Crypto, Etc
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Crypto, Etc

9 Celsius Network Alternatives for Non-Accredited Investors (April 2022)

Welcome, Celsians, to the world of DeFi.

celsius alternative

The bad news: Due to U.S. federal and state regulations, the party may be over for non-accredited investors who want to use custodial cryptocurrency interest accounts like Celsius Network and BlockFi.

Starting April 15, 2022, only accredited investors in the United States can add to their Celsius Network Earn accounts.

The good news: Decentralized finance (DeFi) is here to help. Not only can you earn (often more) interest than with centralized finance (CeFi) companies like Celsius Network, but you also maintain custody of your money.

Looking for a Celsius Network alternative that non-accredited investors can use? Here are nine great options, ranked from easy to power user.

Disclaimer: Educational content only. Not investment advice.

9 Non-Custodial Celsius Network Alternatives

  1. Gelt Finance
  2. Linen
  3. Argent
  4. Zerion
  5. mStable
  6. Aave
  7. Anchor
  8. Uniswap
  9. Compound

Keep reading for more detail on how these products and protocols work.

The Obstacles Facing Celsius Network

Celsius is far from alone in facing regulatory hurdles.

BlockFi, Celsius’ main custodial competitor, was fined $100 million in February 2022 by the Securities and Exchange Commission (SEC) for failing to disclose risks and for offering securities in violation of federal law.

“‘Crypto lending platforms offering securities like BlockFi’s BIAs [BlockFi Interest Account] should take immediate notice of today’s resolution and come into compliance with the federal securities laws,’ said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.” — SEC press release

Though Celsius’ conversations with the SEC and state regulators have not been disclosed, they have resulted in the platform’s decision to restrict new cryptocurrency interest account deposits to accredited investors only.

What is an accredited investor?

As defined by the SEC, an accredited investor is a person, bank, company, broker, or trust that is thought to need less guidance from regulators.

To become an accredited investor, a person must earn a minimum of $200,000 per year for two years ($300,000 with a spouse), have a net worth of over $1 million, or be a high-ranking employee at an enterprise that issues unregistered securities.

What can accredited investors do (that you can’t)?

In the U.S., accredited investors can invest in what the SEC considers high-risk investments that may or may not be registered with the government.

Increasingly, custodial cryptocurrency interest accounts seem to fall into this category, restricting their access to high net-worth individuals and corporations.

Custodial vs. Non-Custodial

To understand why regulators are taking such an interest in cryptocurrency interest platforms — and why many are looking for a functional Celsius Network alternative for non-accredited investors — it’s important to know a little about blockchain asset (cryptocurrency, NFT) storage.

In the world of Web3, there are two types of digital asset storage: custodial and non-custodial.

Custodial solutions are increasingly subject to regulatory scrutiny

In the case of custodial storage, a third party takes custody of your private keys (cryptography that lets you access/move your digital assets), and through them, your cryptocurrency/NFT, much like how a bank takes custody of your savings.

  • Pros: Taking away your private keys abstracts away blockchain’s complexities.
  • Cons: You don’t actually hold your own assets. Your “decentralized” currency can be, in practice, quite centralized — and there are significant risks and regulations that go along with that.

With custodial platforms, your decentralized currency can, in fact, be quite centralized.

Non-custodial solutions: the future?

You hold your own private keys, giving you unilateral control over your cryptocurrency/NFT. A third-party (interest account, exchange, software, wallet) cannot restrict your access to your assets.

  • Pros: You are large and in charge. Additionally, non-custodial products are not regulated the same as custodial companies like Celsius Network and BlockFi because they aren’t technically holding your money.*
  • Cons: With great power comes great responsibility. If you lose your private keys, you may lose access to your assets.

*at the time of writing

Enter DeFi

Following Celsius’ decision to only allow accredited investors to make new deposits and BlockFi’s $100 million fine, it is clear that custodial interest-generating platforms face significant regulatory hurdles.

As a result, the best (and perhaps soon to be only) way for non-accredited investors to generate interest on blockchain assets is DeFi: decentralized finance.

Beginner-Friendly Celsius Network Alternatives

Migrating from Celsius and not sure where to get started? You have a lot of options. These are the easiest.

Gelt High-Yield Savings

User-friendliness: 9/10

A non-custodial DeFi savings product that abstracts away decentralized finance’s complexity, Gelt High-Yield Savings earns 5–10% APY, offers direct deposits from U.S. banks, and automatically protects funds up to $100,000 per user.

Gelt does not require a cryptocurrency wallet or any existing knowledge of how DeFi works.

Pros: Direct USD deposits; no cryptocurrency wallet required; user-friendly; automatically covered deposits up to $100,000

Cons: Not available in all 50 states; does not accept cryptocurrency deposits

Argent

User-friendliness: 5/10

Argent is a wallet for purchasing, earning, and staking cryptocurrency. As Argent uses zkSync, an Ethereum Layer 2 network, fees are significantly lower and transfers are faster than Ethereum Layer 1 solutions.

Pros: Access to multiple interest platforms (Yearn, Gro, Lido); cheaper fees as it is built on Ethereum Layer 2

Cons: Requires existing cryptocurrency and protocol knowledge; still has fees

Linen

User-friendliness: 6/10

Though Linen is more of a cryptocurrency wallet, it allows users to connect to the Compound liquidity pool through which they can earn interest. Specifically, users can supply USD Coin (USDC) to Compound, a decentralized money market that enables peer-to-peer lending, through the Linen app.

