As most crypto investors tighten their belts in the current bear market, crypto millionaires have benefited from innovative decentralized finance (DeFi) products including Uniswap, Aave, PancakeSwap, DAO Maker, and self-custodial wallets like MetaMask.
The bear market is taking its toll on the average crypto investor. But why not learn how DeFi professionals are making millions using tools you may not have heard of?
Crypto Millionaire Tip #1: Uniswap Gems
Uniswap is a decentralized exchange (DEX) on the Ethereum blockchain that offers DeFi users the opportunity to earn transaction fees by contributing liquidity. Anyone can create markets by depositing both assets of a trading pair into one smart contract, thus removing the gatekeeper in creating liquidity.
The DEX charges a 0.3% fee on all trades. Liquidity providers earn passive income from these fees, proportional to the amount of liquidity they contribute, minus temporary losses.
Suppose you deposit 4 DAI and 4 USDC. The ratio between them is 1:1. Any change in the price ratio between the two will result in a temporary loss. Liquidity providers prefer high trading volumes and low transient losses.
Sometimes traders create markets in less famous altcoins called “gems”. These are crypto assets with a market cap below $20 million that have solid fundamentals and the potential for a 100x price increase. Traders can use Uniswap to make an early trade before these coins are listed on exchanges and rise in price.
A crypto trader turned $800 into $1,000,000 by trading assets less than a day old and made a profit in less than 3 hours. They learned about these assets through Uniswap listing bots and Telegram pre-sales marketing.
Crypto Millionaire Tip #2: Aave
Crypto millionaires also use Aave to generate passive income. Aave is a borrowing and lending protocol that enables DeFi power users to generate passive income.
Lenders who deposit funds into a smart loan agreement earn interest set by an algorithm. Borrowers post collateral of a crypto asset in a smart loan agreement to earn returns or lend other cryptos. They can generally only lend assets worth up to 75% of their collateral.
One of the ways they use this to their advantage is by depositing an asset like Bitcoin, which has a low rate of return in DeFi due to its large holdings, to lend a stablecoin. They can then earn a higher return on the stablecoins by depositing them into a DEX liquidity pool. Aave also offers an 8% APR for lending stablecoin USDT.
Aave will liquidate your position and take your collateral when your collateral falls below a certain threshold. This risk of liquidation discourages many people from participating.
Crypto Millionaire Tip #3: Yield Farming
Another more complex strategy used by crypto millionaires is yield farming, which can take place on a decentralized exchange like PancakeSwap.
At PancakeSwap, traders earn Liquidity Provider tokens by contributing a cryptocurrency trading pair to a liquidity pool. The LP token allows them to enter a FARM on the DEX where they can stake their LP tokens with other traders to earn annual percentages ranging from 2% to 200%. They are paid out through a harvesting process in CAKE.
To maximize profits, CAKE can be harvested automatically or manually and reinvested in the same pools using Syrup Pools.
Crypto Millionaire Tip #4: IDOs
An initial DEX offering (IDO) is a new avenue discovered by crypto millionaires. A decentralized protocol collects funds from investors by issuing a token that can represent a newly listed asset on their platform.
DAO Maker is an incubation and fundraising platform for new decentralized autonomous organizations that gives DAO tokens to investors in projects. DAO token holders who are proven investors can participate in a token sale of IDO’s Strong Hold Offer (SHO).
Since its launch in 2021, the DAO token has generated returns of up to 41x for early bird adopters.
Crypto Millionaire Tip #5: Self-Custody Wallet
A common requirement for using DeFi products is a self-custodial crypto wallet.
A crypto wallet is software or hardware that essentially stores unique strings of numbers and letters called keys that authorize your access to spend crypto. Each wallet contains both a public key and a private key. The public key is used when sending crypto to someone, while a recipient can use a private key to spend crypto in their wallet.
When someone wants to spend crypto in their wallet, they present a public key and a signature created from the private key. These two pieces of information tell the blockchain network that the donor owns the funds they are using.
While some crypto users cede control of their keys to companies like Coinbase, Binance, or Kraken, users who are heavily engaged in DeFi generally retain control of their keys. They store them in a self-custody wallet rather than a company-managed custody wallet.
They are then solely responsible for controlling and managing these keys. If they lose their private key, they lose access to their cryptos as they cannot create a public signature to spend received cryptos. Hence the mantra: “Not your keys, not your crypto”.
Popular self-custodial wallets
Popular self-custody wallets are MetaMask and LedgerNano. MetaMask is a software wallet that you can download as an extension for the Google Chrome browser.
After installation, the MetaMask software will prompt you to enter a password. The software creates a wallet for you. A 12-word mnemonic phrase will then be displayed to help you get your money back if something happens to your computer. It is important to keep this phrase safe as anyone who finds it will have access to your wallet.
Ledger Nano is a USB-based hardware wallet that works through a companion app. You can buy the wallet from Amazon or directly from Ledger, although the latter is more secure.
After you install the app, you’ll be asked to answer a few questions to ensure the device still has the same security that’s programmed into the Ledger factory. Then the device presents you with a mnemonic that you must keep safe.
As with MetaMask, the mnemonic is the only way to access your funds. After you save the mnemonics, you can move your crypto from exchanges by setting up an account in the companion app for each of the cryptocurrencies you want to move.
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