10 Tips on How to Ride the DeFi Boom

On the back of Ethereum’s decentralized finance sector booming in 2020, it seems the cryptoeconomy once again is entering a bull market some two-and-a-half years after crypto’s last bull market ended in January 2018.

Of course, much has changed since then. Ethereum is now pulling in more transaction fees than Bitcoin, DeFi’s top projects have finally found product-market fit with growing volume as the proof, and Chainlink’s LINK token has soared into a top 5 coin per market capitalization.

In other words, Ethereum’s ecosystem is leading the 2020 crypto bull run just as it did in 2017 when the ICO boom exploded atop the smart contract platform. The difference between then and now is that Ethereum’s fundamentals — and the fundamentals of the best projects built on it — are exponentially better today.

That said, some of the risks and pitfalls of crypto in 2017 are just as relevant to our present cryptoeconomy, while new cryptonative dynamics have been introduced since then that warrant new kinds of vigilance accordingly. As such, in this post I’ll walk through a series of basic tips that will help you weather the 2020 crypto bull market in generally sound fashion.

Don’t Chase Everything

The big hit in DeFi this year has been yield farming, where protocols reward users for supplying liquidity to their projects. With this phenomena comes new kinds of cryptonative earning opportunities, but it also brings new risk avenues.

For example, this week Yam Finance launched and within the span of about a day the protocol had already amassed $600 million in assets under management. Then a bug was discovered that ultimately rendered governance of the project impossible, which in turn rendered the project useless.

The point is this: at first, Yam seemed like an interesting avenue to yield farm and the team meant well. But the project launched unaudited, and a big problem was soon discovered that cost more than a few users money.

The takeaway? Seemingly sexy projects…

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