Stablecoin is BETTER than cash | Protecting Your Money from Inflation ~ Part 3
Stablecoin is BETTER than cash. Earn 10%+ APY.
How much cash do you save in your bank account? Is it generating any yield? Almost zero right? It’s time to put your money to work.
There are various ways you can generate passive income with cryptocurrencies, with CeFi being the most popular way. Companies like Celsius and BlockFi offer anywhere between 3% to 10%+, depending on the cryptocurrency you are holding, and they are on their way to becoming the new bank! Stablecoins such as ZUSD, USDT, USDC, and PAX earn the highest yield on both platforms with Celsius and BlockFi offering 13.3% and 8.6% APY, respectively. If you do not want exposure to the volatility risk of Bitcoin but want to earn yield or simply participate in the crypto ecosystem, stablecoin is the best option for you. Specifically, Celsius offers benefits over the other platforms, including;
- Higher yield
- More cryptocurrency options
- Weekly payments
- Ability to withdraw instantaneously without getting your fund locked up for few days
If you are an active trader of crypto assets, you can trade while you earn rewards on Liquid Exchange. Liquid is offering yield generating accounts through a partnership with Celsius Network, and the APY is similar to what Celsius offers. You can learn more about Liquid Earn here. Meanwhile, Nexus Market is also offering Nexus Vault where you can earn up to 7% on GYEN and 11% on ZUSD. GMO Trust’s USD stablecoin ZUSD is supported by Celsius Network, Liquid Earn, and Nexus Vault, so enjoy your passive income with ZUSD :) So what’s the catch? There, your crypto assets are not FDIC insured, so if something goes wrong, your assets are not protected. However, it looks like Celsius plans to offer an insurance policy that you can opt-in to in the near future.
Finally, there are DEXes and DeFis that allow you to earn passive income by participating in liquidity pools. We will focus on Uniswap in this blog because they are one of the most successful DeFi protocols in the current crypto ecosystem. Traders can exchange Ethereum tokens on Uniswap without having to trust anyone with their funds, which means they are responsible for managing their assets. Meanwhile, anyone can lend their crypto to special reserves called liquidity pools. In exchange for providing tokens to these pools, they earn fees. Markets are created when liquidity providers deposit an equivalent value of two tokens into a smart contract. These can either be ETH and an ERC-20 token or two ERC-20 tokens. These pools are commonly made up of stablecoins such as DAI, USDC, or USDT, but this isn’t a requirement. In return, liquidity providers get “liquidity tokens,” which represent their share of the entire liquidity pool. These liquidity tokens can be redeemed for the share they represent in the pool.
We will use ETH/ZUSD liquidity pool as an example and call the ETH portion of the pool x and the ZUSD portion y. Uniswap takes these two quantities and multiplies them to calculate the total liquidity in the pool, call this k. The core idea behind Uniswap is that k must remain constant, meaning the total liquidity in the pool is constant. Therefore, the formula for total liquidity in the pool is x * y = k. When traders trade 1 ETH for ZUSD, they must do so at a ratio for which the formula still holds, which implies a price.
One important thing to remember is that no one can protect your asset except yourself. So make sure you fully understand how DEXes and DeFis work, make sure the protocol is audited by a third party, and make sure you manage your private keys to your wallet(s) in the most secure way you can think of.
Now go enjoy your passive income using stablecoins!
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