Disclaimer: Discreet investment is suggested for the risk of the market. This information doesn’t constitute investment advice. All rights reserved.
KingData official website: https://kingdata.com/
It has been 12 years since the birth of BTC since January 3, 2009. It has experienced multiple rounds of bull market. I believe everyone is aware that hoarding coins is the real win, which is the HODL culture that everyone often says. An CEO also posted on Twitter: If you can’t hold, you won’t be rich, looking back at most mainstream currencies, BTC, ETH, BNB, there are thousands of times or more than ten thousand times the increase from the initial starting point.
Of course, hoarding does not apply to all tokens, mainly refers to mainstream coins. The essence of hoarding is to be a long-term value investor.
The advantages of hoarding currency are obvious, but the disadvantages are also exposed, that is, capital efficiency is low, liquidity is locked, and the interest income such as traditional finance is lacking.
The birth of DeFi has solved this problem well. In the past two years of DeF’s development, thousands of DAPPs have appeared, especially loan products are an important pillar of the ecology. Hoarding coins in DeFi is already a daily operation for big whales. It is also a gameplay with lower risks and more stable returns on DeFi. Here is how to scientifically hoard coins in the DeFi market and make a game. Happy farmers, get daily passive income.
Core idea
Deposit-borrow-deposit
Operation path: mainstream currency-loan agreement deposit-lending other token assets-other DAPP single currency pledge profit
Introduction to DeFi lending
To put it simply, the common DeFi lending in the market is mostly the liquid pool mortgage loan model, which means that the mainstream currency supported by the project is deposited on the platform to obtain a fixed annual interest. At the same time, the deposited assets can also be used as collateral, similar to the release of a car Mortgage to the bank, and then lend other token assets.
The mortgage loan model of DeFi lending is the same as traditional finance. It is over-collateralized, that is, depositing assets worth 100 US dollars. The market value of loanable assets should be less than 100 US dollars. Usually the upper limit of the market value of loan assets is 70%~80 %. Since the exchange rate of deposited assets and loaned assets fluctuates in real time, in actual operation, the market value ratio of loaned assets is usually 50% or 40%.
Loan Pool Screening
Borrowing will also generate interest. The interest of different assets is different. For stable currencies such as USDT DAI, the interest usually does not exceed 10%. Here is a recommended data tool that covers more comprehensively: https://kingdata.com/apy/ loan?lang=cn, you can get an overview of the APR (annual interest rate) indicators of the entire DeFi ecosystem. By default, the borrowing cost is displayed from low to high, as shown in the figure below:
Regarding the negative loan interest rate, the first contact users may not understand it. It is not a data error. The reason for the negative number is because most loan agreements have designed a deposit mining + borrowing mining model, that is, deposits and loans will get extra The platform token rewards and token reward mechanisms are different. When the token rewards are enough to cover the interest of borrowing, the comprehensive borrowing cost will become negative, and the borrowing can still make a fortune.
The actual use process can be screened according to the tokens held. Take the ETH assets on the BSC public chain as an example. For example, we want to mortgage the ETH to lend the stable currency USDT. The results obtained through the screening are as follows, arranged in ascending order of cost, as shown in the figure :
As can be seen from the above figure, the real cost=borrowing APR-deposit APR=7.22%, that is, the net cost of borrowing for one year is 7.22%.
After confirming the loan pool, click [Go to Mining] on the far right side of the Flux pool, jump to the Flux official website, find the loan pool corresponding to ETH, authorize first, and then enter the amount to deposit.
The deposit office can see that the Collateral Factor=140% is the over-collateralization rate of 140%, that is, we deposit 140 US dollars worth of ETH, and the maximum value of the tokens that can be released is 100 US dollars, that is, the maximum loan amount is about 70% of the value of the mortgage tokens ; In actual operation, it is certainly not possible to borrow in full, and RTH also has relatively large volatility. If the relative exchange rate changes significantly, resulting in a mortgage rate of less than 140%, the system will force liquidation.
When borrowing, control the total amount of borrowing, or directly lend 50% of the maximum loanable assets. If you choose to lend 50% of USDT, you can guarantee that the system will not undergo liquidation under the premise that the value of ETH does not fluctuate more than 50%. The description can also refer to the Zhihu content mentioned above.
After operating the loan, it enters the next step to screen the stable investment targets of USDT.
Stablecoin investment subject
The loaned USDT is the same as regular tokens and can be used at will. Of course, we can also use it to cash out directly, or buy other token assets. Purchasing other assets is invisibly adding leverage to our principal. The risk is high, and you must operate cautiously based on personal judgment.
The most stable way is to find a platform that supports USDT single currency pledge and profit. At present, DeFi ecological projects are very rich, in addition to lending, DEX (decentralized exchange) and machine gun pool (automatic investment strategy agreement) projects are also Very rich, we only need to find a pool that only uses USDT single currency pledge annualization higher than the borrowing cost by 7.22%%.
For the screening of investment targets, you can use the [Mining APY] section of KingData, switch to the [Mining APY Analysis] page in the menu bar, select the stable currency area, and you can see the current market’s mining pool income distribution.
