How DeFi creates a new class of millionaires
While Bitcoin is hitting new records, low – market-cap altcoins are where savvy investors are currently making the most profits.
DeFi-the source of multimillion-dollar dreams
The coming millionaire class has more in common with gamblers than with serious investors. They invest their savings in cryptocurrencies with colorful animal icons, mocking financial rebels like Buffett for panicking Delta stock sales at the start of the pandemic. They gather in Telegram chats to exchange tips, rally support around certain digital assets, and talk about bears and skeptics.
“If I don’t get a free Lexus in my phone a few times a month, then I’m doing something wrong,” one blockchain enthusiast said last month, when discussing how the decentralized cryptocurrency exchange Uniswap gave all its users 400 free tokens last year to celebrate the release of its new digital coin, UNI, which features a pink unicorn as its badge.
Today, these 400 coins will be worth $ 12,000.
The virtual world in which this becomes possible is called “decentralized finance”, also known as “DeFi”. With decentralized payment rails and smart contract services rapidly being built on top of blockchain ecosystems like Ethereum, a digital gold rush is underway. If Bitcoin was the first iteration of the cryptocurrency, then DeFi is a natural evolution.
Many have ventured into this landscape, drawn by the sirens of generational wealth creation that funds entire governments and military apparatuses, only to lose everything. The bullish cycle of alternative coins in 2017 was driven primarily by retail investors looking for the next Bitcoin. But the turbulence was too much for many: Ethereum’s flash memory dropped from $319 to 10 cents in seconds, and numerous alternative coins were essentially pump-and-dump schemes. Retail investors who bought cryptocurrencies at the peak of 2017 were panic sales, and when the market went sideways, became cautionary tales.
The Law of the Jungle for Decentralized Finance
Today, DeFi is something like the Wild West. The SEC is at war with Ripple Labs over the XRP token. Earlier this month, a hacker attacked the PAID Network blockchain project, causing the PAID token to drop more than 80% as the virtual bandit escaped, taking an estimated $3 million in Ethereum. Who knows if the price of the token will recover or if investors will return their initial investment. But does the loss of money matter to the retailer if another low-cap DeFi project comes off?
Thieves, federal investigations, cyberattacks, and a new class of brash capitalists chasing the gold rush: this is a classic American love story for capitalism, exported to a global level, played out in Telegram, not in the oil fields. Just as the mafia built Las Vegas before corporations entered it to turn the city into a corporate Disneyland, earlier uses for cryptocurrency included money laundering, circumventing sanctions, and circumventing regulations.
But the outlaw days may be over, as institutions flock to DeFi in droves and lawmakers formalize regulation in this area. The World Economic Forum (WEF) in December published a report entitled ” Cryptocurrency: What is it for?» Instead of focusing solely on Bitcoin, the WEF, which annually sets trends for the global economy, has identified key players in the DeFi ecosystem, including decentralized exchanges such as Uniswap.
The report also states that Deutsche Bank recently opened a digital vault to provide investors with “lending, betting, and voting” services – a popular concept in DeFi in which cryptocurrency holders can borrow digital assets and receive payments from other holders and exchanges. Meanwhile, lawmakers such as Rashida Tlaib have introduced legislation regulating stablecoins, cryptocurrencies that have a constant value. Even chain analysis firms have started monitoring the blockchain to track financial transactions.
A lot of money goes into DeFi. For example, Uniswap has reached a market capitalization of more than $17 billion. JP Morgan Chase said DeFi would pose a threat to traditional financial institutions, while Bank of America last week noted that Ethereum “has more features” than Bitcoin.
The founders of cryptocurrencies are currently running this reality like gods (buying NFTs for $60 million, dumping millions of dollars in tokens, and moving entire markets). But corporations will inevitably rule DeFi with the same firmness of their fists as in Las Vegas.
In the meantime, this is a slot machine for players looking for payouts. The unsophisticated will lose their homes by buying a very attractive altcoin, but others will gain financial freedom by being one step ahead of all financial institutions.