Sirwin
Sirwin

Risks Vs Reward

By Buzzbeeg | The Crypto Cave | 30 Jan 2024


What's on the other side of that cliff?

What's on the other side of the cliff?

Risk Vs Reward

Would you make a flying leap across a chasm to pick up a penny? I wouldn't. What about 1000 dollars? Some would but I am not that desperate. What about 10 bars of gold or a briefcase filled with hundred-dollar bills? I would think about it. And if the private keys to Satoshi's wallet were on the other side of the cliff I would certainly leap! 

I think looking at crypto investing through the eyes of risk vs reward is essential. We all want to find low-risk investments with high rewards (alpha). Let's take a look at a few different cliffs that I think are worth jumping across. I shall analyze the likelihood of falling off the cliff and what I think could be on the other side. Risk vs Reward is the name of the game!

Cliffs worth jumping over (yes I shamelessly include referrals) 

1. Lolli

2. Blast

3. Ether.Fi

 

Lolli

What is Lolli?

Lolli is a cashback system that rewards users with Bitcoin instead of cash. Buy stuff using the Lolli App and they give you Bitcoin back. Simple. It's a referral-based system and Lolli shares the wealth.

Risks. Lolli is free to use so there are very few financial risks. But it is possible there could be a data breach and thieves could sell your data on the dark web. I think this is no more likely to happen than with most other apps but it's possible. Lolli offers a debit card boost for shopping at restaurants like Chic Filet and you must link your bank using Plaid. If you don't trust Plaid or are nervous about linking your bank you don't have to. There are still big rewards for using their online referral system and they don't get vital information.  

They claim to not share your data with other companies for marketing purposes but it's always possible they are keeping a secret list of all your shopping and selling it to the highest bidder. If you use Facebook you have nothing to complain about. 

Reward. You get Bitcoin for buying stuff you were going to spend money on anyway! But let me show you a screenshot of some legit alpha.

50 dollars back in Bitcoin with Lolli

If you don't have an Etoro account use Lolli and then set up the account. Put in 50 dollars, buy a stock (or how about some paper Bitcoin), and wait. Don't immediately sell and withdraw because Lolli can't give you the Bitcoin until they get the referral bonus from Etoro. This could take up to 90 days but will most likely be much sooner. Wait a few days and you should see a pending notification in Lolli letting you see the incoming Bitcoin reward. Once again don't withdraw from Etorro until you receive the Bitcoin from Lolli and make sure you put in $50. You could invalidate your rewards if you withdraw too soon and don't put in enough money.

But this is an easy 2x! You buy 50 dollars worth of paper Bitcoin or your favorite stock and you get 50 dollars worth of Bitcoin! I should also point out that if you use my referral code you will get an additional 5 dollars worth of Bitcoin...

This is a relatively small reward but there's very little financial risk! Let's see others for potentially greater rewards. 

Blast the L2 with native yield 

Now we are getting to bigger reward but bigger risk

Blast is an upcoming Layer 2 solution that will be an optimistic rollup. The big thing that makes it different from Optimism is that it provides yield while using their L2. Users automatically receive 4% for staking Ether (they use Lido) and 5% for staking Stablecoins (they use MakerDAO) on their protocol. They have not yet launched but are encouraging users to stake on their platform and wait for it to come out in February. Most of all they have an airdrop coming in May to reward all of the early users.

Risks. The risks with Blast are more extensive than Lolli so I shall put them in bullet points.

  • Blast is encouraging users to stake on their platform but does not allow withdrawal until sometime in February. This means you won't have access to your deposited funds for at least a few weeks. 
  • Blast is using Lido and Maker DAO for yield so if there's a smart contract hack for either of them you would lose funds. 
  • Blast is a new bridge/layer 2 and these sorts of protocols have been hacked in the past. A hack could result in a loss of funds. 
  • Blast is currently secured by a multisig system and could be compared to a centralized exchange or hedge fund at this point. Until February you are relying on the honor of at least 3 people to secure your funds. 
  • Some people don't like the Blast referral system itself and see it as a pyramid scheme.

Some of the risks I listed are fairly low risk like a Lido or MakerDAO hack. The referral system gives points for the upcoming airdrop so I don't think it matters that it's structured like a pyramid. The real risk is whether your funds are secure with the 5 person multisig. The Blast team has a good reputation and was founded by the same leadership that set up the Blur NFT marketplace. They are also backed by Paradigm and Standard Crypto. But FTX had great backing and community trust and look where it got us.

