Nord Finance and DeFi
Among the several crypto products that have gained traction in the last year, DeFi has been the most prominent with real world use cases given its potential to become a leading product to challenge the trillion dollar traditional financial sector. At the time of writing, the total market capitalization of the DeFi protocols stands at USD 61.68 billion. Additionally, the total value locked in DeFi contracts has jumped from about USD 1 billion in June 2020 to a massive USD 79 billion as of June 2021 with the numbers only rising each day.
At its very core, Decentralized Finance, or DeFi, is an umbrella term for applications and projects on the public blockchain that are designed to disrupt the traditional financial sector. DeFi protocols are typically built on decentralized blockchain networks that don’t require any access rights to lend, borrow, or trade financial products.
Nord Finance, a DeFi application, is a multi-chain interoperable platform that combines traditional finance features into the DeFi network in an effort to make DeFi investments more accessible and convenient for users. From yield-farming aggregation, fund management, robo-advisory to loans on assets, Nord offers a host of financial services through its 4 key products — Nord.Savings, Nord.Advisory, Nord.Loans and Nord.Swap.
In this article, we would explain what Nord Advisory is and how it brings one of the most important features of traditional finance — customized investment plans — to DeFi.
Understanding Nord Advisory:
In a nutshell, Nord Advisory is a robo-advisory system that analyses customers’ profiles and tailors investing requirements to their financial goals in order to give personalized investment solutions. This article will cover the mechanism behind Nord Advisory in detail.
How Does Nord Advisory Work?
So, Nord.Advisory is an in-built robo-advisory system that aims to make the process of investment decisions easier for users. Sounds great but how does it work? Let’s find out:
To understand how Nord.Advisory works, we need to first get a deeper look into some of the common problems that DeFi investors face today.
Just like any other investment, even DeFi investments contain several risks and require knowledge of the underlying dynamics of their investments.
In both scenarios, traditional and decentralized finance, the challenges of understanding the product/company in which one is investing are common.
However, given the niche nature of Cryptocurrencies there are several challenges
- Lack of familiarity with the technology and managing a decentralized environment
- Even a basic question such as ‘How to invest’, becomes complicated for a new user in the context of DeFi
- Additionally, since Cryptocurrencies are not as well regulated as traditional finance, high quality research is not easily accessible in Crypto
- Thus, making the question ‘Where to Invest/What to buy’ a more complicated question that it would be in traditional finance
This is the gap that Nord.Advisory aims to address, through its Customized Investment Strategies and Portfolio Rebalancing based on User’s Risk Profiles. Let us understand this through the De-Fi journey of two investors — Jack and Jessica.
Jack is an investor who is looking to diversify his portfolio.
Jack is planning a long-term investment strategy, so he wants to get a better understanding of both how risky and profitable his investment would turn out to be. Either Jack might spend a lot of time and resources on doing it himself, or he might hire a risk expert or consultant to assess all aspects of the investment, including Jack’s current assets, debts, investments, financial goals, etc.
Even after this is done, Jack will have to spend a considerable amount of time on drawing up a risk-return profile, creating asset allocation strategies, adjusting strategies based on Jack’s financial goals and finally, on monitoring the investment. If he’s hired an expert, then he would have to spend a lot of money instead of time.
Let us now consider Jessica’s journey.
Step 1: Instead of choosing the traditional risk assessment and portfolio planning process, Jessica chooses Nord.Advisory, the in-built robo advisory system of Nord Finance.
Step 2: Jessica shares her investment preferences, her investment goals and other information by answering relevant questions in Nord.Advisory.
Step 3: Nord.Advisory then determines Jessica’s risk profile based on several factors such as required risk tolerance, investment goals etc. Her risk requirements, determined based on the questions, help establish the optimum amount of risk that Jessica should take to achieve her financial goals. Using the risk tolerance assessed by Nord.Advisory the product is able to help determine the amount of risk that she would be comfortable with.
Step 4: Based on this, Nord.Advisory then suggests intuitive investment strategies for Jessica finding the perfect balance between high yield and high risk.
Step 5: Once this is done, the Portfolio Rebalancing mechanism of Nord.Advisory will ensure that Jessica’s stablecoins are both deployed and dynamically adjusted based on market movement and her portfolio’s growth. As a result, Jessica will have access to a customized portfolio with a diverse asset mix, all tailored according to her target investment allocations.
The Nord Finance Advantage
Thanks to Nord.Advisory, investors can ensure that their investment portfolio is in line with their financial goals despite market movements. And as a cherry on top, Nord.Advisory also allows users to personally define their risk profile, helping them understand the risk they will need to take to achieve their financial goals. Investors, especially beginners, can achieve a perfect balance between risk and rewards.
Also read about how NORD Advisory gets a boost with Solidum Capital partnership
About Nord Finance
Nord Finance, a blockchain agnostic platform, is an advanced decentralized financial ecosystem that focuses on simplifying decentralized finance products for users by highlighting traditional finance’s key attributes. Deployed on the Ethereum Network, it integrates multi-chain interoperability, thus proposing a plethora of financial primitives, which constitute savings, advisory, loans against assets, investment/funds management, and swaps.
At Nord Finance, we are building a one-stop advanced decentralized financial ecosystem to serve the rising needs targeting novice users and professionals to meet their financial goals.