Interest rates at your local banks at the moment are tanking and your money is barely working for you. Currently, the Bank of England base rate of interest is 0.1%, which dropped from 0.25% to help with the economic shock from COVID. Now there are whispers of negative interest rates in 2021 and given the fact many countries across the globe are in or heading towards a second lockdown, it’s even more of a possibility. So what can we do to protect our hard-earned savings? Use the blockchain of course!

During my short time using the blockchain, with the help of my CryptoBanditz mentors, I’ve delved deep into the different ways you can use the blockchain to protect and grow my finances. There are several different ways we can use blockchain tech to multiply your finances in ways the traditional banking system only reserves for a select few individuals.

Lending and Borrowing

Some of the protocols available to those who use the blockchain make the traditional finance system pale in comparison. One such protocol I’ve used before is fulcrum trade. Powered by Bzx, Fulcrum trade allows you to lend your tokens and earn interest on them for doing so. At the time of writing Fulcrum are offering 12.45% on Dai Stablecoin and 12.30% on USDC with no minimum deposit and no lock-up period. Dai and USDC are stablecoins so you have limited risk as they are pegged to the USD so they do not fluctuate as much as a typical crypto asset.

When I took part in this the interest rates were closer to 40%! So the interest rate may fluctuate but they beat traditional finance every time I’ve checked. You can also lend other assets such as Ethereum (ETH), Wrapped Bitcoin (WBTC) and some others although the interest rates are often not as attractive as the offerings for stablecoins. Fulcrum also offers crypto-backed loans with fixed interest rates, although I haven’t personally taken part in these as of yet… The true beauty of Fulcrum is it’s decentralised! So no KYC, no credit checks and it’s non-custodial so you always own your assets, and we love that!

Liquidity Pools

Now, these are something I love! I’ve dived headfirst into these and have not regretted it yet! My understanding is limited as I’m still a relative noob but I’ll go ahead and try and break it down. Liquidity pools involve someone depositing their tokens with an exchange to receive a portion of the fees people pay on their trades. This system solves the bureaucratic nature of the order book on crypto exchanges. In traditional models exchanges rely on bidders and takers to fill orders, if they’re not enough of either then your order may not get filled. So by supplying your tokens and providing a pool of liquidity- secured through a smart contract, we are tackling this issue.

I’ve partaken in several liquidity pools so far including, Mooniswap, Honeyswap and Uniswap all of which have worked out better than just letting my tokens sit there. All three are decentralised exchanges meaning you don’t need to put your tokens on an exchange, making it secure. All you need to do is connect your wallet to the app and you’re ready to swap or deposit your tokens into the liquidity pool of your choice. When you deposit your tokens into a liquidity pool, you can begin earning a share of the fees paid for trades and the more tokens you deposit the more your share of the fees. On centralised exchanges, the exchange gets the fees from trades but in decentralised exchanges, the fees go to the liquidity provider – meaning we get them! Uniswap is the most common and the volume on Uniswap on some days, outstrips that of centralised exchanges, showing you how popular it is. Also when you enter into a liquidity pool you can receive the liquidity pool tokens and some pools pay rewards in multiple tokens as proof of the liquidity you provided and these can be used to do the next thing we’ll discuss- yield farming!

Yield farming

Yield farming is a huge part of decentralised finance and could be considered one of the reasons for the recent surge in the price of some DeFi tokens. Personally, I have not done this as I still have to get my noob head around the concept, but some of the percentages you can get are insane! This is the wildest part of the Wild West of crypto! But we love finding new land and yield farming has ripe land for you to carve out if you do it right. Although, to get the best rewards and ‘pieces of new land’ you may need to employ very complex strategies.

So, here I go at explaining… With the token rewards you get from liquidity pools, you take those and add them to another liquidity pool, essentially earning interest on interest. If you move your rewards around enough you can start looking at interest rates in the 100s or even 1000s percent range. Although the percentages are enormous the risks are too so #DYOR before getting involved in any of these!

I hope I got your interests intertwined with doing your research about earning interest on the blockchain. At CryptoBanditz, we find it very interesting as I’m sure you may do too.