How to strategically position yourself for Decentralised Finance next year
15 min read
It's that time of the year when everyone becomes a sage that churns out different posts on what and how to position yourself for the "next DeFi revolution." So one thing you must take out of this post even though the headline says "How to strategically position yourself for DeFi" next year and beyond that, I am not your financial advisor. Also, if you're looking to see which coin or token I am endorsing for 2022 or even the next five years or more, I am not sorry to disappoint you. We don't do that here!
Alright! Now that we have set expectations let me jump right into it.
So, DEXs like Uniswap, Sushiswap, dYdX etc., which operate using AMMs to rebalance liquidity pools, marshalled more than $1 trillion in trade volume this year alone. If you're not taking DeFi seriously, what are you still waiting for?
It's Christmas here, and I am waiting for the meals to get ready, so while waiting, I thought to myself, "why not just put down some of your thoughts on how you can help anyone position themselves in the growing decentralised finance industry?"
I intend for this to be a short piece, but it ended up rather long with some vital info that I think you'll enjoy. And quite frankly, it's not like I prepared to write this post, so I apologise if it comes off as shitty with too much DeFi jargon. Not to worry, I defined most of them at the end of this post so you’re not left hanging when they hit right in the face. Lol
Let's ape right into it, shall we?
Learn and ape into DAOs
If your head turns whenever you hear about some of the DeFi blue-chips like Aave, Uniswap etc., understand that they are not run by regular corporations or even individuals, for that matter. DAOs — decentralised/distributed autonomous organisations govern how these protocols operate. DAOs have grown over the years, especially as DeFi began to find its feet.
The industry has grown so much that several firms now specialise in services such as starting a DAO and encouraging voter participation in DAOs. Others specialise in providing tokens to DAO contributors or even running DAO votes on proposals, handling disputes if they arise, and managing DAO treasuries. The beauty of DAOs is that it meets you at your point of interest. The different types of DAOs out there: social, investment, protocol, creator, services, collector, media, grant etc. Indeed, depending on your quirks, your interest must align with one of them or even more.
Why should you take advantage of DAOs?
- Insanely easy to join: There is no complicated process to joining a DAO, they are primarily permissionless, and all you need to do is own the DAO token to join. Just so you don’t drift along with the masses aimlessly, you may want to set a goal on what you intend to achieve by joining the DAO. So that will inform the kind of skills you need for you to be a productive DAO member. Then and only then will you get a return on your investment of time and skills. To join a DAO you can serve for one that fits your goals on DAOlist or DeepDAO. Ensure you familiarise yourself with the beginner documentation or founding Charter. Finally, join the DAO community on Discord or Telegram, introduce yourself to other members and start aping!
- Push forth your great ideas: Once in the DAO, you have to join a tribe that fits your skillset and contribute to ideas or even raise a proposal. For some DAOs, proposals have to be voted on to move to the next stage, and if yours passes, you may have just introduced a great idea to the community.
Collaborate and improve your skills: since you are in a community of like minds, collaborating and improving on your skillset is easier. Community members are placed in teams or units to work on projects, and this fosters collaboration and helps fine-tune skillset within community members.
Make money: Of course, it’s all about the benjamins baby, and with the right DAO you can make more of it. Usually, you have to complete some tasks and earn some tokens at the end. Also, some DAOs have a hierarchical system such as SwissDAO, and you earn more as you take on tasks and raise on the hierarchical chain.
Change the world or at least try to: You do not need to be an Einstein to change the world; all you need is to be part of something valuable. With DAOs, you can make your contribution to changing the world. A proposal raised on a DAO may move on to become exceptional. Take a look at ConstitutionDAO; within five days, in November, this internet collective DAO crowdfunded close to $47 million to purchase the original US constitution. Although the bid for the document did not pull through, the unity and speed with which the DAO pooled its funds and took action is an indication that you can be a part of the change coming.
Key into staking
I've never been a trader. Yes, sure, I have a few funds parked in my Binance and FTX account for some quick trades when I see the need for it, but trading futures has never been my thing.
I am more of a "degen" who prefers to stake and earn yields on profitable opportunities out there. And this can be done from a passive standpoint rather than the frantic spree of chasing the market. And it makes no difference whether it's leverage trading or just spot, I don’t enjoy trading. Per stalking, I understand this may not be the easiest way to explore DeFi if you're a newbie with mad gas fees and horror-filled slippage, but it's still a better way than the time it takes you to set up and engage in day trading.
If you devote your time to diligent research, you may uncover some DeFi gems with newly launched protocols offering juicy APYs. Compared to just "hodling", you can participate in liquidity rush campaigns where you help seed liquidity pools for tokens bootstrapping liquidity on DEXs and get LP tokens which could be further staked to boost your APY. And if you consider that a bit too intimidating for you, perhaps just "stake-lock" your DeFi gem token and enjoy the given APY, usually in four digits. This is what is called liquidity mining.
