What is Node Investing?

If you’re new to the concept, node investing has gained traction in DeFi due to the enticing daily rewards offered in exchange for an initial locked investment. Unlike traditional nodes, these protocols require investors to lock their funds in a treasury to support growth, with the hope of earning back their initial investment plus additional returns.

My philosophy emphasizes taking profits before reinvesting. Time is the ultimate test of a protocol's viability. The mere fact that a node project has survived for several months without a rug pull does not guarantee its future stability.

As new protocols emerge, many tend to prioritize flashy promotions over sustainable, long-term utility, leading to potential failures due to a lack of strategic planning.

Don't Overcommit Financially

It’s crucial to approach investments with caution. I often hear of individuals investing upwards of $10,000 in projects that ultimately fail or experience rug pulls. While larger investments can yield greater returns, understanding the underlying business principles is equally important.

It's worth noting that most startups face challenges; research indicates that approximately 11 out of 12 fail (Startup Genome). Moreover, around 10% of new startups fail within their first year.

Small teams may struggle due to a lack of experience, marketing skills, or financial knowledge. These challenges are compounded by the fact that team members often juggle other jobs, which can lead to stress and loss of focus. Losing a key team member can be devastating, especially if they possess unique expertise critical to the business.

For further insights on startup failure rates, refer to Josh Howarth's article on startup statistics.

Constantly Remind Yourself of DeFi's Volatility

I frequently remind myself: “DeFi is volatile, and losses are possible.” The unpredictable nature of DeFi operates under rules distinct from traditional markets. Many participants in DeFi lack a background in conventional trading, meaning their investments can be swayed by market sentiment or even a single misunderstood tweet.

Before making any investment, I ask myself, “Am I investing or just gambling in crypto?”

Are You Investing or Gambling in Crypto?

A recent discussion on my Twitter highlighted a common issue in the crypto space...

Utility vs. Promises: The Real Measure of Value

The sustainability of any rewarding protocol hinges on its token utility. If a project relies solely on reward distribution, it may eventually be forced to reduce payouts, increase fees, or impose higher taxes, rendering it unprofitable.

Assessing the Team's Experience

While DeFi is relatively new, the success of inexperienced teams is often fleeting. They may experience temporary success driven by hype and investor enthusiasm, particularly when token prices are at their peak.

Key questions to consider include:

• Does the team have someone with a solid financial background to manage investor funds?
• Are technical challenges addressed in-house, or are they outsourced?
• Is there an experienced marketer to craft effective strategies encompassing social media, SEO, and public relations?

Getting In Early and Evaluating Returns

My strategy involves participating during a project's initial launch and investing only what I am comfortable with. I establish a schedule for cashing out, ensuring a positive Return on Investment (ROI) from the outset. Once I achieve my ROI, I can assess whether to reinvest, compound, or withdraw.

The Challenges of the Crypto-Millionaire Mindset

I've observed a growing mindset in the DeFi community that warrants discussion...