HIGH APY - does it make you EXCITED or discourage you from investing in DeFi Projects
Last year, I've been partly involved in the process of launching a few projects built on top of blockchain technology. Two of them were DeFi pancakeswap fork built on different chains (one on top of BSC - Binance Smart Chain, other one used TRON network). During that time, I've tried to learn reasons for why some of them were successful while others were total failures.
I then quickly learned that most of those projects seemed to be providing early investors with absolutely high APY (annual percentage yield) and I know that many people are excited to see huge APYs, however I have my concerns. Concerns which I would like to share with you.
Today, I would like to learn what emotions and approaches you have to similar projects. The ones which are offering very high returns for those who join early. I would obviously share my own personal view as well, which you may use as a point of reference for the discussion.
MY LINE OF THINKING
My own experience within a few DeFi projects has taught me that pretty much all of them are offering high returns for early supporters and those who provide liquidity into the pool. I do understand the idea behind it; offering high APY is a great marketing tool, which allows to build more HYPE around the project and attract greater attention.
However, my strong impression is that it mostly attracts investors who only care about quick gains. They often do not care about the future of the project and do not think about providing long-term financial support. They will provide liquidity or stake tokens only to enjoy extremely high initial rewards and they will then dump most of it on the market. Crashing token prices.
The moment when the entire process is not profitable any more - they will just pull out the remaining of their funds and look for another opportunity.
Isn't that an impression you also may have? How many DeFi projects did we see, which followed that footpath?
How does offering high APY affect long-term supporters? How would they potentially look at such a project? Would they be optimistic, while knowing that high initial APY = high "dumpage"? Or would they feel that they need to dump their minted tokens ASAP, before the price collapses?
What do you think?
Small real-life example
I recently had a friend, who was interested in investing 1000usd into the upcoming DeFi project. Byt then he realized that those who provide liquidity into the pool in the early stage will receive a bonus of 50k % APY within the first few days after the launch.
He told me that seeing such a huge APY made him feel uncertain about the ability of the team behind this DeFi to stabilize the price of their token. And I must admit, that I feel just like he does. I am myself also put off investing in any project, which offers high APY for initial investors. I also feel that high APY may force me to join "dumpage".
What about you? Would you feel just the way I do?
LONG TERM SUPPORTERS
In my personal view, each project in its early stage should realize the importance of focusing their strategies on long term investors and supporters, and to offer them something other than high APY. Something, which would build their trust towards long-term project survival. So early supporters would not be focusing mainly on getting high rewards and looking for ways of selling it before others would.
Instead, ensure that communication with them is working fine. Make them feel that they are part of the project. Involve them into efforts of building community around it. Give them a "sense of belonging". Make sure that they would see and appreciate efforts and transparency.
Instead of offering high APY, those projects should focus on working closer with those who want to take long-term risk and support projects in the long run. It may be a more challenging way, but one that could provide more token price stability. It may take much longer to bring investors and initial growth but it would definitely be much more steadier.
However, is it THAT BAD to grow slow?
MVP (minimum viable product)
I've learned a number of times that it's best to launch a project on a small scale, with a small following base, with only few investors, with minimum functionality.
And only then SCALE IT.
Would you agree with me on that?
SHARE YOUR FEEDBACK and your experience
As always - I would appreciate every single valuable comment. I would like to learn your opinion, your view and I hope you can share your experience with investing in any project, which attracts investors mostly by offering high APY.
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When we give very high apy it seems like a double edged sword , 1) We get a lot of new customer ( hight marketing like you mentioned) 2) But we usually gain an customer base thats here only for the profits and once the apy reduces they tend to Stop 🛑... supporting the project because they no longer are getting what they joined the project for.
If we leverage the boon vs bane here , in my perspective I would focus on something that gives utility to the the project and maybe add the apy feature in the future once we have a decent customer/ support .
Hi dear friend @crypto.piotr
Interesting topic you share in the community, from my perspective, people are wary of investing in DeFi projects that offer very high APY, but at the same time avoid investing in projects with very low APY.
Investors currently trust projects that offer attractive APY (neither too HIGH nor too LOW).
From my own experience, when I see a project with a super high APY, I immediately discard it and assume it is a SCAM, on the other hand, when I hear about projects with a super low APY, the first thing that comes to my mind is that it is a consolidated project, for example; PancakeSwap is a consolidated DeFi and most of the APYs in FARMS range between 7% and 20%.
