How to Choose a Successful DeFi Project (Part 1)

How to Choose a Successful DeFi Project (Part 1)

Written by

Jack Bass

October 25, 2021

You might be ready to try DeFi, but not know where to start. That's exactly why you need to enlist the help of a crypto wallet like Pillar.

More and more, media attention on making money with crypto is increasing, especially with decentralized finance (DeFi). You may be game to try DeFi, but you may not know where to start. 

Let our team at Pillar help you.

Playing It Smart From the Beginning

First of all, when you find a cool-looking DeFi project, consider how it matches your interests and priorities. Don’t know what to look into first? For a funky cute flavor, you might consider PancakeSwap or focus on NFTs of real and virtual items kept on wallets such as the Pillar wallet. For an immersive experience to rival reality, you could check out virtual worlds with virtual real estate investments such as Decentraland.

If your mind’s mainly on your money, consider from the start how a potential DeFi project matches:

  • The returns you expect — many dApps allow you to lend your crypto and offer a higher Annual Percentage Rate (APR) than bank savings accounts and other cash investments do, while higher-level opportunities like providing liquidity or staking on DAOs, such as Pillar’s, tend to bring higher returns.  
  • How the project would fit into your overall investment portfolio — regularly check your allocation of different cryptocurrencies as well as non-crypto kinds of assets according to their levels of risk and return. As you learn more and more about what makes a potential DeFi project risky, continually reflect on your emotions and level of risk tolerance, too. Along the way, look to develop the patience to not overreact and cash out of a project you’ve learned to trust well due to a one-off negative event.
  • Your level of experience — lending and yield farming on dApps such as Uniswap tend to be easier, while techniques such as arbitrage trading on Curve are more advanced. 

While different dApps offer different opportunities, the same principles guide them all, especially one: 

Only invest what you can afford to lose. 

DeFi investment opportunities can be fun to try, but having no roof over your head or food in the fridge is less so.

Knowing the Right Questions

It’s important to start a research process you can keep up with that fits your lifestyle and available resources, to avoid wanting to give up.

Accordingly, consider these questions as you research DeFi projects, their leaders, and their company cultures. Many of us at Pillar have learned to ask such questions ourselves—and sometimes only arrived at them the hard way:

(Take a screenshot of the bulleted section below and keep it handy as you go. Trust us—it’ll be worth it!)

  • Stay up to date about any project of interest and others, too, by checking in on DeFi news daily. For the best DeFi opportunities out there, use the Pillar wallet and its all-in-one, dynamically up-to-date ‘learn-to-earn’ trading interface as your go-to starting point. Our wallet provides essential coverage of all things DeFi—projects and tools to try, as well as bad actors to avoid. 
  • Read through all the website’s pages. By that, we mean all of them. Even just a few words on these low text density pages can reveal a great deal about a DeFi project.
  • Reach beyond the project’s bubble—does the project have partnerships? If not, how many reputable dApps are they connected to? If any of those partnerships involve grants, even better. Scam artists are less likely to have earned vetted attention from third parties.
  • Study the project’s roadmap or projected timeline, often found on the project’s ‘docs’ page or a homepage toolbar link. Does what’s being accomplished seem to realistically anticipate what’s forecasted?

It’s OK to not understand something, but any research into a potential DeFi project pays off, as it also does to keep an open mind. You’re more likely to find new ways to make more crypto on a project’s website just by clicking on a random dropdown menu than following the herd on a hot trending token. 

For example, your inner crypto ninja may really come out with DAO governance, even if you’re not familiar with it—especially after you learn that DAO tokens can gain you some of the surest and highest returns in DeFi. 

Ready to give DeFi investment opportunities a try? A big step in the right direction is downloading the Pillar wallet to let its in-app curated insights guide you through nearly every corner of the cryptoverse. 

Download the Pillar wallet app for Android or iOS, buckle up, and start your ride to real returns today!