We all know DeFi has been a hot topic of 2020, maybe THE hot topic, but is that it? Are we done with DeFi? Mmm, I don’t think so, we’ve barely started.
Remember the whole crypto space is still early. We’re barely past geek stage!
DeFi is definitely here to stay. The whole decentralised space is going to continue to balloon, and as early adopters we need to make bank off it. Yeah, come on, don’t be shy, sure we love the tech, be we want to make MONEY (spoken like Ryan Gosling in The Big Short).
Part of your strategy should be how you grow your crypto collateral, not just buying crypto and waiting for it to increase in value, but using it to earn you more.
Enter stage left, DeFi lending. Decentralisation allows us to be our own banks. Already we have options to make it happen, and here are four different lending options currently available. Enter Aave, Compound, Celsius and Yield.
Alongside crypto purchases, staking, geysers and more, lending out your crypto is a profitable way to increase your wealth. Here is a brief run down comparing them side by side.
Aave.
A decentralised money market platform where lenders post collateral on the platform, allowing them to lend in the form of an aToken like Compound and their cToken, however the aToken is pegged 1:1 to the collateralised asset allowing it to be used as if it were the deposited collateral. The lender then accrues interest tied to their deposits. Two interests rates are offered, stable or variable offering more or less volatility depending on the lender’s risk tolerance and lenders can switch between the two. They also offer flash loans using pooled funds without collateral.
Whilst on the other side the borrower posts collateral by purchasing DAI. The borrower can then borrow in ETH. This allows the borrower exposure to a diverse range of cryptos without the need to own them outright.
Compound.
The original money market platform. Compound allows you to deposit your crypto to earn interest. They launched to a frenzy. Users rushed to deposit and earn. In return users would receive COMP for participating in the Compound ecosystem, both lenders and borrowers.
Lenders deposit assets in pools, and then receive cTokens to represent the underlying asset. Interest is based on the demand for the asset, the greater the demand. the more interest they earn, incentivising lenders to add to the pools.
Borrowers draw from the pooled funds but as the pool grows and interest increases, borrowers are deterred from over stretching themselves.
Celsius.
Is basically a middleman. Lenders deposit crypto, which Celsius then distributes to borrowers. The lender is then paid interest on their collateral set by Celsius (minus they’re cut). Lenders and Borrowers can earn greater interest if CEL tokens are purchased.
Yield.
DeFi lending with fixed guaranteed interest rates. Lending and borrowing on the platform is individualised, not pooled. Lenders earn guaranteed rates of interest, no longer having to worry about market dynamics causing the rates to trend to ~0%, while borrowers that maintain loans and repay on time earn YLD, the token native to the platform.
Now let’s look at some pros/cons of each platform:
Aave.
Pros
Extensive collateral options
Innovative DeFi products
Cons
Rates are dynamic and typically trend towards ~0%
More complex platform to understand
Compound.
Pros
Easy to use platform
Cons
Rates are dynamic and typically trend towards ~0%
Limited collateral options
Celsius.
Pros
25+ collateral options
No fees or penalties
Cons
Centralised platform
Yield.
Pros
Individualised loans
Guaranteed Interest rate
Borrowers earn Yield for repaying loans
100% of fees used to burn YLD
Extensive collateral options
Cons
Maximum loan size $50k
Aave.
Market cap $1.4bn
Circ supply 12.1m
Compound.
Market cap $740m
Circ supply 4.1m
Celsius.
Market cap $2.2bn
Circ supply 383m
Yield.
Market cap $2.5m
Circ supply 263k
Now you’ve got an idea of the types of options available, it’s time to DYOR and decide which direction works for you.
aave.com
0x7fc66500c84a76ad7e9c93437bfc5ac33e2ddae9
compound.finance
0xc00e94cb662c3520282e6f5717214004a7f26888
celsius.network
0xaaaebe6fe48e54f431b0c390cfaf0b017d09d42d
yield.credit
0xdcb01cc464238396e213a6fdd933e36796eaff9f
Choose your poison wisely ;)
