Crypto “is finally not just about a new gold or a new kind of money,” says Olaf Carlson-Wee, one of the crypto market’s earliest major investors. DeFi represents a concerted, crowdsourced effort to put digital coins to work, offering people financial reasons to hold crypto beyond merely speculating on price movements. For now, the ecosystem is populated primarily by people who range from comfortable with to rabidly passionate about crypto-with all its risk and legal uncertainty.īut that insularity may not last. Most of the action takes place on Ethereum, the second-biggest crypto network, whose blockchain comes with a built-in programming language, Solidity, that makes it easy to build so-called decentralized apps. Also, caveat DeFi-or: Assets aren’t covered by the federal insurance regime that protects “normie” accounts.Īs a largely unregulated part of the economy, DeFi has exploded in tandem with demand for cryptocurrencies like Bitcoin and Ethereum. (At the time of my dabbling, a pool token traded for about $10, down from a high of $32 in March.) It’s an all-crypto universe: In virtually all DeFi projects, deposits and earnings alike are denominated in crypto, never in fiat currency. ![]() People can sell these tokens for a profit on crypto exchanges, an additional incentive to participate. Savers accrue more tokens over time, even if they never win a lottery drawing. People who deposit assets earn loyalty points in the form of tokens-called “pool” in this case-that let them vote on PoolTogether’s direction. While not the biggest DeFi project, PoolTogether’s structure is typical of this burgeoning world. PoolTogether and similar projects are drawing a generation of tech-savvy tinkerers, crypto-coin early adopters, outside-the-box thinkers, and, yes, occasional degens to an alternative and largely independent financial system, one where they can borrow, lend, save, and insure themselves-based on rules they make themselves. PoolTogether is a prime example of “ decentralized finance,” or DeFi, a booming part of the neck-breakingly volatile crypto economy. The program runs on Ethereum, a global network of computers that collectively tabulate a ledger, or blockchain, through which it dispenses interest, and jackpots, every week. Cusack and a band of online collaborators whipped up the application using open-source code and cryptocurrency parts, built a pretty website, and launched it all into the ether. ![]() The incredible thing about PoolTogether is that the system runs entirely on software. There are no steel-and-concrete vaults, no tellers, and no executives in charge. (Even the lottery is banklike: Many banks and credit unions use prize-linked accounts.) But it isn’t a bank. The app takes deposits, lends money, and pays interest. While that makes PoolTogether sound a bit like a casino, most of its activities involve acting like a bank. At the end of July, the app had almost $200 million in total deposits and was sharing nearly $100,000 in prizes per week. While traditional savings accounts spread meager interest among all depositors, PoolTogether regularly delivers a big payday to a handful of winners. Leighton Cusack, who cocreated the project two years ago, prefers a different name for the game: a prize-linked savings account. The event was a “loss-less lottery” run by an app called PoolTogether. My toe dip into the club? A pool party held by a digital-only organization that would be happy, someday, to replace your bank. This summer I took my first step toward becoming a “degen.” The word-short for “degenerate gambler”-comes from the zany, $1.5 trillion cryptocurrency world, where cheeky speculators have embraced it as a term of endearment.
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