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Top 5 DeFi projects to make you profits in Crypto

Date: 2022-07-23

Crypto projects

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Real yield projects are a sound way to success in DeFi

In Crypto, you only get that far before a few risky trades or investments destroy your portfolio.


It’s hard to earn money in Crypto

You are tired of reading about uber-successful traders and investors in the crypto space boasting about how rich they are and how quickly they “made it”.

Far from the truth, these guys and gals represent only 0.001% of the crypto investment space — considering their boasting isn’t bullish*t in the first place— and the vast majority of traders, even the most thorough of the bunch, end up losing money in the long run.

However, this is not an endemic pattern of crypto investing, the vast majority of investors and traders, especially day-traders, lose money across all markets.

Explicitly, just by buying an S&P 500 index fund, in the long term, you’ll be insanely more profitable than 95% of active investors and traders.

The truth is that investing is far easier than people imagine; the problem is that the “easy path” just simply takes too long — at least 10 years to see a worthwhile return from your investment — a path with a timespan so long that people’s greediness and impatience just don’t let them go that way.

It’s fair to say that getting rich isn’t that hard if you put in enough patience and time, but to the majority of investors the temptation of making just that ONE trade that will make them insanely rich is too strong to pass by. However, these trades nine out of ten times go sideways and make people lose money, a lot of money.

The problem of margin investing

The issue with crypto investors is that margin investing represents a high percentage of trades in the space, much higher than in other markets. In short, crypto investors tend to be immensely leveraged.

But what is margin investing?

Well, investing on margin is when investors borrow money to increase the exposure of their trades — investing with not only their money but also the borrowed one — multiplying their profits if successful…and multiplying their losses if the trade goes sideways.

What’s more, margin trades always involve a liquidation threshold, a threshold set up by the lender to protect itself; if the value of the underlying asset drops below that threshold, the trade is automatically liquidated. That is, the investment is sold at a loss and the investors eat up that loss entirely.

Have you ever wondered why cryptocurrencies have such great volatility and drops?

That’s because liquidations are automatically executed, each liquidation creating even more downward selling pressure on the value of the cryptocurrency, igniting new liquidations and creating a liquidation cascade, sometimes taking the value of the cryptocurrency to zero.

Bottom line, please don’t margin trade, the risk is just too high for the potential reward, and 99% of the time you will be making a bad trade that will destroy your hard-earned wealth.

Engaging in DeFi can be a more sensible approach to value generation in crypto

Happily, there are other ways you can make money in crypto. For instance, you can get engaged in DeFi, and make use of the DeFi protocols to earn money without having to make risky trades; by lending money to others, or depositing your money to provide liquidity to these protocols.

However, the protocols that offer very attractive yields are normally offering these yields by engaging in super risky trades or, in some cases, basically using your funds to pay older investors, and paying you with the funds of new ones, what is known as a Ponzi. If you want to read more about these examples, I wrote an article about it recently.

But surely there must be a sustainable way to earn wealth in crypto, right?…(please say yes)

Well, today is your lucky day!

There are, indeed, DeFi protocols that do offer yields that come from sustainable sources, also known in the crypto community as “real yield”.

But what is “real yield”?

‘Real’ yield is yield derived from the obtention of ‘real’ revenue from DeFi protocols, in a way that the profits are derived from an actual, sustainable business model that incentivizes users to not withdraw their money and fosters an ecosystem of true value generation.

That is, instead of giving investors yields from “magical” sources, yields are handed out from proper, protocol revenues, just like a dividend in the case of a public company is obtained from the profits of said company.

Potentially attractive DeFi protocols for “real yield” exposure

Consequently, I’ve prepared a list of 5 projects — although there are many more — that hand out their yields based on protocol revenue.

Disclaimer: This top 5 isn’t an investment recommendation. I am not a financial advisor and I am personally not invested in any of these projects, as I myself haven’t decided if they are good investments for my portfolio.

