Another Day, Another Hack

DeFi has been plagued by hacks and exploits ever since its official introduction in 2020. Juicy DeFi gains have not come void of risks, and in many instances, rather significant risks. This is unfortunately an unavoidable aspect of the DeFi sector that continues to be a rather significant concern for both new and seasoned DeFi investors alike. However, there are indirect ways of mitigating these risks.

If you can’t reduce the risks associated with a particular investment vehicle, the next best thing is to reduce the element of potential financial loss. In other words, even if the worst-case scenario plays out, you can enjoy a level of protection. Essentially, there is only one way to go about this and that is to utilize capital outside of your savings and liveable income.

For many, this is an unachievable approach because they have not dedicated time to the creation of passive income mechanisms. There are many ways to go about this. Take Leofinance as an example. Interaction on Threads takes place every day, regardless. The introduction of a robust ad revenue model simply creates an additional passive income source for existing activities.

In other words, no additional capital allocation is required. This is what I began hinting at more than a year ago. Stop thinking that passive income requires working capital. That is just one aspect, or expression of passive income, and is what is required when it comes to DeFi. However, leveraging alternative, and more traditional passive income sources can generate “free” capital to deploy into riskier passive income ideas such as DeFi.

Monumental Shift

This is an important shift that needs to take place if you wish to increase your exposure to DeFi, while simultaneously protecting and preserving your capital. It will be interesting to see what the Threads ad revenue model produces in a month. In the case of Leofinance and Threads… this income goes towards purchasing LEO tokens off the open market and rewarding stakeholders. You can make use of similar, or other creative ideas, to gain “risk-free” exposure to DeFi.

This is the ultimate way to gain exposure to a risky market, while simultaneously, drastically reducing the risk dynamic. Many “old school” passive income ideas operate exceptionally well when incorporated and utilized within the world of Crypto and WEB3. Creativity is a key aspect when it comes to the design and construction of these models. As mentioned many times, passive income is at the heart of wealth creation.

One feels a lot better deploying capital they are fairly comfortable losing. Why? Well, the work has been done… and now the model simply just keeps on giving. Even if deployed capital comes to nothing, it’s not fatal. Simply because the passive income models continue producing fresh capital to deploy. I think for many, the beauty of this idea escapes them, at least until they experience it for themselves. That’s when it hits home.

A single income source is difficult to grow past a certain level. However, it’s relatively easy to grow numerous income models to an initial stage of profitability and income generation. That’s how one needs to approach Crypto income, at least in my opinion. It’s funny how diversification has numerous benefits that extend beyond the “protection of capital”. It’s a key principle of financial management that benefits practitioners in multiple ways.

Final Thoughts

In my experience, there is no better strategy to go about gaining exposure to the DeFi space. Not only are hacks and exploits an issue but that of significant depreciation when it comes to token valuations. Whenever a particular token is a reward, it simultaneously has to endure tremendous selling pressure. These are two very powerful dynamics that work in contradiction to asset appreciation.

This is why additional utility is always an area of exploration, as finding ways to reduce selling pressure ultimately protects and props up the valuation of the token in question. Utilizing ongoing passive income to fund risky investment opportunities is an extremely powerful way of reducing risk, and one I have found to be highly effective. All the best. See you next time!