Discovering the DeFi Pulse Index in the garden
The title of this article is intended to create in the readers mind an image of the elderly gardener, slightly hunched over with a Santa-like hoary beard, pressing through rank growth and flowers in the herbaceous border of a walled garden. A digital world to this grandfather-like character is something that exists on the periphery of his reality in the utterances of young people.
Until on a balmy summers evening he hears a rustling in the undergrowth and carefully parts interwoven leaves and stems to glimpse some creature. To his great astonishment, having held council with nearly every garden beast, was his discovery of the DeFi Pulse Index nestling beneath a bush. An iconic looking digital creature with the features of a capitalised ‘D’ and a body redolent of a richly coloured velvet cushion.
Without wanting to exhaust that fanciful preface, we’ll assume the good natured gardener nursed the DeFi Pulse Index with a few spoonfuls of dollars and later befriended an owl (of the curious species Index coop) who would hoot the gardener to sleep with a plaintive ddddddd-ppppppp-iiiiiii, ddddddd-ppppppp-iiiiiii.
The truth of this gardening narrative is that the author is something like a gardener, if not more accurately a general outdoorsman who digs holes, chops wood and tends gardens for a meagre wage. My estrangement to the incumbent digital world is as stark as our imaginary friend, though in former times I had a slender familiarity with tables, HTML and rudimentary CSS. I consider myself ignorant of the new-fangled technologies of the recent decade.
With reference to investing or cryptocurrency, I fear I am the ridiculed retail user who FOMOs into hyped up digital assets and coins with dreams of making millions. A true description of myself until I discovered the Ethereum network in September 2020 and have since metamorphosed into a placid and patient user of various Ethereum based applications or protocols.
Like other COVID driven newbies to cryptocurrency, I made my first purchase this year buying bitcoin through Coinbase having heard mention of Bitcoin many years ago by a dishevelled Australian in Prague. Maybe you’ve read some criticisms of centralised exchanges and their custody of your coins. Using Coinbase was above those criticisms a skilfully crafted idiot-friendly experience, absent of jargon. Some weeks later I purchased a strange thing called ether, before learning of its nature as a utility currency endemic to the Ethereum network. With blushing cheeks and a hope you can empathise, I confess buying ether for its cheapness compared to bitcoin and having that commonplace naivety in thinking it, or anything else cheaper than bitcoin, would be the next big thing.
If you are also a retail investor I pray such confessions give you hope, as some professional Ethereans and knowledgable investors made the same mistaken decisions when once they were ordinary folk.
Like many new participants in cryptocurrency I was always checking my portfolio to see the number tick up by a few dollars. By September of this year, as decentralised finance caught our attention, my paltry pot of bitcoin and ether sat idly swelling in value. The vampiric depredations by a copycat protocol called Sushiswap captured headlines and also provided a further inducement to become more regularly involved in cryptocurrency. Even if that involvement only meant utilising my static coins by injecting them into whichever Ethereum application yielded the greatest return or degree of fun.
With a cringing remembrance of using Ethereum for the first time, I haphazardly managed to provide liquidity to Uniswap. The curiosity of waiting nearly a day to approve my transaction and the exorbitant transaction fee paid, were both a mystery but not a deterrent. Ignoring my confusion, you’ll understand the prospect of financial gain outweighed what I later discovered were criticisms of the network: slow and expensive transactions. However, those static coins you might also have on a centralised exchange like Coinbase or Gemini, were now earning a portion of the transaction fees paid by others using Uniswap. Discovering you can generate a few dollars in passive daily income is a very sustaining reverie if one imagines buying an espresso with fees earned on assets you have the conviction to hold in perpetuity.
If you wonder how something like a Uniswap works, I too didn’t feel comfortable utilising the application not knowing how to interpret and value its interminable lists of tokens. We need to acquire basic knowledge of the Ethereum applications we use and how they roughly generate returns for us, so we can be better investors and users. I subscribed to the reputed newsletters Bankless and The Defiant. Bankless was my introduction to the creators and issuers of the DeFi Pulse Index in Set Protocol.
The circuitous path I had trodden through cryptocurrency, the twists and turns of which you might recognise, came after those seminal interactions with Coinbase and Uniswap. The discovery of the DeFi Pulse Index (DPI) under that metaphorical bush fundamentally changed my investment strategy. The way you think about allocating your capital as you take tentative steps into decentralised finance, becomes a far easier process with the ability to invest in an index that encompasses an entire industry.
An index product like DPI thus immediately satisfied the desire to own all of the leading DeFi applications and also removed their many complexities. It’s a daunting prospect for a non-technical user on Ethereum to try and understand how a myriad of mathematically based protocols work and then to invest in which will likely succeed. Owning DPI is the perfect compliment to not knowing how Synthetix or Loopring or Ren operate, though you believe that there is something profoundly valuable in their offering.
It’s good to begin by watching an asset to get a feel for its price movements and its reactions to goings on in the industry, so I downloaded the Coingecko mobile application and quickly favourited all of the DPI tokens.
There was a maelstrom of digital activity and lightning like developments in protocols, if you were reading of and using DeFi as September morphed to October. The ubiquitous hype about Yearn Finance, the creeping rise of the Ethereum native Dai stablecoin and the ways in which applications were trying to identify as unique and attract users. I wanted exposure to the upside of this rapidly expanding universe and began buying a few DPI tokens every week with a portion of my wages.
There is an underlying sentiment one feels when buying the DeFi Pulse Index that is akin to the spirit of the Western youth. A feeling that you are not only investing in complicated bits of code, but that of being a part owner of permission-less services imbued with a sense of freedom. Owning DPI tokens give you the equal opportunity to participate in the development of services that do not discriminate.
As the autumnal weather became a hindrance in the gardens and woodlands I worked in, I continued accumulating DPI through Set Protocol’s website. When you own the index there is also an option to redeem the underlying tokens and evaporate the DPI wrapper, if ever you wished to own the tokens individually. Beyond buying and holding DPI as a passive vehicle to profit, there are also many emerging and creative ways in which you can participate in the community that envelopes the DeFi Pulse Index.
That community is called Index Coop and a forum is their nexus of activity where you can contribute whether or not you own DPI and be directly involved in the development of all indices it manages. I follow their Twitter feed which regularly encourages those of us interested in DeFi to be a part of Index Coop.
My intentions when writing this article were primarily to speak to ordinary people, that is like myself, who are not employed or have an education in finance or computing. I hope that by writing my personal experience of buying and using cryptocurrency for the first time, to console other retail users who struggle to assimilate the basics of Ethereum and economics.
Maybe you also hoped to find a way of receiving the potential upside to decentralised finance but didn’t know how or have the capital. When I tapped into Google ‘buy bitcoin’ a few months ago, I didn’t know how to use a cryptocurrency wallet and hadn’t the vaguest notion of what Ethereum was. I now have exposure to the most exciting applications on the Ethereum network and all thanks to owning the DeFi Pulse Index.
You can buy the DeFi Pulse Index by visiting its official issuers Set Protocol.
You need a wallet application like Argent or MetaMask and you need to own some ether. You can buy ether using Argent and MetaMask or use a centralised exchange like Coinbase or Gemini.
You can also swap tokens you already own for DPI using Uniswap.