Yesterday I woke up to the news that Paypal and Venmo were planning on rolling out crypto trading despite the CEO of Paypal saying this only a few years ago:
Bitcoin is the greatest scam in history. It's a colossal pump-and-dump scheme, the likes of which the world has never seen
— Bill Harris, founding CEO of PayPal
This very much reminds me of what Paul Krugman said in 1998 regarding the internet:
By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's
— Paul Krugman, economist
At the same time, I realized that in 3 months I'll have been vegan for 7 years - back when I started it was impossible to find options at most restaurants - now everyone carries Beyond Meat Burgers.
And this got me thinking what type of person I am in terms of an adopter of new technologies or new ways of living and where I would place myself on the technology adoption lifecycle.
I would squarely peg myself as an early adopter especially for technology.
With this news of PayPal and Venmo along with Square, Robinhood and others offering crypto, it's clear to me that this space is on the verge of "crossing the chasm" over the next 2 years.
I say this because early adopters capture disproportionate share of the rewards from new markets.
Let me give you an example.
I have a friend that is a hair stylist and influencer on Instagram with 100K+ followers but when she started in 2012 - nobody was on it. It was possible to put up any content and build an audience.
Now it's become professionalized with tools to automate everything along with social media management firms, brands and everyone else crowding into the good times.
At the same time, building an audience has become exponentially harder.
In short, when it's easy - the opportunity is gone.
We're at the same phase with crypto, where it's not yet dead simple but when it crosses that chasm expect it to move quickly and replace finance 2.0 - a multi-trillion dollar market.
Now...let's do a recap before jumping into today's post
Recap
This will be our 9th post - BTC is up to $9600 (+24%) while ETH is up to $243 (+23%) since my first post on April 28th. We started explaining how Bitcoin is a generational shift in how we store wealth.
We then ran a few valuation models to gauge if Bitcoin is under or overvalued before turning our attention to using stablecoins and DEXs (decentralized exchanges).
We then explored dollar cost averaging into the market on autopilot so you could set it and forget it before turning our attention to earnings interest and fees on your assets.
Last week, we talked about safely storing your crypto with cold wallets. Jump back in below to catch up because you aren't getting any younger.
What is liquidity mining?
The hot topic this week across the DeFi space was liquidity mining which is a fancy way of saying incentivizing users to supply liquidity with tokens.
Let me explain:
A friend of mine has 100,000 ZRX and 1.2 wBTC laying around not earning him any money. He was able to dump that into Compound Finance and earn a yield for lending these assets.
They are currently paying 11.89% and 9.49% APR.
On top of that, Compound Finance released their own token COMP that is earned proportionate to your share of the amount of interest earned that day from lending of all tokens.
So in 24 hours, he got $6.92 in wBTC, $11.64 in ZRX and $54.587 in COMP.
Total one day profit for doing nothing - $73.15.
Annualized that's $26,698 or 58% ROI 🚀🚀🚀
People are going a step further and leveraging up their assets to lend more assets thereby 4x'ing their returns. You can do it yourself in one step on InstaDapp.
Just click "Maximize COMP Mining".
What's the catch?
No catch.
Earlier in this post, we were talking about how when Instagram started no one was using it. Well these DeFi projects are the same way (kinda) in that they want to bootstrap usage.
They have a tool at their disposal - in this case COMP - a governance token.
Instead of hoarding it, the team is using it to incentivize people to lend funds to the platform thereby growing their pool of liquidity and allowing them to lend even more funds out.
Everyone wins.
The team's protocol gets used.
Lenders juice their returns.
Borrowers have a larger pool to borrow from (and they get COMP too!)
Important: Don't expect these returns to last and there certainly are a number of risks including smart contract failure but these get smaller with time.
If you're an early adopter why not get the benefits while your assets are simply sitting around not earning you any money.
You can always move them out if returns become poor.
That's the beauty of open finance... there's no vendor lock-in.
Team's compete for your liquid assets.
Earning COMP with Argent (5 mins)
The easiest way to give it a try is simply through Argent Wallet.
You should have it setup by now as we have used it a number of times throughout these guides. If you want a refresher - check out the post on buying your first stablecoin.
Open Argent Wallet
Click "Invest"
Click "Compound"
Select the token you want to deposit
Enter the amount and save
Final Thoughts
Having your money in the traditional banking system is now earning you nothing and in Europe can actually start costing you money in fees. Early adopters in crypto are earning 12%-58% lending out their funds as well as capturing the upside in the native assets they are lending.
If you really wanted to be risk neutral, you could buy 10 wBTC and then go short on Synthetix with iBTC thereby only capturing the 9.49% APR on Compound + COMP. Just make sure to buy insurance.
Over $1.5B is now locked in DeFi - that's an exceptional amount this early and before mainstream adoption. As this space crosses the chasm, watch this number explode into 2022/2023.
What do you want to see me cover next week?
Post in the comments and I’ll explore the topic in a future edition of this newsletter.
Make sure to subscribe to stay up-to-date.
Across the Space
Major crypto debit card issuer missing $2.1B
Wirecard, a major issuer of crypto debit cards, has been reportedly defrauded by employees to the tune of $2.1B as audits at EY couldn't account for the missing cash. Wirecard is the issuer for popular crypto cards including Wirex, TenX and CryptoPay. If this situation plays out it may hurt adoption but also help Coinbase who would be the last team standing as they issued their cards through PaySafe and were recently given approval to become a principal Visa issuer.
Matterlabs zkSync hits mainnet with 200 TPS
Matterlabs much anticipated zkSync product launched on mainnet this past week bringing arguably the best trustless layer 2 solution for Ethereum scaling. They also have a path to 2000 TPS and plan to enable private smart contracts with their own programming framework called Zinc. With Ethereum fees climbing to $2M per month, these layer 2 scaling solutions should alleviate a lot of congestion and allow Ethereum to rival payment networks like Visa and Paypal.
Consensys spins up ETH 2.0 staking service
With ETH 2.0 around the corner there's a industry wide rush to offer staking as a service. It looks like Consensys is throwing their hat in the ring and have announced a pilot program in partnership with Binance, Huobi Wallet, Matrixport, Crypto.com, Darma Capital and Trustology. Giving users on centralized exchange the opportunity to get free yield on their ETH will lead to a huge rush to Ethereum when the service launches hopefully in Q3/Q4 2020.
Native integration on iOS & Android wallets
One of the challenges around governance or crypto asset management is notifying the users about CDP liquidation levels, governance votes and much more. Wirex has come up with a novel solution allow teams to use Apple and Google Wallet to let users subscribe to blockchain events. Consider the example of Pool Together, a no-loss lottery, when users submit funds they will receive a QR code which they can scan into their wallet and then will receive a native notification if they win the lottery.
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Disclaimer: Statements on this site do not represent the views or policies of anyone other than myself. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.