Therefore, those projects with APYs outside the extremes (ideally with APYs between 100 and 150%) are the ones I investigate to find out who is behind the project, and what services it offers and if it has any burning method that stabilizes the inflation process.
Best regards, be well.
Thank you for sharing your perspective on this topic. It's interesting what you've mentioned, that "at the same time avoid investing in projects with very low APY."
I wonder why is that? I always see huge dividents as either ponzi scheme or any other sign of unsustainable business-model. And I sometimes wonder why so many people do not see it this way.
ps. what means that project is consolidated?
100-150% doesn't sound insane. But for me it still does sound like very unlikely that price of such a token could stay at the same level. I myself would be rather keen to invest in projects offering 10-30% profit in a year time-frame.
High APY projects can be a double-edged sword, that is very clear.
They mean a big challenge for the whole team behind the project.
Just as you say, generating a big profit margin the first days can be attractive for anyone, but it can bring investors who only think about short term profit and affect a lot the project in question, it's a great truth.
On the other hand, and it is a viable option, is that the benefits are not only focused on the short term, that's when I say it is a challenge for the team behind the project. Because they would have to look for ways (products, tools, utilities,) so that people do not want to leave with their money and profits, that they see that beyond a few months there is something more, something that makes them want to keep their money in the project for years even.
I like how you described it as a double-edged sword. I wouldn't put it in words any better way.
Every time a DeFi offers a high APY is synonymous of failure or very short life of the project, since the first investors do not think in the long term, but in being able to capitalize, monetize and get out of it , it is very difficult that a DeFi can stay like that. i think that if the developers would think in a long term DeFI they should not offer such exorbitant APY that only attract short term investor
Greetings, actually nowadays many investors only think about investing and making profits in the short term without evaluating how good the project can be, the high APY only capture those short term investors that in a month or less they get everything and the project falls down hurting the smaller investors.
I think it is very important to invest in DeFi projects that are more long term with long returns, as time has shown that they are the most durable projects.
Greetings @crypto.piotr ❤️💕
One of the reasons I sometimes look out for some genuine DEFI project sometime has to do with the Defi project staking. The fact is that most Defi projects are mostly found of offering staking activities and rewards during the early stage of the project which gives early users the opportunity to earn more of it's tokens. Some people do say it's a means of compensating or rewarding early investors while some people see it as a total red flag in any project.
I think what really matter mostly is the team, community and prospect behind the project. If these three factors are solid with good plan, then we can expect good result from such Defi project irrespective if they adopt staking procedures or not.
Thanks for sharing this great post with love from @hardaeborla and I hope you have a great day ahead 💕❤️💕
I read through this post and I must admit that I am really impressed by it. All your point that you outline are not bad but when it comes to cryptocurrency the unexpected can always happen. Going by the long term process building the team is always not easy especially now that almost everybody that are into cryptocurrency wants to earn, dump and make money. If you can launch your project on a small scale and it pays out, then there is nothing wrong with it.
Personally I think there is a very big difference between creating a community that uses a token and creating a token that should be used by many people.
When offering a large APY it usually attracts investors who want quick profits, but for all long term investors offering a large APY reminds us of pyramid schemes.
The success stories I know of are made up of communities that develop their token, which grows little by little as the community grows.
Creating a token that grows slowly is much better than a token whose main attraction is a high profitability.
A slow and healthy growth from my point of view is much better than a fast but fleeting growth.
It seem that we're both on the same page.
Wise words @trabajosdelsiglo
I couldn't agree with you more.
Hello @crypto.piotr, I have always thought that the most "bombastic" projects at some point fall and with it all their followers and investors.
Many times I have tried to be the most optimistic from the beginning of a new project where I want to participate, however it is like a "law", everything that "makes a lot of noise" turns out to be a fiasco in a certain time.
Consequently, I dare to add that, like you, small projects where their development can be directly and transparently monitored and where there are only a few investors, is when short and medium-term gains are best used and they face lower risks.
@crypto.piotr first of I'd you ask me about the high Apr project , i seriously avoid that project the reason behind is that we are a small scale investor with little amount in our pocket and their are big whale who invest in the project and get huge amount of token within a month after one month they start selling the token creating a huge price down and they enjoyed huge return.
