Before the decentralized finance (DeFi) revolution commenced, finding ingenious use cases for cryptocurrency outside of “hodling” or selling it to fund purchases was rather tricky. The idea of earning a return on cryptos outside of speculative activities was also inconceivable. All that changed in 2017 with MakerDao.
Since the DAI stablecoin-based lending mechanism was first unveiled, DeFi has experienced near exponential growth. The emergence of new projects and products has built an entire ecosystem of financial services that operate outside the purview of traditional brick and mortar institutions. From lending to asset management and insurance, the landscape continues to expand out towards the horizon.
Although these developments are making finance more accessible for wide swathes of populations that were previously unreached, the learning curve needed to participate in these types of financial vehicles was steep. Fortunately, continued efforts to expand and develop the ecosystem has borne fruits in the form of falling barriers to entry, a more intuitive user experience, and broader opportunities than anytime before.
For financial crypto analyst Luis Aureliano, who commands deep expertise in macroeconomics from 15 years of industry experience, the environment for cryptocurrency holders has never been better.
“For crypto holders, advancements in the ecosystem offer the chance to earn returns through staking activities. Staking involves actively participating in transaction validation by effectively locking cryptocurrency in a network’s validation node. For instance, Ethereum’s transition to a Proof-of-Stake blockchain will require staked nodes to confirm transactions. For each successful validation, the node is rewarded, generating returns in cryptocurrency for individuals who stake their coins in a node.”
Beyond staking, lending is also another popular area for cryptocurrency holders to put their holdings to work. “Just like the peer-to-peer lending revolution brought investors and borrowers together without the need for a bank as a middleman, blockchain-based lending protocols also offer outstanding potential, adding another avenue for generating returns without having to trade the underlying cryptocurrency.”
According to Luis Aureliano, here are nine of the best ways that cryptocurrency holders can leverage their coins and tokens to generate returns around the clock that beat a bank account’s measly interest every day of the week in 2021.
Many crypto exchanges are now offering some kind of interest-earning programs to their users, and KuCoin has embraced this trend with gusto. It was among the first exchanges to operate its own token, KuCoin Token or KCS. KCS offers many comparable utilities to other exchange tokens in that they can be used to pay exchange fees and obtain discounts. However, anyone who owns at least 6KCS is entitled to a share of 50% daily trading fee revenue from the KuCoin exchange. As KuCoin grows, the estimated APR of KCS has been known to exceed an impressive 30%.
KuCoin also operates a lending program, which pays annualized returns of up to 12% to those willing to stake their cryptocurrency holdings as credit. It recently launched an automated trading bot that allows users to generate stable returns in passive income. You can choose between a classic grid bot, enabling a buy-low/sell-high strategy, or a dollar-cost-averaging bot.
2. Public Mint
Public Mint is a programmable blockchain platform that allows anyone to create fiat-native applications so they can make and accept fiat payments without needing a bank account. Additionally, for the average crypto user who just wants to make some earnings on her holdings, Public Mint is launching an Earn program based on its MINT token that allows users to earn some of the most competitive rates in the industry.
Funds staked in the Earn app are, in turn, used to generate yields in Public Mint’s CeFi and DeFi partners, which is then distributed to users. You can decide to withdraw earnings in fiat currency at any time; however, those who choose to leave them staked will be eligible for more rewards.
Unlike many DeFi apps, Public Mint uses FDIC-insured financial institutions to custody funds, with each depositor insured up to $130 million. The Earn app will go live later in 2021.
The team at Reef is developing a smart yield engine and liquidity aggregator that can work with any DeFi protocol. As it’s based on Polkadot, this means that Reef can onboard DeFi protocols from any platform, including Ethereum, Binance Smart Chain, and Avalanche. The project aims to significantly lower the barriers to entry for new DeFi users while also helping to streamline investment and trading decisions based on risk appetite.
Binance has spotted that Reef offers significant potential to level up DeFi’s game for new investors. Given that the project also provides an opportunity to connect DeFi on Binance Smart Chain to other platforms’ liquidity, it’s a win-win for both sides. However, perhaps the biggest winners will be those who currently feel intimidated by the complexity of the DeFi markets but now have a simplified route to capturing some of the value while it’s still relatively early in the game.
4. Cook Finance
Cook Protocol is a cross-chain asset management platform built for investors and asset managers. Investors can use the protocol to choose an investment vehicle that’s been provided by a fund manager. While fund managers get access to powerful trading tools, investors have access to a sleek and intuitive interface to make informed investment decisions.
