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Today we’ll discuss some of the top Decentralized Finance (DeFi) applications that exist, serving people in a trustless manner around the world.
What do I mean by trustless? Given Ether’s immutable (cannot change) smart contracts, the behavior of the money moved around DeFi is such that it cannot be stolen, hacked, lost or misappropriated. Moreover, to earn the word ‘trustless,’ I don’t have to put my trust into a given person or organization — instead, I trust the underlying technology of the contracts they’ve devised. It’s trustless!
I’ve separated the following doc into four sections, comparing the platforms in each: Trading, Borrowing, WBTC Borrowing, and Lending.
With up to 5x leverage available to traders, dydxprotocol at dydx.exchange and folks like Antonio Juliano and Zhuoxun Yin bring you a beautiful night-mode interface that allows you to trade some of your favorite assets. Some people — especially those burned by Mt. Gox or other exit scams — are risk-averse to what we call ‘counterparty risk.’ What this means is that some people would much rather have less single points of failure when it comes to the custody of their money — and now we can even trade with leverage on platforms like dydx, so who needs centralized exchanges and their bankster owners?
Dydx lets you borrow, too, but we’ll discuss that more in detail in a future section of this article.
I do like how the people at fulcrum.trade (their parent org: bZx) separated their trading interface from their borrowing interface. We’ll have a closer look at their not-for-margin-trading borrowing interface in a later section, but the fulcrum.trade interface lacks some of the leverage available to dydx — although that negative is helped by having a broader selection of coins.
With a resounding set of achieved milestones and growth, compound.finance and some of the team Robert Leshner, Calvin Liu and Jayson Hobby have been building another Ether unicorn to add to our growing list.
With millions under management, and a wide variety of coins to choose from to use as collateral, Compound provides a unique opportunity in traditional financial history. It’s apparent that we can over-collateralize loans in crypto against stablecoins and be long those cryptos while getting spending money for the time being — the bullish attitude we have towards these cryptos says that their underlying growth in equity value will outperform the interest rates we’re paying on our stablecoin loans. Boom, we’ve just earned ‘free-ish’ crypto!
Wait, though, this really only applies to Ether and the Ethereum tokens listed on Compound At Time of Writing, and doesn’t appear to apply to WBTC? I really had hoped to diversify my collateral I’m holding to maximize the upwards potential of both DeFi and The King of Coins, $BTC!
(See, a ‘Collateral Factor’ of 0% means we can’t use Wrapped BTC as a collateral coin).
Whatever are we to do?
Borrowing Against WBTC
Like I’d mentioned above, bzx.network has the tools fulcrum.trade and torque.loans, and some of the people working wonders like Nick Sawinyh, Kyle J Kistner or their team account here bZx Team. We discussed fulcrum.trade above and hinted at the existence of torque.loans — as a flipside of the same coin, instead of lending and borrowing under-collateralized loans for the purpose of margin trading (a la dydx) we can lend and borrow over-collateralized loans for the purpose of hedging, or whatever other purpose you had in mind (a la compound)!
Simply load up your MetaMask or other wallet, select the token to receive, change your collateral to WBTC and — oh, spoke too soon! Found an error among all tokens when selecting WBTC as collateral.
Wonder if there’s a bug bounty…
Soon! You’ll be able to achieve all that diversification and goodness I was speaking about earlier.
EDIT: 15 minutes after my Tweet to bZx and everyone else, at some ungodly hour in the morning that it is right now:
When was the last time your banks answered the phone that quick?
EDIT AGAIN: It looks as though the bug was on my side, and it’s working fine now that I’ve restarted my machine trying to take a screencast for their team — all is good in the hood, and likely no cause for alarm! I’m going to leave this little diversion in here about the bug-that-could-have-been, because it illustrats how prompt, friendly and helpful bZx’s team are.
What do diversified assets and Albert Einstein have in common?
