Research Summary
The article discusses the various risks associated with investing in a DeFi project and how to manage them. The author highlights several types of risks such as smart contract risks, composability risks, execution risks, key man risks, ecosystem risks, competition risks, and legal and regulation risks. The article also provides some principles for better risk management such as proper bet sizing, simplifying rather than optimizing, thinking in terms of probabilities, taking profits early, and thinking on a longer time horizon.
Actionable Insights
- Understand the Risks: Before investing in a DeFi project, understand the various risks involved such as smart contract risks, composability risks, execution risks, key man risks, ecosystem risks, competition risks, and legal and regulation risks.
- Manage Your Risks: Apply proper risk management strategies such as proper bet sizing, simplifying rather than optimizing, thinking in terms of probabilities, taking profits early, and thinking on a longer time horizon.
- Stay Informed: Keep track of the protocol and its competition, trending metrics, and the buzz and sentiment in the crypto community.
- Support Pro-Crypto Initiatives: As a crypto citizen, donate to crypto lobbies, support pro-crypto politicians, and be a positive actor in the space.
