DeFi 101

New to DeFi? Pick a question below to learn the basics.

What is DeFi?

How does Donut use DeFi?

Is it risky?

What about insurance?

How can DeFi work for me?

What is DeFi?

DeFi is a growing sector of financial tools built on Ethereum. It lets people lend, borrow, trade, and bank digital assets.

Open to individuals and institutions everywhere, DeFi offers new ways to participate and earn in a decentralized financial ecosystem.

In the past year, DeFi has grown over 50x to become a $80+ billion space with institutions, retail investors and funds taking part around the world.

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How does Donut use DeFi?

Donut lets anyone easily take advantage of high yield earning opportunities within DeFi's lending sector.

We automatically convert your USD into digital dollars (USDC), which are lent out on our partner platforms, such as Wyre and Genesis.

The dynamics in decentralized money markets are unique — which means demand from borrowers generates higher interest rates for you.

With Donut, you earn yield in real time and can seamlessly invest and withdraw on demand.

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Is it risky?

All investments have some degree of risk, but as an emerging technology DeFi's risks are unique.

Technology Risk: Donut and all DeFi businesses rely on Ethereum's infrastructure to operate. If a smart contract (such as one governing a lending-borrowing agreement) or a stablecoin (such as USDC) were to fail or break, then your funds and many businesses would likely be affected.

Partner Platform Risk: Donut works exclusively with the most trusted, qualified partners in the space to give you access to the best earning opportunities. As with any software platform, they run the risk of bugs or hacks creating failure. Depending on the bug, you could have issues accessing invested funds for a few hours, or in a worst case, lose your principal. Fortunately, extensive auditing and security measures are in place to prevent this.

Lending Risk: In every securities lending market there is a risk that a borrower defaults. When your funds are lent in decentralized money markets, our lending partners mitigate this risk by requiring 125% collateral or more from borrowers. In the case of a default, the lending partner may liquidate this collateral so you can withdraw your funds.

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What about insurance?

Digital assets are not FDIC insured, but Donut provides protection to keep your investment safe.

Through our lending partners, Donut provides coverage protection for your invested funds. Coverage helps reduce lending risk, but is not equivalent to FDIC insurance.

To cover your funds, our partners require high collateral (125-200%) from borrowers, often in the form of ETH. In the case of a default, our partners liquidate the collateral to ensure you still have access to your funds.

Donut also partners with trusted lenders such as Yearn, who protect your funds through regular smart contract audits.

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How can DeFi work for me?

DeFi can be part of a diversified investing strategy that also includes stocks, ETFs and digital assets. How you choose to invest is up to you.

Whichever plan you choose, Donut provides predictable income in the form of DeFi-powered interest on your digital dollars.

It's important to remember, however, that funds on Donut, as with all digital currencies, are not legal tender or FDIC insured. FDIC insurance does not apply to stablecoins (such as USDC) and other cryptocurrencies.

And this is alright by us - we're not here to replace your bank account, but to help you discover new ways to save smarter, work your money harder and grow your wealth with DeFi.

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What is DeFi?

DeFi is a growing sector of financial tools built on Ethereum. It lets people lend, borrow, trade, and bank digital assets.

Open to individuals and institutions everywhere, DeFi offers new ways to participate and earn in a decentralized financial ecosystem.

In the past year, DeFi has grown over 50x to become a $80+ billion space with institutions, retail investors and funds taking part around the world.

Learn more on our Blog!

All you ever wanted to know about DeFi investing, written in actual English.

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Digital currency is not legal tender, is not backed by any federal government and Donut accounts are not FDIC insured. While Donut and its custodial partners make every effort to keep your money safe and covered, please note that any investment entails risk. The interest rates featured on this page vary according to the dynamics of digital currency markets and are subject to change at any time.