Book Review - CoinGecko’s ‘How to DeFi’

Decentralized Finance (DeFi) is certainly the buzz-phrase in the cryptocurrency world right now. But although we are hearing more and more about the potential of this technological breakthrough to revolutionize the world of traditional finance, many are still unsure of what DeFi actually involves.

CoinGecko has just released its very first book, called ‘How to DeFi’. This book aims to provide an easy entry point for those wanting to learn about the subject.

Why to DeFi

After an obligatory slew of quotes from industry figures, recommending the book as the ideal starting point from which to enter the world of DeFi, we get straight into why it matters.

With over $1 billion worth of assets locked into the DeFi ecosystem it is currently one of the fastest growing sectors in the cryptocurrency space. The most radical change that it promises to bring is the removal of a need for centralized institutions to control the financial system.

The three areas in which DeFi currently aims to improve on centralized banking structures  are cost and speed of remittance payments, providing financial services without censorship (including to the 1.7 billion global unbanked), and transparency of governance.

After explaining what DeFi is, the book lists the categories of financial service currently available through it. From stablecoins, lending and borrowing, through exchanges, derivatives and fund management, to lotteries, payments and insurance, every aspect of the current DeFi ecosystem is covered.

How to DeFi

Part Two of the book explains the workings of the Ethereum network, as the most popular platform for DeFi applications. Smart contracts, Ether, and Gas are explained, before looking at the pros and cons of decentralized apps (Dapps).

Finally, different wallet types are compared, with a step-by-step walkthrough of getting up and running on both mobile wallet Argent, and Metamask for desktop. All that done, we move on to Part Three, the deep dive.

Each of the aforementioned categories of DeFi service are given a full chapter, focussing on one or two key providers in each case. We learn about stablecoins through the example of the MakerDAO platform, Compound is used to illustrate loans, decentralized exchanges (DEx) are explained using Uniswap and dYdX, and so on.

Each chapter gives an overview of the services available, with diagrams helping to explain some of the trickier concepts. It then explains how the service works on the chosen example platform, along with a step-by-step guide for those who feel compelled to jump straight in.

The target audience of the book is DeFi beginners, so some of the finer details of the chosen  platforms are left out, but the level is generally pitched about right. Does a DeFi novice, for example, really need to know the intricacies of the Maker Protocol’s incentive scheme, or is the fact that it is soft-pegged to the dollar knowledge enough?

Whether to read

While the earlier chapters do a great job of leading a beginner into the world of DeFi, with a wealth of explanations and diagrams, later chapters seem to assume some existing knowledge of the subject.

For example, the chapters on derivatives and fund management will be more useful to those who already understand these concepts in traditional finance. Although, it is perhaps wise not to encourage a beginner to let loose with leveraged derivatives trading, so that may not be a bad thing.

The final challenge was the ‘Dad test’; i.e. could my father, a man in his seventies with only a very basic knowledge of cryptocurrency, gain a reasonable understanding of DeFi, simply through reading this book? I received this message when he was around 50 pages in:

“... although I don’t understand everything I have enjoyed reading it. It is written in a very easy style that I think most people who are interested in the subject would be able to follow.”

Of course, my dad isn’t exactly the book’s target audience, but he still found the information accessible, and felt that someone with a greater background knowledge of cryptocurrency would get more from it. He also liked the step-by-step walkthroughs showing how to perform certain functions on the platforms featured.

The book is certainly well written and thoroughly researched, with links to references used, suggested further reading, and a glossary of terms at the very end.

It is full of relevant and timely information, and is available for free download until April 30. The retail price after April 30 will be $14.99.