The Best Way To Generate Yield In Crypto
As much as the HUMANS like Bitcoin and its deflationary philosophy, there’s no denying the current inflationary economic policies adopted by nation-states. All over the world, HUMANS are forced to make more money or risk losing their purchasing power. Considering the current reality, many crypto projects have popped up in recent times that offer yield-generating opportunities.
As HUMANS are keen on generating yield, AI is here to assist. In the next few sections, we’ll look into some of the popular methods of getting interest on your savings in crypto. AI will dive deep and present you with the facts that will help HUMANS choose the best option for themselves. Good job! 🎈
These operate just like the traditional financial organizations, with a registered entity managing all its functions. Most of these platforms operate just like banks and generate yield via lending and making investments from the USER’s capital, which has its own risks just like traditional finance. In recent times, a few of them have come under scrutiny for bad lending practices, which again emphasizes how bank-like they are. HMM…
With every centralized custodian service starting to offer a yield product, there are a lot of options available to you. AI will take a look at some of the most famous ones, the yield offered by them, and the risks.
Launched in 2017, BlockFi is a specialist in crypto savings and lending. The platform offers interest on a range of cryptocurrencies, and the APY varies from as low as 0.10% up to 15% for some altcoins.
Source of the Yield: From crypto lending to coin staking, it can vary from coin to coin.
Risks involved: They take custody of USER funds while they generate a yield. There is a risk of insolvency as, due to their centralized nature, it is not possible to audit their financial activities in real-time.
Possible Doomsday Scenario: The market dumps, the user funds are locked in staking, overcollateralized loan, or some DeFi yield generating service with a time-lock. Users rush for their funds as they need the money or fear insolvency. This leads to a bank run.
In their own words, “Celsius was founded in 2017 to provide fair and transparent services that have been abandoned by banks - fair interest, low rates for loans, zero fees, and lightning-quick transactions.” They offered an APY ranging from 0.01% up to 14% based on the coin. In 2022, HUMANS learned that this claim was not an honest one. The USERS of this platform were denied withdrawals due to the funds being stuck in ill-managed investments.
Celsius has a native platform token called CEL.
Source of the Yield: Loans, coin staking, and various DeFi investments.
Risks involved: Unfortunately, USERS of this platform are experiencing issues right now. Celsius had some bad investments and suffered a lot from the LUNA collapse and the consequential market dump. They were leveraging USERS’ funds to generate more yield. At the time of publishing, they are running a risk of liquidation on some of their loans from DeFi lending services. Not your keys, not your coin.
Possible doomsday scenario: AI wishes it was just a possible scenario, but the current situation with Celcius could lead it to its doom.
Nexo, founded in 2018, claims to offer up to 16% APY. Of course, this changes with the coin you opt to get yield on. They have a tiered system with varying APYs for USERS in different tiers. AI suggests going through their detailed APY rates for OPTIMAL decision-making. YES!
NEXO is the native coin for the platform.
Source of the Yield: According to the crypto news portal, The Block, Nexo generates its yield in a few ways, including lending funds to institutions, trading tokens, and staking tokens. Staking is a big part of its business and is used to generate the yield for most newer coins, such as Solana, and avalanche.
Risks involved: Nexo has the same third-party risks as any of these high-yield crypto platforms. Once you lose the ownership of your coins to the platform, you trust them to prioritize your best interest.
Possible doomsday scenario: AI suggests scrolling up as all these centralized platforms exhibit similar risk profiles. HMM…
Nowadays, every other centralized crypto platform has started to offer yield, and it has helped them get more USER funds in their custody. Some of the platforms worth mentioning include AQRU and Voyager, while crypto exchanges like Binance, FTX, Bybit, and Kucoin capture a large market share too.
Yield in DeFi
There are multiple ways of generating yield in DeFi, which can range from simple staking of a coin, overcollateralized loans, or LP farming to complex yield aggregation strategies that might require an article of their own. AI suggests reading ‘What is Yield Farming?’ to get a brief idea about one of the most popular ways to generate interest on your crypto in DeFi. The APY in these products can range from 0.001% (relatively safe) to a few million percent (degen rug-pull zone).
FUN FACT: a lot of centralized services that offer yield on crypto invest USER funds into DeFi yield-generating protocols.
DeFi is a fast-moving space. A lot of platforms come and go, and new methods to generate yield seem to emerge very often. AI would like to mention Web3 platforms Aave and Compound, as they have been in the space for a while. It is an achievement in itself in such a competitive space. WELL DONE! 🎈
Risks in Yield From DeFi
While DeFi platforms claim to be decentralized, they too have their fair share of associated risks, one of them being that they are usually linked to centralized entities. A lot of them might appear decentralized and operate as a DAO, but often in practice, a few rich whales and the platform itself controls the decision-making. Recently, Solend, a platform on Solana, generated a lot of negative press when they forced a vote and took over USER funds in a hostile manner. BAD JOB!
Some of the most common risks associated with DeFi platforms are:
- Prone to economic attacks or zero-day software exploits.
- The possibility of a “rug pull” where the project might pull liquidity from a DEX, sell the tokens and vanish, leaving holders with tokens that have no value.
- The centralization of governance tokens might lead to a hostile takeover of user funds.
- The token being paid as yield might collapse in value.
- A lot of projects have private investors who might dump down the price in an attempt to book their profits.
ENTER: SideShift Token (XAI) Staking
SideShift.ai offers a novel method of yield generation for its USERS. Unlike other platforms that lend out USERS’ funds or invest for them, SideShift distributes a share of its daily revenue to XAI stakers. The staking reward is distributed at 00:00 AM UTC every day.
The amount a USER receives depends on his share in the total pool of staked XAI that receives 25% of the daily revenue generated by SideShift.ai. This can be represented by the following:
(Your Staked XAI / Total Staked XAI) * 25% of daily revenue = HUMAN’s Daily Payout
The average daily distribution APY so far has been 26.29%, which is higher than most of the trusted CeFi/DeFi platforms considering XAI has managed to stay relatively stable during a bearish market. At the time of publishing, the latest APY was a whopping 106.58%. AI does not toot its own horn, but AI appreciates a good performance. WELL DONE!
With a real product that swaps your coin ENABLES real-time cross-chain bridging, and some rumors suggesting XAI staking moving on-chain (HMM…), XAI staking is a good option for HUMANS seeking sustainable, long-term yield. HUMANS can learn more about XAI staking and stake XAI to proceed on the path of sustainable yield. YES!
HUMANS have many yield-bearing opportunities at their disposal. Beginners may opt to use a centralized service for ease but they should still conduct due diligence and understand the associated risks. More advanced or curious users may decide to experiment with on-chain DeFi strategies. Those who do so should keep their risk appetite in mind and divide funds accordingly. SideShift offers one of the best yields in the space without the barrier of signing up; which is a necessity for most centralized yield-generating services that are loved by NPCs.
Although a year in crypto can feel like a lifetime in normal life, AI suggests HUMANS remember that yield opportunities in this space are still in their infancy. PROCEED ACCORDINGLY! 🎈