I know one of the questions you may have is: how do I know which protocol will do fine in the long term and not just get sucked up into one that could just stage a rugpull? My answer is simple — you don't! Smart contract risks are real, and even that solid project could get hacked and lead to huge losses for you. Just recently, Polygon, the poster child of Layer 2 scaling infrastructures for DeFi discovered a fatal bug that could have led to a loss of over $24 billion until a recent hardfork. But beyond smart contract risk, a thorough DD would help you avoid being enticed by astronomic APYs only to end up being knifed. Some of these yield farming opportunities post but paying solid attention to fundamentals. What is the value prop of this protocol? How does it fit into the broader DeFi sector?
Take a good example, Curve Finance. As a DEX, it has blown up over the years in activities. While Uniswap offered swaps in ETH and token pairs, Curve allowed swaps in stablecoins and wrapped assets, hugely addressing impermanent loss concerns for traders. LPs who supplied liquidity in pools on any of Curve's pools can get LP tokens which they can further stake on other protocols. My point is that traders and LPs swarmed Curve, which has caused its native CRV token to grow in price. The same can be said for Uniswap's UNI and Sushiswap's SUSHI. There are other DeFi gems with the same trajectory; my point is that you dig deep, understand what they are building, ensuring it's got pretty solid fundamentals because we're still early in this sector called DeFi.
Beyond all that, Aave, the leading crypto lending platform, now allows loan collateralisation with real-world assets. This is a game-changer move from the DeFi unicorn as real-world assets do not tend to fluctuate and jive in price like most crypto; hence, there is no need for over collateralising loans when borrowing with such asset classes.
Take advantage of the yield farming opportunities and mine yourself some good profits when you do.
The coolest stuff this year was NFTs, no doubt. Today, NFTs are more of social signalling with celebrities such as Snoop Dogg, Gary V, and Serena Williams, holding some of the most expensive NFT arts in the world. There is a whole world of tapped and untapped earning possibilities with NFTs, from minting to buying and selling and even staking your NFTs. So, how do you ape in NFTs? Simple Mint NFTs: This simply means creating NFTs. Before doing this, you have to understand that not all NFT pieces are equal. You may have to join a community of creators to ensure that your pieces get the proper recognition and sell faster. Also, it is crucial to choose a suitable blockchain platform and marketplace to launch these pieces.
Buy and Sell NFTs: Trading NFTs has proven to be quite a lucrative business. The most expensive NFT ever sold was Beeple's NFT that sold for $69 Million. You can buy an NFT at a lower value and sell it at a higher value. Marketplaces like Opensea makes it easy to carry out these transactions. And infrastructures like Mural makes it easier for you transfer your NFTS across multiple chains.
NFT airdrops: In 2017, CryptoPunks decided to airdrop 5,000 NFTs for free back in 2017. Today, single Punks and bundles are selling on Sotheby's and Christie's auctions for $7.5 million, $11.7 million, and $17 million. You can participate in NFT airdrops and carry out simple tasks; who knows; you may get in another CryptoPunk miracle.
NFT games: Unlike the traditional gaming system, today, with play-to-earn games you can earn in-game assets in form of NFTs which you can then exchange for some cool benjamins. NFT games combine the benefits of P2E games and NFTs; giving you the leverage of being able to mint your gaming character, trade your weapons and other assets as NFTs. Guess what? Most NFT games are free to play. You can even join a gaming guild, a group of gamers competing to earn, to get more out of NFT games. So why not ape in and make yourself some cool bucks once you learn the ropes?
Acquire skills DeFi sector badly needs
As innovators continue to experiment on what they can improve in TradFi and Web 2, one thing has surfaced — there is a shortage of skills. Whether it's Community Management, smart contract development in Solidity or Rust, Technical Writing, Marketing, BD, graphic and video editing etc., it's a full-fledged industry.
Whether it's DeFi or blockchain, it's all about people. And as the concept of DeFi is somewhat new, there are always questions to answer from people who are just delving into it. Undoubtedly, the majority of the people you will attend to as a Community Manager will try to frustrate your life by asking you questions like "wen moon?" but the job is fun if you are people-oriented and love the technology. CM's get paid an average of $200 to $3,500 every month, depending on projects. You could also earn more if you understand how to program bots on Telegram or Discord as a CM.
Smart Contract developer
The need for smart contract developers in the DeFi sector has blown over the roof. From $150k per annum for senior smart contract devs to at least $250k plus token incentives, we see between 2018 and now. You could position yourself as a Solidity developer or even a Substrate developer (you have to understand Rust programming language). The juiciest part is the token offering that comes with this sweet pay.
Personally, I am fascinated with Substrate blockchains like Polkadot that allow developers to perform forkless upgrades on their network. Beyond that, Pallets are the foundational pieces of Substrate networks natively interoperable with other pallets and other networks. Perhaps you can call me a bull for networks that facilitate interoperability in DeFi.
P.S. I don't hold any DOT; I've contributed all of it to a crowdloan.
