- It's an excellent way to make payments and transfer value without giving up on your position on more volatile assets that you'd like to hold. E.g, I am long BAT. I can deposit my BAT stash on a MakerDAO vault to make an overcollaterized loan of DAI. I go on then to use DAI to pay people and services and other investments (see next point). If BAT's value falls between a certain threshold and the loan is no longer collaterized, then the loan is liquidated.
- Provide liquidity in a volatile-stable pair (e.g, ETH/DAI) on a decentralized exchange like Uniswap and reduce what is commonly called impermanent loss or impairment loss.
- Provide liquidity on Curve Finance on the DAI/USDC pool. The fees I get to collect from that so far more than offset the interest rate from the original loan, and if you put on top of that that Curve gives their own tokens as an incentive to liquidity providers, I am getting around 2% ROI per month by holding fairly stable and low-risk crypto assets.
All this stuff sounds pretty interesting. Any beginner-friendly pointers on any of them? Especially the last one (how to get started, minimum amount of money for it to be worth doing, etc.).
As for the actual yield on loans, there is no lower limit beyond the fact that there are fees to lend and return your coins to and from these lending contracts. Those fees are currently quite high, so it is in your best interest to plot those out when calcuating returns.
- It's an excellent way to make payments and transfer value without giving up on your position on more volatile assets that you'd like to hold. E.g, I am long BAT. I can deposit my BAT stash on a MakerDAO vault to make an overcollaterized loan of DAI. I go on then to use DAI to pay people and services and other investments (see next point). If BAT's value falls between a certain threshold and the loan is no longer collaterized, then the loan is liquidated.
- Provide liquidity in a volatile-stable pair (e.g, ETH/DAI) on a decentralized exchange like Uniswap and reduce what is commonly called impermanent loss or impairment loss.
- Provide liquidity on Curve Finance on the DAI/USDC pool. The fees I get to collect from that so far more than offset the interest rate from the original loan, and if you put on top of that that Curve gives their own tokens as an incentive to liquidity providers, I am getting around 2% ROI per month by holding fairly stable and low-risk crypto assets.