Einstein knew that being on the winning side of compound interest would free people — and diversifying your portfolio is step #1 to earning consistent returns. All our moms (or indeed dads, or indeed people-y people) told us ‘don’t put all your eggs in one basket,’ right?
Here’s where stuff gets interesting. Because the three solutions noted above are all open-source and allow and encourage people to develop tools to add to their utility, staked.us of course at Staked developed their tool Robo Advisor for Yield. Edit: Shoutout to their man Devan Purhar, who handles all my support tickets I’ve had on their GitHub (one example link and ensuing conversation to follow). Much appreciated!
What’s it do?
At present, it indexes Compound, dydx, and fulcrum.trade and gives you the best rate among each of them — meaning that if you were to have Robo Advisors for Eth, USDC, DAI and SAI, you’d be earning the best yields for four different assets (one might moon! And: eth staking, coming soon!) — maybe more different assets in the future: https://github.com/Stakedllc/robo-advisor-yield/issues/5 at any given point.
They’ve used on-chain, open-source solutions in the keeping with crypto spirit and in order to bolster the offerings of the participant protocols. This means that they add a layer to the tech without adding a party to be considered when thinking about counterparty risk — the trust is still in the tech (which has all been thoroughly audited, be sure)!
So head on over to staked.us, check out their platform where you can earn returns on staking PoS coins, but more importantly check out their Robo Advisor for Yield today. You can mint your own RAYs and begin the journey to doubling your crypto, too!
Looking to trade undercollateralized loans, on the blockchain and without a third party? Check out some of the other solutions, like dydx.exchange and fulcrum.trade.
Looking to borrow funds against your crypto? I’d recommend compound.finance or torque.loans.
DeFi is here to stay — banking the unbanked — let the games commence!
Bonus 1: Nuo.Network
Nuo.network (with an encouring team including team account Nuo Network, Varun Deshpande, Siddharth Verma and Praneet Sinha allows you to lend and borrow — including WBTC — and margin trade using non-custodial addresses, like the other contenders in this list.
Why didn’t Nuo make the original list?
Their smart contracts aren’t public — meaning that the interface to build on nuo.network is controlled by their team, and doesn’t allow folks to create additional value by plugging pieces together and offering something brand new — like staked.us’s Robo Advisor for Yield does.
However, the Staked team reassures us that they’ve been in touch with Nuo’s and that — pending an upcoming update — the code will be public and the joys of Nuo can be introduced into the Robo Advisor for Yield.
Check more details on this post I made outlining Nuo as a possible way to earn yield (and earn yield on WBTC) on Staked’s RAY: https://github.com/Stakedllc/robo-advisor-yield/issues/5
Bonus 2: Uniswap
People like Callil Capuozzo and Hayden Adams have been building Uniswap: Heralded as Ethereum’s unicorn — Uniswap allows a whole bunch of interesting features. These include swapping Ether tokens and paying a small fee all the way up to submitting your own new exchange (token) to the network and having all your friends increase your token’s liquidity.
What happens (as far as I know, and in Laymen’s) is, as I undertand it, a liquidity pool I can put funds into so that market makers and other parties can execute trades at leverage or for ‘free-ish.’ These funds then produce yield as the market makers have paid fees which gets added to the pot, then available for the liquidity providers to later withdraw. I may be incorrect in my understanding or I may have forgotten something.
Check out an idea I had to generate yield by COMBINING Compound and Uniswap (I know, insane) here: https://github.com/Stakedllc/robo-advisor-yield/issues/3
And see an idea of mine for integrating Uniswap in their own traditional sense into Staked.us’s RAY here: https://github.com/Stakedllc/robo-advisor-yield/issues/6
No, I don’t work for Staked.
Yes, I am an affiliate and will earn affiliate commissions if you sign up using my links.
No, there are no other affiliate links in this doc — I gave an honest and unbiased opinion here, not affiliate spam 🙂
You can be Staked.us affiliated, too!
The author is, however, employed by Coindex Labs — leading us nicely into a plug:
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