Consequently, this information is intended to alert readers of the existence of these and other “real yield” projects, for you to then carry out the necessary research to acknowledge if they are suitable investments for your portfolio based on your risk management strategy and investment capacity.

It would be particularly illogical to invest in these projects based on this article as I haven’t decided if they are worthwhile investments in the first place. This information is meant to be educational, not advisory.

But how do we know if a protocol offers “real yield”?

Real yield can only occur when:

Revenues > Token emissions + Operating expenses

That is, revenues must be higher than the sum of tokens emitted (the more tokens in supply, the less valuable their unitary value), added to the proper operating expenses of the protocol.

Please let me know in the comments if you wish for me to prepare a guide on how to measure revenues and token emissions for a specific protocol.

The list

  • DyDx ($DYDX token)

DyDx is taking on the DeFi space with a protocol that allows for perpetual trading.

DyDx, which stands for “decentralized exchanges by decentralized protocols,” is an exchange that promises to provide users with the ability to trade perpetual contracts. The protocol is based on the Ethereum blockchain and utilizes smart contracts to enable trading.

The DyDx protocol is designed to allow users to trade without having to trust a centralized party. The protocol also includes a number of safety features, such as an emergency shutdown mechanism, that are intended to protect users’ funds in the event of a hack or attack.

Revenues last 90 days: $64.8 million

Token emissions last 90 days: $35.78 million

Unless operating expenses for the last 90 days were above $29 million, which is pretty safe to say it isn’t the case, DyDx has some solid revenues that uses to pay investors.

  • Synthetix ($SNX token)

The Synthetix protocol is a decentralized finance protocol that enables the creation and trade of synthetic assets. The protocol is powered by the Ethereum blockchain and utilizes smart contracts to mint, burn, and exchange synthetic assets.

The Synthetix protocol allows users to trade a wide variety of assets, including commodities, fiat currencies, cryptocurrencies, and more. The protocol is designed to be simple and user-friendly, making it accessible to a wide range of users.

Revenues last 90 days: $22.9 million

Token emissions last 90 days: $7.1 million

  • MakerDAO ($MKR token)

Yes, I know, I just recently did a post in which I alerted of the dangerous situation MakerDAO was in — even at the risk of disappearing if the OFAC sanctions their USDC wallet.

However, as I clearly stated in the above disclaimer, this is not an investment list, I am objectively showing examples of DeFi protocols that offer yields derived from protocol revenues, not the protocols you should be investing in, so please get off my back will ya’?

MakerDAO offers a variety of services including lending, borrowing, and exchanging cryptocurrencies. The company’s native token, Dai, is pegged to the US Dollar and can be used to stabilize prices in the event of volatility.

Revenues last 90 days: $6 million

Token emissions last 90 days: 0

  • GMX ($GMX token)

GMX is a decentralized spot and perpetual exchange that supports low swap fees and zero price impact trades and lets you trade top cryptocurrencies with up to 30x leverage directly from your wallet.

It is available both on Arbitrum (Ethereum Layer 2 protocol), and Avalanche.

Revenues last 90 days: $4.6 million

Token emissions last 90 days: 0, doesn’t offer token incentives

  • Illuvium ($ILV token)

A Decentralized Ethereum RPG. Illuvium is a blockchain game with a play-to-earn structure wherein users can earn in-game rewards in ILV tokens by engaging in competitions and quests.

Disclaimer: This is not a DeFi protocol but a blockchain game (you need to play to earn). However, you can still earn money from it by staking, so I’ve included it as another example.

Revenues last 90 days: $73.3 million

Token emissions last 90 days: 0, haven’t found any token incentives offerings

On a final note

There are a huge deal of protocols that have understood the importance of creating sustainable revenue models, to not only continuously generate healthy interests to hand to investors, but sustainable revenue models also foster and retain their communities, making them even more secure and feasible in the long term.

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