DeFi has been making millionaires overnight and turning millionaires broke at the same speed.
Those who are on the bandwagon are rejoicing and those who either missed out or got burned by one of the fake projects are yelling ‘Scam’ at DeFi.
Our views are a bit different on the subject.
We do think DeFi is going to be a successful vertical among the blockchain (and crypto) solutions.
It will not be THE holy grail for the redemption of crypto status though.
Supply Chain, Crypto Lending, Insurance, Financial Services, Accounting, Identity, and many more verticals will collectively take blockchain and crypto to the masses.
Shifting our focus back on DeFi, here are some of our thoughts on the current state of DeFi. We do appreciate you dropping any insights you have that we might have missed.
DeFi is not a ponzi, here is why
If the DeFi project you are eyeing meets the following conditions, it is not a ponzi:
- Audited code: Is the code on which DeFi runs is audited by reputable blockchain auditors?
- Reliable team: Who is behind the project? Do they have the know-how? Do they have a history of running scams or leading successful projects?
- Actual (sustainable) revenue model: What is the revenue model? Is it too ‘scammy’ sounding or is it based on sound mathematical (and algorithmic) models?
- No lock-in periods: Is it easy to get in and out of the platform without any restrictions or lock-in periods?
If you answered yes to ALL of these questions then there is a 100% certainty that the DeFi you are dealing with is not a ponzi (or scam).
However, a caveat is due here.
Just because the project is not a ponzi doesn’t guarantee its success. Lot of well intentioned companies fail, that’s just the nature of business.
So, do not be one of those guys who sells their home to invest in crypto or DeFi (and that itself is not advice, just an opinion).
If you don’t want to hear it from us, listen to what Yearn Finance creator has to say about DeFi tokens (not all, obviously) having ZERO value.
Source: Crypto Culture
DeFi on Ethereum is not sustainable, here is why
Most, if not all, DeFi projects that are making the news today are on Ethereum.
Ethereum is not a reliable blockchain when it is overloaded. It gets choked and crashes.
People are already complaining about exorbitant fees on the network due to the DeFi craze.
DeFi itself as a crypto vertical is quite new and we are sure there are going to be a lot of ‘killer apps’ that will show up on the scene.
We are currently looking at the DeFi solutions that are being built on other blockchain networks (subscribe for free to know when we post that article).
PolkaDOT is not the end all be all, here is why
Many are turning to the DOT as the next big thing after Ethereum.
It may very well be.
However, it has not had the chance to prove itself, not yet.
Ethereum’s resilience (or lack thereof) was revealed only during the ICO craze (and then later during CryptoKitties debacle).
What monsters lie in the DOT’s belly? We don’t know and we would be weary of anyone who claims to know with certainty.
Other things to consider
Entire DeFi space is pretty new and we do not know what we do not know about potential vulnerabilities.
While this is true of Bitcoin itself, Bitcoin has withstood assault for over a decade and still stands stronger.
Same cannot be said about DeFi.
Can you imagine someone investing their life-savings into DeFi only to have funds taken because of a bug in the code?
Needless to say, many folks are exploiting the looping system in the DeFi where they take loan against their deposit then lend it back to the platform to take another loan against their deposit, and ad infinitum.
This is causing the DeFi systems to show more liquidity than what truly is.
We think DeFi is an exciting development, however, we still put it alongside ICO craziness for now.
When this space matures and we see reliable solutions emerge – DeFi has the potential to drive a trillion dollar vertical on its own.
That is just the potential, all the trials and tribulations that we have to go through to get there is going to be one hell of a ride.
So buckle up and enjoy (and please do not lose your shirts on the ride)!
Thank you for reading and sharing this article. We appreciate you.
Stay safe and healthy!
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