Decentrilized Finance - Is it worth the risk?

DeFi wants to make a new financial system that is open to everyone and doesn't require trusting intermediates like banks.

But DeFi requires technical skills right now. The technology can have problems, risk and potentially catastrophic bugs. This is something that applies in general in the crypto world, not just DeFi. There is still a gap between the future vision and the reality. But this is expected, it does not mean that we cannot reach the vision, it just means that we have to patient and a little more careful. This technology is still maturing and promises/threatens to change the world.

I feel that putting a small part of my capital at risk, is the only way to learn about these new products and services that are available on crypto. They could become mainstream in the future.

The example that follows, is the result of me wanting to be part of these exciting things that are happening on crypto right now. Savings is something I need to do in my life anyway so why not choose to do it in crypto and gain exposure to DeFi at the same time?

Why on Terra?

Why save funds on Terra and not on some other platform? There are some options available mostly on Ethereum. But gas prices are very high at the moment and development to fix this is quite slow. There are alternatives out there that can do things that Ethereum simply can't do for me right now. On the other hand, most of the liquidity in DeFi is currently on Ethereum so if that is important to you then you need to be on Ethereum.

No minimum deposits, no account freezes, no signup requirements, anyone can use it. Who can resist that!

Anchor protocol offers a simple savings product. It is built on Terra which is a fast cheap network based on the Cosmos blockchain technology. There are other things you could do to earn with Anchor, but we are focusing on savings today.

The interface is simple, you can deposit, withdraw and see the APY which is always around 20% yearly.

This APY can fluctuate a bit but the protocol is designed to always keep it close to 20%. The deposits and interest payments are made using TerraUSD (UST). UST is a stablecoin that represents a dollar and Terra protocol makes sure that the price of it is always pegged to 1 USD.

What do we need?

It takes a little preparation before we can deposit our funds and start receiving interest.

Anchor protocol is a web application and we need a wallet to interact with it. If you are familiar with Metamask this works in the same way. So we first have to 1. install a wallet and 2. fund that wallet. Terra has it's own web wallet called Terra Station that we can use for all platforms on the Terra ecosystem. Terra Station is available as a desktop application and as a chrome extension.

If you already have some ERC-20 tokens in your Metamask wallet, you might be wondering how does one get assets from Ethereum over to a new blockchain like Terra. And what happens if I send UST tokens from Ethereum (ERC-20 tokens of UST) to Terra? Well the answer is you are going to lose that money! But there is a simple way to move assets from one blockchain to another by using https://bridge.terra.money

Let's do it!

Step 1 - Install the Terra Station wallet browser extension

This is exactly the same process as for Metamask, search for it in the chrome web store and add it to Chrome or Brave browser (I use Brave for the privacy features, no ads in Youtube videos and also, to earn some BAT tokens)

After the extension has been added, open the wallet icon and setup a New wallet.

Give the wallet a name like TerraBrave and a password. This password will be asked later on, everytime we want to login to our wallet and everytime we want to approve a transaction. So pick a safe and long password, that is easy enough to type regularly.

Next you have to note down the 24 words. These words are your keys to this wallet in case you need to recover it in a new computer or install it in another browser. This is your private key. Write it down and make sure you use a system so that you can recover these words in case you need them. Write it down on a piece of paper, hide it in your favorite book, put it in a ziploc bag, memorize it, whatever works for you! There is no "Reset" option here, there is no support you can contact to remind you of your private keys. Your private keys are your responsibility.

Tip - Every address on the Terra blockchain starts with terra just like an Ethereum address always starts with 0x. This way it is quite easy to tell which address is for which blockchain when you are moving funds between blockchains.

Step 2 - Get some UST to Terra Station

There are 2 main ways to get some UST: either buy it or swap another token for it.
We can buy UST on one of the exchanges that have it like Kucoin or Bittrex. It can also be traded on:

• Uniswap (with Ethereum tokens)
• PancakeSwap (Binance Smart Chain tokens) or
• TerraSwap with other Terra tokens.

If you do get some UST on the Ethereum blockchain or on Binance Smart Chain blockchain, then you need to make an extra step to bring those UST tokens over to the Terra blockchain by using https://bridge.terra.money/

In my case, I use Binance to buy crypto and I don't have any other tokens to swap for it. So I decided to buy some Luna on Binance, send it to my TerraStation wallet and then swap that Luna for UST on TerraSwap.io. Fun times!

Step 3 - Deposit and start getting yields

Open the Anchor protocol WebApp and press Connect wallet to connect with the Terra Station wallet

Click Deposit and you can fill in how much UST you want to deposit and also see the transaction fees (about 0,25 UST in the time of writing this)

Click the Proceed button and type your password in Terra Station to confirm this transaction.

4. That's it!

Our Total deposit appears and is already gaining interest. Each day some UST is coming in and our funds are compounding. We don't have to do any other actions to claim that yield, there is no other coin we need to worry about its' price fluctuating. We deposit UST and get paid interest in UST that is automatically added to our savings capital.

And if you deposit a few dollars each month this platform will put your money to use and compound a lot faster:
100$ will get you 1,66$/month,
600$ gets you 10$/month,
I think this is a lot better than letting my money sit in a traditional bank!

What do you think?