The point is that small investors are always get trapped in this kind of huge Apr project.
Now regarding my general thought I wi invest a very little amount for a month and get out of the project as I know their is no huge growth in the project.
I agree with your thoughts small scale and slow growth , a project should always care about the investors and need to be for a long term project not come and go. In this way you build trust with the project.
And in future if you expand also people will be with you at every step and invest in you.
I personally like the average Apr project with strong team and have a token value in future are I will invest in long term basis.
Hello dear friend, it is an interesting topic, really the projects with such an exaggeratedly high APY generate me distrust, I think I have already seen several of them fail because of the strong sales pressure generated by those first investors who have already managed to generate sufficient profits, it is a great marketing strategy but certainly helps to start the project, but it ends up being counterproductive, as it certainly attracts investors who only want quick profits and withdraw.
I have seen many projects offering huge apy in the beginning but later its got reduced badly and even the token price was dumped. I had invested in one of the project and my expeirince was not good. I joined in the beginning and got good apy but latyer token price fall down and I somehow managed to recover the money. No profit and no loss. I think a product with more stable apr is good idea and I am ok with lower % as well since it will last long. Nice post Thanks
Greetings dear @crypto.piotr, no doubt the DeFi projects have become popular and every day new of these projects arise. Unfortunately many of these projects are focused on short term profits and do not provide real support to investors to motivate them to invest long term in them.
Personally, offering an extravagant API is synonymous of alert since a project that has just started, has no support to maintain the returns of the same, as you express this type of API is only a way to attract investors and only those who enter early manage to capitalize in a good way, without forgetting the exorbitant profits received by those who obtained tokens in the pre purchases or stages prior to the launch of the project.
Regarding stability and scalability, I agree with you is to prefer to launch the project at micro-scale and then grow as the price of the token stabilizes, I say this thinking as a long-term investor.
Entertaining read my friend, regards.
It is true that most of these projects do not last long but some do. I have personally invested in many high risk projects and taking out my initial investment once I get a chance while reinvesting only my profit can make it risk free. I must admit that it is really like a gamble and we need to predict how long the project can last for those who put in money for such projects. Those who want to invest in such projects must be prepared that they may lose their money too. Getting in early indeed does provide early adopters a chance to gain a very attractive profit.
In my view, I feel that projects with high APY%, will always have the problem of pump and dump. That's the human tendency. If one is looking for a project to grow steadily and becoming really successful - it doesn't need to have a high APY%.
If that's too high that will discourage me from investing. More than 100% is already strange for me. Because they can't predict the exact inflation anyway. And that means that the more free tokens they will destribute, the less value it will have.
Those sky-high APYs are pretty much a detraction and a gimmick because they are not sustainable. But they tend to damage a lot of projects in the early going because a flock of "yield hunters" move in, take the high APY and then dump everything, moving on to the next project... leaving actual investors holding the bag.
the two most succesful ones afaik dont have intrest rates at all - one is the mother-of-all and the other one by sheer non-stop salesforce by vitalik ... the buzz is probably most important as always. If you see block.one getting about the budget the belgian state would need for their yearly deficit in one night while actually EOS itself means absolutely nothing, its not even worth much and has quite the cryptogarchy on top deciding, which makes it dangerous to stick much money in since someone up there can get 10 votes and decide all your money aint yours anymore .
i also feel a lot of projects are designed by their own designer for what you would say quick gain : put out a token, sell it with a lot of hot air, inflate it, then sell fast while its peaking and move on to the next
which gives crypto a bad name but lately those things might have slowed down
we know by now what we knew from the start on NFT : the state and megacorp adopted it immediately, even china has a state-based controlled NFT platform , while on the other hand bitcoin has been fighting hamburger hill since day one. So nft must be fishy (and it shows more and more)
which is one good thing : most scam artists have moved to more facile grounds for the time being while the laundry's being done (nothing new btw selling art for off the books to make it fresh and sparkly)
i assume the air must be tense in poland at the moment ...
anyway ... i think , as in all things, every single new project should start with a blank paper, not a template picked from another project already existing
well :) hang in there ....
Somehow I've missed your comment and I've only read it now.
Late thank you for this amazing feedback @tyrnannoght
that's great, i try not to stand out hahah ...
