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Common DeFi Degen Misconceptions

DeFi Degens - are they just degenerate gamblers who take foolish risks? Or are they bold, adventurous, trailblazers building a stronger digital economy? Let’s hear both sides of the DeFi Degen story.

Name-calling is one of the most popular tools used by the masses to alienate anyone who doesn’t look, feel, or think the way they do. So when the hungry capitalists and white-collar traders laid eyes on the bold, risk-taking crypto traders, they called them degenerates.

Little did they know that these crypto traders would actually embrace the name and gain popularity as DeFi Degens (short for degenerates). Since the name has been thrown around quite a lot, the meaning has evolved over the past. And with that, came a lot of misconceptions. 

With this article, we aim to eliminate all the misconceptions you might have about DeFi degens.

But before we get into the details and talk about DeFi degens further, let’s take a look at everything you’ll find in the article:

  1. What are DeFi Degens?
    1. The Tweet that started it all
    2. The day Eminence swam in money
    3. The DeFi degens
  2. Common Misconceptions about DeFi Degens
    1. DeFi degens act without thinking
    2. DeFi degens would invest in just about any project
    3. DeFi degens are being rash and ruining the market for traditional traders
  3. The Dark Side to DeFi Degen
  4. From Degenerative Finance to Regenerative Finance

With that out of the way, let’s jump right into it!

What are DeFi Degens?

This is going to be a long story. So make yourself a cup of coffee, play that jazz record, and sit down on your recliner to make the best of it.

It began with a harmless tweet.

The Tweet that Started it All

On the 28th of September, last year, Andre Cronje retweeted an image. If you think you've heard the name before but can't put a finger on exactly when or where you've heard it, don't worry. He is the developer behind the famous DeFi platform, Yearn.Finance. Most of those who invested in this platform have seen huge financial gains over their crypto investments.

So, what was the tweet he retweeted? This one:

https://twitter.com/eminencefi/status/1310628912339316736

As you can see, this simple tweet from an account called Eminence.Finance reads "Spartans". That's pretty much it for the tweet.

But the fact that someone like Cronje, who was deemed a decentralized finance god, retweeted it blew things out of proportion. At that time, the Yearn.Finance platform had helped many traders make a lot of money. The Yearn.Finance token itself used to be valued at over $28,000 back then.

All of this together built a hype nobody expected.

The Day Eminence Swam in Money

In just over a day, Eminence saw $15 million flooding in from investors all around the world. Cronje was reportedly working on a gaming project and the tweet a mere reference to it. 

That was all the push the die-hard fans of Cronje and his platform needed. Everything was perfect—except for the fact that the gaming project did not exist.

So then, how did the investors even access it to put their funds in? Eminence.finance did not even have a UI (the user interface - the web page with buttons, icons, etc that allow you to interact with the product/service). There were only some untested smart contracts.

But nothing stopped these hardcore degens, they dug up the smart contracts and figured out how to access the tokens. They wanted to be the first in, the pioneers of the new protocol. Now you must have some idea how crazy DeFi degens can be.

As you can expect, this did not go well. The very next day, all the hype collapsed when someone exploited a flaw in the code to take the entire $15 million. Bear in mind, this is all investor money. This is the money that the "DeFi degens" put in.

And how did they react to it? Nothing! They went about their day just like they would've any other day.

Controversially, the hackers returned $8 million to a wallet managed by Cronje.

That's the thing about DeFi, you kind of walk into the system assuming the worst would happen (at least I did!). When something good happens, you feel great. But the lows never keep you down.

The risks are enormous, but so are the rewards. That's something all "DeFi degens" understand. They understand just how volatile the industry is and they've been hit hard last March. But they've also seen unprecedented gains in that very summer. The gains were so high that seeing 100% APR/APY was commonplace.

People are trying to redesign the financial system to usher in a new era of finance with DeFi. They’re trying to fix an extremely broken system.

Some of the brightest minds around the world are experimenting. They're creating the next generation of financial products. Products that succeed where the previous vehicles of finance failed. The products they're creating are bringing finance to areas where traditional banking isn't an option. That is no small feat. Doing it with the help of a trustless system? Now that’s something!

From the token's introduction in July'20 to the end of August'20, Yearn.Finance grew 77,000 percent! It rose from $31.65 to $32,345 in under two months. And it was only possible because people who were bold enough to take risks did that. They invested in Yearn.Finance and the platform didn’t disappoint them.

Even in its rather nascent stage, DeFi showed people gains they wouldn't have seen with traditional financial products. And that is the reason why DeFi degens exist. Let’s talk about them further.

DeFi Degens Are Risk Takers

People usually call heavy gamblers ‘degens’ or ‘degenerates’. The term "DeFi degens" points at a similar class of people. These are traders and builders who push the limits of decentralized finance.

Don't be fooled by the name, these traders are going to be quite critical to the world of DeFi. There's something about DeFi that is so attractive that people are actually willing to bet their money on it.

DeFi is the new Internet and it is disrupting finance as we know it.

DeFi degens are merely riding the waves the ripples from the disruption build into. What sets them apart is the fact that they do it fearlessly.

These aren't your regular DeFi users. They aren't casual enough to tie their money up in projects, forget it, and reap the benefits in the long haul. These aren't people who actively work to make money either. They're different.

DeFi degens are traders who experiment and take calculated risks. They don't lose their sleep over losses. They know that's a possibility and they embrace the prospects of potential financial ruin.

