How long have you been farming? I mean, proper agriculture. You probably didn’t get it the first time. Crypto changes many things, including the way we understand common words. A good percentage of the future generation will understand mining and farming as computing protocols, primarily. History could change. It’s safe to say that crypto is touching everything you could think of. Massive, if you ask me.
Bitcoin introduced mining, DeFi introduced farming. Just like both names imply, they describe a means of obtaining certain resources via different processes. DeFi is a blockchain notion, it encompasses every attempt by blockchain and cryptocurrency projects to create a decentralized replacement or alternatives to real life financial activities. From the bitcoin blockchain itself and its lightning network to decentralized exchanges and financial institutions built on the blockchain; blockchain technology have dived deep into the economic sector and is making attempts to create a new and better way of handling financial activities.
Decentralized financial systems comprises applications built on top of blockchains which facilitate permissionless financial services and provide seamless options for running financial activities. DeFi hopes to introduce the core virtues of blockchain technology to the financial systems. DeFi projects are expanding the scope of financial systems, shifting the paradigm from ‘portable means’ of payments to smart contract applications running independently on a parent blockchain and offering advanced financial services such as insurance, lending, wealth management and an array of other financial management using blockchain resources and exhibiting desired blockchain features such as immutability, security, privacy, speed and interoperability.
Forget all those long definitions of DeFi; the plain understanding is enough for now. Swaps, farms, pools, and ‘connect wallet’ lol. Like a ‘plug and play’ system, connecting your wallet to a website is all you need to experience a whole world of fun …and risk. Yeah, the risk part is swept under the carpet most times. The DeFi space marks a huge resemblance to the early crypto space. Emergence of new projects which are mostly a copy of already existing projects with just very little difference. Bogus promises, pump and dumps, naive and gullible investors, shady project teams and ‘get rich quick’ schemes.
Majority of DeFi projects have suffered huge ‘exploitations’ and each time, this is not traced back to the project teams. But exit scams have dropped in frequency…well, I don’t like coincidence. Mainstream adoption of blockchain-based financial solutions have been limited due to these toxic features. Creating a new project has never been so easy. Building a community around it is even easier, it would only take the DeFi tag and a ‘promising’ airdrop to get it done. Either way, this gives way for the exact scenario the earliest cryptocurrency boom created.
Are these projects really ‘technologically exploited’? or are we redefining ‘exit scam’? either way, I think it is a good development from the past. It is way more professional…lol. However, it doesn’t speak well of the ‘new rave’ in cryptocurrency and a concept which was dubbed to open up the crypto space to the world beyond it.
Over a year after the initial DeFi boom, defi projects are still a rave as people jump in to benefit from the numerous promises of new and existing projects. Price jumps with the high APRs and follows same route when they get lesser. It’s another wild west of cryptocurrency.
To DeFi or not? Well, it’s just another “not financial advice” advice. DeFi protocols are more exposed to ‘exploitations’ than any other blockchain protocols you can think about. Worst is, your wallet could be exposed in the process. Many hacks are due to this. While it will be hard to look away from the countless opportunities provided by DeFi; the need to acknowledge these risks and take precautions cannot be overemphasized.
Double checking DeFi websites and ensuring reputability of DeFi projects before connecting your wallet to their platforms is also important. After using a platform, your wallet stays connected to the website and is still accessible in case of any breach. Ensure to disconnect your wallet from these sites before leaving the platform. Clear your wallet cache frequently too, if your wallet has this feature.
DeFi safely…if you must.
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