The crypto market at large has enjoyed a nice bull run over the past several weeks. Bitcoin is up from $7,500 a month ago, currently trading at $8,645. Ethereum has grown from $133 to $168 in the same timeframe. And EOS has shot up from $2.55 to $3.65. It’s a good time to be holding crypto lately!
But there are gains that go beyond simply riding a rising market. Consider decentralized finance apps like MakerDAO or Equilibrium, which depend upon users locking up these volatile digital assets as collateral in order to acquire a price-stable currency in exchange: the value of the stablecoins a user generates will never change, but the value of the collateral that backs that user’s stablecoins will still increase.
The open nature of blockchain technology makes it easy for us to look under the hood at each of these platforms to see how much money moves through them. MakerDAO stores its collateral in a smart contract that works without human intervention to open and close its collateralized debt positions. At the time of this writing, there’s just under 2,767,000 ETH stored there — one month ago, that sum would’ve been worth $368 million. After the recent market run, MakerDAO’s collected collateral is now worth $467,623,000, and it faces no extra liabilities for DAI stablecoins already in circulation.
Equilibrium & EOSDT
Equilibrium is a smaller project by comparison, but the pattern holds true here as well. All the collateral that backs the EOSDT stablecoin in circulation lives in its own smart contract, which currently houses more than 4,658,000 EOS. One month ago that sum was worth $11.8 million. But at today’s prices, that collateral is now worth more than $17 million.
And with that much money running through these projects’ different infrastructures, there are opportunities for users to earn profits in the form of passive income. It’s possible to stake EOSDT on the Bancor Network, for example, in order to become a decentralized liquidity provider and earn fees for each conversion you process, typically between 0.1%-0.3%.
MakerDAO users have access to something called the DAI savings rate (commonly shortened to DSR). DSR is a passive savings system for DAI stablecoin holders that lets them earn an annualized return by locking up their tokens. Importantly, the DSR is dynamic and bound to change — MKR token holders can vote to adjust this annual rate at any time. It was set to 4% APR at launch, for example, but has since been rejiggered to 6%.
In either case, the takeaway is clear: it’s completely possible to take advantage of DeFi crypto platforms to turn your crypto holdings into a source or new crypto income. Just because a user relinquishes custody of his ETH or EOS to generate stablecoins doesn’t mean that crypto is gone forever. Users only need to pay back their loan in order to regain custody of their (now more valuable) assets.
Let’s just see how much longer the bull run continues.