SuperOne positions itself as a DeFi business

The years 2020 and 2021 have been a shocking time for many, many people. Entire industries have been badly affected, and few have escaped a major crisis. But not everyone has had a rough ride.

Look what’s happened to DeFi (decentralized finance). Barely a recognized sector at the start of 2020, at least by people not closely attuned to the world of blockchain-enable start-ups, the growth of DeFi has been of magic beanstalk proportions. According to a CryptoDaily study, something in the order of $11b has been locked away in DeFi projects, a 20-fold increase since January.

CryptoDaily’s take is this:

“On an immense scale, DeFi has offered multiple users peer-to-peer banking systems to exploit traditional banking services like credit systems on a decentralized basis. Of course, there are many reasons and explanations for the growth of the DeFi space; one recurring topic is yield farming.”

So what is yield farming? Inevitably, this is a term that requires a fair bit of demystification, but it’s essentially a mechanism by which individuals seek to earn a small amount of interest on owned cryptocurrency capital. With traditional fiat savings yielding minute amounts in interest compared to a generation ago, people who wish to put aside money for a few years, or even more, have limited options in terms of realizing capital growth.

So, DeFi has a solution. It starts with a crypto asset that tends to be a stable coin (one pegged to the US dollar). The yield farmer offers his asset to a permissionless liquidity pool and earns passively from it. Profitability in yield farming depends on two things:

1. How quickly you can move your asset

2. The reward system of the DeFi protocol

The collateral put forward is sometimes described as a “stake”, so you might hear about “staking”, which is simply another term for yield farming. DeFi has existed for four years, coinciding with the cryptocurrency bull run of 2017. However, it was a minor aspect of the crypto world, frequently overshadowed by ICOs and the sheer power of a media-enhanced bubble.

This changed in June 2020 when Compound started distributing its new governance token, COMP, to its protocol users. With a fully decentralized product, COMP owners began to earn further tokens by providing liquidity to the pool in a process described as liquidity mining. In the past, some token protocols like Focoin and EIDOS had often rewarded users for performing transactions. COMP’S token took this a whole stage further and within weeks liquidity mining had proved the chief catalyst for the DeFi surge, bringing in waves of new people waking up to crypto.

This all coincided with a summer and autumn of positivity for crypto as a whole, as a number of companies, disillusioned with the dollar, switched their treasury funds to Bitcoin. (Firms who did this in 2018, by the way, got their fingers badly burned so it can’t have been a decision taken lightly.) Inevitably, people are questioning the sustainability of yield farming protocols. Some go further, suggesting the risks taken are extreme and comparable to gambling. And then there are the specific risks:

Smart contract bugs: Yield farming protocols are based on Ethereum’s “gold-standard” ERC-20 token. Although this in theory helps eliminate the risk of intermediary corruption, it is not free of problems. A bug or malicious software can ruin a DeFi protocol
Liquidation risk: When borrowing a token on a DeFi protocol, collateral must be maintained above a certain amount. If not, the borrower will be liquidated immediately by the smart contract. This happens automatically, there is no wriggle room.
Increasing gas fees: One of the reasons Ethereum has not always kept pace with Bitcoin during the 2020 bull run is because it is a very overladen blockchain. The increased number of yield farmers leads to more transactions and slower confirmations making higher fees inevitable.

However, it would be a mistake to assume that the DeFi boom is unilaterally tied in with yield farming. SuperOne positions itself as a DeFi business for sure, but the staking side of it is only a very small part of the rewards structure that has been compiled. Fundamentally, SuperOne is not in the business of luring in unscrupulous yield farmers.

It is in fact looking for committed individuals keen to form a lasting bond with the community and to work hard growing their own networks. It is vital that, should you choose to support a DeFi project, you ensure it is a legitimate enterprise with an exciting final product.

SuperOne has a great concept in a sector that continues to defy the global economic downturn triggered by the pandemic. SuperOne is clearly one of the best DeFi opportunities out there right now.