▶ Click here for a larger view
The cryptocurrency (coin) market froze. Even hard-working investors who used to shout ‘HODL (a coin industry slang for long-term holding)’ were at a loss for words during the recent plunge. When it comes to stocks in a bear market, there are only two methods: holding on and waiting after cashing out. There is one more way in the cryptocurrency market. DeFi is a method of increasing the stake (the number of coins) without being attached to the immediate value. Experts say that DeFi can be a good alternative if you believe in the future of cryptocurrency and wait for the bull market. However, keep in mind that Article 1 of the DeFi investment credo is ‘dangerous and risky’. In the process of maximizing profits, a secured loan occurs. You can also borrow the loan assets. Naturally, if the value falls, there is a risk that the collateral will be liquidated. That’s why some say “DeFi could be the second subprime mortgage.”
◆ There was Ethereum in the beginning of DeFi
DeFi is an abbreviation for ‘Decentralized Finance’. It is difficult to know what kind of product it is just by looking at the words. To understand DeFi, you need to understand Ethereum. The history of DeFi is the same as that of Ethereum. The dictionary definition of finance is ‘to borrow money by receiving interest’. Since it does not end with the exchange of goods right now, a ‘contract’ is necessary. It is for this reason that DeFi shares the history with the emergence of Ethereum, a ‘contractable coin’. In Bitcoin, only the status of ownership that someone owns how much can be recorded on the ledger. On the other hand, Ethereum can put various computer-coded codes. This characteristic of Ethereum is called ‘smart contract (contract)’.
The situation in which money was invented in the era of barter is compared to the advent of Bitcoin, and the era when loans and savings were created through contract writing was the emergence of Ethereum. Think about the process of getting a loan in your daily life. A contract is written when making a peer-to-peer (P2P) loan. If this contract meets certain forms and conditions, the contract is enforced by law.
However, in the digital world, tampering is free. Previously, it was difficult to enter into a contract with such binding force as offline. If you get an online loan through a bank, etc., you can trust the bank and make a transaction, but it is difficult to trust the digital personal loan in reality.
Blockchain technology fills this gap. Information once uploaded to a block is not tampered with. The trust of the contract is guaranteed. The simplest example of a smart contract is ‘escrow’. For example, when making a used transaction, the platform holds money in the middle and sends it to the seller when the buyer confirms that he has received the item. Ethereum smart contracts are the same. When the buyer sends a signal that ‘the item has been received’, a contract can be created to send Ether equal to the price of the item to the buyer. After receiving the goods, the buyer sends a signal to the Ethereum ledger. The Ethereum system processes the transaction. Buyers and sellers transact without intermediaries.
◆ What are the DeFi products?
In the world of DeFi, there are various financial products such as loans, liquidity supply, and settlement. This is the case for loans. For example, coin investor A wants to invest by creating leverage. Then you have to borrow coins from somewhere. Where can I borrow coins? Get a coin loan from somewhere through a smart contract. It is also an individual who makes an investment that lends the necessary funds here. If you are new to DeFi, you can lend coins to these people and earn interest.
There are also products that provide liquidity. In this case, a decentralized exchange (DEX) is mainly used. The life of an exchange is ‘liquidity’. For example, in the stock market, you want to sell 10 million won worth of Samsung Electronics stock at 70,000 won each, but what if there is no one to buy it? You have to accept the amount offered by the person who wants to buy. You may have to sell it for 40,000 won or 30,000 won with tears in your eyes. In this situation, the transaction does not occur well. So, in the world of virtual currency, there are ‘market makers’ who fill the gap between the asking prices and reduce the price gap between buyers and sellers and make transactions happen. The provision of liquidity to support them so that they can work well is called liquidity supply. Market makers receive incentives from exchanges, and individual investors can earn profits by depositing coins with them and sharing the incentives.
Personal financial demand is not yet sufficient due to problems such as the characteristics of highly volatile virtual assets and trust in the market. Therefore, liquidity supply is the most frequently used investment method in DeFi. How is finance possible with a virtual currency whose value changes rapidly in seconds? The virtual asset market is where the Ethereum I sent for 2.95 million won can become 3.1 million won or 2.6 million won within 0.5 seconds of movement.
For this reason, it is the ‘stable coin’ that has grown noticeably in recent years. Stablecoins are literally ‘coins with a fixed value’. Although it is not a prerequisite for DeFi, a currency with a stable value is essential for the expansion of the DeFi ecosystem. Most stablecoins peg their value to $1. Tether (USDT) is a typical example.
If you leave it to a clay swap, 4% of annual profit… 27% when depositing with token KSP
[WEALTH] Each DeFi product has a different rate of return
Aggressive investments with higher returns
35% when depositing by exchanging clay and tether
With leverage, it surges to 120%
◆ Should I try DeFi myself using clay?
