Crypto is unstoppable. Crypto is the future — Charles Hoskinson
The above opinion doesn’t just resonate with Charles Hoskinson, many schools of thought are of the opinion that blockchain technology, cryptocurrency, and the future are intertwined. While cryptocurrency and the entire blockchain is indeed an impressive technology, Decentralized Finance (DeFi) takes this technology a notch higher.
What is Decentralized Finance (DeFi)?
DeFi is an acronym for Decentralized Finance. Simply put, it is a financial service-based system built on decentralized technology. Most DeFi projects are built on Ethereum, although many are moving towards more scalable and cost-efficient platforms. The DeFi space has been in the limelight over the past couple of months for all the right reasons. Notably, 2020 has been dubbed the year of DeFi due to the massive price rally and adoption this space recorded. As of December 2020, the Total Value Locked (TVL) in DeFi reached an all-time high of $15 billion resulting in gains of over 2100%. The DeFI space is truly impressive, however, it is still basically nascent and so investing in it comes with a fair share of pitfalls.
Good Students of History, or Not?
Dozens of new DeFi projects are launched every month. This increased interest in the DeFi space is quite reminiscent of past events in the crypto space, one of which is the ICO boom of 2017.
The boom saw the launch of hundreds of new tokens and coins with each carrying out an Initial Coin Offering (ICO) and promising investors huge earnings. The sudden interest in ICO also attracted scammers in their numbers, with many unaware investors falling prey to fraudulent tokens and ICOs. Apart from scammers, many of these tokens have been unable to make good their promises to investors as their projects have proved to be unrealistic.
The DeFi space has seen an even higher influx of investors as compared to the 2017 ICO boom. Many projects are being launched on blockchain platforms every day. Telling which projects have the potential to succeed can be tricky. This article covers in detail DeFi Projects That are Most Likely to Succeed, and How to Identify Them.
How to Identify Viable DeFi Projects?
There are many critical points to put into consideration before investing in a particular DeFi project. Many of these points do not require in-depth knowledge of the cryptocurrency space and so can be applied by traders irrespective of their knowledge of the DeFi space.
1. Project Whitepaper
The first thing to pay attention to is the project’s whitepaper. A whitepaper is the foundational document of a project showing important details like road-map, aims, market strategy, token utility, objectives, etc. Any project without a whitepaper should be avoided. Interested in investing in a DeFi project, it is imperative that you pore over its whitepaper.
What to look out for in a whitepaper
When going through a whitepaper there are several important details to look out for, namely:
i. Token Supply (either finite or infinite) — For a project with an infinite token supply, the likelihood of a long-term price increase is quite slim.
ii. Token utility — What use does the token have in its ecosystem, and is there a possibility for the high demand of the token due to its utility?
iii. Exchange listings — What exchanges currently support the token. You could also check out the token daily trading volume.
iv. Project feasibility
Despite huge publicity, it is important to pay close attention to how feasible a project is. Are their aims achievable both in the long and short term?
Other important details to look out for in a whitepaper include token allocation, token economics.
2. Who are the team members?
The viability of a project can also depend on its founders, developers, and general admin team members. What qualifications and general know-how can they boast of? Do they have already existing projects they’ve worked on in time past? While this is an important aspect of determining the viability of a DeFI project, it isn’t foolproof. This is because a project whose founder is without prior major achievements may turn out to be successful.
3. Project use case
Another important aspect to look out for is the project use case. As previously stated the DeFi space is basically still nascent. Many projects available today are proposing complex use cases without a workable plan to achieve them. It is advisable to avoid such projects.
Other important details to put into consideration include: how secure is the project, can it resist attacks, is it scalable, and who are its major users.
We’ve extensively covered how to identify a viable DeFi project. To put into practice the points noted in the article let’s analyze popular DeFi project PlasmaPay.
Case study: PlasmaPay
PlasmaPay, popularly known as DeFi for the masses, is well-known for its focus on ensuring a truly financial-inclusive world. The non-custodial wallet is known for allowing interested persons to purchase cryptocurrency via several means. PlasmaPay is also operational in over 160 countries globally. Its mission is to revolutionize the finance sector as we know it, ensuring it is completely decentralized. The platform boasts of being a Decentralized Bank, that is both free, and flexible. Providing users with top-notch financial inclusion and freedom based on decentralized finance (DeFi).
Its native token PPAY is an ERC-20 token intended to be a one-size-fits-all DeFi service token. The token can facilitate swaps, used as rewards, serve as a governance token, used for staking, lending & borrowing, and liquidity mining. Interestingly, the token will increase interoperability among major blockchain platforms like Binance Smart Chain (BSC), Ethereum, Polkadot, and PlasmaPay. In-depth details about its roadmap, achievements, updates, etc can be found in PlasmaPay’s whitepaper.
PlasmaPay is made up of 25 top-notch and experienced cybersecurity, fintech, blockchain, and UI engineers. CEO of PlasmaPay, Ilia Maksimenka, is a well-known serial entrepreneur, finance engineer, DeFi developer, and investor.
The DeFi platform boasts of top partners including Kava, Orion Protocol, PAID Network, AnRKey X™, Elrond, and APY.Finance. This partnership with top industry players is a pointer to the positive viability of PlasmaPay.
In-depth research before investing your funds is quite crucial in identifying viable DeFi projects. It is also important to avoid taking decisions based on FOMO (Fear of Missing out).