Its quite obvious most people who venture into the crypto space are only concern about the pay High APY attract more investors to a project but it consequence are mostly difficult for those project to manage we have seen several platforms who offered attractive APY to their investors and barely hold the project for months.
No investor would love to make loss and would take calculative risk when they sense a project would be rug pulled.
For once i've learned high APY only cause a launch project to run into bankruptcy leaving late investors to suffer large dump in price.
Long term initiative on projects with focus keeps a project running without unnecessary financial problems is best although a business is always a business investors are interested in high APY
My take on this will be to reduce inflation company are to focus on long term development of their project instead of using attractive paying means to entice investors who will probably dump such project any time soon
Thanks for sharing.
I think you're right, for most of these projects (even in the legacy non-crypto markets), the developers and early adopters (investors) are looking for capital, for liquidity, project expansion, etc…
In my experience, this is how the whole process plays out.
This scenario is usually associated with pump and dump schemes, but sometimes that wasn't the intention, developers just recognize that people like to make quick money, and that is one of the ways they can get capital to their project. So some of the time it's not sinister, it's just mismanaged.
Slow and steady is a lot more work, but if the project is useful, it will pay off much better in the long run. And much better than the scenario I laid out above.
Somehow I've missed your comment and I've only read it now.
Late thank you for this amazing feedback @fijimermaid
I find defi projects to be exciting, but in most cases they only work as quick ways to make money for early investors. I think a better approach would be to offer an attractive apy, but not too high or unrealistic because this would end up causing investors to only worry about the money and not about the project itself.
Before having an extremely high apy, as in many cases, I prefer a project that transmits security to me, this will strengthen the trust that exists between the creators of the project and their community. if it is possible to start with a smaller base, all the better, because some projects fall precisely because of their inability to handle a large number of investors.
You have made some really good points... In my opinion, it all depends on the project and what it is all about, the solution it brings as there can be strong arguments for both high APYs and low APYs... High APYs rewards has its own benefits as it would definitely attract more users who will be willing to lock their tokens to benefit from the high APY especially if the DeFi project has a lot to offer and has shown to have growth potential. However, the downside to it is that it can lead to more dumps in the market which can drive the price of the token down quickly. In my opinion, having a balance between good APY rewards to attract more users to lock their assets and take it out of circulation, and also preventing users from dumping due to excess supply.
I'm going to talk about the situation from an investor perspective. I have invested in many defi projects already with various amounts of money and various strategies and since 90% of them were successful I will share what I usually look for:
If I'm investing in a project that I don't have to use their native token then I would be looking for high APR and low deposit fees. That's not always possible but when it's there then that's a good opportunity since it has very very low losing percentage.
If I'm going to invest in a native token or add liquidity to LP then I would take a look at the price chart and see whether it can stay stable in one price range (+-10%) so if it drops I buy and if it rises I would be enjoying extra profits from price increase aside from high APR I'm getting with token stability too. In this strategy, the APR should be good enough, not too high and enough to compensate if a price drops by expected range in the upcoming days of investments.
Defi projects especially farm like ones never last forever. Maybe they may last for long with high APR yet price will be dropping and maintenance of stable price would be really challenging especially if there is no other source for the developers to buy-back and burn after no more investors are coming and it's only the ones who joined at very first.
That's my whole POV for the situation. Thanks for sharing with us.
Well said, a Project with high API attract investors who invest in that project for a short period of time to enjoy small gains and they certainly don't care about the future of the project,
I agree with you,
A project always needs trustworthy investors [Long term] who will make it work till it becomes big enough financially, they will be the backbone of the project,
I think Providing other support rather than giving High API is worth it, and this way both developers and investors no one has to worry about it more financially,
because investors are getting something in return, not in form of high API
Workload of Developers will decrease as they are not going to give High API and marketing pressure also will decrease.
Another Wonderfull publication from your side with excellent presentation and clear information,
Thank you so much for sharing this with us : )\
Hello friend @crypto.piotr.
Another great delivery that you share with us in this opportunity, actually I have invested in few defi projects..
I really share your point of view when you express us:
This is absolutely true and is linked to the durability of the project and therefore should be an indication for an investor to believe or not in a project defi.
Thanks for sharing your knowledge with all of us, greetings to you and your family.
