DeFing All Odds - The Daily Gwei #500
DeFi is here to stay - are you?
As you would have undoubtedly noticed, today’s edition 500 of The Daily Gwei newsletter! I started this humble newsletter back in mid-2020 because I wanted to share my thoughts/commentary on Ethereum with anyone would who read them (turns out there are a lot of you). Anyway, thanks so much for sticking with me over the years and here’s to another 500 newsletters!
Obviously the crypto markets have been very volatile lately (to say the least) but there is a silver lining - DeFi on Ethereum is handling it all very well. Liquidations are being performed in an orderly manner, AMMs are processing trades, and the Ethereum network itself isn’t falling over. This may be unexciting to you, but it is the result of years of hard and meticulous work to ensure that these protocols work when we need them most.
“DeFi 1.0” normally refers to the original DeFi projects on Ethereum (Maker, Compound, Uniswap, Aave etc). These are also typically referred to as “boomer DeFi” or “boring DeFi” because they take a slow, steady and methodical approach to development rather than the hard, fast and loose approach that we’ve seen from so many pseudo-DeFi projects. These projects have also been battle-tested through various market conditions over the years and are some of the lowest risk protocols you can use on Ethereum today.
Of course, we had the “DeFi 2.0” trend last year that really didn’t bring anything new to the DeFi table - it just consisted of lots of money games, ponzis and liquidity mining. Most of these projects have already failed or will fail quite soon simply because they are unsustainable and don’t have real product/market fit. The same is not true for DeFi 1.0 projects that have been around for quite a while now (DAI is over 4 years old!) and, as I said above, these projects have also survived and thrive all sorts of volatility over the years.
There are also newer DeFi projects that have come onto the scene over the last year or so that I think are doing things very right (building sustainably, not boosting TVL via ridiculous liquidity mining programs and some haven’t tokenized due to not finding product/market fit yet). I won’t name any names here as I don’t want to endorse any particular project, but I’m sure it’s not difficult for you all to figure out which ones they are. On top of this, the existing older projects are continuing to innovate and dominate their respective product categories.
With both DeFi 1.0 and newer DeFi projects continuing to see growth and success, I find it very hard to be bearish on the DeFi sector as a whole. Yes, the tokens related to these projects are “down bad”, but I don’t really think that’s reflective of the projects themselves (moreso that the token valuations just got way too heated too quickly in DeFi summer of 2020). Not every project will succeed and not every token wil go up in value, but I truly do believe that DeFi protocols will replace the entire existing financial system - it’ll probably just take a while.
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.