DeFi Deep Dive

How to do DeFi in ~7 steps down the rabbit hole

Over the past week around the start of November 2021, I have decided to learn a little bit more about the current state of decentralized finance (DeFi), with a focus on the various blockchain “features” to get a better pulse of the current state of the market. I have been somewhat invested in a few cryptocurrencies that I was not very familiar with but they SEEMED to have decent staking rewards (more on this later) at more that what a bank would give – on Kraken up to 20% for Kava as an example (and it was not required to claim any rewards; restaking seemed to happen automatically with the exception of Ethereum, also more on this later).

Step 1: Need a New Wallet

I had the same wallet(s) for up to 10 years and they were starting to look outdated! At one point, I tried opening up my Ethereum Mist wallet and it was so old that it couldn’t connect to the network, but I did at least claim some bitcoin forks by exporting my private keys of a swept (IMPORTANT!) wallet about a month ago, which meant I had a bit of extra crypto to play with.

After sorting out all these wallets and sending to various exchanges, getting kicked off Binance, and doing some traditional CeFi (centralized Finance, i.e. aforementioned exchanges such as Kraken, Binance, and others) trading, I started to read about DeFi and pretty much watched every video on Finematics.

It was a prerequisite for me to get a new wallet that was DeFi friendly. So I ended up trying Trust Wallet as I was interested in Kava, since I literally have stake in it. The setup process was very straightforward and I was able to transfer some coins from the various centralized exchanges to this multi-coin wallet with very little effort (the only pain point being copying addresses from mobile app to my desktop session – I used a Google Drive document for this).

Step 2: Peruse a Platform (Kava)

Once I had some Kava in my “Trust-y” new wallet, I was able use WalletConnect to link to the Kava app in a very simple but new to me way, by scanning the QR code on my desktop with my phone camera. I started by essentially loading up funds from my wallet to the platform; its interesting how your Kava balance can still reflect in the Trust Wallet app too. I tried the various platforms, Mint, Lend, and Swap (specifically adding liquidity to a pool), and was so very impressed at the transaction speed and low cost, but not so impressed about the reward vesting period and deceiving APY numbers – you have to vest for 1 year to get the displayed APY, otherwise 1 month vesting only gets you between 1/5th or 1/10th depending.

The mint feature I thought is a pretty clever way to not have to pay capital gains tax, so thats what I did, minted some USDX using Kava as collateral to play around with the Lend and Swap functionality.

I thought this was pretty cool, but what else is there?

Step 3: Do a dApp

I checked out a bunch…I don’t remember them all but the short of it is, in the current state (November 2021), the ERC-20 (Ethereum based) ones are basically unusable if you aren’t a whale. I mean that the gas fees were so high >$50 worth of ETH per smart contract that it just isn’t worth it when I was spending less than a penny worth of Kava in my previous experiment. Nonetheless, for curiosity, I spent a small fortune on fees to try out pooling some AMPL Ampleforth on AAVE as the APY numbers were insane. I don’t think I will be seeing those returns but it was a YOLO bet that I allowed myself to do because I found a few ETH in an old wallet the other day.

The only time I felt I could condone the use of any dApp using my Trust Wallet was when they leveraged Binance Smart Chain. There the fees were much more reasonable, but because I can’t use Binance, it is a relative pain to get BNB to convert to Smart Chain so I ended it here. It seemed like Kava was the way to go, but it also felt lacking. What made it so easy/fast? Turns out it was built on Cosmos, so that’s what I looked at next.

A NOTE ON ETHEREUM: If/when Ethereum 2.0 is implemented we should see significantly reduced gas fees. From what I have been reading this may take place as early as 2022. As I mentioned in the introduction, Ethereum staked on Kraken does not auto re-stake as you are effectively staking it permanently (until ETH2 I believe). As such I only staked 1 ETH at a rate of 4-7% ETH back into my spot wallet. If ETH2 is properly implemented, I could envision significant increases in market capitalization of Ethereum.

Step 4: Covering the Chain (Cosmos)

So would you believe that I also was staking ATOM (Cosmos) on Kraken at a mere 7% reward rate (I thought this was pretty, pretty good before). A bit more reading later and I found myself wanting to unstake my ATOM and play around with the new-ish Emeris platform they have built…

Step 1: Need a New Wallet (again)

Nope not a typo. Emeris required Keplr wallet to integrate…I’ve come this far so I unstaked some ATOM and deposited it into the Keplr wallet, lets see what this can do.

Already able to stake directly in the wallet using validator of your choice at a higher APY than the 7% I was getting on Kraken? Ok, lets try it – not sure how I feel yet about having to claim the staking rewards. Time will tell on this one.

UPDATE: So far this week I have been checking every day and able to claim pretty significant rewards daily. I could see it becoming a chore though, and may set a reminder to do it every 2 weeks or month.

Looking  through the various (all Cosmos chain? I mean Kava is on the list) supported cryptocurrencies, I was shocked at some of the staking yields, again, time will tell but I understand they payout at “epoch” daily which is 5PM UTC? Please “Do Your Own Research” on this. It sounded like Osmosis was the one to look at next.

Step 5: Crossing Chains (IBC transfers)

What I really like about Cosmos (Emeris) is that you can mostly intuitively move assets between blockchains (pay close attention to which blockchain you have selected as Akash seems to default and I may have mistakenly sent to the wrong chain once). The fee is pretty low at the lowest setting, ~9 cents, and it was relatively fast ~9 seconds.

Step 6: O! cOSMOSis!

It took me a while but I eventually realized the cleverness of the name! I will leave this step with one simple image with the caveat that every transaction I have done so far has been FREE!

Step 7: Checking Crypto.com

Let’s just say my deep dive ended with me getting a crypto backed Visa debit card from crypto.com by staking some CRO. I feel as though this is rather gimmicky (they have gamified missions that give you rewards), but decent exchange that I may provide a more detailed write-up on once I receive my card. In the mean time I am going to try and leverage their 12% yields on stablecoins with a 2% bonus (not taxable?) of CRO. 

In the meantime, if you found this helpful, feel free to sign up using my referral code:  https://crypto.com/app/x5q5p3jzx8 or https://crypto.com/exch/x5q5p3jzx8 if you don’t have a mobile phone for some reason, or are not interested in the applying for the card. You need the “app” version to apply from the card.

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