There are many reasons why EOS has become my favorite cryptocurrency to use.  Transaction speeds are so fast that they all just seem instant.  The fact that there are no fees makes it a lot easier to perform thousands of transactions a day.  Account names make it easier to quickly send and receive funds.  The community is intelligent and helpful.  Block producers are creating useful tools that make the experience better.  But with all of these amazing benefits, the main reason that EOS is my favorite crypto is because of the passive income opportunities.

I’ve used nearly all of the other cryptocurrencies out there, and EOS is in a league of it’s own.  It does what it was designed to do.  One of those design elements is the proof of stake consensus algorithm.  Think of EOS as a super computer that has a certain amount of RAM, CPU and bandwidth.  This super computer is not owned by one company, or even 21 different companies.  All of the EOS token holders own their share of this super computer proportional to the share of tokens they control.  These computer resources are used to complete tasks like transferring tokens, using dapps and running smart contracts.  So if you own EOS tokens, you can only use the network until you have burned through your staked resources.  When you use up all these resources, the worst that you have to do is simply wait 24 hours for your resources to reset.  This is how EOS is able to offer zero transaction fees, there is a limit to how much of the network you can utilize for free.

There are two situations that are going to happen for most users of this network, over-utilization or under-utilization.  This means that depending on how many EOS tokens you have, you are either going to have too much or too little resources.  An example of over-utilization would be a dapp developer that is trying to create and distribute tokens or run complex smart contracts.  If this developer does not have enough EOS staked, they are going to be using up their daily resources much faster than 24 hours and will not be able to do what they want.  Under-utilization is the opposite problem to have.  Think of a large investor that bought a ton of EOS tokens with the hope that they appreciate in value.  This person does not know how to create smart contracts and may not have a desire to use dapps all day long.  This person owns a portion of the super computer, but doesn’t really need the resources on a daily basis.  Luckily, there is now a solution to both of these problems and it is called Chintai.

Chintai is simply a resource leasing platform that allows the under-utilized users to rent their resources to over-utilized users that need them and are willing to pay for that usage.  This creates a market for resources that can be measured by interest rates.  There are 4 different term lengths to choose:  7 days, 14 days, 21 days and 28 days.  If you lease out your EOS resources for these lengths of time, the tokens will be locked from using them, but you will get your full EOS tokens and resources back at the end of the term plus interest (the interest is actually paid up front).  There are different interest rates for each term length, but you can also see the APR (annual percentage rate) to determine what sort of return you can get if you did 52 separate 7 day leases in a row, or 12 separate 28 day leases.

So, how much did the market decide that these resources are worth?  Well, that is constantly changing depending on supply (people willing to lease) and demand (people willing to pay for resources).  When Chintai first came out there wasn’t that much of demand for resources and the annual interest rates were very low (1% – 2%).   Now that we are seeing dapp users and developers running out of CPU often, the demand is increasing and we are seeing annual interest rates upward of 10%.  If you understand investing and fixed income, you will know that 10% per year is a great return for something where you are not risking your initial investment.  Now, since these rates are always changing, your rate is only fixed for the duration of the term you choose, not the whole year.  In order to actually make 10% on your investment, you would need to keep leasing the same tokens for a year and the rates may change each time.  There is a risk that rates will go down, but there is also the chance that rates will go up as the EOS network is used by more and more people.  Imagine seeing 20% or 30% APR’s on leasing your EOS tokens?  It is very possible.  This adds a whole new dimension to the concept of hodling.  You get the best of both worlds since you still own the tokens and benefit from any price appreciation, but you are also earning passive income that you can either spend or reinvest.

So what is a good strategy to start earning passive income on EOS resources that you are not using?  I am setting aside a portion of my EOS tokens to be used for Chintai leasing, this will be like the “fixed income” portion of my EOS portfolio and I will not need the token’s or their resources for at least a year.  Looking at Chintai’s website, it looks like the 7 day term is offering the highest volumes and best APR’s.  My strategy is to lease these tokens at the current market rate and then set a reminder on my phone so that I know when the tokens will be unlocked and back in my wallet.  The goal is to reinvest quickly into another 7 day term using the original balance of tokens plus any interest that was earned on earlier leases.  I’m hoping that this will create a significant compounding interest effect over a long enough time horizon.  It will take discipline to make sure that I keep leasing every 7 days to make sure that my EOS is working for me at all times.  You can think of this as active hodling that requires some work on the user’s part.  But really, it should only take a few minutes per week to place some orders on Chintai and set reminders.  It is well worth the time to create a new passive income stream while also helping out other users that need my resources to build the ecosystem.  Win-Win.

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Responses

  1. Conceptskip

    Nice summary about Chintai. I would recommend to take into account, that there is a 3 day unstaking period after the end of the lease, so with a 7 day lease, your tokens are gone, 10d, that together with the refunding time windows they are having, this could take up to a maximum of 6 days.
    My personal strategy is rather to leasing out for 28 days and wait for favourable rates, this also minimises the amount of time to invest.

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