Intro

My current focus is mostly on Defi/Ethereum based projects since they have the largest ecosystem and have the most mature Defi apps. From my experience, they are way ahead of any other blockchain. In future, I will revisit some of the other ones, and see if there are any advantages (like EOS for example)

Current Strategy (From lowest risk/return to highest)

Lending Stable coins

This is the easiest and least risky way to make from 5-9% on a stablecoin which is usually pegged to $USD. This is a good return when you compare it to the traditional financial system, which has very low, and in some cases, negative rates. The disadvantage of this approach is that you won’t get the increase in value during a bull market. But it is a good strategy for bear and stable markets. I have found the best rates are at Fulcrum, Dydx or Ddex for Dai, and Nuo for USDC. Check current rates with tools listed below since they fluctuate. Automatic re-balancers and pooling/aggregators are coming in the future (see below) so that you will get an even better return, with lower fees, but they are not battle tested yet.

Liquidity pools (market making)

If you check the mydefi.org or the pools.fyi tool, you will see that best ROI is currently on Uniswap with the Dai:eth, Link:eth, and USDC:eth pools. There are some really good tutorials, and explanations of how to provide liquidity. Basically, you are getting a share of the transaction fees when people covert with this pair, in either direction to/from eth. You have to provide an equal amount of Eth, as well as the other token, which is usually best to be a stable coin. That way you are exposing yourself to only 50% of the volatility of eth, and reducing the unrealized (impermanent) losses by having a stablecoin on the other side of the pair. In the next section, I talk about a similar method of providing liquidity to the Bancor relays with USDB pairs, so that you can have stable coins on both sides of the pairing.

Token Sets, automatic portfolio re-balancers

These tools allow you to automate your investment strategy for holding volatile assets like Eth or BTC, in relation to a moving average or relative strength index. For example, I favour the eth 20 day moving average crossover strategy. So, if your position falls below the 20 day moving average, it re-balances to include more stable coins as a higher percentage of the portfolio. You can get more elaborate with other strategies, or use other tools like Defizaps, and Structured eth to combine interest bearing positions with leveraged margin positions, but I don’t like to use them since I am not a fan of margin trading, personally. Also, some of these tools can take advantage of synthetic assets like Gold/silver, Fiat currencies or traditional stocks and indexes (see below). But I prefer to control these manually for now. So, I stick with the Set protocol for my Eth holdings only. My only complaint is that I don’t get any interest on the temporary stablecoins in a bear market, but maybe they will enhance the sets in future. I still need some manual intervention, and it will be a while before I can fully automate my strategy.

Synthetix

This is an interesting project with a lot of different facets to it. It took me a while to get the hang of it, but now I am finding it profitable, and I think that it has a lot of good potential for the future. The project is about producing synthetic assets, backed by crypto currency collateral. As I mentioned above, there are many synthetic assets (synths) that have been created for things like Fiat Currencies, Commodities, other Crypto assets, tokenized conventional stocks/equities, or stock indices. So, for example sXAU is pegged to the price of gold, or sCEX is pegged to an index of Centralised exchange tokens. There are also inverse synths for short positions, if you want to bet against the synthetic digital asset. I am looking forward to investing in an Index of Defi coins, or shorting the S&P 500 index for example. In the mean time I am holding the SNX tokens which have gone up quite a bit. I also get rewards for staking, and a small share of the transaction fees on their exchange, which is an alternative to using Uniswap to trade any of the synthetic assets.

Good Tools to check rates, ROI, and monitor portfolios

Mydefi.org

Zerion.io

Defirate.com

Loanlist.io

Pools.fyi

Unspent.io

Coincodex.com/portfolio, Coinlib.io/portfolio

Stable coins

Currently, I am using mostly Dai, USDC, sUSD. In future I will be adding others like USDx, USDB, etc. (see next section of article) All of these are currently pegged to the US dollar but have different methods of maintaining the peg. I tend to prefer the decentrlized/algorithmic ones, but hedge my risk by using both kinds.

Fiat On/Off-ramps

This different for every country. In Canada, I have found that Shakepay is very good and easy to use with our fiat banking system. For credit card purchases, I can use Carbon fibre, Coinbase and others, but the fees are higher.

Good contenders - On the way with a lot of good potential

Bancor

I am writing a full article about how to contribute to the Bancor relays (liquidity pools) and comparing it to Uniswap pools as an investment option. I will point out the advantages, disadvantages, profitability etc. But unlike Uniswap which always has ether as the second part of the pair in the pool, Bancor will use a stablecoin called USDB. If you combine that with another stable coin, like the ones mentioned above, that should eliminate the “impermanent losses” and make it more profitable. In addition, there is the possibility to earn more rewards by minting USDB coins yourself (similar to MakerDao) but with much better returns since the stability fee is currently 0. But wait, there more! If you hold and BNT tokens in December, you will be airdropped a proportional share of the $2 M USD into the eth relay, so that you can earn on transaction fees. So to get started, all you have to do is hold some BNT tokens during December. Then you can always decide if you want to use the windfall to earn even more, or cash out. Whatever you like. Nothing to lose.

Lendf/USDX/dForce

This is another stable coin/lending service which is currently better known in China. I have been monitoring the lending returns over the last few weeks, and they have been averaging over 8%. And there is only a small spread with the borrowing rates. Also, the stable coin combines 3 other stable coins into one "Metacoin" to further reduce the risk. I will also be documenting this alternative more, but it is up and running now.

Equilibrium/EOSODT

This is a stablecoin running on the EOS platform (similar to Maker), which also has a complimentary lending platform called AcuEOS. So you can mint EOSDT with EOS as collateral, and lend them natively on EOS. Or you could convert them using Bancor, and lend the coins on one of the Eth based services. The only thing that I am waiting for is the EOS Block producers, and Block One to get together and resolve the annoying CPU issues which keep plaguing the ESIO platform, and prevent it from progressing with promising Defi projects like this one. More to come in the future.

Lending Aggregators/Rebalancers

There are various lending aggregators and balancers which use techniques like batching and pooling to reduce Eth gas fees, and increase lending rates. I am waiting unitil they are more battle tested, and see which one will emerge as the winner:

Some contenders are Idlefinance, Topofinance, Metamoneymarket, 1lend.io, rebalance.io

Tokenized Real Estate

There are several projects with tokenized real estate in different countries. The one that I am following right now is based in the US, and is for investors outside. It is called RealT, and the tokens are listed on Uniswap currently. They have currently tokenized some residential properties, but will also be offering commercial and rental yielding returns. But I can’t assess the potential risk and returns yet, so I am waiting until they are a little more mature. But this space has a lot of potential for people who want small fractional liquid exposure to real estate investment, which tends to perform well, and is part of a diversified portfolio.

Conclusion

This space is rapidly growing and evolving. Overall I have had very good results and returns, with no major problems. And I anticipate them to get better in the future as the market improves, and the services/tools keep improving. In the mean time, I can still earn good returns.

Let me know if you agree with the strategy, what you are doing, and if I have left out some good discoveries