If you're like me and you're always keeping an eye out for ways to passively build your portfolio, though hodling and stacking, then you may well have heard about CakeDeFi. Even, if you've not heard of it before I hope, after reading this article you, take a second look at the platform to see what they have on offer.
With CakeDeFi the goal is simple:
Easy, reliable and secure products for hodler to put their portfolio to work. In this article We'll quickly review each of the main products available (Liquidity Mining, Staking and Lending) and discuss why CakeDeFi may well be head an shoulders above other similar platforms like Nexo, Celsius, YouHodler and BlockFi.
Liquidity Mining
First off, and by far the overarching product, we have a crypto-finance staple: Liquidity mining. This is the act of providing trading liquidity to a trading platform (be it centralized or decentralized). The process is simple, individuals provide pairs of assets in equal valued parts (initially) to a pool. This then operates as a base liquidity pool allowing you and others to be able to trade these paired assets for one another at almost any time. The benefit to the providers is that usually a small trading fee is taken from each trade and added to the pool. Relatively speaking your slice of the cake remains the same (proportionally) but as the pool (or cake) grows so does your portion.
Above are a list of the core CakeDeFi liquidity pairs along with the estimated APR for taking part in these pools. One thing that separates Cake from their competitors however is the list below, the decentralized asset pairs. CakeDeFi operate a decentralized exchange running on their own blockchain (DeFiChain) with the native token DFI (a fork of BTC). This means that as well as being able to offer liquidity for support of centralized exchange pairs users can also choose to (either through the main custodial service, or the Non-Custodial DEX wallet provide liquidity to the decentralized platform giving much wider options.
To learn a little more about liquidly mining, and the potential risks with this check out the following video from the CakeDeFi CEO:
Masternode Staking
The second type of product offered by CakeDefi is staking, more specifically masternode staking. DeFiChain (although a fork of BTC) does not operate a Proof-of-Work (PoW) algorithm, instead it utilizes Proof-of-Stake (PoS) as a consensus mechanism for the chain's operation and block creation. As with most projects it can be quite costly to operate your own PoS node, indeed this costs around 20,000 DFI currently if you were to set one up on your own. So instead, for smaller holders the CakeDefi platform offers scalable staking, collecting the funds from many holders and using them to create nodes. This is incentivized by a very nice, secure method of earning >35% APY on tokens held.
In addition to their own blockchain CakeDefi also offer masternode staking for other projects (like DASH). Stakers using these masternodes (unless freezing, see later section) can stake and unstake without penalty and without tie-in. Personally, this was my first experience of the CakeDeFi world and is an excellent place to earn solid returns on their native token DFI.
Lending
Moving on from staking we also have lending. This is more in line with the products offered by Celsius etc. Indeed, this is how centralized companies can offer interest on BTC and other assets. Usually it works by users depositing funds to a platform which then lend them out either thorough defi or corporate partners. One of the biggest risks, however, with most platforms it how to protect your funds? Recently you may have noticed that Celsuis was hit as a result of the hack on the BadgerDAO defi protocol. Therein lies the main concern I have with centralized interest earning accounts, the risk is all on the users when the funds are lent out and if they are not repaid there is no recourse for this. Some platforms are working on insurance but have yet to deploy this in a meaningful way. This is where the CakeDeFi team have taken a different tack, the team both guarantee the returns and also protect the deposits! This in massive in this space because it actually fixes one of the biggest things (other than being custodial) that puts off investors, risk of losses.
In addition to the guarantee of the base level of interest the team also offer bonus interest should the underlying asset preform well in the market whilst you have it invested.
Here is how it works (example = BTC):
- Users deposit into one of the upcoming 4wk lending batches
- The pot locks the funds for 4wks and gives users (currently) ~3.5% APY
- If the price of BTC increased by >=20% from the time the batch starts to when it ends this becomes ~4.75% APY
- If the price of BTC exceeds this and moves as much as >=40% the final APY stands at 6%
- After the batch ends the funds unlock (with bonus added) and can be put toward the next batch or withdrawn
As you can see on the surface this looks like a lower rate than offered by other platforms. You may be asking yourself why it is less competitive? Well, this is the cost of protecting the funds and guaranteeing them to be returned without loss. I'll be honest if it is a difference between 3.5% and knowing it is safe and 6.2% but possibly losing my funds I know which I will choose.
Christmas Bonus
Since we're in the holiday season the team have also put together a batch running at a guaranteed 10% APY starting on 24Dec2021. Definitely, worth a look if you're considering making use of their lending/earning product.
The final passive earning product offered by CakeDeFi is actually an extension of the masternode staking. However, think of this as staking on steroids!! The freezer is a commitment to no withdrawing funds (locking them in) between 1 and 120 months. This is a great one for folks who see long-term that the project has legs, it is effectively incentivized commitment, and if you ramp it up to the full 120 months you can lock in a rate that is far above the standard 35% base APY.
Interested in seeing how much has been committed so far, well as of writing $179.13M of DFI have been locked away in a the freezers, with a staggering $102.80M at the 120 month level!! This serves to lock funds off the market and maintain scarcity in the DFI token, plus with the bonus rate uplift it is a win-win for CakeDeFi and DeFiChain bulls alike.
Final Thoughts + Referral
As you can see CakeDeFi offers an interesting alternative to the traditionally CEX platforms, with their own chain and DEX it feels like they are bridging the gab between the two currently though all of the focus seems to be being put into moving more and more decentralized over time. I think this will be an excising transition to be part of.
If you're interested in taking a look at the platform yourself then you're welcome to use my link below to pick up some extra DFI for your trouble.
https://cakedefi.com/?ref=692192
