Despite the bear market that is currently making investors dizzy, the frenzy around cryptocurrencies is outweighing the usual hum 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 greatest number of people to this discipline. In reality, this approach allows investors to rely on a financial instrument with a strong social dimension in order to limit risks. This can contribute significantly to the widespread adoption of DeFi. This is precisely the objective pursued by the Nested project. That said, while welcoming the benefits of the social component, the start-up remains aware of the risks inherent in Web3.
A broken promise
Since its emergence, decentralized finance has developed spectacularly. However, it is still struggling to reach the general public. As a result, the initial promise to foster financial inclusion across the world has been slow to materialize. Admittedly, 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 solely based on what influencers say, whether or not they have technical trading expertise. Very 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: “ the poor user experience, the lack of community and giving the opportunity to monetize crypto knowledge “.
Social trading provides a response of choice to these various concerns. It allows you to observe the most experienced and analyze their strategies. Therefore, it is an excellent informative 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 in order to reproduce their strategies. In fact, decentralized social trading platforms, like the project nested, have the potential to introduce a novel peer-to-peer learning experience. The goal is to empower newbie investors and significantly increase the number of DeFi stakeholders.
In addition, the start-up had the idea of taking advantage of NFT technology. She decided to bring together various tokens in a digital wallet whose value changes according to 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 decided to support the start-up.
An attractive model
Some platforms have democratized stock market investment and have demonstrated that this economic model is attractive. There’s no reason it shouldn’t be part of Web3 with a much wider offering. Decentralized social trading has the power to grow the DeFi community. Users benefit from the guidance of professional traders. This allows them to be able to strengthen their knowledge over time.
In addition to providing referral support for novices, Nested rewards strategy creators through royalty mechanisms. This gives them more incentive to improve their skills, diversify their approach and share better content. Beginners and experts enrich each other and develop the ecosystem organically. Therefore, everyone wins. In addition, the playful side of social trading also brings lightness and reassures the most beginner traders.
Limit the risks
Cryptocurrencies are always very volatile. Therefore, they may appear to be a riskier investment than traditional market assets. Social trading promises to lessen the effects of this instability, but not to cancel them out. Indeed, new investors may be led to blindly follow crypto influencers who, despite their strong performance, are not themselves immune to a bad decision.
Indeed, social trading does not allow the delegation of responsibility. Each user remains the sole decision-maker. Therefore, it is imperative to get as much information as possible in order to understand the fundamentals of the market before investing. Any newcomer remains the sole master of his investment choices. Copying a trader’s strategy is different from making a collateral buy. The trader does not provide any after-sales service and is not obliged to reimburse any investment in the event of 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 if social trading has certain disadvantages, the risk-benefit ratio seems rather favorable.