45. Real Yield in DeFi – what is this trend? What does it consist of?
Real Yield is a trend in decentralised finance (DeFi) that few have heard of. The very concept of this idea is interesting. DeFi protocols pay out profits in major currencies – Bitcoin (BTC), Ethereum (ETH), USDC or BUSD. In this case, the funds come from the actual revenue of the protocol.
Well, today we are going to analyse the pros and cons of this trend. Is there really anything to get excited about? In the cryptocurrency industry, opinions about Real Yield are divided. Without further ado – let us get to today’s lesson!
Real Yield – definition
Real Yield is very similar to dividends from shares. It involves investing our funds in the DeFi protocol, through which it generates income. Of the income so generated, we as investors have a small share.
The real gain is to show that decentralised finance is sustainable, healthy and safe. Investors earn from the returns that their funds actually generate, whether it is chained credit or the provision of liquidity.
What distinguishes Real Yield from other investments is the ‘real’ part. To put it more bluntly, in this case, our profit is not based on unsustainable issues of tokens and other strategies. Any protocol that uses a real profit strategy must earn more than it spends. Therefore, in practice, it profits more from revenue than from token emissions and any operating expenses.
Why is an investment strategy based on real returns so tempting? Because it allows us to earn an income with far fewer worries. We do not have to worry about the fluctuating value of the token because we do not receive rewards in the form of tokens.
Why do we need Real Yield in DeFi?
The concept itself aims to create a reliable passive income market. It is such a kind of demonstration of the maturity of the decentralised finance (DeFi) market. Real Yield is based on two, key principles:
- When you support DeFi Protocols, basing your strategy on real profit, your interest is paid in a stable cryptocurrency such as BTC.
- The return on your investment is based on actual activity.
Real Yield does not involve any additional tricks or additional risks. It exploits the potential of decentralised finance, in particular algorithms and intelligent contracts to further increase the amount of returns.
Can DeFi Protocols afford to pay out such high returns?
Yes, why? Because decentralised financial institutions can operate with lower overheads than traditional financial institutions. As a result, they offer users a more competitive rate of return, making liquidity providers all the more enticing.
In addition, all decentralised financial protocols are built on decentralised networks. This means that the allocation of our capital is even more efficient. A more efficient allocation of capital means a higher profit.
As a curiosity, we would like to add that one of the factors for such a high profit in DeFi is the use of management tokens. They represent ownership of the protocol, which allows voting on its development and direction.
DeFi protocols that offer real gain
Dopex. The DeFi protocol, which provides Single Staking Option Vaults. It works like conventional cryptocurrency staking. This option allows users to lock assets for a specified period of time. They then provide liquidity to the vault while providing a profit on the staked assets. The project also provides options for trading on various underlying assets, such as Ethereum (ETH) and Bitcoin (BTC).
Another example of such a protocol is GMX. The project allows users to monetise their own digital assets, by providing liquidity to a decentralised exchange. Very significantly, GMX DEX, is something of a hybrid exchange that combines the functions of an AMM and a limit order book.
Synthetix is also a Protocol DeFi with a Real Yield option. In this case, profits are generated by providing liquidity on a decentralised exchange for synthetic assets. In this case, we have the possibility to trade synthetic assets without a centralised intermediary. The protocol offers real returns to SNX holders – around 53%.
Summary
Real Yielding is a nice addition to the protocols of decentralised finance (DeFi). It provides investors with more real and, above all, secure returns on their investments. Will this strategy, or rather the offering of decentralised applications, stay with us permanently? We will find out.
Decentralised finance is a real treasure trove of passive income generation. Remember that real profit is a great, more sustainable option. At the same time, protocols have less capital, to invest in their projects. So you can see that Real Yielding has its pros and cons!
Complete your lesson!