When it comes to DeFi degens, 2021 (and into 2022) was all about ‘DAO’ and ‘node’ passive income projects. I place those terms in quotation marks because neither should ever have been used to describe either.
Within both crazes there has been a lot of drama; from highs and lows to rugs and scams and everything in between.
That’s not to say there have not been massive failures in actual DAOs (Decentralized Autonomous Organization) and actual node projects/coins (aka masternode). It’s just that actual DAOs and actual nodes (ie the real ones – the ones that keep blockchain running!) are completely different things to what people meant when they used these terms in 2021/22..
Which is already confusing.😵💫
This article will provide a brief background pre-2021, then the degen madness that kicked off in mid-2021 when Olympus DAO and StrongBlock exploded into the scene.
My background (2017-18)
I’ve had an interest in nodes and masternodes since 2018 and in June I bought my first collateral to Eximchain, a masternode-based blockchain born from Harvard innovation labs centered around creating efficiencies for enterprise supply chains with quadratic voting – something quite novel at the time and which Vitalic vocally supported. Masternodes back then were tricky to setup and configure.
I did not have any hands-on experience of DAOs – Decentralized Autonomous Organization other than probably owning a few tokens. However, I can say that prior to 2021, the word ‘DAO’ did not mean rebase tokens with crazy-high APYs for staking. And, although DAO theory had gained popularity in 2017/18, it had been tainted heavily by the hack / exploit of The DAO for $50M in 2016.
Either way, after the 2017 crypto boom and subsequent crash in 2018, many projects failed.
My journey into masternodes halted, not due to Eximchain, but mainly due to other work commitments alongside post-crash feelings of deflation. Many masternode projects disappeared quickly, Eximchain battled all the way through to 2020 before finally closing its doors.
Similarly, after the 2021 crypto boom and subsequent crash in 2022, many projects failed. Not least ‘DAO’ and ‘node’ projects. Let’s take a look…
Passive income interests
If you’ve been following along, you’ll know I’ve had a long-term interest in passive and semi-passive income sources. From writing Kindle books and creating T-shirts to investing in cryptocurrency and masternodes.
And that’s how I fell into ‘DAO’ projects and ‘node’ projects. Although nodes came first, we’ll start with DAO Season as that’s where it really all kicked off…
2021: DAO Season
Firstly, the ‘DAO’ really shouldn’t have been the term used for ‘DAO Season’ as the focus of all these forks was not on the DAO aspect, but on the rebase.
Who could give the greatest APY and survive the longest?
‘DAO Season’ kicked off with Olympus DAO (OHM), with their innovative vision of creating a world reserve currency via an algorithmically stabilized token distributed through rebases.
What followed was a series (hundreds?) of DAO forks, a lot of highs and a lot of lows.
Although launched via a Discord Initial Offering in March 2021, I didn’t get into Olympus until July, and entered with a small sum — anonymous teams make me more wary than doxxed.
I was pleasantly surprised that the price went up over the months ahead, because all my reading had led me to believe the price should go down — the high APY was essentially a compensation plan for minting early until price stabalized. You can read more on my ‘DAO’ experience here.
In the earliest of days, you could earn an eye-watering 100,000%+ APY. OHMies shouted from the rooftops of Twitter and the word spread. Soon the optimal configuration behind the OHM’s bonding and staking game theory, ‘3,3’ became embedded in many usernames across Twitter and Discord.
Very quickly, people realised they could fork the code (copy/clone it) and create their own version with minimal effort.
And so ‘DAO Season’ was born.
DAO forks and the (3,3) craze
As Olympus was pretty much just code, anyone could fork it. And so, many anonymous clones with minor differentiators appeared on the scene as early as August 2021 and the (3,3) craze grew.
The search for the highest APY was on. Some even provided full ROI within 5 days due to APYs that hit the millions.
And there were many, many more. There was even one called $RUG!
There were so many that tools started appearing to help you manage them — basically jumping from one DAO to another to capitalize on the rebases and reap the ‘APY’ rewards.
Most clones had no utility or differentiators. Several did differentiate considerably and/or used part of the model as means of token distribution. However, there was one common denominator in all; that crazy-high APY and rebases.
I only dabbled lightly (with money I could afford to lose!) and fortunately, despite many failures, I did not experience what I felt to be a malicious rug. A quick Google search of the list above (and other DAO token) you will see many projects did rug and most have either failed or have had to completely re-work their business model and/or rebrand to survive…
However, not everything can be read from the charts.
PapaDAO $PAPA is one of the projects I invested in that ‘failed’ but bowed out honourably by distributing their treasury upon closure. This was a great and honest ‘DAO’ project that still has a community on Discord even after shutting down. I’m ever-hopeful the Papa team will come back with something in the future and am grateful to $HEC on which it was based (also a great and honest ‘DAO’ project that is still surviving).
2021: Node Season
Whilst DAO Season kicked off pretty quickly after the awareness of Olympus DAO spread due to ease of deployment, nodes were more convoluted and thus ‘Node Season’ would take a bit longer…
In reality, ‘Node Season’ had virtually no connection or relation to nodes other than that the model on which it was the ponzinomics element of Strongblock, which is a story in itself that I’ll only touch on briefly here.
