Learning about the seemingly unending number of new DeFi protocols and dapps can be overwhelming, especially for people who want to participate in and contribute to these projects. Fortunately, the process doesn’t have to be difficult. By first gaining a basic understanding of decentralization and how DeFI projects benefit users, and then asking and answering several questions about the most appealing protocols and dapps, anyone can discover and even contribute to different projects and their accompanying communities.
Decentralization is the Framework of Strong DeFi Communities
Decentralization is the foundation on which new financial products and services are built. Decentralized projects are community-governed, open, and function without third-party permissions or interference, making it possible for individuals to transact on the blockchain more securely, autonomously, and peer-to-peer. Simply put, DeFi might not only level the playing field for users to interact with and observe protocols, but also enable a high degree of user confidence.
The composability of decentralized projects—the fact that new dapps and services can be created on top of existing ones, like “money legos”—drives innovation and DeFi user benefits. For example, because DeFi services are built on the open infrastructure of the blockchain, any developer can be a creator and any user can get started with no more than an internet-connected device.
Moreover, composability allows developers to better express their creativity with products and services they build because, in part, they do not need to spend valuable time rebuilding common infrastructure. Rather, they can rely on the common frameworks of DeFi and the Ethereum blockchain, and focus on launching unique protocols.
Steps for Deciding Whether to Join a DeFi Community
In the same way TradFi companies depend on their customers for survival, DeFi projects depend on their global communities for success. Therefore, there is no shortage of doors to open to begin your DeFi journey. Consider taking the following steps to determine if a community is right for you.
Step 1: Ask Fundamental Questions
The first time you encounter an interesting DeFi project, whether it’s one newly launched or one that’s been around a while, you’ll want to get a sense of what it’s about before conducting further research. Ask yourself a few general questions right away to help form a list of projects to explore further:
- What is the overall aim of the project, and is that vision aligned with my beliefs and priorities? Would I enjoy being involved in the project?
- Has the project published a white paper and other technical documentation to help me to understand how its protocol or dapp works?
- What sector does the project serve, and does the community provide a thorough analysis of how users benefit?
- Are the protocol’s use cases clearly listed and explained?
Note that leading projects in DeFi have established standards of communicating about their work from the get-go, including white papers, public documentation, and open Github repositories. If a project does not live up to those emerging market standards, you might reconsider engaging as a potential member of their community.
Step 2: Gauge the Level of Project Decentralization
Not all DeFi protocols and dapps feature a high degree of decentralization across every aspect of a project. For example, some begin with a centralized team of individuals tasked with bootstrapping the project on its way to the ultimate goal of complete decentralization. Others intentionally combine centralized and decentralized processes into their projects, and choose to remain blended for the long term. Still others may not have fully developed a long-term strategy regarding processes. Given the range of views and approaches around decentralization, consider asking yourself the following:
- How decentralized is the project at present? Are teams working toward complete decentralization? If so, does the approach make sense?
- Does the founding team still control administrative keys for critical smart contracts?
- Can I participate in governance as a community member? If so, is the voting process clearly explained?
- Is there sufficient decentralization for community members to get involved in other ways, such as by working for the project? For example, can members be hired to write code, test new software, create written and visual content, help with community management, etc.?
Step 3: Get Acquainted with Project Teams and their Communities
A truly decentralized project’s operations are governed by its community members. Together, these individuals are critical to helping the project succeed. While some may be known long-term members of the general Ethereum community, others will be anonymous or new.
To best gauge overall the community’s knowledge, experience, and communication effectiveness and style, consider the following:
- Do community members look beyond the value of their specific project to the broader DeFi space, engaging with and adding value to the ecosystem as a whole?
- How does the project founding team keep the community informed? Does it publish a blog and offer a forum for important discussions? Do team members engage directly with the community through AMAs, videos, podcasts, social media, etc.?
- Does the community offer communication channels independent of the project team? Does the community have control over critical smart contracts?
- Does the community organize around core concepts of governance decentralization?
- How does the community engage with new members? Respectfully and with intellectual rigor?
Step 4: Acquire a Deep Technical Understanding of the Project
A DeFi protocol’s core functionality is dependent on its smart contracts—the software code that enables users to access DeFi services without the interference of middlemen. If you’re familiar with Solidity, Ethereum’s smart contract language, you should review the project’s GitHub activity to understand how the existing code behaves. If you’re not familiar with coding, you should dig into the available materials and get in touch with the project’s developers. With an open-source ethos, most communities are willing to respond in public forums.
Remember, direct engagement with talented technical communities, and their receptiveness to it, is one of key cultural traits that makes DeFi open and accessible to all.
Help Shape the Future of Finance
Anyone can get involved in DeFi thanks to the open nature of the ecosystem. If you discover a great DeFi project, think about joining its community to help shape and advance its tech, governance, and culture.
For those interested in the MakerDAO project, visit the Maker Forum to learn more and discover the many ways to get involved.