Well, there you have it. If you’ve made it this far, you’ve established a solid foundation to further expand your knowledge and understanding of DeFi. While the people joining the crypto industry now are less early than those who joined 5 or 10 years ago, they’re still substantially early.
Today’s Agenda
- You’re Still Early
- 10 Steps to Begin Your Crypto Journey
- Risk
- High Beta Assets
- Away You Go
You’re Still Early
Traditional finance as we understand it has only existed since the birth of the Federal Reserve and, more accurately, since the onset of the Bretton Woods agreement – and even more accurately, since the start of quantitative easing practices resulting from the Great Financial Crisis and the Covid 19 response. Roughly 60% of all $ was put into circulation within the past few years. That changes things.
Compared to other fields, traditional finance is not that traditional – its fundamental structure has only been in place for about 80 years, which is considered modern compared to the humanities. Finance is grossly behind where it needs to be compared to scientific fields like medicine and chemistry.
As referenced in Chapter 2, traditional finance today is about as evolved as 16th-century chemistry was. It’s full of alchemy.
The cutting edge of traditional finance could be more cutting edge. FinTech technologies like mobile-only banking apps or buy-now-pay-later schemes such as Klarna are not revolutionary. They’re simply byproducts of what’s possible with a mobile phone. Compared to the constant innovation at the cutting edge of DeFi and blockchain technology, traditional finance’s innovation over the past few decades is insignificant.
10 Steps to begin your Crypto Journey
Ok, enough of the theory. The remainder of this chapter includes the guides and articles you need to successfully onboard yourself to Solana’s DeFi ecosystem. Each step consists of a mobile and desktop version of the guide involved, so you have no excuses!
- Read this article if you want a deeper technical understanding of how your wallet works.
Step 2 – Connect your Ledger or Keystone device if you have one.
- If you haven’t yet set up your Ledger, follow this guide.
Step 3 -Natively Stake SOL within your Solflare wallet
- You can unstake your SOL tokens using the following guide.
- Here’s a quick primer on SOL staking.
Step 4 – Swap tokens within your wallet
- Here’s a quick primer on token swaps.
Step 6 – Stake SLRS tokens
- You’ll have to have SLRS tokens in order to stake them. Maybe you can use the guides in step 5 to help you acquire them!
- You can unstake your SLRS tokens using the following guide.
Step 6 – Become a liquidity provider on Orca
- Here’s a quick primer on Orca’s platform.
Step 7 – Trade on-chain perpetual futures contracts using Mango Markets
- You can also do this as a Solrise Fund Manager. Check out the Solrise Gitbook for more info.
- Here’s a quick primer on perpetual futures contracts.
Step 9 – Trade on-chain options using Zeta Markets
- Here’s our spotlight article on Zeta.
Step 10 – Invest in a fund on Solrise
- Read this to learn more about being a Solrise Fund Investor.
- You can withdraw from a fund using the following guide.
Extra Credit: Step 11 – Create a fund on Solrise
- Read this to learn more about being a Solrise Fund Manager.
Miscellaneous Guides that might be helpful
Risk
Risk works as a stairway on the way up and an elevator on the way down. When sh*t hits the fan, all correlations go to one. These two concepts explain your average investor’s mindset when it comes to risk. The low-risk, low-return, and high-risk, high-return framework have become the de facto understanding of risk for investors over time, and DeFi is no different.
Risks in DeFi come in many shapes and sizes, some new and some old. These risks range from smart contract risk (lousy code) to user error (forgetting one’s mnemonic) and everything in between. DeFi and the rest of crypto are highly correlated with risk-on-tech assets. Along with the standard volatility of risk-on tech assets, DeFi users must understand that DeFi is very volatile.
There are small-scale scams and large-scale hacks taking place very often, and regulators need to learn how to deal with it all and often can’t go after what they need to. If you want to understand examples of these hacks, go through Rekt’s graveyard. They’re actively going after people and have started sanctioning protocols like Tornado Cash to prevent bad actors from siphoning money into untraceable wallets. To go after a protocol in this manner would require smart contracts to be sanctioned, which is explained further below by Harry.eth, a security researcher from Metamask.
There is even a state-sponsored hacking group called Lazarus that operates in North Korea, which has attempted to infiltrate crypto companies and has stolen hundreds of millions, if not billions, over the past few years by exploiting blockchain applications and bridge vulnerabilities. It’s theorized that these funds are being used to fund North Korea’s nuclear program.
This isn’t the wild wild west but it’s definitely not for the faint of heart.
Storing crypto in a wallet is safe but using that wallet to interact with applications may put your crypto at risk.
Do not put any significant amount of assets in a wallet that will be at risk of being compromised.
Use a hardware device like Ledger or Keystone to store your private keys offline and ensure an extra layer of protection. If you understand this and are ready to explore DeFi and beyond, read this article.
High Beta Assets
When an asset moves in a similar direction as another, it’s said to be correlated. When one asset consistently moves in the same direction as another but with more significant moves, it’s said to have a high beta.
When the Nasdaq 100, an index of the top 100 US tech companies, is up 3%, you’ll probably see Bitcoin up 10% and vice versa. This is to say that cryptocurrencies are high-beta digital assets highly correlated to risk-on-tech assets. These extremes make it easy for people to make AND lose money.
Best practices in crypto are to never recommend buying to family members or friends who wouldn’t know what they’re doing. You don’t want to be that guy/girl when prices decide to go the wrong way.
When it comes to your own portfolio, that’s up to you.
Away You Go
You now have a strong enough understanding of the context, technologies, potential, and risks involved in DeFi to research and engage with it on your own. Remember to do your due diligence before investing any significant amount into a cryptocurrency or using a DeFi, NFT, or DAO protocol.
If you found value in the various rabbit holes we went down in this course, you’re in luck. Crypto is full of rabbit holes that have been theorized for decades since the cypherpunk movement in the early 1990s. Just start researching things like Bretton Woods, Rights to Encryption, Dollar Debasement, etc.
It’s, of course, good to hear and understand criticisms. In fact, go ahead and follow no-coiners and other crypto critics. Some podcasts and individuals make a living pointing out everything wrong with crypto. These people will open your mind to how non-crypto people view blockchain technology (tl;dr, they usually hate it). In the ways that some people are religious zealots for Bitcoin, there are also religious zealots for anti-crypto belief systems.
Please refer to F. Scott Fitzgerald’s quote in Chapter 5 to understand what both examples of zealots lack.
Next chapter
Crypto Fundamentals
Away You Go