DeFi for Investors: Finding the Next Crypto Unicorn

Courtesy World Economic Forum’s DeFi Policy-Maker Toolkit

The Settlement Layer

This is the infrastructure that DeFi is built upon. For the vast majority of DeFi projects, that layer is Ethereum. As I’ve said again and again, the easiest way to invest in DeFi is to just buy and hold ETH. It’s the foundation of DeFi, and it’s the foundation of a smart DeFi investment portfolio (including mine).

The Asset Layer

These are the stablecoins that serve as “on ramps” and “off ramps” between traditional and digital financial systems. Most of these stablecoins are pegged to the dollar, so there’s no point “investing” in them, as they won’t go up in value — though the companies that issue stablecoins will become extremely valuable as they go public on the traditional stock market. (See my piece on Coinbase stock.)

The Gateway Layer

This is the wallet that holds your crypto. In DeFi, the vast majority of market share is owned by Metamask, which is a product by Consensys. Currently, Consensys is a private company, but I expect that to change. (Coinbase recently launched its own Metamask competitor wallet — another reason to consider investing in COIN stock.)

The Application Layer

Here’s where things get interesting. These are like the apps that run on your computer or your phone, and the WEF report has split them into four categories (there will surely be more).

How DeFi platforms work (courtesy of DeFi: Beyond the Hype)

The Aggregation Layer

Here’s where all these DeFi services can be combined, which is something that’s really unique to this space, and where the banks just can’t compete. Because it’s all based on software, the crypto that you have invested in DeFi can be automatically reallocated, constantly chasing the best return on your money. (Think of it like a robo-advisor on steroids.) In this category are:

The book with the cult following. (From our Read and Grow Rich reading list)

The Secret Book to Develop Your Uni-Sense

There’s a book with an underground cult following among successful blockchain investors: Technological Revolutions and Financial Capital by academic researcher Carlota Perez. (The hardcover sells for $125.00 on Amazon, and it’s worth it.)

Courtesy Technological Revolutions and Financial Capital by Carlota Perez

Putting it All Together

Now, let’s combine Perez’s categories with the DeFi categories from the World Economic Forum report:

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