Pros: Wallet with user-friendly access to yields; allows in-app cryptocurrency purchases; option to buy deposit cover

Cons: Low interest rates; fees; fund protection isn’t included

Zerion

User-friendliness: 4/10

A DeFi portfolio management tool, Zerion integrates with a user’s existing DeFi wallet and allows them to interact with yield-generating protocols like Aave, Compound, Bancor, and many others. Zerion also allows users to earn through the in-app Zerion Borrow, a collaboration with Compound.

Pros: Can purchase cryptocurrency directly through the app in some locations; diverse and moderately user-friendly access to different protocols

Cons: Requires existing protocol-specific knowledge; requires an existing wallet; no fund coverage; fees

DIY Celsius Network Alternatives

Not for the faint of heart, the most varied way to replace Celsius Network’s yield generation is by interacting with DeFi protocols directly.

But before you can use any of the below-mentioned protocols, you’ll have to:

  1. Create a non-custodial wallet. This can be MetaMask, Coinbase Wallet, Ledger, or one of the above (Linen, Argent, Zerion). Note that not all protocols will support all wallets.
  2. Purchase the currency needed to pay transaction fees, which may be significant. This may be Ethereum.
  3. Purchase the cryptocurrency that you wish to loan on a cryptocurrency exchange or in your wallet (depending on which state you live in and which product you use). This will involve paying transaction fees.

With that in mind, here are five protocols that can function as Celsius Network alternative yield generating platforms.

mStable

User-friendliness: 5/10

mStable is a stablecoin-only swap ecosystem that enables users to earn rewards in exchange for providing liquidity. Funds that are not used in swaps are lent out on Aave and Compound, earning participants additional interest.

Pros: Non-speculative as swaps are restricted to stablecoins; ability to earn extra yields through staking; risk mitigation through stablecoin baskets

Cons: You must source your own liquidity (purchase funds via an exchange, transfer to your wallet, then add to mStable); cannot earn interest on free-floating currencies such as BTC

Anchor Protocol

User-friendliness: 4/10

Billing itself as a “fixed income instrument,” the Anchor Protocol is a lending ecosystem composed of borrowers, lenders (called depositors), liquidity providers, and liquidators.

For our purposes, a lender deposits TerraUSD (UST) to the protocol, after which point funds are pooled and lent out to borrowers. In addition to earning a portion of interest from the pool, lenders also earn the interest off of the borrower’s collateral.

Pros: High interest rates (approximately 20% at the time of writing); different opportunities to earn yields

Cons: Only accepts TerraUST; requires a cryptocurrency wallet; speculative

Aave

User-friendliness: 4/10

Aave is a series of liquidity pools that allow users to borrow or lend funds to one another. In essence, Aave scales the concept of peer-to-peer lending to liquidity pool to peer lending. In exchange for providing liquidity, participants receive aTokens, the platform’s native token.

Pros: Aave accepts many tokens; Aave rates tend to be higher than Compound’s; Aave is the market leader in DeFi borrowing/lending partially due to its flash loans feature and higher borrowing amount to collateral ratio

Cons: Some Aave features are are highly speculative (flash loans) and involve risk; interest is in the form of aTokens, the platform’s native token, not the asset lent; significant prior knowledge is required

Compound

User-friendliness: 4/10

Another borrowing and lending protocol that can function as a Celsius Network alternative, Compound allows users to earn interest off of their funds by lending them out.

Compound and Aave are similar in functionality, with Compound having a smaller market cap, slightly lower interest rates, and higher loan collateralization.

Pros: Potentially less risk than Aave as lenders can only borrow 66% of loan amount (compared to 75%); second-largest DeFi borrowing/lending platform by market cap

Cons: Lower interest than some competitors; fewer coin offerings; significant prior knowledge required

Uniswap

User-friendliness: 2/10

An automated market maker, Uniswap is a non-custodial competitor to centralized cryptocurrency exchanges (Coinbase, Binance) wherein its participants provide liquidity and receive trading fees in return.

Note that Uniswap returns vary widely and participants often experience what is called impermanent loss: the price of the token deposited decreases in relation to what it was worth when deposited.

Pros: The largest decentralized exchange; one can provide liquidity for any ERC20 token

Cons: Fees; requires significant research into liquidity pools; requires active management; potential for impermanent fund loss

Look to DeFi for Celsius Network Alternatives

Though perhaps among the most user-friendly, custodians like BlockFi and Celsius Network are far from the only way to earn yields on decentralized assets.

In fact, non-custodial solutions that let you maintain control of your funds can offer you higher interest rates, better access to your money, and a massive (often overwhelming) amount of customizability.

Before you make the leap from CeFi to DeFi, ask yourself:

  • How much time do I want to spend on my DeFi portfolio?
  • What amount of speculation am I comfortable with?
  • Do I want my funds to be covered automatically (or am I OK with purchasing fund cover myself, if I’m interested in it?)

Welcome, Celsians, to the realm of DeFi.

Disclosure: Not financial or tax advice. This article is strictly educational and is not a solicitation to buy or sell any assets or to make any financial decisions or investment advice. This newsletter is not tax advice. Talk to your accountant. Do your own research.

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A publication devoted to blockchain-based technologies for those who wish to go beyond paid-for headlines. Topics include cryptocurrency (Bitcoin (BTC), Ethereum (ETH), and other altcoins) DeFi (decentralized finance), CeFi (centralized finance) and NFTs (Non-Fungible Tokens).

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