I strongly believe it is the other way around.
Slow and steady growth is the most healthy way for any project that looks to come and stay. It is literally the opposite of what we see with 90% of Defi projects, and by the way, reading the post made me more exciting about the upcoming launch of the Hope token
High return implies higher risk. Offering high return for a token means that the founders themselves do not think that the token has great value. Investors should be attracted to a lower yield because the projects offers substantial benefits over other projects. Marketing should focus on these benefits. However, right now DeFi platforms have been commoditized to a large extent.
Hello friend @crypto.pyotr.
From my particular opinion, the projects that offer such high APY are not of my confidence and I have my reasons, mainly they are not durable over time.
These projects with a lot of APY tend to generate a very high amount of token, so this can generate that there is a lot of supply with which you can lose the value of the token completely, and that is a matter of hours after the withdrawals begin.
On the other hand, I consider these types of projects as SCAM, it always capitalizes a small part, and many of the small investors end up losing their resources.
We must always be attentive to projects that allow us to have a stability, not that they are only for a few days and everything ends up dying, as is the case of prprojects that generate high APY.
I prefer investing in more stable projects and with a profit percentage of 15% to 20% are very good the truth, with this it becomes durable and a very stable economy.
My personal input on this is that investment makes much sense when the APY is less because investors are often not ready to gain less from their investments.
Now when we are talking about crypto investments, for me it totally wac because sometimes influencers have a way of influencing the APY of any token. For instance some time ago, Elun Musk made a publication on twitter about DOGE coin, and soon millions of people plugged in and bought it in large volume and the next moment, the price went down.
Now I think that people should always look out to know if the token is just fomo.
Thanks for dropping by @eldecor and sharing your thoughts with me.
Hi friend, I agree, the APR should be more realistic, we all know that at the beginning it is very high and over time it decreases, so that discourages anyone. Since it is the big investors who have higher profits and then decide to withdraw their capital. They are not bad projects but you have to know which one to invest in.
Hello friend, unfortunately it is we the users ourselves who move the markets, these defi projects certainly start out offering high APY percentages, however this does not hold up because most take advantage of the high prices and profits and withdraw, making everything lose value.
Perhaps if the APY percentage were offered lower, people would not find it profitable to withdraw and this would make such projects more sustainable in the long run.
Greetings and thanks for showing us these types of concerns.
Hi @crypto.piort. I was just wondering if you have been made aware of this below and if you have any comment. There is a large and ever growing number of people who have been abused by this group like you clearly were too.
I'm really happy to see you doing your thing over here on Steemit, and we encourage you to continue. However there is a rapidly growing movement towards blurt and we would love to see you expand over to that platform as blurt prepares for major marketing, investment, and growth.
Furthermore, the organized corrupt network running things at hive came and destroyed my blog unjustly like so many others. So I had information gathered and assessed professionally and this was the conclusion that we all came to.
Hope this message reaches you well.
Your message indeed reached me :)
But it doesn't seem to be related to my publication and I'm not even sure why you decided to write it to me?
Do we know each other by any chance?
I replied on your other comment. Sorry for the late reply....
no worries, I'm going to check out your other comment right away
Well, DEFI was great early last year for me but things took a turn after the first general dip last year. DEFI projects with high APR are always the first coins disposed of by sellers and that marks that High DEFI projects should stay away from. That's my two cents on the issue
Thanks for your 2cents @lebey1 :)
Hi @crypto.piotr Greetings very much in agreement with your approach although I have not lived the experience I have read a lot about it, it may happen that users can migrate their liquidity to other protocols once they have met the decentralized loans or the APY seems low enough to want to seek a higher one on another platform, in a so-called pendulum, interesting your reflection and your proposal and thank you for transmitting your experience, success.
Hello friend, certainly the projects with a high APY look tempting, but for me they set off alarms, because they only attract investors who want to get quick profits and withdraw, I think that a project that has a slow and constant growth is a safer investment At least when you think long term.
Well, the most important thing is develop good use cases. High APY is a good marketing. For projects on decentralized exchanges, it is one good way to attract people to provide liquidity and enable easy trading of the token. so, High APY is inevitable for projects on Dexes, except if the team is bouyant enough to provide enough liquidty. Even at that, one entity providing liquidity is a huge turn off for any project.