Rewards. The potential rewards for Blast are just as big (if not bigger) than the risks. The Blast airdrop coming in May could be huge and you still get a yield on your $ETH and Stablecoins. I will also point out that people bought ICOs in 2017 with greater risks and completely depended on a new token's success for the reward. This at least gives yield even if the Blast token fizzles out. But I think the Blast token will likely be a top 100 coin in May. Here's why:

  • Its airdrop and use case is structured in a similar way to Manta Network which is now 70 on CoinMarketCap and is worth 3.5 Billion dollars. 
  • Yet it has twice the Total Value Locked (TVl) that Manta ever gained (1 billion vs Manta's 500 million). This means there's more money and more users behind Blast than Manta.
  • It's also founded by the same people that did Blur so will likely become the layer 2 solution for the second biggest NFT marketplace.

So how do I see this? I look at this like an ICO from 2017 but you get back your $ETH with yield and then are given tokens that could moon. Is it possible you could lose all of your $ETH and Stablecoins? Yes. But I think the reward is huge. But I am not suggesting that you drop everything you own into it either; the risk is real. If you think this something worth aping into check it out.

Keep your keys. Build the Network

My final cliff worth jumping over is ether.fi. I like ether.fi a lot because it acts like Lido where it stakes your $ETH for 3.5% yield but then it goes one step further and takes the stake and puts it on Eigenlayer for additional yield. 

Risks. This project has a lot of moving parts so it has more risks. Here's a brief list of moving parts.

  • Their own (lido) like staking system. The good news is that once you stake $ETH you receive $EETH in return and can withdraw at any time back into $ETH. But this always has smart contract risks to it that you can read about here
  • Staking on Eigenlayer is very new and this has its own set of risks. I suggest you read about them here.

This project also encourages users to take their $EETH and put it on DeFi platforms like Balancer and Curve for more yield and ether.fi points. You don't have to do this but it does add additional risks smart contract risks if you choose to participate. I should also point out that the yield is split between the stakers, ether.fi protocol and node operators. The stakers keep 90% of the yield and everyone else receives 5%.

The real risk is the complexity of the smart contracts involved. If Eigenlayer fails then ether.fi is toast. And it's also possible that ether.fi has its own problems. I will also point out that the team is doxed and you maintain control of the keys to your $EETH at all times which mitigates risk.

Rewards. I think the rewards are HUGE! 

  • 3.5% staking like LIDO.
  • Eigenlayer staking rewards which should be an additional 3-5% yield. 
  • Eigenlayer points earned which make you eligible for a huge airdrop.
  • ether.fi points earned which make you eligible for their airdrop!

happy face

The yield is great but so are the potential airdrops!

Eigenlayer has a TVL of 2 billion dollars and ether.fi is not shabby at 470 million! 

High TVL good

A lot can be said about the metric of TVL alone. It shows the user base and user confidence and enthusiasm for a new protocol. I want to emphasize that Manta launched into the top 100 on CoinMarketCap with a similar TVL to ether.fi's. These airdrops could be huge!

Just think about this like an ICO where you keep control of the keys to your tokens and receive 5-8% in yield in Ether when it's all done. Except you receive two tokens that could moon instead of just one. But do your research before aping in.  

I hope you enjoyed my post and enjoyed my thought process on risk vs reward. Best of luck!

This post is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice. Certain information presented is gathered from third parties and has not been independently verified. The views expressed here are those of the individual author and are not the views of 1.2 Labs Inc. or its affiliate firms. If you decide to buy or invest in anything, then your returns and potential losses are your own. No statements about taxation are taxable advice and you are encouraged to consult your own tax professional. No statements are legal advice and you are encouraged to consult your own legal professional. No statements about investing constitute investment advice and you are encouraged both to do your own due diligence research before investing and to consult an investment professional in that process.

Finally, as the author of this report, you should recognize that I do actively invest. Many of my trades are quick and I do write about many investment items, whether stocks, coins, collectibles, and the like which I do not own. For the purposes of disclosing any conflicts of interest, assume that if it is covered, I own the investment item. Or if my coverage is negative that I am short the investment item.

 

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Buzzbeeg
Buzzbeeg

I work for several Cryptocurrency projects including Silica neXus and Divi Project. I also write on Quora and share many of the same posts that I share here.


The Crypto Cave
The Crypto Cave

The fun side of crypto; making money, blockchain games, and learning. Like my thoughts on Crypto? Check out my Quora space: https://cryptocave.quora.com/ and 🔥Subscribe to our Free Investment Newsletter. https://theartofthebubble.com/newsletter/🔥 This post is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice.

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