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To most investors, stablecoins are considered boring because they are designed to maintain a stable value in relation to a specific traditional currency. Although they are also a kind of cryptocurrency, they are not subjected to the volatility of the crypto market. Investors used them primarily for their stability and predictability.
Apart from the fact that they are ideal for value storage, there is more to stablecoins than we think. Investors can make money through stablecoin yield farming. Although investors need to be careful of algorithmic stablecoins, many of them have collapsed in a terrific manner. In today’s issue, we shall take a look at opportunities for making money from stablecoin in 2023.
Due to high volatility and investor confidence, stablecoins have established themselves as the cornerstone of most of the cryptocurrency economy. This digital currency can also be used as a tool to generate income via DeFi protocols. This is possible when investors supply liquidity to platforms or provide loans for the purpose of earning interest on their stablecoins.
Stablecoin Yield Farming
Stablecoin yield farming is a type of decentralized finance initiative or strategy that allows
investors to earn a yield on their stablecoin holdings as they provide liquidity to DeFi platform. Stablecoin yield farming is able to provide a higher yield on investment, which is unusual for stablecoins. However, increasing the yield capacity of stablecoins can also come with high risk, but the risk involved here is minimal in comparison to using other crypto assets.
For instance, if an investor deposits crypto on a lending protocol, hoping to gain interest on the investment, it is subject to the volatile nature of the market. If things do not go well, the investor can run into a loss. However if the same investor uses stablecoins on a lending protocol with the hope of getting interest on an investment, in the case of a volatility storm, the invested asset will still retain its value. Therefore, stablecoins are a safer option than cryptocurrencies when it comes to this type of venture.
The Two Major Ways of Putting Your Stablecoin Holdings to Work for in Returns Are:
Providing liquidity for Decentralized Exchange platforms: This involves putting in your assets along with other investors to help facilitate the running of a particular platform. For this business, investors also have access to some share of the income on the platform.
Providing Loans on DeFi lending protocols: The Investors contribute to the provision of loans on the platform. They will also have a share of the interest on loans when they are repaid.
List of Some Top Yield Farming Platforms – Platforms Where You Can Provide Liquidity:
Curve
This platform is designed for swapping tokens with the same pegs as stablecoins. The implication of this is that it will require low fees, a reduction of temporary losses due to volatility, and minor slippage. For each transaction made on the platform, the fees are shared among liquidity providers.
APY.Finance
This platform focuses on a user-friendly approach to providing yield farming services to investors. It simplifies complex farming strategies by presenting a single interface for making deposits of your funds. After you have made your own deposit in the liquidity pool, you will be provided with the platform’s token, which will stand as your own pool share.
mStable
This platform unites and strengthens stablecoins. It assembles a portfolio of assets that accept USDC, DAI, USDT, and TUSD stablecoins. Each of these stablecoins is referred to as a “basset”. On each occasion when a basset is deposited into the platform, it creates a representative token that is known as mUSD. This token is backed by several stablecoins. And it is believed that because of this, mUSD is safer.
The protocol offers a product called “SAVE” that enables you to deposit mUSD tokens and earn yield from the underlying assets through platforms like Compound and Aave.
Platforms That Facilitate Lending and Borrowing:
Aave
On this platform, loan facilities are available for users based on the peer-to-peer system. Loans are provided by lenders on the platform, but borrowers must provide collaterals that are more than sufficient in value than what they borrowed. And in the event of default on debt repayment, at the end of the day, the collateral will be liquidated.
Compound
This platform also provides loan facilities by accommodating both the lender and the borrower. For any deposit you make on the platform, you will get an equal-value token to stand in for your investment. This token is known as cUSDC.
Compound now supports stablecoins such as USDC, DAI, and USDT. Moreover, COMP, the protocol’s native token is released daily to lenders and borrowers. Compound offers up to 2% APR on selected stablecoins like USDC and has over 15 marketplaces.
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