Cover image: DALL-E 3

Last weekend, I woke up to see 10 missed calls from a friend. I knew all was not well as this was quite unusual. I had to call back immediately.

He picked up the call even before his phone rang. The next thing I had on the other side of the phone was…

“Uchenna, I need your help. I’m in trouble”

Then, he continued…

“Two hours ago. I bought an “x” token for $100 but I’m just seeing $16 now, what happened? Did they scam me”

It turned out that he aped into a token without due diligence, 2 hours later, he was 84% down. He probably bought the top of a pump-and-dump token. He got burnt badly. This space is wild, crazy. “Degening” is not for the weak.

However, this piece is not just about my friend, he learned from personal experience adding to the explanation I gave him in the course of our chat.

Degen-DeFi is a term that refers to the subculture and practice of engaging in high-risk, high-reward decentralized finance (DeFi) activities. As we all know, DeFi aims to create open, permissionless, and transparent financial services on the blockchain, such as lending, borrowing, trading, and investing. Degen-DeFi is the extreme version of DeFi, where users seek out the most lucrative and speculative opportunities, often without carrying out proper research or due diligence.

Degen-DeFi can come in different forms viz;

Yield farming

This is the process of earning rewards by providing liquidity to various DeFi protocols, such as Uniswap, Compound, or Aave. Yield farmers often switch between different protocols and pools to chase the highest returns, which are usually paid in the form of tokens that have volatile prices.

-Aping in.

This is the act of jumping into a new or hyped DeFi project without doing any research or analysis, hoping to ride the wave of price appreciation and sell before the inevitable crash. Aping in is often driven by fear of missing out (FOMO) and social media influence.

Meme tokens

These are tokens and projects that have little or no intrinsic value but are created for fun, satire, or trolling. They often have catchy names, logos, or slogans, and rely on viral marketing and community building to attract investors.

Pump and dump schemes.
These are coordinated efforts to artificially inflate the price of a token or project by spreading false or misleading information, creating hype, and buying in large amounts. Once the price reaches a certain level, the orchestrators of the scheme sell their holdings, causing the price to plummet and leaving the unsuspecting investors with losses.

Degen-DeFi can be rewarding for Degens who engage in it. Yes, it can. These rewards may include;

Potential to make “life-changing” money in a matter of days, hours, or even minutes.
Ability to capitalize on emerging trends, opportunities, and innovations in the crypto space.
Provide massive profits for early investors who can time the market and take advantage of the price fluctuations and arbitrage opportunities

However, its risks outweigh the perceived benefits,

It can expose investors/users to significant risks and losses, such as hacks, scams, rug pulls, flash crashes, and impermanent loss.
It creates a culture of greed, speculation, and gambling, rather than a culture of value creation, collaboration, and social impact.
Possibility to lose all the money, or even more than the initial investment, in a matter of seconds, minutes, or hours.
Exposure to high levels of stress, anxiety, and depression that come with high-risk, high-reward trading.
Addiction to gambling, trading, or chasing the next big thing, can affect the physical, mental, and social well-being of the person.

Who is a Degen?

A Degen is not a typical investor or trader. They do not follow the rules of the market, the principles of risk management, or the best practices of due diligence. They are driven by greed, fear, and FOMO (fear of missing out). They often chase after the latest trends, hype, and memes, without doing any research or analysis. They are willing to gamble on any obscure, unproven, or dubious project, as long as it promises huge returns in a short period.

Some of the common characteristics of a Degen are:

They use high leverage, margin, or borrowed funds to amplify their gains (or losses).
They trade frequently, impulsively, and emotionally, without a clear strategy or plan.
They ape into any signal, shill, or pump, without verifying the source or the validity of the information.
They ignore the fundamentals, the valuation, or the quality of the project they are investing in.
They do not diversify their portfolio but rather put all their eggs in one basket.
They do not take profits but rather hold on to their positions until they reach the moon or zero.
They do not use stop losses, risk-reward ratios, or exit strategies, but rather hope for the best or the worst.
They do not learn from their mistakes but rather repeat them over and over again.

Therefore, Degen-DeFi is not for the faint of heart or the inexperienced. It requires a lot of research, analysis, risk management, and willingness to accept the consequences of one's actions.

Degen-DeFi can be fun and rewarding, but also dangerous and destructive.

Do not be like my friend. Always DYOR..