Despite the bear market that is currently spinning investors’ heads, the cryptocurrency frenzy is outpacing the usual buzz of traditional finance. Among the emerging trends in the field of decentralized finance (DeFi), social trading appears to be an innovative formula capable of attracting the largest number of people to this discipline. In fact, this approach allows investors to rely on a financial instrument with a strong social dimension in order to limit risks. This can significantly contribute to the widespread adoption of DeFi. This is precisely the objective pursued by the Nested project. Having said this, while welcoming the benefits of the social component, the start-up remains aware of the risks inherent in the Web3.
A promise not kept
Since its inception, decentralized finance has developed spectacularly. However, it is still struggling to reach the general public. As a result, the initial promise to promote financial inclusion around the world was slow to materialize. It is true that decentralization has made it possible to carry out peer-to-peer transactions without the intervention of an intermediary.
However, in this atypical and often very complex environment, users are left to fend for themselves, without any supervision. This leads them to make investment choices based solely on what influencers say, regardless of whether or not they have technical trading experience. Most often, this results in a partial or total loss of their savings. Therefore, it is necessary to remedy this phenomenon.
For Rudy Kadoch, founder and CEO of the Nested project, the democratization of DeFi must go through the resolution of three essential issues: ” poor user experience, lack of community and the opportunity to monetize knowledge of cryptocurrencies “.
Social trading provides a choice answer to these various concerns. It allows you to observe the most experienced and analyze their strategies. Therefore, it is an excellent information pillar to provide the basic skills needed to get started in DeFi without complexity.
The nested project
The idea is to be able to browse freely and search for profiles with a sufficiently satisfactory investment history to reproduce their strategies. In fact, decentralized social trading platforms, like the project nested, have the potential to introduce a new peer-to-peer learning experience. The goal is to empower first-time investors and significantly increase the number of DeFi stakeholders.
Furthermore, the start-up had the idea of exploiting NFT technology. He decided to bring together several tokens in a digital portfolio whose value changes based on the underlying assets and their market value. This wallet (NestedNFT) can be managed by anyone, without the need to master cryptocurrency investment techniques. This makes it much easier for everyone to take part in the DeFi ecosystem. No wonder Web3 giants like Alan Howard and Jump have decided to support the start-up.
An attractive model
Some platforms have democratized stock market investments and have shown that this economic model is attractive. There’s no reason it shouldn’t be part of Web3 with a much broader offering. Decentralized social trading has the power to grow the DeFi community. Users benefit from the guidance of professional traders. This allows them to strengthen their knowledge over time.
In addition to providing referral support for beginners, Nested rewards strategy makers through royalty mechanisms. This gives them more incentives to improve their skills, diversify their approach and share better content. Beginners and experts enrich each other and organically develop the ecosystem. Therefore, everyone wins. Furthermore, the playful side of social trading also brings lightness and reassures more novice traders.
Limit the risks
Cryptocurrencies are always very volatile. Therefore, they may seem like a riskier investment than traditional market activities. Social trading promises to mitigate the effects of this instability, but not to reverse them. Indeed, new investors may be led to blindly follow cryptocurrency influencers who, despite their strong performance, are not immune to a bad decision.
Social trading, in fact, does not allow the delegation of responsibility. Each user remains the sole decision maker. Therefore, it is crucial to obtain as much information as possible to understand the fundamentals of the market before investing. Any newcomer remains the sole master of his or her investment choices. Copying a trader’s strategy is different from making a side purchase. The trader does not provide any after-sales service and is not obligated to repay any investment in the event of a loss.
It is also important to note that the more an application is open to social interactions, the more it exposes its users to the excesses of traditional social networks. However, even though social trading has some drawbacks, the risk-benefit ratio looks pretty favorable.