In a new series, we are going to explore the world of DeFi and cryptocurrency. First up, we will take a look at Scarface Finance but let’s give a little bit of background to what is DeFi.
What is DeFi?
The traditional financial sector (also known as TradFi) relies on KYC—know your customer—which refers to processes that banks use to verify a customer’s identity and legality before doing business with them. In other words, a client must show that they are who they claim to be.
If you want to borrow money from a bank, you’ll need a credit check, documentation of your identity, and, in most cases, some sort of income verification. However, with DeFi, a consumer’s personal information and identity may often be hidden. The most important thing is usually digital assets.
Instead of dealing with banks, DeFi participants use a “smart contract,” which is computer code that serves as the go-between to guarantee that everyone keeps their promises.
Aside from identifying customers, many conventional banks demand a minimum deposit of $25 to $100 when opening a savings account. In addition, most savings accounts have a minimum balance fee or monthly maintenance fee.
DeFi differs in part because there are so few hurdles to overcome. A DeFi application, such as Compound, a project on the Ethereum blockchain that specializes on loans, or Yearn Finance, a project that focuses on lending and trading cryptocurrencies, just requires a crypto wallet and access to the internet. And there is frequently no minimum investment requirement.
You may get started with DeFi apps by creating a cryptowallet with companies like Metamask or Frame and buying some cryptocurrency.
Why is it Important to Pay Attention to DeFi?
The champions of DeFi say that it is a fundamental shift in the ways people interact with finance, and expands access to that world to anyone who wants to join.
But critics claim that because of a lack of regulation, the industry is dangerous and prone to frauds. In 2021, more than $10 billion in DeFi applications was stolen. DeFi apps have also become a more popular tool for money laundering—criminals used them to launder about 8.6 billion dollars last year, according on Chainalysis.
In mid-June, the Acting U.S. Comptroller of the Currency Michael Hsu described DeFi as a “fool’s gold rush.”
“I have seen one fool’s gold rush from up close in the lead up to the 2008 financial crisis,” Hsu said. “It feels like we may be on the cusp of another with cryptocurrencies (crypto) and decentralized finance (DeFi).”
Taking a Look at a DeFi Group: Scarface Finance
There are a lot of DeFi groups that have popped up in the past several months due to the growth of DeFi and the amount of money flowing into the arena. One group that recently started is Scarface Finance. Scarface, at the time of writing this article, has over $682,000 in total value locked up in its varies coins, vaults, farms and boardroom. What are each of these things? That we will save for our next article. What is important is that there is a lot of money in Scarface and after an up and down start to the group, things have settled in and appear to be headed in the right direction due to the group’s leadership and emphasis on community.
Many of these DeFi groups are centered around communities of like-minded investors. Some groups have managers that make decisions on their own, other groups have managers that lean heavily on the community to decide the direction of it’s funds. Scarface would fall into the latter category. The strength the community and transparency is important in the world of DeFi, with rugs being pulled daily and honeypots capturing the funds of uneducated and inexperience investors.
I posed some questions to the manager of Scarface, who goes by the username of “TM”. I specifically asked what is Scarface. Here’s TM’s response:
We envision this to be the first protocol that will be controlled by the community. If we can make that happen, we succeed and we won’t be necessary anymore. Treasury can be burnt or be used for a good cause (outside crypto).”
For those who aren’t completely understanding everything about DeFi and Scarface, I asked him to explain it in layman’s terms. TM replied, “Scarface is community owned protocol (or system) in which you can invest which gives that a daily percentage up to 20%. It will reward you with our SCAR or SSHARE tokens which you can invest back in to the protocol to optimize your profits / gains”
I’ve taken a week since speaking to TM and watched Scarface’s Discord and how trading was going for the new group. So far, TM and his team have held true to this statement and interaction with the community has been excellent and all executed with the intent to grow the protocol and do what is best for the community/investors.
A Word to the Wise
Before you jump in on any DeFi project, you should do extensive research. This whole world of DeFi is new. Understand what you are investing into and what are the risks.
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