Decentralised Finance (DeFi): What it is and how it works

Published on
October 22, 2021

The world is changing. So are the rules of finance, and the way financial transactions are conducted. Cryptocurrencies and blockchain technology have certainly made a huge impact on the world of finance and the way we buy, sell, and invest. But it is not just cryptocurrencies and blockchain technology that are changing the rules of finance. Numerous companies have taken a step into a new world of finance – decentralised finance. This growing trend is comprised of new blockchain-enabled technologies that allow people to invest and transact more freely than ever before.

How does it work?

DeFi can be thought of as a parallel financial system that is not managed by central institutions such as banks. It is an emerging ecosystem for managing financial assets on the blockchain. The goal of the DeFi platforms is to provide alternatives to traditional banking allowing individuals to take control of their finances.

In a decentralised system, money can be converted into what's known as a stablecoin. These are digital replications of the euro, US dollar, or other fiat currencies. Since the value of the euro does not change that quickly, stablecoins provide stability in the cryptocurrency market. These stablecoins can then be lent out and interest can be generated on them.

At Coinpanion the stablecoin part of the 'cautious' and 'balanced' portfolios generates consistent returns for you and lowers the risk of your portfolio. Your interest is paid out daily and there is no minimum term.

Not that different from your bank

With a savings account, you give your money to the bank to hold it for you. However, this money is not just sitting there but is used by the bank to grant new loans. While providing your money, you receive an interest rate.

In the decentralised system, interest rates are determined by supply and demand. With more demand than supply, you can earn high interest-like returns, all without any intermediaries. With DeFi lending and borrowing, control is given back to the people who decide how to use their money. Blockchain technology assures a high level of security and transparency and functions as a guarantee for both counterparties in the peer-to-peer lending system.

FAQ

How does Coinpanion work?
We help you to invest in the cryptocurrency market like a professional. Simply select a smart portfolio and get started straight away.

We help you to invest in the cryptocurrency market like a professional. Simply select a smart portfolio and get started straight away.

How much does Coinpanion charge?
If you invest in a portfolio (and not in a single cryptocurrency), a service fee of 2% per year is charged. The fees can be viewed at any time in your transaction history.

If you invest in a portfolio (and not in a single cryptocurrency), a service fee of 2% per year is charged. The fees can be viewed at any time in your transaction history.

Who can invest?
You need to be over 18 and live in a country that is part of the European Union or the European Economic Area (Switzerland, Liechtenstein, Norway, Iceland).

You need to be over 18 and live in a country that is part of the European Union or the European Economic Area (Switzerland, Liechtenstein, Norway, Iceland).

Can companies invest?
Yes, we already have several corporate clients. The minimum investment for corporate accounts is €25.000. Please send us a request to support@coinpanion.com and we will take care of it.

Yes, we already have a large number of corporate clients. The minimum investment for corporate accounts is €25.000. Please send us a request to support@coinpanion.com and we will help your company along the way.

What is the minimum deposit?
The minimum deposit is €50.

The minimum deposit is €50.

How long does it usually take for my transfer to arrive?
That depends on your bank. On average, a transfer takes 1-3 working days.

That depends on your bank. On average, a transfer takes 1-3 working days.

How can I set up a savings plan?
After you have transferred your first deposit, you can easily set up a savings plan in your dashboard. The minimum monthly investment is €10.

After you have transferred your first deposit, you can easily set up a savings plan in your dashboard. The minimum monthly investment is €10.

When will the start bonus or referral bonus be credited?
The start and referral bonus will be credited within 48 hours after receipt of payment.

The start and referral bonus will be credited within 48 hours after receipt of payment.

What happens to my deposits and withdrawals?
Deposits and withdrawals are carried out via third-party providers who take care of the purchase and custody of the cryptocurrencies. Coinpanion takes care of the rest.

Deposits and withdrawals are carried out via third-party providers who take care of the purchase and custody of the cryptocurrencies. Coinpanion takes care of the rest.

How can I deposit money?
We have several payment options for you. You can deposit money with your debit card, credit card and with a direct bank transfer.

We have several payment options for you. You can deposit money with your debit card, credit card and with a direct bank transfer.

How/when can I withdraw?
You can withdraw at any time on your dashboard.

You can withdraw at any time on your dashboard.

Is there a minimum term?
No, you can withdraw at any time.

No, you can withdraw at any time.

In which currencies can I withdraw?
Withdrawals are possible at any time and are currently exclusively in euros.

Withdrawals are possible at any time and are currently exclusively in euros.

What is the difference between the Coinpanion portfolios?
Each portfolio has a unique allocation. You can find out more here.

Each portfolio has a unique allocation. You can find out more here.

Which cryptocurrencies are included in the portfolios?
Coinpanion offers risk and theme-based portfolios. Depending on the portfolio you choose, other cryptocurrencies are included. Learn more about it here.

Coinpanion offers risk and theme-based portfolios. Depending on the portfolio you choose, other cryptocurrencies are included. Learn more about it here.

How is the trading of the portfolios handled?
The cryptocurrencies are traded according to the portfolio's underlying strategy. You can also adjust this via the settings. All cryptocurrencies are traded via third-party providers. You can find more information in the terms and conditions.

The cryptocurrencies are traded according to the portfolio's underlying strategy. You can also adjust this via the settings. All cryptocurrencies are traded via third-party providers. You can find more information in the terms and conditions.

Can I invest in more than one Portfolio?
Yes, you can invest in multiple portfolios at the same time.

Yes, you can invest in multiple portfolios at the same time.

How can I take care of the taxation?
Generally, taxation depends on the legal situation in your country. Coinpanion gives you the possibility to download all transactions directly on the platform. In addition, we have a partnership with the cryptocurrency tax company Blockpit. Through them, we can offer you a complete tax report. In cooperation with Blockpit, Coinpanion offers you a complete tax report free of charge for download.

Generally, taxation depends on the legal situation in your country. Coinpanion gives you the possibility to download all transactions directly on the platform. In addition, we have a partnership with the cryptocurrency tax company Blockpit. Through them, we can offer you a complete tax report. In cooperation with Blockpit, Coinpanion offers you a complete tax report free of charge for download.