DEFI is not the place where you can increase your deposit

I mean, if you don’t want exposure to dex coins, cex coins, dogecoins, kittycoins, and other shitcoins. You have no way to earn some decent yield on BTC, ETH or stablecoins. Or the yield will be miserable or the protocol is so suspicious, so no way I will put my money there.

Imagine I want to earn some interest on my BTC. The average yield in trusted protocols is like 0%-2%. The bridge fees that I need to pay to bring my native BTC to the other chain will just eat that yield and you will need to wait YEARS to at least have your initial deposit back.
I can buy AVAX, then swap it in a DEX for BTC and I already lose like 0.3% of my deposit! and the same applies when I decide to withdrawal my deposit.

The same is applicable to the stablecoins. The yields are too way low. Also, if you have 1000$ in your bank account, and bring it to some defi protocol, you will lose around 5% of you initial deposit with exchange fees, gas fees, protocol fees.

I even not talking about the risks like protocol and bridges hacks, scams, depegs and so on.

DEFI is still a good place that replaces centralised finance services, but I don’t see it as a place to earn interest on my assets.

Please discuss.

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14 thoughts on “DEFI is not the place where you can increase your deposit”

  1. Being early doesn’t eliminate the risk for being a first mover. This space is incredibly new and it sounds like you are not risk adverse. This place has low liquidity, security concerns, etc as you described.

    If it works out you will get a much higher APR than what’s stated on something like uniswap from people buying on the pools in much larger quantities than they are now. If you don’t want to accept the risks in a space that’s not even 5 years old yet then there’s no problem with that. It’s great you can identify the risks. You just need to be able to understand the reward that mass adoption of DeFi brings. Which is not guaranteed to even happen.

    I keep less than 5% of my crypto portfolio on DeFi protocols like uniswap. It’s not even a coin flip chance that it happens, but if it does, I would like exposure to the fees that grow when it does. If it goes to zero, gets hacked, or never gets adopted it won’t hurt my overall portfolio.

    I would suggest sitting this one out until fees get better and more adoption. Savings accounts provide a ton of interest.

  2. Invest in coins that have utility, meaning they have a purpose in a growing project, diversify your holdings across a range of popular chains, be patient, sell a coin if growth stagnates and never invest more than you can afford to lose, avoid hyper-growth get rich quick schemes, if you could time buys/sells in volatile markets you’d already be rich

  3. Disagree with most of this. For a start you can get a pretty safe ~5% on eth liquid staking derivatives. Bitcoin is harder but you can easily borrow against it and earn decent yield in many places – just practice good risk management and spread out to manage risk. Also, 5% on fees to get money into defi is absolutely not the case in my experience – use exchanges without high deposit and trading fees and send directly into Ethereum L2s where fees are much lower.

  4. That’s very correct. Well, that’s why there’s this IL caution when it comes to DEFI. You can lose. You can even lose on stablecoins (you’ll be surprised if I shared my experience with you). But like you said, it’s still a great place, but never be in a hurry when it comes to DEFI. I do LPing on Beefy finance, single side staking on platforms like DAFI protocol, I recently threw in some USDTs on Aave. Just watching what comes out of those come 2023.

  5. You’re looking for low risk low reward yield in a high interest rate environment. It would be hard for anything to beat treasury bonds in this environment.

    IF you have a high(er) risk high(er) reward appetite, you can just use defi options strategies/hedged defi perps and earn passive income that way.

  6. Well, DeFi platforms have some decent APRs/APYs where you can stake it, so even that fees will be covered in no time, especially if you’re staking tokens with proper use cases, like what I do with IRIS and PGEN as I wait for Polygen’s raise with Naviern. Also, that 0.3% is way better than swapping fiat, with ridiculous rates of exchange.


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