After Bitcoin made a swift recovery in recent weeks – reclaiming the $40,000 level – altcoins are waking up. Ethereum is leading the altcoin rally by example, breaking out of its downward trend.
ETH should have a place in all crypto investors’ portfolios. And yet too many of them are failing to capitalize on Ethereum’s potential by not making it work for them.
- Ethereum has the first-mover advantage.
- Putting Ethereum to work increases your asset holdings.
- Holders can get a stable 5-10% yield with minimum risk.
Crypto adoption goes hand in hand with Ethereum adoption, and smart contracts propagated by Ethereum’s use case have given birth to a new era of blockchain usability, especially with DeFi and the new digital realm of NFTs.
While users know – especially those in the Banter Fam – that it’s essential to own Ethereum bags, in the process, some may have forgotten to assign their ETH to a day job (at a yield-farming factory!)
If that’s the case, then we’re going to show you where you need to start earning (yield) on the side!
Storing it for good measure!
Crypto can often be like the Wild West, and the draw to multiply your assets and earning capabilities by 100X comes with a risk. 76% of hacks in 2021 occurred on DeFi platforms. And that’s not where you want to lose your crypto investment. Risking small is gaining big in crypto!
DeFi comes with certain dangers, it’s just a fact. Keeping your ETH in a cold wallet and not touching it can pay off in a huge way. Having safe capital to fall back on is not the most attractive play, but in the long term, it works!
The centralized play
Lending your ETH on centralized finance platforms is one way of legally putting your tokens to work – They’re going to be working for the suits! Platforms, such as BlockFi and Celsius Network, provide an attractive annual percentage yield (APY) of between 5% and 5.5%.
You’re not going to beat inflation or any rate hikes estimated for 2022 but you’re still going to be ahead of other people. However “safe” such a play might seem, always consider this: If you don’t own the private keys to your assets, they are not really your assets (and we covered this in our previous article on how to store your crypto).
Platforms can fail or be exploited by bad actors, but CeFi platforms are considered safe (Gemini is the custodian for BlockFi). This does come at the price of being KYC’d, but on the other hand, they do provide a higher yield than all the banks combined!
The original stake
If you hold ether (ETH), it’s a no-brainer to become a validator directly on the Ethereum blockchain. At an annual percentage rate (APR) of 4.9%, users are rewarded in ETH tokens and also help increase network security!
As Ethereum migrates to proof-of-stake, the network needs validators to work on the Beacon Chain. There are over 9 million dollars’ worth of ETH staked directly on Ethereum.
However, there’s a price to staking on Ethereum. The minimum stake to become a validator is 32 ETH (roughly $100,000), and the tokens staked are locked until the merge is final. For new investors, that’s too high of a price (without considering gas!) Alternatively, users can add their ETH to pool staking services with various entry points from 32 ETH to 0.1 ETH. You can find the entire list here.
Alternative ETH staking
Centralized exchanges (CeX) like Coinbase, Kraken or Binance provide a workaround for the high entry point. The referred-to APR is 4.5%, and users need to hold tokens in their wallets. Yet, the same con takes over the narrative. If you don’t own the keys, you don’t own the assets.
Alternatively, platforms such as Lido Finance solve the issue of directly locking up ETH (without the possibility to pre-unlock tokens). They have no minimum amount or staking period. Each staked ETH user receives stETH, pegged at a 1:1 value of an ETH. Here, you can find an explanation of how to stake on Lido Finance and understand how yields are generated.
We’ve kept this until last. Liquidity pairing is the riskiest strategy, because asset value and safety are dependent on numerous variables, such as price fluctuations, platform security, asset liquidity and impermanent loss.
Users can provide liquidity in an ETH pair and generate yields on the protocol. Users can pair ETH with any token from any decentralized finance (DeFI) platform, such as Uniswap, 1Inch… Users can deploy ETH-USDC or ETH-USDT pairings to minimize their risk on-take and prevent high impermanent loss.
Ethereum is an expensive chain. High Ethereum gas makes it hard for the bulk of people to interact with the protocol – but fortunately, new Layer-1 or Ethereum scaling solutions offer lower gas fees with similar attractive yields.
Users can bridge to dedicated Ethereum Layer-2 scaling solutions, such as Matic or Arbitrum, or wrap their ETH on faster Layer-1s like Fantom, Solana or Near Protocol. Liquidity pairings then have to be made on the new protocols using wETH. You can find more useful strategies on ETH liquidity farming on The DeFi Hedge’s thread.
Even if bridging and wrapping ETH offers similar yields with lower transaction costs, users still have to use gas to bridge or wrap tokens. So, in order to reduce fees, time your wrapping to snipe the lowest fees possible. After that, costs from interacting with liquidity farming protocols will be significantly lower!
But that’s not all she wrote, because any action has a reaction. Rewards gained from liquidity farming are often paid in a different token. The ETH-USDC pairing will yield tokens in the protocol’s native tokens (BOO if farming is done on SpookySwap). And that’s a double-edged sword if the price of BOO goes lower or higher.
Ethereum has a strong first-mover advantage. With the protocol shifting towards proof-of-stake, Ethereum will continue to be a reference protocol. We believe you should still buy Ethereum using dollar-cost averaging (DCA) strategies.
If you hold ether, you should consider delegating it to low-risk strategies which can increase the value of your holdings – because ether will become a store of value as the Ethereum chain continues to burn tokens. However, never allocate your ETH to protocols/platforms you do not trust, and always play the Ethereum strategy safely!