Where you are accustomed to getting interest on your savings in your bank account, those days seem to be long gone. Banks are even charging money to save your hard earned money on your bank account.
I would always advise to have at minimum 3 months worth of your fixed cost in your savings.
So when your cost of living is $ 2500 a month, you should always have at least $ 7500 on your savings account. I prefer to have some more, but the rest of your money could and should be working for you, instead of working for the bank.
On of the ways you can let your money work for you, is via staking them in a pool on the blockchain.
Staking is like putting money in your bank account and receiving interest on it.
Let's go over your options one by one:
Single coin staking is the easiest way of staking. You simply buy a token, stake them in a pool and receive interest on your tokens. Let's look at some examples of a single coin staking pool.
Single coin staking pools at BiSwap.
1 A. Stake native token / earn native token
Here you see three different pools, all single coin staking pools, where you can stake the native token from BiSwap called BSW. The first pool is the Holder Pool, that gives you multiple benefits, like staking BSW for blue chip tokens. It autocompounds your interest periodically, which means you do not have to do this yourself, saving you both time and transactions fees. The second one is a autocompound pool pretty similar to the first one, but without the Holder Pool benefits. The major difference is the penalty you get, when you unstake in the Holder Pool before the end date has been reached. The second pool only has a minor fee.
The third pool gives you 62,93% APR and you may choose to harvest and compound your rewards manually.
Let's say you put in 100 BSW in each pool. When you do not do anything at all, you will have 187,64 BSW after a year in both the first and the second pool and you will have 162,93 BSW in the third pool.
Please note that the APR and APY go down further in time, so you will most likely end up with less than the said amount.
Now let's say BSW is worth $ 1 at the time of staking and worth $ 2 after a year.
You will have $ 375,28 in the first two pools and $ 325,86 in the second pool. That is a pretty nice Return On Investment (ROI). When BSW gets worth less, you may still end up with profit, as long as the decline in price is less than the interest you received.
In order to stake, you must approvc the pool in your wallet first. Click on approve and confirm the popup in your wallet. Please note, for each action you take, like approving, harvesting and staking, you will pay a minor fee on the BSC network.
Native tokens are almost always inflationary, meaning the value of the token goes down, when the demand is not continiously increased. In a bull market, this is not a problem, as the demand is much higher than the inflation. In a bear market it does become a problem. Something to keep in mind when you asses the risks. Usually the APR is one of the highest when you stake native tokens. The DeFi platforms often burn a batch of tokens once in a while to bring the price back up.
1 B. Stake native token / earn blue chip token
Now let's look at the option to stake native tokens for blue chip tokens.
Staking BSW for blue chip token
Here you see you can stake BSW to earn blue chip tokens. Blue chip tokens are tokens who already earned their place in the crypto space. Their volatility is usually less than that of a non blue chip token.
The APR you receive is often lower than the APR you get in the native token/to native token pool.
Staking in such pools gives you benefits. You may invest in the native token and hope for a price increase while earning a relatively stable coin as reward.
The APR may also vary here. The staking platform allocated a certain amount of ADA to the pool.
This ADA is divided over the investors who staked BSW in the pool. When more investors enter the pool, the APR will drop.
1 C. Stake native token / earn new token
Now let's look at one of our favorite options to stake. Stake native tokens to earn upcoming tokens.
This is a excellent way to invest in new tokens, without actually paying for them!
Stake native token to earn new token on Apeswap
Here you see some staking options on Apeswap. We staked some Banana to earn GMR.
GMR went to the moon last bullrun and is down a lot compared to the all time high (ATH).
Since the team is still building and they keep promises, we still believe GMR has a nice future.
The APR is not that high, but you could be wise to look at it like this. If GMR manages to get to their ATH in the future, the APR you are getting today, will be worth 36 times more! So if you earn a dollar worth today, your dollar earned will be worth 36 dollar!
Apeswap often launches coins with a lot of potential. They recently co-launched ANML. Right after the launch they prepare pools where you can earn the newly launched token as well.
Newly launched tokens with potential are worth having in your portfolio, since the chance of them getting x2 or more is pretty high! Please note that we staked GNANA (Golden Banana) in order to earn a higher interest in ANML.
2. Vault
A special version of single token staking is the vault, When you put tokens in a vault, it will automatically
compound your yield for you, saving you both time and transactions fees. The DeFi world is still pretty new and not all websites call it vault. When you see autocompound, you know you are dealing with a version of a vault.
Vaults on Apeswap
The picture shows you the vaults available on Apeswap. As you can see, they clearly show you the daily ROI and the estimated APY per year. When you take a closer look, you will see there is more than only a single token vault, you may also stake LP. Now let's see how that works.
3. LP Farming
Providing liquidity may be fruitfull on its own. It may become even more attractive because of LP farms.
First take a closer look at LP, what is it?
When you provide liquidity, you merge two tokens into one LP.
Say for example BNB and Banana become BNB-Banana LP. Without this LP, people cannot trade Banana for BNB and vice versa. As a liquidity provider you get a part of the transaction fee equal to the share of LP you have provided. So if your LP is 1% of the total LP provided, you will get 1% of the transaction fees.
