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Decentralized Asset Management: Past, Present and Future (Part 2)
A New Age of Investing
Invest as a Tribe
Invest your money to save to buy a house, send your kids to university, save for retirement, bla bla. Sounds boring, right? Instead, buy a call option on AMC stock with Wall Street Bets for $1000 to make $30,000 if the stock is up 30% by Saturday? Sounds more interesting, right?
DeFi has built an even better casino than Wall Street did. Besides the profits and the novelty, people are attracted to DeFi because it’s entertaining, it has its own culture. The original degen wore a suit, made aggressive phone calls, and traded bonds on Wall Street. Now, the modern degen is pseudonymous, makes memes, and buys coins with a good story. The modern degen invest in dog-named coins like Shiba, Floki, or food coins like Sushi, Pancake. Some rely on investing for their emotional needs in a similar way that people have relied on social media.
Online communities such as Wall Street Bets have infused a social dimension into the realm of investing, transforming it into a shared experience. People share their ups and downs with each other, like experiencing a concert together. The Wall Street Bets community serves as a vivid testament to the power of investing as a tribe. In January 2021, many members bought call options on Gamestop that caused massive losses for hedge funds that shorted the stock earlier. In June 2020, some members yolo’ed, plunged into a gamble, opting to long Hertz, a car renter, immediately after the company had filed for bankruptcy. Nothing is more entertaining than a bankrupt company resurging into prominence because of a bunch of shitposter online.
Tribes have the power to meme something into existence. Elon is rallying his community to make Doge as the future of global currency. He is likely tweeting this ironically, but the most ironic or entertaining outcome could be the most likely.
Volatility serves as a catalyst for fostering growth. It operates as a source of amusement. When an asset is volatile, it becomes a topic of increased discussion, leading to higher trading activity, like Dogecoin, Shiba, Pepe. Memes and price volatility can inject energy into the asset’s community. This energy can eventually positively impact the development of the project itself.
Consequently, there is no fundamental reason why investment funds need a single manager. Communities can organize around an investment thesis, make it stronger and collaborate to increase the returns from the idea. The incident between Wall Street Bets and Robinhood has again brought mainstream awareness to the inherent risk of centralized platforms. If you are not paying to use a proprietary platform, you are the product. Asset management has to be trustless and permissionless.
Now, Social meets DeFi
It’s beyond obvious to us that direct access to actively managed trading strategies with little to no lockup periods are going to find gigantic product-market fit in DeFi. It’s just only a matter of time. And what we’re trying to say is: “SocialFi is inevitable.”
Naturally, individuals feel apprehensive about investing their own money. One major reason is the inconvenience and complexity of dealing with DeFi, which most people would rather avoid. While some venture into DeFi for potential profits, many others prefer to entrust their funds to someone else, preferably a person deemed "smarter" and experienced with a proven history of successful management.
We are still in the early days of blockchain technology and crypto assets, more or less comparable to the Internet during the 90s. We are still far away from a significant adoption by society, but this might come rather faster than slower. Right now, we’re in the first iteration of SocialFi, which operates in a straightforward manner. Users visit a platform, place their crypto into a vault, and the vault manager handles the asset trading on their behalf. Nevertheless, in the upcoming months and years, SocialFi is poised to evolve into something far more complex and extensive.
As the DeFi space evolves, it becomes essential for investors to possess a high level of sophistication and knowledge to maximize their returns. Staying ahead in this fast-paced environment requires keeping up-to-date with the latest trends, understanding how different protocols work, and identifying potential risks and opportunities.
Furthermore, to lower barriers to entry, SocialFi makes decentralized asset management more accessible to a broader audience. SocialFi also promotes community building and active user engagement. By fostering a sense of ownership and belonging, these platforms motivate users to participate, share insights, and collaborate with others. This vibrant and engaged community not only enhances the platform's overall experience but also contributes to better decision-making through the collective wisdom of its participants. Users can start with smaller amounts and gradually increase their involvement as they gain confidence and experience within the community. This inclusivity empowers individuals who may have been excluded from traditional finance due to various restrictions.
Indeed, the benefits of SocialFi primarily cater to the users. However, the question arises: why would skilled traders in the crypto space willingly manage funds for others without any incentive? The solution to this issue is straightforward. Currently, SocialFi platforms have embraced the approach taken by traditional finance by offering a share of the profits to the vault managers. By providing them with a cut of the profits, these platforms incentivize skilled traders to participate in managing funds and facilitate the growth of SocialFi.
There you have it. Users potentially benefit from degen or talented traders managing their money in any way they see fit. Managers benefit by earning fees and a cut of the profits from money they otherwise wouldn’t be managing. Easy!
However, this is just the beginning, and there is a lot more to anticipate in the evolution of SocialFi. As the concept progresses, we can expect exciting developments and further enhancements that will shape the future of decentralized finance.
We have raised a few points about the social factor, the importance in crypto investing in this blog post.
We have it all, on deFarm!
Each individual will have the autonomy to decide where they allocate their capital and which protocols best align with their objectives. Our vision is to empower forward-thinking investors through a diverse array of integrations, offering balanced incentives for both proactive idea generators and active participants alike. Embracing the concept of a positive-sum game, we are committed to enhancing the ecosystem’s liquidity to the fullest extent possible.
Absolutely, the potential of SocialFi is undeniably exciting, and it's understandable to be enthusiastic about its prospects. The path that DeFi is taking, with direct connections between traders/investors through social media and peer-to-peer interactions, has the potential to create an all-encompassing public asset management platform. Such a platform would be unprecedented in traditional finance, and it could be the transformative moment for disrupting the traditional hedge fund industry.
For deFarm, we have planned to launch the following products that we think would be market-fit no matter bullish or bearish markets:
deFarm is the convergence of many concepts. Our asset management products are being built on top of the DeFi thesis. Our system is designed with a combination of gamification and social factors making investing more fun, more retention. All of that will be introduced in other articles.
With the vision shared through many blog posts, the team has committed to bringing many features and development designs towards mass adoption smoothly.
Call to the Fam
The first product - Single Farm is ready for Public Testnet in this August. Here’s everyone’s chance to immerse themselves in the DeFi world:
If you are a DeFi expert, and want to lead a community around your thesis, join us.
If you are a pro trader, and want to get funded without strict registration, join us.
If you are a DeFi investor, and you want to join forces with skilled people, join us.
We’d love for you to join us and build this culture together!