Intro

I am looking for a reliable service to earn interest on my crypto assets while I am HODL’ing, and waiting for the price of bitcoin (and altcoins) to go up. I am not getting any interest or dividends on my crypto investments, unlike my traditional holdings, which increases even if the market stays the same. (I guess you could draw the analogy of staking in the crypto world). I imagine there will be ways of joining staking pools in the future, but there also seem to be some interest earning alternatives which I decided to investigate.

Stepping back

It is interesting to see where these services fit into a decentralized banking/financial stack. The image below shows all the different parts of the Etherium decentralized banking map with all the different layers. This medium articles explains the various components and how they relate: Mapping The Decentralized Financial System 

 

As far as EOS is concerned, there is a long term project called Worbli which sounds like it is trying to accomplish something similar, and I plan to look into this further at some point. But it seems to be at a pretty early stage.

Lending and borrowing projects

From my initial research, I decided to look further into Ethlend, Compound, and Celsius. I am also aware of a few other lending/borrowing projects which I didn’t really have time to research and evaluate – Salt, Nexo, and Blocklend (maybe someone else has experience with these that they could share)

Conclusion

I found Ethlend to be somewhat cumbersome, and I didn’t like having to create my own loan orders with Metamask, especially since I was just testing at this stage. I also didn’t like having to incur eth/gas fees just to do some evaluation. I didn’t get very far with Ethlend. Compound sounds interesting, but it doesn’t seem to be available yet, so I will investigate further when I can get access to that platform. That left me with Celsius, which I like the best so far. I like their approach, and I found it easiest to use. I didn’t have to create orders or negotiate with a P2P counter party. All I had to do is deposit funds in the Bitgo (regulated custodian) wallet in order to start earning interest. As I understand, I am able to withdraw at any time, and my funds are not locked-in. The rates seemed pretty reasonable to me. ex, invest US dollars at 7%, or eth at 6.7%, bitcoin at 5%, or borrow at 9% (depending on how much, and which crypto). If you want to borrow, you have to deposit crypto as collateral. I plan to do further testing with small amounts and see how it goes. You also seem to be able to convert back and forth between fiat and crypto, but I am not sure about all the different scenarios. I like everything that I have read about it, and the team is very impressive. The founder, Alex Machinsky was one of the original patent holders of VOIP, and one of their primary advisors was one of the original creators of blockchain (and referred to by Satoshi himself). The token is called CEL, and is an ERC20 token, and the smart contracts run on Etherium.

I also discovered a few interesting things like being able to short sell by taking a loan, and paying back less if the crypto goes down in relation to fiat. I also got some tax deferral ideas which I hadn’t thought of before. 

I think that this project (Celsius) has a lot of potential. (I don’t own any CEL tokens, so I can be objective). I have some concerns about scaling if they grow very fast, but that isn’t a problem yet. 

I would like to hear if anyone else is earning interest on their hodled crypto, and which service they are using. 

14 votes, average: 4.64 out of 514 votes, average: 4.64 out of 514 votes, average: 4.64 out of 514 votes, average: 4.64 out of 514 votes, average: 4.64 out of 5 (14 votes, average: 4.64 out of 5)
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Responses

  1. Fred Blauer Post author

    HOT UPDATE – Coinbase compound went live today. In short, it works well for me, but you have to use metamask, and also convert your etherium to WETH, if you want to lend it out. Not a big deal, but a couple of extra steps that you don’t have with Celsius, which I also really like. The coinbase compound rate for etherium was double (8%) that of what they were offering on Celsius. I believe that I will keep both services, since they support different coins.

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