a lot too. A few years ago, the asset was trading for a few tens of USD, and now it’s worth more than thousands.
The prices of these assets go up and down, but those who truly understand the nature of the asset will be kept separate from the value of ETH. This is because if someone holds an ETH token that we tried to buy real estate, the price of Ether plunges, the real estate market will remain stable. So, at the end of the day, the portfolio has a better chance of remaining stable.
Are guaranteed tokens beneficial?
It is common to see such real-world applications of secured assets. Investors can trade anything that is supported by consensus-based verification methods. The postman offers an alternative to the many unbanked people around the world who are not served by traditional commercial banking systems.
Additionally, when trading such assets, scaling becomes more accessible and, again, the volatility of a single crypto can be diversified into much more stable holdings.