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DEC 5, 2023

Deep Dive into DeFi CopyTrading

by ZIBAH, CopyChain Crypto

(DeFi) is currently evolving, and to reach its revolutionary state, it demands unique innovations. For newcomers in the crypto world lacking a refined trading strategy, copy trading becomes a gateway to profit alongside seasoned traders. In this guide, we will be taking a deep dive into how trader profile analysis and copy trading work together in helping traders stay profitable on DEXs.

INTRODUCTION 

In the current crypto frenzy, everyone seems to be diving into investments and trading, some striking it rich. Successful crypto trading, however, demands extensive research, practice, and a grasp of various moving parts. The beauty of DeFi lies in its genuine Web3 identity, which aims to be inclusive and accessible to all. While copy trading in DeFi was once a distant concept, this piece sheds light on how it operates within the realm of decentralized finance.

What is Defi?

DeFi, short for decentralized finance, represents an innovative approach to providing financial services using blockchain technology. Unlike traditional financial systems, DeFi operates on a peer-to-peer basis, devoid of a single controlling entity. To aid understanding, picture a vast playground where participants collaboratively engage in a stark departure from centralized control.
Picture a big playground where everyone gets to play together. That's kind of like what DeFi is. Instead of one big bank or company controlling everything, everyone who joins the DEFI network gets to help out and make decisions. That means no one person is in charge, and everyone gets to have a say. Some examples of Defi companies are Pyth, Coinbase, Injective, Polygon, Uniswap, etc. 

The Paradox of DeFi Copy Trading

DeFi users cherish the autonomy granted by the saying, "Not your keys, not your coins," highlighting the importance of controlling private keys to one's crypto wallet. Unlike centralized exchanges (CEXs), where users might seem to own their digital assets, the absence of private keys means they might not have access to them. However, in the realm of DeFi copy trading, the process involves participating in smart contracts managed by traders with verifiable track records on the immutable and transparent blockchain.

Overview of where you can Copy Trade on Defi Platforms.

1. Block Explorers
If you're diving into copy trading, kick off your journey with a user-friendly block explorer like Etherscan. As you become more comfortable exploring addresses and understanding transactions, you can advance to more sophisticated techniques.
Image Source: Etherscan
Image Source: Etherscan
Create your account on Etherscan and set up email alerts for addresses on your radar. Navigate to the top addresses – but keep in mind, that some of these might have ties to centralized exchanges. Get ready to do a bit of detective work to uncover potential traders among these top addresses.
2. Dune Analytics
Explore various Dune Analytics dashboards designed to help you track whales. The ETH Whales Tracking dashboard keeps tabs on the most recent transactions of the top 1000 ETH holders.
Image Source: Dune
Image Source: Dune
Additionally, the Whales Transaction Tracker dashboard empowers you to personally select the top N whales for tracking their transactions. For instance, if you're interested in monitoring the activities of the top 50 whales, you can specify N = 50 and observe their on-chain transactions.
3. DeBank
Discover the unique offering from DeBank – the Web3 Social Ranking feature. This feature evaluates wallets based on their on-chain activity and influence in Web3. 
Image Source: DeBank
Image Source: DeBank
For a more user-friendly experience in tracking traders, follow any of these ranked accounts, and witness their transactions appearing in your feed in real-time.
4. Nansen
Nansen categorizes addresses with the highest realized profit across DEXes, NFTs, and liquidity providers as 'smart money'. This real-time updated data often foreshadows significant price movements.
Image Source: Nansen
Image Source: Nansen
To tap into these insights, anyone can easily sign up for a free account on Nansen. This grants you the ability to observe the flow of smart money into DeFi contracts, NFTs, and ERC-20 tokens. For more advanced features and deeper insights, consider unlocking additional capabilities with a paid subscription.
5. X (Formerly Twitter)
Stay connected with real-time tracking of traders through various Twitter accounts. Enable notifications to receive instant updates on your chosen traders.
For monitoring large trades, head to CoinLobster's website and its X page. Here, you can actively select a cryptocurrency pair and apply a filter for the desired trade size, keeping you in the loop in real-time.
Explore WhaleAlert’s website and X page for real-time tracking of large transactions. This platform keeps you informed about significant movements in the crypto space.
For in-depth analysis, check out Whalestats, a tool that scrutinizes the top 100 ETH wallets, providing valuable insights into Ethereum transactions.
6. UniWhales
Explore UniWhales, a versatile tracker covering DEX swaps, liquidity, bridging, and more across 12 blockchains.
You can also stay in the loop with real-time trade updates through their Telegram channel. 
Image Source: UniWhales
Image Source: UniWhales

Bonus

If you are copying trades on Uniswap, be careful! Scammers are sending fake tokens to people's wallets and making it look like a real Uniswap deal. Watch out for how the tokens leave – check if it's a direct transfer or a swap. Be careful always and do your homework to avoid falling for scams.

Closing Thoughts 

Copy trading in DeFi boosts holdings without sacrificing crypto rights or challenging centralized services. However, it's not a guaranteed profit-making scheme. Remember that copy trading isn't a surefire profit path. Do your due diligence and set rules for shadowing traders—it's a vital technique but not foolproof. Traders sometimes enter a trade early, make a profit, and then share it on their timeline. If you copy the trade without knowing this, you might end up losing. That's why it's crucial to do your homework. In our next article, we're going to discuss top crypto sniping bots, exploring how they can help you find promising coins and execute trades before the coin takes a dip. Do well to check out the next post, cheers!
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