It is human to try and make profit, so people will always dump a whole or part of their farming earnings. But if the project offer good utility, it will continue to grow after the dump and after the APY is lowered.
Obviously projects with high APY are tempting, naturally almost anyone would prefer a high APY investment, provided they heard early.
Most times, like it has been said by several others, people who suffer the fall of those projects are the late investors. No one, not even myself would want to keep a coin everyone is dumping.
Now I believe all projects must have arrangements for both early and late investors.
So my conclusion is, whether the APY is high, low or zero, project owners should have a foresight and must be genuine and true with their project. Users should also be carried along to know what's going on at every point or stage of the project.
I have seen a lot of projects come and go in the Defi space. I have a slightly different take on the subject.
I have a few observations to make: If a project offers a very high APY then yes it seems walking the path of doom.
However if a project offers a low or zero APY is this a safer investment?
Not really in my . The DeFi space is like a sea full of small fish. At times most of these projects are clones of the popular projects and there is little difference in them.
So I feel it is important to see beyond the APY
Look for the purpose of the project and the token.
Read the whitepaper and see the use case.
Does the use case makes sense? How is this token going to make a difference in the crypto space and what is its unique use case.
Go through the tokonomics and see if it makes sense.
Next Check if the team is available and ready to answer your questions.
If they do then match them with the ones provided in the white paper. A lot of times the so called small project are willing to launch a project but have no whitepaper in place.
At times these white papers and tokenomics get outsourced and the team has no clue as to what it says. So be vary of such projects.
Another thing is the project roadmap. Is it going to a plan and is the team willing to share the development with the community?
These are all very important questions to be answered. Though boring one may say dear @crypto.piotr I look for these answers and a lot more before I want to put my hard earned money into any project.
Then comes the APY for sure or lack of it.
I like your poi t of view, so both projects with high APY zero or low APY projects must have a definite agenda.
Thank you for taking the time to share all those thoughts with me buddy
Hi dear friend @crypto.piotr
The success of any DeFi project is to be attractive enough for more and more people to arrive, if people stop entering the project things start to go wrong.
That is why I believe better in few investors and slow growth, because you can see how you are doing and change in time, instead, if you attract many investors at once and an unforeseen event happens, it will cost you more to move the project forward.
god bless you
This sounds very well to me.
The truth is that having an excessively outrageous APY will not be sustainable for long and it will reduce drastically. Then majority of those that invested earlier and got the high APY may dump their tokens and may further crash the price of the token. So for a long term project, it is better to attract investors by building a use-case for the project than by offering investors an APY that is "too good to be true".
Excellent read buddy
Hello dear friend @cripto.piotr, I find excellent your analysis regarding the system defi, although I am aware that in the market of cryptos, many people have acquired some wealth in the short term, I think those projects were then diluted after everyone made a profit.
The organic investments are medium to long term, as it should be in a system that guarantees to be sustainable, particularly I would like to participate in DEFI systems with stable currencies, looking for a certain percentage of profits, because if I wanted to speculate, I’d be trading.
So long friend, good article, have a great start to the week.
Late thank you @amestyj for sharing your thought with me
It is interesting the initial approach because certainly the high interest rates are usually an incentive for those who want quick profits, however for those who expect an investment with long term security, these high interest rates could be a warning that this project has a short life even if it is otherwise stated in its promotion. So we must be careful with quick profits, in my case being prudent is the best alternative especially when we are starting in this process of investing in the blockchain.
I totally agree with you. In the past year we saw a lot of projects fail because they failed to deliver and investors were jsut after quick gains. In my opinion early investors should be rewarded with a solid product that is attracting more and more people over time. This is why your approach with a small group in hte beginning and scale over time is exactly the right approach. Unfortunately, we are living in a very quick changing envirnoment which makes a maintaining a sustainable projects very hard as it runs into the risk of being irrelevant after a few months. I think this is the reason why so many people are here for the quick money.
I myself love to see projects that people can believe in, because if they have a clear idea and good roadmap you know that you are investing long term and not gambling short term! :)
Nice topic for discussion yet again!
We've seen number of such a project to fail to deliver.
Thanks for sharing your view with me.
Super true. We cannot underestimate the power of starting small, and working hard to grow step by step. That's the way anything long lasting, reliable and steady is built. Nice post!