A nice bonus, considering both tokens on theirselves would not give you anything extra.
Normally the ratio is fixed at 50%, so you will have 50% BNB and 50% Banana in the LP.
Please note that the value is measured in dollars, so you will have both coins in an amount equal in dollar value.
Back to our example:
Say 1 BNB = $ 500 and 1 Banana = $ 1
You want to create an LP with 1000 Banana, for the sake of the example, worth $ 1000.
That means you will have to add 2 BNB to have both equally represented in the LP.
What happens when one of the coins change in value? You ALWAYS need to have the 50%/50% ratio in the LP. Say for the sake of simplicity 1 BNB is still worth $ 500 and Banana has increased in price to 2$ per Banana. Now your 1000 Banana is worth $ 2000 while your 2 BNB is still worth $ 1000.
Your LP will automatically sell part of your Banana for BNB to keep the ratio within the LP at 50%/50%.
It is hard to calculate, since the LP will contiously check the balance and buy/sell BNB or Banana to make sure the balance is kept. In this example you might end up with 700 Banana worth $ 1400 and 2,8 BNB worth $ 1400, giving the LP a total worth of $ 2800. Here is where impermanent loss comes in.
Without the LP your 1000 Banana would have been worth $ 2000 and you BNB would have been worth $ 1000. That would make a sum of $ 3000, instead of that, you end up with $ 2800 worth of LP.
It is called impermanent, because you only suffer the loss, when you sell the LP.
LP will soften the blow when one of the coins suddenly drops in price, since the ratio must be 50%/50%.
When Banana drops in price, the LP will sell BNB for Banana to make sure they both are equally represented in the LP. On the other hand a increase of one of the tokens will have less impact when you have them in LP, as described above due to impermanent loss.
Professional investors tend o break the LP when one coin hits a low on the chart. This way you may profit maximally from a increase in price. They tend to create a LP when the coin is at a high, so they profit from the security it provides when the coin may drop in price.
Now you know what LP farming is, let's look at your options here:
Now we have covered the different options you have in the area of staking, let's see how we can make it work best for us. We like to create a vehicle where we put in an initial investment and use that to grow our staking portfolio without using any new investments (of course you might DCA your way into staking).
How do we do that?
We use BiSwap as an example, to get started on BiSwap, click here.
We pick a farm with a nice APR and with a risk profile that fits our needs, usually the farm with the highest APR also have the highest risk involved. If one of the two tokens in the LP is a stable coin, the risk is greatly reduced.
We have selected a LP farm with RGOLD combined with BUSD. With an APR of 181% you almost get 0,5% interest per day. You will get your rewards paid out in BSW token.
It depends on the size of your investment what your next step will be. You may choose to buy 200 BSW to unlock the launchpools. If you do not have funds to do so, you may put your earned BSW in the Holder Pool. This is extra beneficial when you are on a tight budget, since every action cost a fee in BNB. Once you have reached the level of 200 BSW you unlock the launchpools, where you can earn other tokens with your BSW.
Now you have unlocked the launchpool on BiSwap you may choose a pool to stake your BSW and earn blue chip tokens or upcoming tokens. If you have a small portfolio we suggest to keep the amount of pools low, due to the transaction fees needed to perform every action. If you have a bigger portfolio, you may pick a couple of them. It is wise to pick the WBNB as well, as this will earn you some much needed BNB to pay for transactions on the BSC chain.
As you can see there is a maximum on each pool you can stake. We have chosen to first fill the ADA pool with our yields and to pick a new pool when we have reached the 500 BSW limit.
Besides increasing our pools to earn even greater rewards and to let our money work for us, it is imperative to periodically claim your tokens and swap them for BUSD or another stable coin. You may put two stable coins in a LP to earn APR, although low, but with near to zero risk.
This way you build up a bag of fiat to buy the dip or to pay out so you can spend it in real life.
Example strategie
This way you implement proper risk management and you use the power of compounding to your maximum advantage to earn you both BSW and other tokens you find worth your while.
Do you like this strategie and do you want to get started on BiSwap? Support us by using our referral link:
5. APR versus APY
APY means Annual Percentage Yield. This is the percentage you get at that moment calculated for a year, if you compound your interest periodically. Please note, I wrote at that moment, since the interest rates in the world of blockchain change constantly. . APR means Annual Percentage Rate, this is the actual percentage rate you get at that moment, calculated over a year.
When you want to compare pools, especially on different website, please compare APR and not APY.
Some website use a rather optimistic method to calculate APY and this gives a wrong image of the actual return on investment you might get. APR is barebones truthful and will show you exactly what you will earn per day.
6. Staking on Centralised Exchanges (cex)
We have seen multiple options to stake your tokens on a decentralised exchange, now let's look at the options at centralised exchanges.
First of all we like to point out, staking on a cex in general gives a lower interest rate on your tokens.
Why would you want to stake on a cex? When you do not like the hassle of creating a Metamask wallet and you do like to get interest on your investment, staking on a cex is still a good idea.
Since Binance is by far the number one exchange in the world, starting there would seem the appropriate thing to do. Binance offers multipe ways of letting you earn some extra tokens on their exchange:
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