As can be seen from the above figure, the current mining pool with the highest revenue is the For Tube project of the ETH public chain. Since the cross-chain of USDT to ETH involves cross-chain, and the gas is high, I will not discuss it here for the time being, just look at the same as the BSC public chain. For the project, we can see that the annual rate of mining on DeerFi for BUSD (stable currency anchored at 1 U.S. dollar) is 50%, which is also very high. Choosing to invest in this mining pool requires two steps:
1) Convert USDT to BUSD
It is recommended to use BSC’s leading DEX pancake: https://pancakeswap.finance/swap
2) BUSD pledge mining
Directly on the original data website, click [Go to mine] on the corresponding pool to jump to the official website of the machine gun pool. After finding the USDT single currency pledge pool, click [Deposit] to enter the amount and confirm the transaction to start mining.
APY
After the above operations, let’s calculate the comprehensive annualization. FLUX’s over-collateralization rate is 140%, which is converted according to the loan limit of 70%. We lent 50% of the maximum loan limit, which is based on the real-time price of ETH, we lend Assets with 35% of the market value of the gold standard:
Annualized loaned assets = DeerFi-pledged APR-FLUX real cost of borrowing = 50.2%-7.22%≈ 43%
Comprehensive annualization = (100%-35%) FLUX deposit APR + annualized loan assets*35%=1.28%*65%+43%1.28%=15.8%
Although 15.8% is not a particularly attractive annualization, it is already a very good choice compared to hoarding coins in wallets or exchanges. As the market fluctuates, when the mortgage asset ETH rises and stabilizes At a new height, the amount of borrowing will also increase, and more stable coins can be borrowed to operate the above process to expand the rate of return.
In the absence of extreme market volatility, we can also slightly increase the borrowing limit, such as increasing the proportion of borrowed funds to 70%, and the market volatility can guarantee safety within 30% of the market volatility. At this time, the comprehensive annualization can reach 22.14%.
Multi-strategy trade-offs
Compared with the above-mentioned [Deposit-Borrow-Mining], mainstream coins can also be directly invested in the machine gun pool. The operation process is more convenient and convenient, but the relative capital utilization efficiency is not high. Like deposit mining, funds cannot be released. fluidity.
Most machine gun pools also support single-currency pledges of mainstream currencies, and you can also find Kanban on the above-mentioned data websites:
As shown in the figure above, if you pledge ETH directly into the HUNNY project, you can get 16.13% of the annualized income.
Risk judgment
Strategy 1: Deposit-Borrow-Deposit
potential risks:
1) The security risks of the protocol itself: hacker attacks, lightning loans, currency theft
2) Liquidation risk caused by currency price fluctuations: extreme market fluctuations like 519 trigger liquidation and lose mortgage tokens
3) Reward token fluctuations: The currency price of the lending platform drops significantly, and the cost of borrowing increases, causing the comprehensive annualization to become negative.
4) Project runaway risk: the project party directly swept away the pledged assets
Strategy 2: Aggregator Valut Pool
potential risks:
1) The security risks of the protocol itself: hacker attacks, flash loans, and currency theft risks,
3) Project runaway risk: the project party directly swept away the pledged assets
Risk prevention
Hacking incidents cannot be prevented. After such incidents in history, most of the project parties will compensate users for their losses, and the price of the platform currency will also rise after being attacked; most of the project parties’ runaways occur in small projects like local dogs. This is rarely seen in most mainstream lending and machine gun pool agreements.
The fluctuation of the currency price in the secondary market is market behavior, which is unpredictable and can only be used to assist decision-making based on personal knowledge of the market.
In general, in order to avoid risks, the following elements should be observed during project selection:
1) Audition
The audit report proved the security of the project to a certain extent, but hacker attacks cannot be avoided. After all, there is no upper limit in technology. But it can be used as a reference. After all, auditing requires the project party to pay the cost, and the project party who dares to invest here is relatively more reliable, and the more audit institutions, the better. And pay attention to verify the authenticity of the official website based on the information.
2) Project TVL
Generally, TVL of more than 100 million U.S. dollars is relatively safe, and there will be no major problems; or at least more than 2,000 W U.S. dollars, and keep growing.
4) Trend of reward tokens
If the reward token is at a high level in the market, the high APR is only temporary and unstable. Once a sharp correction occurs, the overall income will also be greatly affected, especially the [deposit-borrow-deposit] strategy. May cause the comprehensive annualization to be negative.
4) Media data
The official media account of the project party and the number of fans and activity in the official community also reflect the authenticity and marketing capabilities of the project.
Summary
The above content is temporarily sufficient for users who are new to DeFi. It is said to be a flat coin hoarding, but there are still many data to refer to when making investment decisions. Although high APR is very attractive, the most robust strategy is not Only the highest one must be selected, which also involves the potential value of the platform where the asset is located. After all, most APRs have a platform token incentive component. The analysis of the project requires a comprehensive white paper and related data to make auxiliary judgments. We will talk about the basic analysis plan of the project in the next issue.
If you have already read and mastered the above content, you can follow the above plan to step down the operation process and dig a better mine with higher returns. Look at and use KingData: https://kingdata.com/apy/loan. You can always find a profit strategy that suits your risk appetite.
If there is any improper description in the article, please correct me, and welcome everyone to come and exchange relevant experience in DeFi mining. Thank you everyone!
