How DeFi ‘Degens’ plays the money Legos from Ethereum

First there were Tendies and YFI. Then YAM came (and went). And since yesterday we have based money.

Learn about today’s decentralized finance (DeFi) in a crossover between massive multiplayer online (MMO) games like World of Warcraft and crypto pump-and-dump schemes.

These aren’t the same DeFi projects that started earlier this summer, said Steven McKie, co-founder of Amentum Capital. These new projects are about harnessing Ethereum’s technology for unintended purposes. They want to make crypto fun again.

It’s about making money for them.

Yam Finance was launched on Tuesday. The following day, YAM shot to $ 160 per token and had around $ 700 million in lossless collateral under contract (aka yield farming). YAM entered Github Valhalla early Thursday morning when a mistake blocked project administration and the $ 750,000 treasury. The token’s market capitalization quickly lost $ 60 million in 35 minutes.

Continue reading: DeFi Meme Coin YAM succumbs to fatal ‘Rebase’ bug and makes plans for ‘YAM 2.0’

Play the game

From the first heartbeat to the last breath in less than 48 hours. But those are the rules of DeFi’s newest toy, “minimally practical money experiments,” as Yam Finance called itself.

“The longer it takes to do due diligence in this cycle, the lower your alpha,” McKie told CoinDesk in a phone interview. “When you are comfortable with the game, play it. If not, sit down with the next one. “

McKie was an early liquidity provider for Based.Money, another DeFi MMO game (as he likened it). The anonymous founding team of the “Ghouls” project warmly welcomed its users via Tor:


Play by the rules (even if you don’t know them)

Does the project have a governance structure? Where can I use collateral for the farm? Which pool has the best returns?

These are the questions that DeFi “degenerate” (or “degenerate”) shoots back and forth ad nauseam in various Community Telegram and Discord channels.

For YAM, the central rule was “Know thy rebase”, the algorithmic offer dump issued every 12 hours in order to push the value of the token back towards one dollar. According to CoinGecko, the token was offered up to $ 167. Traders rushed to take profits before the rebase. After that, they pumped up the value of the token again.

Continue reading: Deposits into “Monetary Experiment” Meme Token YAM break $ 460M

Based Money isn’t much different, save for a few rule changes: farm the BASED token, drive up the token price, and storm out the door before the algorithm changes the rules.

“The BASED Protocol is a DeFi chicken game designed to shake out weak hands and get the highest profits for those who understand the rules,” the website says.

BASED is trading at $ 128 at the time of writing, according to CoinCecko.

DeFi MMO is possible because of the composable nature of Ethereum, Aave CEO and founder Stani Kulechov recently said on a Chainlink blog. Often analogous to Lego bricks, Ethereum applications can be put together to create novel financial projects.

Yield farming makes liquidity just another plastic building block in the box, he said.

Continue reading: What is crop farming? DeFi Rocket Fuel, explained

“If this product is good, it will quickly achieve network effects as the liquidity moves interoperably,” said Kulechov.

DeFi composability

However, composability does not mean product safety, OpenZeppelin security researcher Austin Williams told CoinDesk in an email. Just ask YAM investors.

“It’s important to understand, however, that just because a project is made up of code that comes from several other audited projects, the new merger is unsafe,” said Williams.

However, yield farming is a better alternative to Initial Coin Offerings (ICOs). Income farmers are rewarded with a project’s native token for adding liquidity to their market. In other words, if you swap fiat for an unproven token, you won’t get burned.

Continue reading: Compound’s approach to DeFi governance begins with giving away COMP tokens

It’s not that these projects didn’t warn users about the risks beforehand. Both Yam Finance and Base Money publicly announced that the code banks were unchecked.

In it for the memes (and the money)

This makes it not a smart game or even a good look for an industry faced with scams. Those who bought YAM or BASED tokens at retail prices paid for every Farmer ticket to the arena, crypto blogger Lefteris Karapetsas said Thursday.

“The bad side of agriculture is the ‘DeFi Chad’ or ‘Defi Degen’. The kind of meme-driven farmers who jump from log to log with no thought of contract security, hunt the biggest yield, give their tokens to the new people, and then move on, ”he wrote.

But it is lucrative for farmers who are hungry for interest. It’s also really fun.

Continue reading: DeFi traders play Ethereum for higher profits, researchers say

“A community that didn’t exist 30 hours ago will have a higher turnout than the US presidential election through the power of memes and the provision of financial incentives,” said Eric Meltzer, owner of Yam Finance Telegram , early Thursday morning. Regarding a governance vote to save the project.

A chill from “When to Rebase?” Memes and emojis welcomed Meltzer’s comment. Within hours, the whole project was as good as bricked up. But don’t worry, a YAM 2.0 is already in the works.

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