DeFi

From staking to recursive lending

Published

7 months ago

13 July, 2024

CoinFlix Staff

The following is a guest post by Vincent Maliepaard, Marketing Director at IntoTheBlock.

Staking

Staking is a fundamental yield generation strategy ChallengeIt involves locking up a blockchain’s native tokens to secure the network and validate transactions, earning rewards in the form of transaction fees and additional token issuance.

Staking rewards fluctuate based on network activity: the higher the transaction volume, the greater the rewards. However, stakers should be aware of risks such as token devaluation and network-specific vulnerabilities. Staking, while generally stable, requires a thorough understanding of the underlying blockchain dynamics and potential risks.

For example, some protocols, such as Cosmosrequire a specific unlocking period for stakers. This means that when you withdraw your assets from staking, you will not be able to actually move them for a period of 21 days. During this period, you are still subject to price fluctuations and cannot use your assets for other yield strategies.

Liquidity provision

Liquidity provisioning is another method of generating yield in DeFi. Liquidity providers (LPs) typically contribute two assets to a liquidity pool on decentralized exchanges (DEXs). LPs earn fees on each trade executed within the pool. The yields of this strategy depend on trading volumes and fee levels.

High-volume pools can generate substantial fees, but LPs should be aware of the risk of impermanent loss, which occurs when the value of the pool’s assets diverges. To mitigate this risk, investors can choose stable pools with highly correlated assets, ensuring more consistent returns.

It is also important to keep in mind that the projected returns of this strategy are directly dependent on the total liquidity of the pool. In other words, as more liquidity enters the pool, the expected reward decreases.

Source: In the block

Ready

Lending protocols offer a simple yet effective method of generating yield. Users deposit assets that others can borrow in exchange for paying interest. Interest rates vary based on the supply and demand of the asset.

Strong borrowing demand increases returns for lenders, making it a lucrative option in bullish market conditions. However, lenders must consider liquidity risks and potential defaults. Monitoring market conditions and using platforms with strong liquidity buffers can mitigate these risks.

Airdrops and Points Systems

Protocols often use airdrops to distribute tokens to early adopters or those who meet specific criteria. More recently, point systems have emerged as a new way to ensure that these airdrops are targeted to actual users and contributors of a specific protocol. The concept is that specific behaviors reward users with points, and these points are correlated to a specific allocation in the airdrop.

Trading on a DEX, providing liquidity, borrowing capital, or even just using a dApp are all actions that would typically earn you points. Points systems provide transparency, but are by no means a surefire way to generate returns. For example, the recent Eigenlayer airdrop was limited to users in specific geographies and the tokens were locked during the token generation event, which sparked debate within the community.

Leverage in Performance Strategies

Leverage can be used in yield strategies such as staking and lending to maximize returns. While this increases returns, it also increases the complexity of a strategy, and therefore its risks. Let’s see how this works in a specific situation: lending.

Recursive lending capitalizes on the incentive structures within DeFi lending protocols. It involves repeatedly lending and borrowing the same asset to accumulate rewards offered by a platform, thereby significantly improving overall yield.

Here’s how it works:

Asset Supply: First, an asset is supplied to a lending protocol which offers higher rewards for supply than the costs associated with borrowing.
Borrow and Replenish: The same asset is then borrowed and replenished, creating a loop that increases the initial stake and corresponding returns.
Incentive Capture: As each loop is completed, additional governance tokens or other incentives are earned, increasing the total APY.

For example, on platforms like Moonwell, this strategy can turn a 1% offering APY into an effective APY of 6.5% once the additional rewards are factored in. However, the strategy carries significant risks, such as interest rate fluctuations and liquidation risk, that require ongoing monitoring and management. This makes strategies like this more suitable for Institutional DeFi participants.

The Future of DeFi and Yield Opportunities

Until 2023, DeFi and traditional finance (TradFi) operated as separate silos. However, the increase in Treasury interest rates in 2023 has driven demand for integration between DeFi and TradFi, leading to a wave of protocols entering the “real-world asset” (RWA) space. Real-world assets have primarily offered on-chain treasury yields, but new use cases are emerging that leverage the unique characteristics of blockchain.

For example, on-chain assets like sDAI are making it easier to access Treasury yields. Large financial institutions like BlackRock are also getting into the on-chain economy. Blackrock’s BUIDL fund, which offers on-chain Treasury yields, has accumulated over $450 million in deposits within months of its launch. This indicates that the future of finance is likely to become increasingly on-chain, with centralized firms deciding to offer services on decentralized protocols or through permissioned paths like KYC.

This article is based on IntoTheBlock’s most recent research paper on institutional DeFi. You can read the full report here.

