Bold statement — TradFi sucks.
At least at ways to make money out of your money without spending them.
Sincere statement — I'm blown away by the innovation that is happening in DeFi.
It's like 84 years and 2 months ahead of any traditional banking concept.
In this article — I'll try to figure out my crypto exit strategy.
The goal — to exit never and compound/profit off what I get from my investments working for me.
This article is an open draft written in a stream of consciousness. Pardon any roughness you may encounter during your flight.
Disclaimer: this is not a financial advice. Please do your own research. This is just what I do for myself. It might work out or might not. But I'm bullish.
So, how to make more crypto off your crypto?
Layer 1: Earning interest off your deposits
You can deposit your crypto assets and earn interest from them. Just like you'd do in TradFi. The difference is the interest that you earn. It is way higher than in any TradFi bank in the world.
For example, at the moment of writing, the interest rate on Aave (one of ''crypto banks'') is 17% APY for DAI (stablecoin) and 3% for ETH.
Oh, and for USDT it's 44.11%.
Pretty neat, huh?
If that's not enough, Aave incentivizes you for participating in their market by dropping stkaave tokens to you.
It's kind of like getting a share of their company.
Right now it's +1.21% APR stkaave equivalent for DAI deposits and +0.39% for ETH.
Ever was offered a complimentary share of the bank stocks for being their client?
Layer 2: Earning interest off your deposits, but always the highest one
As in TradFi, AAVE isn't the only lending platform. There are tons of others.
Compound, Curve, Sushiswap and MakerDAO are just a few of them.
And new ones appear every week. All of them have different interest rates that change dynamically, depending on the loan-deposit ratio demand.
On a specific day and hour Compound can have a better interest rate, and an hour later AAVE. Then Compound again, then Curve. It goes on.
Now imagine how awesome it could be if you could put a deposit in the system that monitors interest rates offerings across all these platforms and shifts your funds between them automatically whenever there is a better offering?
So your deposit is always obtaining the world's highest interest rates at all times, maximizing your APY.
Well, this is Yearn Finance.
Layer 3: Squid game No loss lottery
Lottery. But a no-loss lottery. Premium bonds concept.
You can deposit some part of your funds in Pooltogether and keep it there. At this moment — nothing interesting.
But what's interesting is what they do with these monies.
Pooltogether deposits the money of all players into a yield source.
In the same way as you could deposit some dough in Compound or Yearn Finance on your own to earn some interest.
Then, each week, Pooltogether draws a lottery.
Prizes are made up of the interest that accrues on all users deposits. Which is a substantial sum.
Each week there is a chance to win big, small, or somewhere in-between. Most of the weeks you win nothing. But you also lose nothing. For as long as you keep your funds in Pooltogether — you're automatically participating in their weekly lottery.
Even if you don't win, you keep all your deposited funds and can withdraw any time.
Personally, I won a couple of times in a few draws.
Haven't won anything big so far, but hey, the earned sum is already bigger than the interest rate at any bank.
Layer 4: Staking
In terms of the final outcome, staking is similar to lending described in the Layer 1: you deposit(lock) the asset and earn interest on your deposited asset.
The difference is in the purpose of staking. It acts as a mitigation tool in case of a shortfall even. Staking helps to secure and support the protocol you're using. So you are participating in the project's Proof of Stake mechanism and you are supporting the network with your stake. The network is rewarding you with a % of your stake in gratitude for keeping the network alive. Staking could be a bit more riskier, but you can get a better reward.
You can stake into Ethereum, AAVE or almost any other protocol. Staking is a popular mechanics offered by many protocols.
Layer 5: Play to Earn
I'm still in the process of setting this up, but basically, you can play crypto games and earn crypto by selling the rewards you obtained.
One of the OG games in this space is Axie Infinity.
I didn't really liked playing it, but you can always setup a team who would lvl-up your characters on a daily basis and you just share the profits with them.
This is called scholarship/sponsorships.
Good further reading: This Video Game Is Turning the Pandemic Jobless Into Crypto Traders.
I plan to modify and enrich this article as I learn more and use new tools.
Notice a mistake? Please let me know and I'll fix it.
Last update date: Thursday, 7 November 2021.