4: The Best Tools You Need to Succeed in DeFi Have Nothing to Do with DeFi at All

In traditional finance, your best weapon is a fat stack of capital.

The rules of the game are firmly established and highly regulated, and though the rewards aren't anything crazy, neither is the risk. You can feel relatively safe investing your money and turning a profit.

In the Wild West of DeFi, if you show up with a wad of cash expecting to strike digital gold, your money could be gone faster than you can say "rug pull."

The further I dive into DeFi, the more I realize these 3 topics mean everything:

Microeconomics and supply vs. demand

Cryptocurrencies i.e. "tokens" are not the same as shares. Shares are highly regulated. Tokens can be printed solely at the developer's discretion.

Understanding supply and demand could mean the difference between boom and bust. You need to know things like:

  • How many tokens exist and what are the supply caps?
  • How strong is the demand for this token? Why?
  • Does it have actual utility? Or is it just hyped?

Don't underestimate the latter. Bitcoin offers nothing other than the belief that it could be a better long-term store of value than gold. Yet it's doing just fine.

Game theory

DeFi is a world built on math. Game theory is the study of mathematical models of strategic interactions among rational beings.

Game theory is a complex subject to master, but if you can grasp it, it will help you understand why some cryptocurrencies foster massive demand.

If the game theory of a system is sound, it's generally a safe(-ish) bet.


DeFi is not for the faint of heart.

If you think the stock market is volatile, the crypto market will make your head explode. There are no breaks on nights and weekends. The market is always moving, always rising and plummeting.

It's psychological warfare.

The one thing I've learned about crypto and investing in general is that:

Money is made in a bull market, but wealth is made in the bear.

Hang on because you're in for a hell of a ride.