They are more than happy to take on risks any traditional trader would walk away from. Even when they know a shitcoin could perform badly, these traders are willing to place huge bets on it. They would farm and trade new tokens and risk it all without breaking a sweat—all for higher returns.

While this behavior of theirs encourages innovation, there's always a dark side. As high as the rewards may be, the chances of getting scammed are high too. And when people hop on the bandwagon without due research, they do get scammed.

Common Misconceptions about DeFi Degens

The thing with being influential is people talk a lot about you. And when they talk about you, every now and then, they say things that aren’t true. Sometimes these are silly assumptions and sometimes these are spiteful lies. If enough people believe in them, these lies and misconceptions become the widely accepted truth.

Let’s break down some of those misconceptions and find out the truth:

1. DeFi degens act without thinking

That is very untrue. It looks like they make the decision of investing in a project on a whim.

But if you ever stop to ask them why they’re investing in a certain project, they’ll give you multiple reasons. They’ll answer with the chain of reasoning that led them to want to invest in the project.

2. DeFi degens would invest in just about any project

Continuing on what I said above, they think a lot before investing in projects. Sure, there would be some traders in the lot who would invest without giving it much thought. But the majority knows exactly what they’re investing in.

In fact, most of them have the numbers handy, just in case they need them. Whitepapers, reviews, they’ve read them all by the time they take the final call.

3. DeFi degens are being rash and ruining the market for traditional traders

Obviously, this is far from the truth. We’ve established earlier on in the article that DeFi degens are helping the industry.

They’re investing in innovation and are allowing for risky, yet rewarding projects to grow. And they’re doing it all at their own expense after much consideration.

If anything, it looks like the traditional traders who are playing the safe bets are the ones ruining the market.

The Dark Side to DeFi Degen

I had mentioned earlier that there is a dark side to DeFi Degens. Decentralized finance is not regulated the way traditional finance is. There are, sadly, many who take advantage of this to create disruptive crypto projects that amount to nothing more than jokes or even outright scams.

In today’s DeFi ecosystem, you can find plenty of crossover between major multiplayer online games such as World of Warcraft, and crypto pump-and-dump schemes.

DeFi degens tend to get featured in pump and dump trends. Private forums and channels are used to hype up junk coins. Then these ‘degens’ take out their profits before abandoning or forcing them into collapse.

Telegram and Discord channels are getting famous for their Degens congregations where new protocols and potential profits are discussed. Unaudited and unregulated tokens are often hot topics here. A classic example is the YAM token. Yam had new token dumps every 12 hours. Some users worked at creating the hype and building up the token value before taking out their profits.

YAM is frequently described as the totem or symbol of the DeFi Degens. The YAM token was launched on Tuesday, August 11, 2020. The very next day, the token skyrocketed to over $160 per token. About $700 million was entered into yield farming contracts. By Thursday early morning, a bug within YAM’s rebase function locked not only its on-chain governance feature but also its $750,000 treasury. In just half an hour, YAM lost $60 million in market cap.

While many DeFi Degens may view their activities as fun and profitable pastimes, you will most likely get burned if you do not understand how DeFi projects operate.

From Degenerative Finance to Regenerative Finance

Degens may be associated with debauchery and greed. DeFi degens may test crypto code limits and push the boundaries of acceptability within the cryptocurrency community. But they did bring in massive amounts of investment into the DeFi space.

Plenty of new open financial protocols witnessed huge growth in their TVL. TVL stands for Total Value Locked. This represents the quantity of assets currently staked in a specific protocol.

All of these investments may have been driven by some or the other hype. While some of them crashed and burned, wiping out investor assets, others not only skyrocketed, they displayed astonishing staying power. They held on to their gains. This led to the rise of regenerative finance.

Regen Finance can be explained in terms of funding of community projects where the funder expects returns on his investment.

Simply put - this made more people willing to invest/donate their money for building new open financial systems.

Rather than billionaires funding what they deem worthy, regen finance runs on crowdfunding by the community. It uses peer-to-​peer (P2P) money to gather these funds. Gitcoin Grants from Quadratic FundingWhalerDAOCommons Stack, and Panvala are some examples.

In traditional markets, we see both bulls and bears. In DeFi, the wild swings between irrational degen exuberance and restorative regen finance will continue.

Conquering new frontiers requires brave soldiers willing to take on the risks and lay down their lives (or rather their financial assets). But thanks to Degen’s brave and innovative approach as well as their risk-aggressive appetite, we will eventually be able to build a stronger digital economy.

Before You Go…

Degen is short for a ‘degenerate’ gambler. In the crypto world, degens referred to the hordes of money-crazy, pseudonymous crypto-holders who blindly gambled for yield in questionable assets. But the term was embraced by these bold, adventurous, trailblazing risk-takers.

Now DeFi Degen is a name some proudly bear. They are the movers and shakers in this brave new landscape - exploring areas where others don’t dare to tread. Some of them face huge losses and go down while others still trudge on to gain massive victories.

There’s no objective truth to whether DeFi degens are good for the DeFi space or not. But I can bet my last nickel on the fact that traditional traders couldn’t have brought about the change they did. Innovation can’t be found in markets where there’s no risk. 

For most DeFi degens, though, the risk is not an issue. They can deal with it as long as they believe in the projects they’re investing in.

That is the kind of attitude you need the masses to have if you want the industry to move forth in the right direction.

That said, the aim of this article was just to let you know about a few misconceptions you might have about DeFi degens. And of course, to fix those misconceptions.

Sherwood P

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