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DeFi

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Published

6 months ago

29 July, 2024

CoinFlix Staff

If You Missed BONK and PEPE This Year, This Viral New Crypto Might Be Your Salvation

Bonk and Pepe appear set to net new investors 10x to 100x returns over the next 12 months. However, cryptocurrencies in the DeFi play-to-earn gaming sector could offer even greater returns. As August approaches, Rollblock is emerging as a standout DeFi play-to-earn gem with the potential to 100x-1000x gains in the fourth quarter and beyond.

The project features an innovative revenue sharing model and exceptional accessibility, attracting players and investors. Additionally, Rollblock’s extensive game library of over 150 titles and enhanced sports betting are further driving excitement for the platform. Cryptocurrency analysts are expecting a sudden surge in demand. 800% a push for Rollblock from the beginning of September.

Bonk remains strong despite market fluctuations

While most well-known cryptocurrencies struggled throughout July, Bonk remained strong. As one of the highest-grossing meme cryptocurrencies of 2024, Bonk rose over 24% in July, while most cryptocurrencies experienced negative fluctuations.

Investors looking to add a relatively safe memecoin to their portfolio should consider Bonk. While Bonk is unlikely to generate explosive gains of 250x to 1,000x from here on out, Bonk could still theoretically provide returns in the 20x to 100x range.

Pepe should see a big rise in the next bull run

Alongside Bonk, Pepe has yet to go through a bull run. This means that there are still substantial gains to be made from Pepe over the next 12 months.

Pepe is down 4% in 30 days, but that shouldn’t worry Pepe investors in 2024. Experts believe Pepe’s best days are still ahead, with crypto analysts predicting a 10x to 50x surge in the next election cycle around November.

In the long term, Pepe could surpass the 100x mark for today’s investors. However, Pepe is a memecoin, and one should exercise caution when investing in purely speculative assets that have no utility.

Rollblock’s Unprecedented Hype Potential Could Push It Past 100x Valuation in Q4

Rollblock is a GambleFi Play-to-Earn token that integrates centralized and decentralized gambling on a single platform. By allowing players to earn rewards through active participation and gameplay, the platform creates a compelling incentive structure that appeals to both casual and competitive players.

With its cutting-edge blockchain technology, Rollblock offers top-notch security that keeps bets and transactions on the platform secure. The platform’s lack of KYC mandates appeals to both users who value anonymity and security.

Rollblock’s revenue sharing model, which allocates up to 30% of casino revenue to RBLK token holders, is a major draw for investors. The model involves burning half of the repurchased tokens and distributing the other half to stakers, increasing the token’s value and encouraging long-term investment.

The platform is also constantly evolving thanks to user feedback which has enabled updates such as the upcoming sports betting feature within the platform’s casino. This addition will complement Rollblock’s extensive game library of over 150 titles, ranging from traditional poker to innovative blockchain-based games.

RBLK is expected to emerge as one of the leading DeFi tokens in 2024. With a price of $0.0172 with impressive growth potential and over 140 million tokens sold recently, Rollblock is on track to enter the top 100 cryptocurrencies by Q4, making today a lucrative time to buy RBLK tokens.

Discover the exciting opportunities of the Rollblock (RBLK) presale today!

Website: https://presale.rollblock.io/

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DeFi

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Published

6 months ago

29 July, 2024

CoinFlix Staff

Cryptocurrency sector is experiencing ‘most misjudged moment’ since 2020, says venture capitalist Arthur Cheong

Veteran cryptocurrency investor Arthur Cheong believes the digital asset sector offers long-term holders a golden opportunity.

Cheong, the founder of DeFiance Capital, tell His 171,700 followers on social media platform X indicate that he believes decentralized finance (DeFi) is hugely undervalued.

According to Cheong, DeFi projects are innovating at a rapid pace and leaving traditional financial (TradFi) companies in the dust.

“It’s been a long time since I’ve been this excited about the risk/reward and potential upside of DeFi. This is probably the most misjudged moment since the pre-DeFi summer of 2020, with extremely promising prospects.

I see opportunities not only in OG (original) DeFi, but also in some newer projects that are evolving rapidly and growing at a pace that fintech startups will do anything to match.

The veteran investor also believes that crypto is now here to stay following recent launch from the Ethereum spot market (ETH) exchange-traded funds (ETFs) last week.

“Overall, the floodgates are open and there is no turning back. TradFi asset managers will continue to launch new crypto products because, guess what: there is huge demand for them!”

I expect them to launch actively managed crypto ETFs [in the] coming years. ”

Earlier this month, Cheong laid that it might be a bad strategy for cryptocurrencies to seek mass adoption, believing that digital assets are designed to disrupt several key financial sectors.

“I think we should accept that cryptocurrencies may not be suited for mass adoption like Web2, but rather are optimized for some narrow but very high-impact use cases like stateless global money, cross-border payments, and decentralized finance.

Chasing mass adoption of normies may be chasing the wrong Grail from the start.

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