Introduction

After experimenting with a lot of different risk vs. reward strategies I have settled on a plan that works for me, is pretty simple and doesn't require a lot of monitoring (ex. no risk of liquidation).

Lending - stablecoins vs. volatilecoins

There are really 2 types of lending strategies - stable vs. volatile.

Stable

So, for example I can lend Dai stablecoin (or one of the others) on Fulcrum, also known as BZX, and usually earns about 6-7% pretty consistently. It updates and compounds every second! My money isn't locked-in, and I can withdraw it any time if market conditions change. Simple, and straightforward

The other service that I like for lending stablecoins is lendf.me which has pretty high rates for USDx. This is another stable coin which is composed of 3 other fiat based stablecoins to reduce risk of any one of them failing. You can convert eth or any erc20 coin to USDx on Tokenlon exchange (I like the web version) which works well. Then you can deposit coins on lendf, and track your interest. You can also borrow using BTC as collateral, on the same platform, (but this isn't of interest to me).

These 2 methods are pretty low risk, but the disadvantage of this approach is that you don't get the appreciation in value of volatile coins like bitcoin or eth for example.

Volatile

For these types of coins, I Like to lend on Celsius (yes, I realize that it is centralised, but I have done my due diligence). If you chose to get your interest in Cel tokens, you can get higher rates, and exchange your cel token on 1inch.exchange for eth, or whatever you like.

Another alternative is Nuo which is more decentralised, and has some good rates on volatile coins, like Synthetix, for example. (currently 20%)

Liquidity pools

I have spent the last few months testing and evaluating various liquidity pools, where you get a share of the transaction fees between a pair of coins. So the pool, or relay (as its also known) can have 2 volatile coins, 1 stable and 1 volatile, or 2 stablecoins, with decreasing amounts of risk (or unrealized impermanent gains/losses).

Stable + stable

This is the lowest risk and is similar to lending stable coins. The pool accumulates conversion fees (instead of interest), and shares it with the depositors. This does not expose you to volatility, if both parts of the pair are stablecoins. So, for example the Bancor relays can be used with their stablecoin USDB + another stablecoin. I tested it with Tether. You can get USDB on 1inch.exchange. I deposited equal amounts of both stablecoins into the relay using a tool called Zerion (which is really good). This app allows you to manage your bancor relays, as well as track your returns. It shows you total returns and returns vs. HODLING. In the case of 2 stablecoins the difference between the 2 numbers will be fees, since there is no volatility. Here is a very good article on how to add liquidity on Bancor

Volatile + Stable

For this type of pool, you can use either Bancor or Uniswap. There are lots of articles and tutorials on how to use the Uniswap pools. In the case of Bancor, you will have to deposit BNT + another coin (such as Dai for example). In the case of Uniswap, it is Eth + another coin (such as Dai for example). For this type of relay, you are exposing yourself to the volatility of Eth, or BNT, but not the other half of the pair. So, it is twice as risky as the stable/stable combination above, or the stable lending described above. In general, Eth is less risky than BNT, so you are probably better off using the Uniswap pools for this type of investment. You can use Zerion to manage these pools, and track returns also.Your total returns will be higher if there is an increase in value for the volatile coin. The return vs. HODLING will show you how much you are earning in conversion fees, based on your share of the liquidity pool.

Volatile + Volatile

For this type of liquidity pool, you can use either Bancor or Uniswap and chose 2 volatile coins. For example, the Bancor airdrop gave out shares of the BNT:Eth relay. But you can chose any pair combination that you like, on either bancor or Uniswap services. So, there will be more risk for this type of pool, but higher potential rewards in a bull market, where market values are increasing. In Zerion, you can see the total return and return vs. HODLING. The total return will include the increase/decrease in value of the coins. The return vs. HODLING will show you how much you are earning in conversion fees, based on your share of the liquidity pool.

Conclusion

I have found both of the above strategies to be profitable without a lot of risk. And I can increase the risk, based on the overall state of the market. In my portfolio, I am only holding very few coins, and all of them are locked in contracts, as per above. I avoid trading as much as possible. Let me know if you agree, and what you are doing.