Khaled Hawari is a financial advisor based in Ottawa, Canada. Kal Hawari (Ottawa) has many years of experience in DeFi and traditional blue chip investments. This explains why he can provide helpful information regarding finance and accounting. This article, which focuses on decentralized finance (DeFi) investment, comes as a combination of Hawari’s opinion and research.
In the rest of this article, we’ll explore the different challenges of decentralized finance and how to avoid them:
- What exactly is DeFi & how to start investing in it?
- Mitigation of risk is one of the most common challenges of DeFi.
- Regulatory challenges in the DeFi industry
- Is risk management important?
What exactly is DeFi?
Decentralized finance, also known as DeFi, is one of the latest financial technologies for organizing and running cryptocurrency-based transactions, and other related services.
DeFi is still very much new in the financial industry. This year, the DeFi project is expected to see a lot of corrections. This explains why investing in decentralized finance is worth it today.
How to invest in DeFi in April 2023
Khaled Hawari (Ottawa) wants you to know that you have many options when it comes to investing in DeFi. One effective approach you can consider is by investing in DeFi Coin. It’s simple; all you need is to do your due diligence, look for the best DeFi coins, and then buy them into your portfolio.
- With over 540 DeFi tokens available out there for purchase, you certainly need to do thorough research before settling for any token.
- Another effective approach to start investing in DeFi requires you to work with firms that support crypto staking. With DeFi staking, you can passively make your tokens do magic for you.
- You can also start investing in DeFi by considering DeFi saving accounts. With these accounts, you can always make high yields, depending on the platform you’re working with.
Does decentralized finance have any challenges attached?
Like other investments, Khaled Hawari (Ottawa) wants you to know that decentralized finance also has many issues. Below are a few important problems you should know about:
Mitigation of risks
As long as what you’re going into is an investment, you can never be 100% safe from risks. Yes, “mitigating risk” is a key challenge that most people encounter when trying to participate in DeFi.
For you to mitigate risks in DeFi, all you need is to try as much as possible to lower your chances of losing your principal – something that can always happen through hacks, exploits, or even protocol losses.
- For you to avoid this challenge, the first good step is to do your due diligence and carefully research the DeFi initiatives and networks you’re looking to work with.
- You can also manage risks by diversifying your decentralized finance holdings. This requires you to focus on multiple commodities to invest in.
- Risk management tools, such as market monitoring and analysis in real time, can also help you manage risks attached to investing in DeFi.
Inability to retrieve relevant metadata from the protocols
DeFi portfolio managers also struggle when it comes to retrieving important metadata from the protocols. Without the right market analysis, investors can become frustrated when going into DeFi.
Another challenge Kal Hawari (Ottawa) wants you to get familiar with has a lot to do with the regulation of DeFi.
As you already know, DeFi is unique because of its decentralized nature. This nature means DeFi operates outside the conventional financial systems. As such, you can safely say that DeFi is not affected by the regulations of the financial systems. As a result, investors may lack the necessary protection.