To do DeFi, you must first select a platform. Ethereum is the most popular platform. Assets deposited in Ethereum amount to about 188 trillion won. There are also the most types of DApps. This means that you can access the widest variety of financial products. In second place is Terra, with about 22 trillion won in deposits. Binance Chain (BSC), operated by Binance, the world’s No. 1 exchange, ranks third with about 19 trillion won. For beginners to DeFi, we will introduce a method using KLAY developed by Ground X, a blockchain-related subsidiary of Kakao. Ethereum is expensive because the platform usage fee (gas fee) is on the rise. Clay is relatively inexpensive and easy to use to support Korean sites. Let’s try using ClaySwap, Clay’s DeFi service. To use it, you must first buy clay. You can buy it on a coin exchange. Clay is not in Upbit. You can purchase it from Bithumb or Coinone. First, let’s buy only 100 million won. Each piece costs 1600 won, so you can buy 625 pieces of clay.
The wallet for using Klaytn (blockchain platform) is ‘Kaikas’. Send the clay purchased on the exchange to this wallet. Now, select ‘Connect wallet’ on the Clayswap homepage and you’re ready to go.
Clayswap is a decentralized exchange (DEX). A wide variety of coins are being exchanged. The liquidity that clay swaps most require is an exchange between clay and staked clay (sKLAY). Staking is the concept of depositing coins for a certain period of time and receiving interest. SKLAY stands for tied (lock-up) stakes. At this time, someone may urgently need a coin during the mandatory binding period. At this time, Clay Swap provides a service that converts sKLAY into clay immediately after paying a small fee. The principle is that the tied stake is left as it is and the clay that was set aside is given instead. Clay Swap requires Clay to provide this service. Where will the necessary clay be supplied? It is from the people who lent the clay to the clay swap. This is why you can earn profits by depositing clay into a clay swap. Currently, if the clay is entrusted to a clay swap, the annual interest rate is 4.01%. The simple clay interest income is about 1.79%, and the clay swap token KSP income is about 2.21%. KSP is a token given as proof that the clay swap has been used. This is also a structure that can be traded alone. If you entrust 625 clays, you will get 2.68 KSPs, which is equivalent to 11 clays (1.79%) and 13.8 clays (2.21%) per year, and so on. If you think the interest rate is too high, it is better to change all the clay into KSP in the clay swap and deposit it. This is because KSP has an annual interest rate of 27.2%. Profits can be received in real time. If there is no change in the KSP value, it is equivalent to investing 1 million won and making a profit of 272,000 won. If the KSP value rises, you can earn more, but if it falls, the rate of return also decreases.
◆ One more step, let’s invest aggressively
For clay swaps, pair deposits are also supported. Fair deposit is a concept that supports liquidity in transactions between other coins, not between SKLAY and Clay. For example, in Upbit, you can buy Ethereum in KRW. However, you can also buy Ethereum with Bitcoin. At this time, there are two trading pairs: Ethereum-KRW and Ethereum-Bitcoin. In DEX, exchanges between various coins require multiple trading pairs. In this case, the trading volume is bound to be different for each trading pair. Because of this, there is a difference in the return on investment. Even in the case of trading pairs in the clay swap, the annual rate of return varies from over 1000% to 1%.
For example, products that provide liquidity to the clay and tether trading pairs have an annual interest rate of 35%. You can buy 1 million won worth of clay (625 pieces) and convert half of it from clay swap to Tether and deposit it. This means depositing 500,000 won worth of clay and 500,000 won worth of Tether. In this way, you can receive 0.139 KSP every day. In Korean won, it is 1146 won. If you deposit 10 million won, you will receive more than 10,000 won in interest every day.
There are also positive deposits that provide liquidity through leverage by lending some coins. A positive depositor can achieve the same effect as investing 2-3 times the amount of assets he or she owns. If you supply the aforementioned clay and tether trading pairs with 3x leverage for 10 million won, you can earn more than 30,000 won every day. If you do not sell KSP right away but wait and sell after the market price rises, your profit will be greater. If well designed, you can earn close to 1 million won in interest per month with an investment of 10 million won.
Of course, the profitability is high, but the risk of liquidation is high when the coin price falls. For platforms other than clay swap, the method of maximizing the effect through lending is mainly used. For example, if you want to make a long-term investment because the value of Ethereum is expected to rise, you can borrow another coin with Ethereum as collateral. You can supply liquidity with the borrowed coin, or borrow another more profitable coin with the borrowed coin as collateral.
[최근도 기자]
[ⓒ 매일경제 & mk.co.kr, 무단전재 및 재배포 금지]
