Investing

There are a variety of ways to generate revenue with blockchains.

Not only can tokens act like shares in the stock market but there are also a number of products and services available that generate yield on your investments. 

The three main methods we are going to outline here are:

– Speculative Investment
– Yield Farming
– Staking

Speculative Investing

Buying tokens

The primary investment mechanism for blockchain projects is in the purchase of their native blockchain token, whether that project be a store of value (such as Bitcoin), a platform (such as Ethereum), an exchanges own token (such as Binance’s BNB token) or any other.

If investing in this way then you are speculating that the value and price of these tokens increases over time, whether you are doing this against the tokens fiat value (such as GBP or USD) or you are trading against it’s value in connection with another token (such as Bitcoin).

Examples

Price increases for the last year

  • Bitcoin 314% 314%
  • Cardano 1724% 1724%
  • Ethereum 686% 686%
  • Polkadot 880% 880%

Yield Farming

Supplying tokens

AMMs (Automatic Market Makers) are a financial tool unique to decentralised finance (DeFi). This new technology is decentralised, always available for trading, and does not rely on the traditional interaction between buyers and sellers. This new method of exchanging assets embodies the ideals of Ethereum, crypto, and blockchain technology in general: no one entity controls the system, and anyone can build new solutions and participate.

Liquidity Providers are rewarded for the service they provide by getting a slice of the small fee that is charged when users swap one token for another. Sometimes they also gain extra rewards in terms of token incentives.

Examples

APY’s for Liquidity Pools

%

Cake/BNB

%

BNB/BUSD

%

USDT/BNB

Staking

Delegating tokens

Many blockchain projects allow you to stake your tokens in order to receive interest on them. Sometimes this is used as an incentive to have people hold their tokens rather than sell them and other times it is a fundamental part of the blockchain ecosystem. 

For Proof Of Stake (PoS) blockchains (such as Cardano) staking is an integral part of the operation of the blockchain. Rather than having “miners” that compute arbitrary math calculations, PoS blockchains require tokens be staked to validators in order to choose who to mint the next block on the chain. 

This means not only are your tokens gaining the rewards of speculative investment but you are gaining additional tokens as interest for the period your tokens are staked.  

Staking tokens you intend to keep for longer periods of time is a great way to earn a passive income on your investment. You also do not have to stake volatile tokens and can in fact stake stablecoins (1 token always = 1$) and earn interest on these too.

Examples

APR’s for staking

  • Cake 84% 84%
  • Cardano 5% 5%
  • Ethereum 5% 5%
  • Polkadot 10% 10%

Still confused?

Not sure exactly what Liquidity Provision is or the risks associated?

Perhaps you would like to know more about staking or the world of DeFi?

We can help you get to grips with the myriad of ways to get great returns with your token investments, from the basic to the more advanced opportunities.