I’ve been a crypto fan since December 2015, but very new to the world of DeFi (Decentralised Finance). Before we begin, let me start with this admission: I don’t quite understand DeFi yet – it’s very technical and still hard for me to wrap my head around.
However, in the spirit of ‘writing it out makes you learn better‘ and ‘you don’t have to be an expert to write about user experience and journey’, I accept this challenge. I truly believe DeFi is an important topic for everyone to at least be aware of, even if now is not the right time for you to explore it. I’m also going to share how my journey into DeFi looks like, so you’ll know what to more or less expect when you are ready.
How DeFi works
Decentralised Finance or DeFi is financial services built on top of distributed networks with no central intermediaries. Here are some examples:
At the core of it, DeFi is… code. Financial transactions go through when the conditions are met, full stop. The same set of rules apply to everyone who uses it – this can be good or bad, but absolutely transparent – the codes are published and improved upon by community members by a consensus mechanism (the method differs; some use proof of work, some use proof of stake. Click here to learn more)
I won’t go too much into how the technology behind decentralised and distributed networks works (click the image below to see the technical differences, if you’re into that kinda thing). Suffice to say, DeFi is very different from the traditional financial system, which has always fallen under the Centralised Network model.
Don’t get me wrong. The centralised financial system has advantages – for example, if I lose my funds or get scammed, I can submit a report. My deposits are also protected and insured by PIDM. It is completely fine to stay within the traditional financial system if you like this assurance.
Additionally – and this is important – the learning curve to use DeFi platforms is pretty high for people who don’t have (1) financial and/or (2) coding/tech background, neither of which were skills taught in school. You have no choice but to self-learn how everything works.
That brings us to the next part,
My journey in self-learning DeFi
This is how my self-learning journey in DeFi looks like so far (highly simplified):
- Learn about bitcoin, the cryptocurrency that started it all
- Learn about ether, the cryptocurrency used in Ethereum Network. Ether is not just a store of value; developers use it to build DApps, or Decentralised Applications. To fully explore DeFi, you need ether because most DeFi platforms are built on Ethereum Network – buy here.
- Learn how Ethereum Network and smart contracts work. I’m not a coder so I’m super lost here but if you are, definitely check out the ETHKL community group – they organise meetups and stuff. Super friendly people and generous with their knowledge, love them. NEVER ASK THEM ABOUT ETH PRICE, ONLY THE TECH, OR I SLAP YOU
- Play around various no-code platforms built on blockchain, including Steemit (think Medium but on blockchain) and that time I created SurayaCoin (no value btw, just for fun)
- Learn about stablecoins, ie cryptocurrencies that are pegged to a more stable currency (as we know, cryptocurrencies are volatile). USDT or USDTether is easy to understand – 1 USDT = 1 USD. I’m still confused about how Dai works
- Lost a bunch of money in the process. Uncharted territories carry more risk. REMEMBER: Always use play money, not survival money
- Lucky enough to see some gains just by hodling, not trading (Read: Ranked: Lowest to Highest Return on Investment).
- Read CoinGecko’s How to DeFi book (buy it here)
- Explore available DeFi platforms and ngl a bit disheartened that many platforms look like they’re not syariah-compliant (for example, you can make money by lending your ETH, but profiting from interest is Riba’, aka haram money)
- Dipped my toes in liquidity mining (they call this farming) with A LOT of guidance – shoutout to Jason Chew, moderator/ambassador of Aavegotchi Malaysia! Note: Aavegotchi itself is a game but exploring it teaches you so much about DeFi ecosystem
This is where I’m at now, as of the time of writing. I’m still learning. The journey isn’t over.
But why learn it at all?
My motivation to learn about DeFi
To be blunt, my motivation to learn about DeFi is the belief that capitalism (in the way it is playing out now) is screwing all of us common folks, aided by the traditional financial system.
This isn’t new information, it’s been going on for ages. Traditional finance rewards the rich with better access to capital and rates – that’s why you see the rich getting richer and the poor getting poorer. Over time, wealth, and by extension, power, is concentrated in the hands of a few.
The wealth part doesn’t actually bother me that much. Many business owners did create and distribute wonderful products and services which make our lives better. One should absolutely profit from innovation and providing value to society.
The part that does bother me though is the way the top 1% ignores how their decisions negatively affect the bottom half, who have no choice but to live with the outcome. Some examples:
- Uncontrolled and unsustainable growth contributing to worsening air, water and sound pollution – so we have to ‘invest’ in things that cancel them out: expensive air purifiers, water filtration systems, etc
- Living at places further away from the workplace as we are priced out from sky-high properties in the city, thus spending more time, energy and money on commute
- Employees being retrenched, have their salaries cut and every inch of productivity squeezed out of them, by business owners who are already obscenely rich
- The rich and well-connected using overly-complicated financial products which can literally cause economic crisis when things go wrong, but get almost no repercussion (hello 2008 Financial Crisis)
Important: This is not a ‘rich people should do this or that’ article – who cares what I think, I’m a nobody. This is simply an observation of the way things are. Feeling helpless is an understatement.
But then DeFi comes along, with democratisation of finances as its core value.
DeFi, for me, is a way to reduce my reliance on traditional finance, which is heavily influenced by the top 1%.
DeFi, for me, is using technology to take back ownership of my financial life, even for a little bit.
DeFi, for me, is a way to feel less scared of the future, as the concentration of wealth and power continues.
So that’s why I’m learning DeFi. And why I’m telling you about it. Consider this your awareness stage, so you’re not thrown into the deep end if you do need to use it in the future.
And you know, *if* I make a few bucks along the way, all the better. Here’s hoping the airdrop game in 2021 will be good as well – I watched enviously as DeFi early adopters get airdrops worth thousands of dollars throughout 2020.
Are you are learning DeFi as well? Which platforms? What is YOUR motivation? I’d love to hear from you – leave a comment below!