DeFi May Be Hazardous To Your Wealth

  • DeFi is filled with gamblers and speculators who are placing increasingly risky bets.
  • DeFi is building not the future of finance, but a parallel version of our riskiest financial markets.
  • Most people will lose money in DeFi, because of the sky-high gas fees (far more than any bank would charge).
  • DeFi is not a technology for the people, but for the whales who already own enormous amounts of crypto wealth.
  • Like our current financial system, DeFi is making the rich richer, and the poor poorer.

The Dangers of Jenga Towers

Let’s begin with the idea of lending protocols like Aave. First, there’s the confusing and jargon-filled description of what Aave actually is:

  • “Borrowing for unexpected expenses” means you don’t have enough money to pay the rent, or buy groceries. Why are you investing in crypto if you don’t have enough money to live? For God’s sake, sell the crypto and get your finances in order first.
  • “Leveraging their holdings” means people are essentially gambling: putting $10,000 worth of ETH on the craps table, so they can roll it into $15,000 of ETH because they’re sure it’s going to the moon. If they’re wrong and ETH crashes, their position is auto-liquidated (more jargon: it means “we’ll sell your crypto”) and they lose it all.
  • “New investment opportunities” is similar, except here they’re gambling $10,000 of ETH on $15,000 of BillyBobToken. If BBT doesn’t pan out, they’ve lost BillyBobToken and the ETH.

The Dangers of Fees

The premise of all DeFi platforms is the same, and I will explain it simply:

  • Put crypto into our platform and you will earn interest, plus our token. (Put it into Aave and you earn interest, plus AAVE).
  • The more crypto flows into our platform, the more our token will go up in price.
  • You can cash out any time, taking the interest and the token.

Persistence: The Opposite of Boredom

In a recent column, we talked about the Boredom Syndrome, which is a bad habit of our brains that we always need to be doing something. (Says the guy who puts out a daily newsletter.)



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Sir John Hargrave

Sir John Hargrave


CEO of Media Shower. Publisher of Bitcoin Market Journal. Author of Mind Hacking. Making things better.