Technical & Copywriting
This is perhaps one of the most underrated skills in DeFi as an industry. Before I go further, I must state here that writers are not projects' afterthoughts. They are an integral part of any DeFi project's success. Technical writers help communicate a project's offering to their target audience. DeFi is already super technical when you start talking about liquidity pools, LP tokens, strategies etc., so anything that helps break fairly technical concepts to relatable terms is welcome.
Whether you're coming in as a technical writer who conjures nice long pieces or a copywriter with uncommon finesse for churning out punchlines, your skills can fetch you some good money. As a writer for DeFi projects (freelance or full time), you could be
Graphics and video editing
I assume you've not been living under a rock for most of the year, so you’d have already noticed the sheer number of social media influencers talking about crypto and DeFi. These influencers churn out an outrageous amount of content on platforms like YouTube and TikTok to push the DeFi narrative and educate people about the crypto space. Mass adoption means more people getting interested and learning more about DeFi and how to ape into opportunities
This inadvertently means that there's an ever-growing need for good quality content. This is where having some cool video editing skills positions you for many juicy opportunities in the DeFi space. The same goes for graphic designing, a skill that is central to every social media campaign. With many DeFi projects getting launched and pushed out every day, founders and project developers constantly need graphics and video editing skills to help create aesthetically good and enticing content to help sell their projects. The pay? You can bet it's good, just like every other job in DeFi.
So if you are into app designs and understand UI/UX, crypto badly needs this skill. From crafting cool dashboards to cooking up a nice DEX interface or even a protocol interface that shows how to stake, withdraw and whatnot, you should consider exploring DeFi. As new people enter DeFi from next year, especially from the mainstream sector, natives within crypto already know they need to design their dapps and primitives to bear some semblance with the average Joes are used to in the web 2 space. Why not help push crypto adoption further with that cool product design of yours?
Marketing and BD
So have you heard about one who tweeted himself into a cool crypto marketing role? This often happens as crypto is a weird place. For instance, I know of someone in company crypto who just by being freaking passionate about a project and his activities within the space, landed an ace role. The beauty of the DeFi space is that you can passionately collaborate on a task/project for free and then leverage that to land a super role that earns you a double whammy. And yeah, I agree you don't even have a formal marketing degree to excel in the DeFi, just pure passion. I must mention here that formal training is, however, a boost. By all means, enrol for professional marketing and business certifications if you think you have the time and discipline to complete them.
Definition of DeFi terms
Degen: A short word for 'Degenerate' gambler commonly used to describe those chasing after yields in DeFi projects but on unaudited projects. A Degenerate in the gambling world also refers to a gambler who regularly makes bad bets or gambles too much. Besides crypto traders, stock traders, sports bettors and poker players can also be degenerates.
Rugpull: imagine standing on a fine piece of rug and having it pulled off from under your feet; you'd come crashing down right? With rugpulls, Developers abandon a project, siphoning off investors funds, leaving them holding fake cryptos that can not be used. E.g SQUID token scam.
APY: When farming, staking or supplying liquidity to a pool, investors get a specific ROI on their investment called Annual Percentage Yield (APY). It is the rate an investor earns on staking, farming or yield investment over a yield including compound interest.
HODL: In the cryptoverse, Holding on for dear life, is a term that means you do not sell your tokens or coins no matter the downward trend in the market. It originated as a misspelling of the word 'Hold' and is now common in crypto.
AMM: traditional exchanges use order books to price assets, but An automated market maker (AMM) is a type of decentralised exchange (DEX) protocol that relies on an arithmetic formula to do the same. The formula can vary depending on the protocol, but assets are priced using a pricing algorithm.
DEX: While centralised exchanges are solely under the control of an entity, decentralised exchanges (or DEX) creates a peer-to-peer marketplace that enables transactions to occur directly between crypto traders. On a DEX, transactions are not carried out via third parties but directly either from a pool of funds or peer-to-peer models.
DD: You may be familiar with the term, Do Your Own Research (DYOR), but Due diligence (DD) also refers to taking necessary cautionary steps before investing. Before investing, you need to carry out investigations before dedicating your funds, by doing so, you are carrying out your Due diligence.
LP: Liquidity providers (LP) are the backbone of a DeFi project. They supply funds to a pool with crypto assets to enable trading on the platform in return for yields or passive interest on their funds.
Wagmi: An acronym of We Are All Gonna Make It. Wagmi connotes the happy go lucky attitude of crypto people when they are excited about a token, a project or even a piece of recent news that suggests crypto is going further mainstream. Even when there's a dip, crypto natives like myself, after thoroughly studying the fundamentals, can still jump around throwing the "wagmi" slang because I can already see a bright light at the end of the tunnel.
Ape: In crypto, the word is not a noun but a verb. To ape means taking advantage of and spilling some sweet gains from it. For instance, to ape into a newly launched protocol could mean splashing some money into any of the supported pools to farm yield and earn huge APY for your risk-taking venture. Let’s ape!