The application is still in development. However, at its launch in the first half of 2021, investors will be able to choose from an array of index-based and actively managed funds.
The twist is that while investors may be familiar with these concepts from traditional finance, Cook Protocol is completely decentralized. It aims to make DeFi more accessible to investors from the retail markets. As the funds are based on blockchain, users can see the risk index and profit information for any particular fund for themselves and trust that it’s based on actual data that hasn’t been manipulated.
5. Pylon Finance
Pylon Finance operates the largest ETH mine in the United States, and its PYLON token is the world’s first and largest backed with tangible real-world income-generating assets. To take a real-world analogy, if ETH is like gold, then PYLON is like owning stocks in the company that mines the gold. The price of PYLON is negatively correlated to the rest of the cryptocurrency markets in a bear market, meaning that it is likely to continue gaining even if ETH itself is falling. Therefore, it serves a function as a “safe haven” asset in a diversified cryptocurrency portfolio.
Furthermore, the project has a mechanism for protecting token prices. The ETH earned from mining activity is used to market-buy PYLON tokens, which are distributed as rewards to PYLON stakers. This constant buying of PYLON from externally-generated revenue gives the tokens sustainable value.
The DeFi movement started with Maker’s Dai, a stablecoin backed by cryptocurrencies. But arguably, it took off once DeFi innovators started creating ways that people could put their DAI and other stablecoins to work to generate income. This is the principle behind BXTB and its CHIP token, a yield-generating stablecoin.
The system operates based on CHIP and BXTB tokens. A user can mint CHIP stablecoins by pairing BXTB with another supported stablecoin. When they’re deposited into the BXTB vaults, it generates CHIP and also yBXTB. Now, the users can spend their CHIP tokens while also earning yields from the yBXTB, which is generated from transaction fees when users exchange CHIP for goods and services.
The project’s overall aim is to gain enterprise adoption of CHIP, thereby creating a mechanism for sustainable yields. BXTB uses its own consensus algorithm, making it faster and cheaper than Ethereum.
In the traditional CeFi world, people make money by buying company stocks on the basis that they hope the value of the company will go up and give them a return on investment. DeFi introduced some similar concepts in the form of governance tokens, which offer holders the chance to participate in the decentralized governance of a DAO.
However, so far, DAOs have been fairly limited in the range of governance options they provide to token holders.
MetisDAO aims to level up the concept of the DAO with its ComCo framework. It works on the principle that a DAO should operate comparably to a centralized company, with DAO participants collaborating on the development of a project by staking bonds as a commitment.
It also uses the concept of “optimistic governance” assuming that collaborators will generally be able to avoid disputes, but with a failsafe dispute resolution process for when issues arise. In this way, DAO participants will be able to extract more long-term and meaningful value from their governance investments.
DeFi has become notorious for its high risk-reward ratio. While this has fueled dizzyingly rapid growth for the markets, it’s not for everyone. Therefore, Prophecy offers something different.
Prophecy’s Prophet Pools allow anyone to set up a pool with a defined number of participants, say ten. They also specify the staking amount in Prophecy’s PRY tokens. Say 100,000 PRY, and the success rate, between 60 and 90%. If we imagine our pool has a success rate of 90%, then nine out of the ten participants will be selected to win a share of the total jackpot comprised of all participant’s stakes.
In case you’re the unlucky one who lost out, Prophecy also operates “Second Chance Pools. The chance of walking away from Second Chance Pool having also lost is only around 4%. Therefore, there’s a high probability that most people will gain incremental profits, without high risks or all the complexity of DeFi.
The cryptocurrency markets have an extremely long tail in liquidity terms. BTC and ETH account for around 70% of the total market capitalization. Over 8,500 tokens account for the remaining 30%. Liquidify is a liquidity accelerator that aims to overcome the challenge of lower liquidity in the long tail of the cryptocurrency markets.
Anyone holding a long-tail crypto asset can stake it as collateral in the Liquidify asset pool, which synthesizes all assets into a fixed amount of tokens, Liquidity Accelerator tokens (LAT) and Liquidify Tokens (LFY.) Anyone holding LAT tokens can use the protocol to convert back to their initial invested asset based on the real-time price. They can also swap them for other tokens in the pool.
In this way, investors can find new channels of liquidity for assets that may otherwise be difficult to gain any value from on the centralized crypto exchange markets.
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