Traditional POS, Lending Or DeFi?

Traditional POS, Lending Or DeFi?

By Sapphire | Sapphire Crypto | 13 Jun 2021


Proof Of Stake

When the previous bear market began to heat up in 2018, I began to think beyond the entry level economics of buy low, sell high. One of the methods I came up with was staking proof of stake coins. Something you need to be aware of, a lot of projects and platforms now use the term "staking" very loosely and is actually not really staking but rather lending. Proof of stake is actually a way to confirm transactions on the respective blockchain involved. Coins like Cardano use POS to confirm and secure the network as apposed to a proof of work blockchain like BTC, that requires mining in order to verify and secure the network. Proof of Work is more secure than POS but as the market grows and risks diminish, more and more projects are shifting over to POS, including ETH!  

This is the safest option of all three in my opinion, as coins are merely stored in order to confirm transactions, apposed to being in the custody of a third party who is in turn lending them out on your behalf. Many of these coins do have their own wallet that can be downloaded in order to directly stake your coins. Another way coin holders choose to stake their coins is via staking platforms and wallets such as Mycointainer and Stakecube, which are third party platforms. They take care of the technical side for you, meaning that a simple deposit is all that is needed in order to start staking your coins. Obviously you have to evaluate the risks involved and come to your own conclusion about whether to utilize such a platform or not. Obviously using such a service to stake your coins is the same as using a lending service. To be clear, staking your own coins is what makes it the safer of the three.

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Mycointainer currently has an insane amount of staking options including Kusama at 11.6% and Cartesi at 70%. Algorand is probably the best and safest staking option, as you can simply hold it in your Coinomi wallet and rewards are directly deposited to your balance. 

The World Of Lending

This is most likely the most utilized avenue in my opinion. Loads of Crypto enthusiasts make use of services such as BlockFi and Nexo, which I have explored numerous times in my writings. Celsius is also another firm favorite among the Crypto community, though I think that new users should take a serious look at Nexo, due to the fact that they offer the highest rates in the marketplace. There is obviously certain criteria that needs to be met in order to receive the higher tiers but with such high rates it is definitely worth a look! BTC and alts can earn as high as 8%, while stablecoins can stack up as much as 12%! It is this element that attracts stakers to the lending market, as most quality staking coins only offer a very modest return.

There are some coins that offer 10% or more, such as ATOM, KSM and BAND! However, for the most part, staking coins generally range between 1.5% and 5%, which means that some investors will be willing to take on some extra risk in the hunt for better returns.

The DeFi Jungle

At the end of the day, why you are wanting to earn additional Crypto is the deciding factor of which avenue you will choose to utilize. If you are just wanting to earn more sats and build your portfolio over time, you will most likely choose to stake coins, or even lend some out to earn interest on an on going basis. However, if you are looking to earn an income from your Crypto earnings, you will most likely turn to DeFi and yield farming.

This particular avenue of Crypto can be very risky with exploits and rug pulls often being the order of the day. Recently we have seen a large number of BSC  projects suffering exploits, including Pancake Bunny, which until recently had billions of dollars in TVL. Despite the risks involved, many still choose to make use of DeFi protocols in order to earn meaningful monthly income. One of the most prominent ways is by locking up CAKE, the native token of Pancake Swap. Vaults are available across a wide variety of AMM's and the returns are typically over 100% APY! Biswap is new AMM/DEX that is currently paying out 833% APR.

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By simply locking my tokens up, compounded by token price appreciation, I will reach ROI within a week or so and I have only been "staking" my coins for approximately 10 days. There are so many opportunities within the DeFi space and I do try to gain exposure to as many as possible.

So Which Is My Favorite Option?

For me, DeFi is the most utilized, although I do make use of all three options. I look to make income from DeFi, while I use staking and lending to increase my long-term holdings. I also have smaller liquidity mining operations on the go that are not used for spendable income. I use this income to purchase more BTC. Accumulating BTC via the Binance Smart Chain or lightning network is very cost effective, as fees are almost non existent.

Please remember that this is not investment advice but rather my own journey through the world of Crypto. Thanks for reading!

 

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Sapphire
Sapphire

Interesting views, news, opinions and all things Crypto. Independent and honest assessments of Crypto projects and earning opportunities within the space. Opinions are my own and not financial advice.


Sapphire Crypto
Sapphire Crypto

Interesting views, news, opinions and all things Crypto. Independent and honest assessments of Crypto projects and earning opportunities within the space. Opinions are my own and not financial advice.

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