Stablecoins aren’t only the best way to store your money - they also give a lot of profit potential. How could you possibly earn by coins, pegged to fiat currencies - let’s see.
Quick Structure
- Lending protocols
- Leverage farming
- Yield farming
- Incentivized liquidity
Lending protocols
The most simple of all the options are basic lending protocols, where both - the lender and the borrower pay an APY. However, the borrower’s APY is higher and is the amount of money the lender gets. The rest is used for the project’s internal asset needs.
This is the best option for just saving money: put your stablecoins into the system, allow the system to use them and forget about that - safe and simple.
The best lending protocols right now are Aave, Compound and the new Anchor, that is however already making huge steps to becoming the best of three (read our article about Anchor to know more).
Though keep in mind that you won’t make any significant profit from lending protocols.
Leverage farming
A more risky variation of borrowing your stablecoins, because you get absolutely no automatisation and have to count all the risks manually.
That way yield of 100% is totally possible, but you still have much higher risks of liquidation.
Not recommended for people with little experience at all. You better not even try leverage farming, until you are sure that you can analyse your trades on a higher level.
The best service to use right now is Alpaca Finance with dozens of pairs to farm from (and not only stablecoins).
Incentivized liquidity
The bounty programmes of stablecoins are incentivized liquidity services. Remember Curve (We have an article on this one too, by the way)? Then that is exactly what an incentivized activity programme looks like.
Provide users and utility to the projects and get paid with their coins, once again not only the stable ones.
These still have some risk to them, but are much closer to an average trader, than leverage farming dApps are. That, however, makes incentivized liquidity programmes have lower APY
And finally, yield aggregators
Something like the Yearn project would take your stablecoins and deposit them into dApps like the Aave or Compound we talked about before, while handling all the operations instead of you.
Also a great way of having low, but relatively stable passive income. The downside is that despite such aggregators having lots of strategies of depositing your assets, they can still fail and make you lose your stablecoins. These also have pretty high taxes, which lead to pretty low profit.
Recommended for those, who would like to have some passive income that would be higher than the lending protocols one, but could still do a bit of monitoring from time to time just to make sure their coins are alright.
Conclusion
The path to choose on managing your stablecoins only depends on the goals you are chasing and the risks tolerance you have.
For people who need to long-term invest their coins somewhere and pay no attention to what is happening with them, lending protocols are the go-to.
Leverage farming requires hard full-time work to make profit.
And incentivized liquidity doesn’t even need any investment, except your time and a bit of creativity.
