As today is the first Friday of June, it is apparently some sort of holiday regarding donuts in the US and "some other countries" (Wikipedia), celebrating the day the Salvation Army honored the ladies who served donuts to troops in WW1.
What has that got to do with the price of a donut in (insert your town here)?
They're probably free today, if there is a donut store near you that is participating.
Story Time
This seems like an interesting holiday to me as it has no religious or historical roots whatsoever. It probably boils down to someone in Chicago in 1938 having this conversation with their boss:
Boss: "Our donation revenues are dwindling because we are in the middle of the Great Depression, and for some reason people think food is more important than charity. But obviously charity = piety, so we need to remind them that we are here, and convince them that they are fond of us so that they'll give us their hard-earned tendies. What have you got?"
PR Employee: "What if we gave away free food?"
Boss: "......"
Employee: "Bear with me!"
Boss: "Secretary, please call security."
Employee: "But Boss, the people are hungry! If we can give them something that helps them with that, they will see us as taking care of them!"
Boss: "So you're just going to feed everyone who shows up?? We don't have the funds for that!"
Employee: "Ok, we can charge them a few cents for something that gives them happy feelings, like say... a donut!"
Boss: "Why would people buy donuts when they are malnourished as it is?"
Employee: "We'll tie it to something they already have feelings about... Our girls handed out donuts to the troops during The Great War, we can call it Donut Girl Remembrance Day."
Boss: "Son, that was 20 years ago. And War is a great tragedy of the human condition. Nobody's going to be so enamored with violence that they will feel happy buying a donut to celebrate it. And besides, none of the Donut Girls even died. Just call it 'Donut Day' and be done with it."
Employee: "Yes, sir!"
Silfra... WTF has this to do with Crypto?
Oh, the Donut App is giving a 5% boost today to celebrate. They do this periodically with certain achievements of theirs or the world. Today they are celebrating the one year anniversary of the "Boost" function, which was added to their app on Donut Day a year ago.
If you have a Donut account, OPEN YOUR APP TODAY to get the boost for 24 hours. If you don't have one, you can get an extra 1% for 30 days by using this link, but it is limited to the first 12 people who use the link (by them, not me, I'd give extra everything to everyone if I could).
What is Donut?
The Donut App describes themselves as "the most simple and secure way earn 8% APY with DeFi."
What does that mean?
It means that they are claiming to invest your "spare change" in crypto using DeFi, and will give you a stable interest rate on it no matter what the crypto market is doing. You connect your bank account and the credit or debit cards that you use regularly via Plaid, and they watch the numerical amounts that you are spending. Using the concept of "round-ups" as established by traditional banks in the 2000s, the amount between the cents of what you've spent and the next full dollar is "collected" for deposit. For example, if you spend $4.25 on something, the remaining $0.75 will be earmarked for investment. Once your change reaches at least $10, they initiate a transfer from your bank account to your Donut account.
Is that true?
The app is frustratingly opaque when it comes to addresses or mechanism, but I think this is in the interest of privacy. In my interface, I don't even see what transactions of mine are being used to collect the change from. My history only shows the amounts that have been transferred over as deposits.
Some of them are clearly more than $10.
Over the course of the past year, it has invested about $300 for me.
This is about $1 per day, though the app has had some growing pains so this has been affected by periods of time where it wasn't paying attention.
Why does it say 9% if you have a 5% boost on 8%?
Yeah, actually to get the advertised highest regular APY you have to have $2,500 invested. That tier is called "Build," and the APY is variable between 5-7%. Below $2.5k the plan is called "Save," and the APY is fixed at 4%.
The strategy is that they will lend your funds to institutional borrowers in the form of DAI. They call this "Donut Fixed."
"Build is designed to provide a balanced approach to capital preservation and growth by combining Donut Fixed and DeFi Lending opportunities."
Once you reach the $2,500 "Build" level, they will rebalance your account so that 50% is dedicated to the "Fixed" strategy and the other 50% is in what they call "Yearn."
"Yearn algorithmically rebalances your funds across lending partners to earn you the highest possible interest rate.
The strategy uses DeFi lendes such as Compound, Aave, dydx and more."
So the max APY is technically 7%?
Unless you sign up with a referral link like this one, which gives you the extra 1% to make 8% total for 30 days.
Why does this feel eerily familiar??
Because it is also the strategy used by Acorns to invest your spare change in the traditional stock market. Except Acorns is longer established, so they have a laundry list of features, such as:
- transfers at $5 instead of $10
- can multiply this so that when you reach $5 of "spare change" it invests $10 or more
- automatic recurring deposits
- selectable portfolio strategies based on your risk tolerance and investment aggression level
- can see the transactions and choose which to include
- or turn on the automation to include them all
- additional types of accounts, like retirements and kids savings
- a debit card attached to a checking account that you maintain with them that gives you a higher rate of cashback return
So why would I choose Donut if I already have Acorns?
Because Acorns invests in the traditional markets, the value of your investments fluctuates and doesn't have a fixed return rate. With Donut, even when the crypto market tanks you'll still get your yield.
Also, the practice of "diversification" means to spread your investments out over a range of products, with the idea that they can't all go bad all at the same time.
Except you started this article with a story about the Great Depression.
Yeah, I'm not saying that all of this is 100% reliable as written 100% of the time, just that it's better to have both than just one.
How does Donut perform compared to Acorns?
This is not an apples-to-apples comparison, but I'll give it a shot.
My first transaction in Donut shows as being made on May 16th last year, so in about a year it has collected $293 me, and my yield has been $7.05.
Between May 1st 2021 and today (June 3rd), Acorns collected $226.03 from my transactions. They also charged me $31 in subscription fees. I had to get this info from Mint because it's not readily available in-app. However, because I've been with Acorns longer and have more invested, my return was ~$22.
Other things that may have affected this number include a large deposit (COVID aid money form the government) and a very large withdrawal (cash for purchase of land to build a house).
But if you compare that my $300 Donut account earned $7 in a year and my Thousands of Dollars (single thousands, not tens of thousands) in the traditional stock market earned only $22, there is a CLEAR winner.
And it's Donut.
Go get you a Donut account and earn those tendies!
(But also get an Acorns account if you don't have one, because more is obviously better when it comes to returns.)
Thanks for reading! Hope you're optimizing your pennies like I am.
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