Looking to make money on DeFi? Expert advice before investing

A year after the “DeFimania” of 2020, decentralized finance platforms (or DeFi) continue to captivate investors. In general, the returns offered by these protocols far outstrip those of traditional banks or finance companies.

But, just as there are apparent advantages to DeFi, there are also risks. CryptoNews has reported numerous cases of scams, hacks

, money loss, detected vulnerabilities and bugs of various kinds on many of these platforms.

Yesterday, September 10, the Blockchain Summit Latam 2021, dedicated its last day to decentralized finance. Among the protagonists of the ecosystem that paraded across the screen at the virtual conference was the renowned youtuber

Juan Nuvreni, better known as Crypto Shenix.

The Argentine influencer

with 45 thousand followers on YouTube was not alone, but shared the stage with his compatriot, the developer Facundo Ameal. The latter is part of the team at DeFi performance aggregator, Yearn Finance.

During the dialogue, Ameal explained what, in his opinion, someone who is interested in decentralized finance should research before putting their cryptocurrencies or tokens

on a given platform.

What has the trajectory of the project been like?

“It’s important for a protocol to have a track record,” says the specialist. According to him, that “not only assures you that it’s going to have fewer problems, but [allows you to see] how they’re going to respond when there are problems.”

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According to Ameal, that’s advice he gives based on his personal experience at Yearn Finance. He mentions that, when he first started the project, there were 10 people doing what they could. Now, however, there are many more people and they have an elaborate incident response

process. The developer says, that the same will surely happen in other protocols with trajectory such as Aave, Compound, Uniswap or Sushiswap. Looking to make money on DeFi? Expert advice before investing Looking to make money on DeFi? Expert advice before investing Juan Nuvreni (Crypto Sheinix) and Facundo Ameal agree that it is important to evaluate the trajectory of a DeFi protocol, before investing. Source: Twitter.

Does the project have audits?

Another important point for Ameal is that DeFi protocols are audited. And it is not enough to be audited.

The audit has to be opened and read,” says the panelist, adding, “They found mistakes.

“The audit has to be opened and read,” says the panelist, adding: “Did they find mistakes? Surely, yes. What did they do? Did they respond? Did they fix them? Anybody who can read English can read the audits.

Higher returns, higher risk

Asked about the issue by Crypto Sheinix, Ameal acknowledged that, in general, higher investment returns equate to higher risk. “In DeFi summer, when there were returns of 10,000% per year, you had to stare at the investment and not sleep,” he recalls.

However, the member of Yearn Finance does not make this an immovable rule, and adds: “in general, the higher the return, the higher the risk, but that does not mean that lower return equals lower risk”.

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Where does the return that a DeFi platform offers you come from?

Something that is fundamental for Ameal is that the investor knows the project in depth and understands where the return comes from: it can be through the issuance of a governance token, or through other DeFi protocols, or based on loans, among other methods.

I think that’s the most important thing to understand. There is a phrase that was said to me a long time ago, when I was just starting out: “if you don’t understand where the yield comes from, the yield is you”.

Facundo Ameal, member of the Yearn Finance team.