DE-FI The Odds - Yield Farming Could Kick Off The Next Alt Coin Run

in LeoFinance •  last month 

Hey JessInvestors

One of the big reasons for the 2017 bull run was the rise of the ICO; it was all the rage and a way to print money. You launch a token, do an airdrop to get initial traction, then do your pre-sale, then get listed on exchanges and promise HODLrs you're using the funds to develop whatever you promised in your white paper. The early bag holders take profits and then rinse and repeat on the next ICO.

As BTC continued to rise, it only brought more promise, investors and drove the cycle of abuse and Ponzi schemes and exit scams. It was a big learning curve for a lot of us in crypto and one the BTC correction happened it purged a lot of these projects seemly overnight.

It has been relatively quiet in crypto terms, but as the halving has happened and the new stock to flow ratio settles in, we're seeing the promise of new highs coming in. Like clockwork, this time ETH and other Dapp chains are now jumping into the DE-FI space, and yield farming is starting to become very popular.

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ZIRP & NIRP

As the worlds financial system struggles for yield under the weight of debt, we see countries either going to ZIRP (Zero Interest Rate Policy) or NIRP (Negative Interest Rate Policy) and with that people are going to look elsewhere to either combat inflation loss or find a place to store some of their money.

  • While you can store it in stable coins and avoid negative interest rates, you still subject to inflation policy,

  • While you can store it in BTC, you're subject to price volatility, and you're hoping it beats inflation.

The DE-FI space

In comes the DE-FI space of which the majority is built on Ethereum, but some have their blockchains, and others are an old school custodial service. The De-Fi space continues to grow and as your search for the yield of appetite for risk increases so too does the projects to accommodate these needs.

The DE-FI space is vast, but I've broken it down to 3 different types and how you can get involved in this exciting space, even if it does come with considerable risk.

Custodial services

So I've been using these services like BlockFi, Celsius Network, Nexo and Crypto.com and while this isn't real defi, these custodial services do provide a nice entry pint into the ecosystem.

The risk is naturally that your funds sit in custodial ownership and you trust this company to be properly capitalised and to be insured and manage risk with issuing loans. You'll get a favourable interest rate based on your crypto form 4-8% which is brilliant compared to banking and certain staking coins since you get paid in the crypto of your choice.

So no need to convert into other currencies and lose on conversion.

Staking coins

Staking coins I've also gotten involved in from BAND, AWC, Link and more. Staking coins allows you to still have ownership of your coins but lock them into a certain pool and earn from the inflation of new coins. Depending on the size and competitive nature of the network, you can earn a fair interest rate and cash out when you are ready.

Staking coins are a "safer" bet when it comes to ownership, but these new chains aren't as decentralised as you might like and apart from giving you inflation many of these chains don't have a function yet, so do your research when picking a chain to stake on.

Liquidity pools

Liquidity pools like Uniswap allow you to provide liquidity to an exchange and then in return, get a piece of the trading action that happens on the exchange. This form of DE-FI is pretty new and is more for DEX, which has often struggled with liquidity and looks like a great solution to start improving DEX.

Remember, these liquidity pools are built on smart contracts that are not always full proof and carry some risk.

The big imbalance and the eventual crash

The problem with De-FI is that these results are either temporary arbitrage or outright scams and you have to be aware of which is which when taking part. The interest rates they offer won't last forever and with so many people looking for yield and willing to provide collateral.

As it is right now, there's an average of 3 lenders for every borrower, and this will put serious pressure on interest rates going forward. It will be platforms task to find more creative ways to use the capital they receive and find ways to monetise the collateral.

I have no doubt the promise of premium interest rates will attract a lot of investors, and soon it will get out of hand with platforms and scams pushing the limits of what they can achieve.

This is crypto, and we have no chill, its always a go for broke mentality once we get something between our teeth.

Have your say

What do you good people of HIVE think? Have you been trying things in the De-Fi space?

So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."

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great stuff as always, BAND and LINK on fire ... going to have to get some AWC too.

"we have no chill", i love it

i'm thinking of trying Atomic Wallet, my son is check it out... but i'm kind of lazy about managing keys, need to up my game maybe (-:

I use atomic wallet, its a bit buggy I will admit but its probably one of the easiest ways to stake a coin than anything else I've found so far

I have invested in most of the DEFI projects but not in the sense of depositing for interest, staking or providing liquidity. I trade them and boy have I made 5X on some of them.

This way, I am in and out and make a lot in return on the initial BTC I invested.

So for me trading on them on medium terms has far more rewards then the 3 methods you mentioned. Cheers.

I've noticed their tokens have quite the predictive volatility around paydays when people have the cash to put in so you can buy up and sell out on those trends.

It's a good strategy if you have the time to watch the market and measure your positions

So much out there to be careful about.

Totaly, its an exciting place to invest in that's for sure but people shouldn't get caught up in the craze

Nice summary of 3 types of Defi
!tip

Thanks! Have you tried any of the 3 yet?

I just started staking AWC and TRX using Atomic wallet so not sure whether it is considered Defi. I don't think so since it has not lending facilities.

I’ve been enjoying AWC I just have remind myself to check it every week to restake my new gains LOl

!ENGAGE 20

I was thinking of restaking the gain as well. Doing compound interest manually. 🤑

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