You’ve probably come across the terms DeFi and NFT. Both have become very popular recently, and many people already own either some form of NFT or have a loan in DeFi. But what exactly are both things? Let’s take a look at that now.
NFT (Non-fungible token)
An NFT, or non-fungible token, is essentially a transparent document that proves ownership of an item. It can be a video, a song, a picture, or even an object in a game. However, pretty much anything can be turned into an NFT. It is quite possible that in the future, a house or a piece of land could be an NFT. An NFT always refers to only one item and carries information about its owner. Many of these tokens are unique, and there are no two things with the same value. The proof of ownership is stored in the blockchain, and there is only one.
Many projects allow people to buy their own NFTs, whether digital art collections, songs, or games. Collecting and then selling there can make you a nice chunk of money.
DeFi (Decentralised finance)
DeFi stands for decentralised finance. It is a very young system, with an entire history of only seven years, which can be a stumbling block for many. It is a collection of applications and projects that provide services and are accessible to anyone. Since they are decentralised, they are not owned by just one institution but are available to all. In DeFi, we can also find widespread services; popular ones include alternatives for financial products we know from the traditional financial world, such as loans or investments.
Recently, the popularity of DeFi has increased quite a bit. It is desirable to investors, who can earn up to thousands of per cent on investment annually. Another appeal is that there is no entity to check the creditworthiness of those interested in a loan or investment.
Both are investments, and so caution is in order. There is always a chance that the thing invested in may lose its value, and you may lose your money. Therefore, you should always stick to the golden rule – invest only as much as you can afford to lose.