When a phrase is repeated enough to become cliche, there’s usually an underlying truth or wisdom within it. 

The truth and wisdom of the title phrase has been especially highlighted in the world of crypto. Early birds to Bitcoin, Ethereum, and many other alt coins are living testimonials.

Why should you care? 

Well, if you’re reading this in 2021, I believe that you’re in the midst of an immense opportunity to be an early bird in the world of decentralized finance, aka “De-Fi”.

What the heck is De-Fi?

For the uninitiated, De-Fi is an alternative financial system. One in which the inefficiencies, gatekeepers, and centralized control of traditional finance are removed.

The goal is to build a sustainable ecosystem of financial resources that’s accessible to everyone and fairly compensates its contributors.

In order to understand de-fi, it helps to understand some of the shortcomings of traditional finance.

Consider the way banks make money. To state it simply, you deposit capital and they lend it out or invest it. They then earn interest and fees from lending the capital that you deposited. In return you may be compensated with a 0.5% APY return. That’s if you qualify, of course.

There has to be a better way, right?

De-Fi introduces the world to a democratized financial system. Efficiency is improved by replacing traditional intermediaries with technology. Transactions are autonomous and transparent, while allowing users to remain anonymous if they so wish.

It sounds complicated, but for users it can be as simple as using an app on a cell phone. Finance is accessible and permission-less. Meaning no tellers, no underwriters, or applications to fill out. 

With De-Fi applications, otherwise known as protocols, you’re able to transact similarly as you do in traditional finance. De-Fi has the added benefit of a lack of overhead costs, thus allowing the fees and interest generated from transactions to be used to better compensate the users providing the assets. 

A World of Opportunity 

As I mentioned before, De-Fi protocols are designed to be able to pay users more interest on their deposited assets. Even stablecoins (crypto assets pegged to the U.S. dollar) have returns that dwarf traditional banks.

This fee sharing model isn’t just a temporary benefit or only found in certain protocols. It’s the foundation of De-Fi. Since there’s obviously no central banks, protocols rely on users to supply the assets needed to facilitate transactions.

The incentive is compensation that’s more proportionate to their contribution. The greater the protocol’s need for an asset is, the higher the interest rate for its deposit will be. 

In the picture above, you can see interest rates on different assets. The additional interest percentages, in blue, are ‘liquidity mining incentives’.

In these early stages, some applications are even paying users extra to help supply the initial liquidity by using these liquidity mining programs.

As you can see, these incentives are not only distributed on assets deposited, but on borrowed assets as well.

Imagine a bank paying you to take out a loan. That’s the reality of what’s happening in de-fi right now.

For clarification, Liquidity Mining Programs are just specific funds, dedicated to rewarding early adopters for depositing assets to a protocol. The obvious goal of these liquidity mining programs is to attract new users and to increase liquidity.

Rewards are paid in addition to the built in compensation that users earn for holding their assets with the protocol.

Seize The Moment 

The reality is, whether you take advantage or not, these opportunities won’t last forever. Liquidity mining rewards are temporary incentives currently in place to draw users to these platforms.

As these apps mature and protocols become more frictionless and user friendly, the returns in the pools will also be diluted. As liquidity become more accessible, fees will be split between more users. Early adopters will watch our rates trend lower. (while still outpacing legacy finance).

Mass adoption is coming to de-fi. Meaning you’ll eventually adopt the technology too. And whenever you do, you’ll likely realize you should have done so sooner. 

Friendly reminder. The early bird gets the worm.

Thanks for reading :)

Feedback good bad or indifferent is welcomed.

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