Despite starting out and gaining popularity before Olympus was even deployed, StrongBlock was not a forkable project. It looked legit, the founders were experienced and doxxed and hard technology appeared to be behind it.
Thus it took much longer for the “clones” to arrive; ‘Node Season’ would not commence until December 2021…one year after StrongBlock launched their ‘nodes as a service’, aka NaaS.
Strong started gaining significant awareness around March/April 2021 as a source of ‘passive income’. It caught my attention, but life was busy and I didn’t buy in until late June.
They made it easy to deploy a node with zero technical knowledge and paid fixed rewards. The rewards aspect was pure ponzinomics and they made this clear, however they also made it clear that this was an incentive to onboard node operators whilst they sought product-market-fit for their ‘blockchain/infrastructure as a service’ offering.
- Each node cost 10 STRONG (non-refundable).
- Each node yields 0.9 STRONG/day.
- Maintenance fee per node was $15/mth.
As attention grew, profit calculators became the craze and a surprising number of degens suddenly started being concerned about tax!
The vision StrongBlock shared regarding their potential utility was compelling (you can read more about StrongBlock here), their team was reputable and on Linkedin and there were regular AMAs with the CEO. However, as the end of the year approached, there had been little progress.
Eventually someone took StrongBlocks UI and ponzinomics rewards model + ideas from the community, wrote a contract and deployed it…
* UPDATE: As of April 2022, Strong is not looking good 😢 read more here.
It was late November 2021 when a horrible looking website for Ring Financial first appeared.
Whilst visually it looked scammy as hell, the value proposition was interesting and compelling.
They had taken Strong’s fixed rewards model (and the ‘nodes’ terminology) and promised to return lifetime rewards by combining 30 different DeFi yield protocols (including StrongBlock) and using the cheap Binance Smart Chain (BSC), rather than Ethereum.
The claim was that $RING would be a hassle-free way of gaining yield from a basket of vetted high-yield projects and avoid scams (by this stage there had been many rugs by OHM forks) and it would be cheap — virtually zero gas costs due to BSC.
The timing and proposition was compelling, a perfect mix.
DeFi and the crypto markets were at all time highs – people had money to burn. There were so many OHM forks, yield farms, and reflection tokens launching it was becoming difficult to keep up. Ethereum gas fees were high making Strongblock expensive and many were starting to get fed-up with Strong’s slow progress.
Ring quickly gained traction.
And soon everyone on Twitter was talking about nodes (that weren't nodes!).
Their team was covered by Cryptonairz. The web app and brand was updated to look clean and classy. They even deployed an iPhone app.
Upon the UI release, Ring exploded, hitting $400 by the start of December.
And Node Season aka DeFi as a Service kicked off. Fast.
Meanwhile, RING ‘evolved’ further and in most people’s eyes; rugged. They pumped and marketed like champions, pushed for bigger nodes and new networks…then disappeared into thin air 🙁
The cloners were fast this time. So fast, many of them even cloned the code and forgot to edit or take out the Ring references. $KTNA aka Samurai, $THOR and many others appeared within days. It was a frenzy.
The frenzy continued and the lambo calculators started appearing.
And it was rife with scams and ruggers with intent. Easy money.
Whilst I dabbled in a few, again it was with sums I was OK losing. Node Season was when I experienced what I felt were properly malicious and intentful rugs, or at the very least ‘abandon with as much $$$ as you can’ attitude from developers.
Similar to DAO Season, there were many, many more projects than are listed above. And similarly, there were many rugs, many failures and many projects that had to pivot and adjust in an attempt to survive.
The bottom line is that nothing had been properly thought out.
Even those who were ‘genuine’ in their thought that DeFi as a Service could work had not been thought out. Everyone jumped in with similar rewards to Ring.
Crypto started a downtrend and the inevitable happened.
Without the ‘DAO’s and their crazy levels of income, plus high-yielding LP etc these ‘nodes’ had no method of generating the income to distribute as rewards…and thus, no utility.
And that’s what happened; the crypto market entered a down trend, ‘DAO’s crashed horribly and ‘nodes’ quickly followed.
Fortunately, there was a movement towards integrity and several ‘node model’ projects have stood by their community and worked hard on utility and ways of generating revenue. Albeit could never be the same. NGRID is one of the few that quickly recognised nodes were not going to work and, similarly to PAPA DAO, distributed their treasury to holders before shutting up shop.
Rug n Roll
As you can imagine, the simplicity of all these clones alongside the bull market made it extremely easy for scammers to quickly create projects and rug. And so Rug Season became a term associated with ‘DAOs’ and ‘nodes’ alike as so many had got caught up in both crazes…some reflection-style tokens thrown in for good measure.
This intense DeFi ‘rug season’ ran primarily between September 2021 and February 2022.
Of course, failure does not necessarily mean ‘rug’; there were many well-meaning, experience-lacking projects within the space, some of which are still battling against all odds to this day. Kudos to them for continuing to try and serve their community and to those who bowed out with honour (i.e. tried to do the right thing). And a big FU to the scammers.
Lessons learned. Right?
‘Til next time!