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My crypto adventures and the blockchain world

I’m no believer in making value out of thin air, and for a long time, I’ve been dismissive of what blockchain technology has to offer to the world. For the past year, I’ve tried to look at it from an objective point of view, and this is what I gathered so far.

Published:  Sunday, 31 January 2021
Author:  Daniel

I first heard of Bitcoin during the 2017 bubble, when everybody was talking about it and how decentralized money will be the new future.

While I was dismissive of it and likened it to the tulip bubble in the 1600’s Netherlands, I still put around 5000 USD of my own money into crypto. Diversified it through a dozen of altcoins with high potential for disrupting the traditional market. Half a year later, all of it was worth less than half in “real money”.

At that point, I drew a few conclusions:

As any normal person would do, I should have sold everything by then and cut my losses short. But being a true idiot and thinking I haven’t lost anything until I’ve closed my positions, I left all my remaining funds as they were. In the back of my mind, I accepted the fact that money was a failed experiment, and I was now free to do what I wanted with it.

2020 and the resurrection of blockchain

I budgeted at the beginning of 2020 around 1000 EUR in “play money”. Money I could afford to lose and “invest” in fringe places I wouldn’t normally do.

Since I already had some funds on Coinbase since 2018, I decided those were just good enough to play more with the crypto market and see what was new.

And, while the 2017 crypto space only offered speculation and the hope of getting rich quickly, the 2020 landscape was more diversified and included a lot more options and real-world applications.

HODLing is not good enough anymore

The first thing I realized was that I should not keep my crypto funds idle. If I just kept my funds locked in a wallet, and others did the same, I didn’t see how the crypto space would ever evolve.

Luckily, there were a lot of options available now. And I liked some of them:

Crypto lending

Crypto lending works in a similar way to p2p lending. A platform connects lenders and borrowers, and interest is earned in the process. The difference is that as a borrower you use your crypto assets as collateral, and if you don’t repay your loan, the funds are recovered automatically from your collateral.

There are many platforms in the crypto space offering lending: BlockFi, Celsius Network, CoinLoan, Crypto.com, Nebeus, Nexo, Vauld, YouHodler, and lots more.

They all offer at least 5% interest on your crypto assets, with various degrees of security and ease of exit.

I’ve finally settled on 3 of them and tried them out: Celsius Network, Nebeus, Nexo.

The first thing I noticed is that the advertised earning rate is not the actual rate you receive.

Celsius Network advertises a 6.61% interest rate on ETH, while I only receive 5.05%. Rates do vary inside the Celsius app, but the ones on their main website are always higher.

Nebeus is a lot simpler, offering 2 crypto “renting” options, similar to a deposit, with a 6.25% and 8.25% interest rate.

Nexo advertises a 12% interest rate on their website, but I only receive 5.25% on my ETH, plus 2% extra in Nexo tokens. I would receive 12% only if I held at least 10% of my balance in Nexo tokens, and only on stablecoins. I like it though, because my assets are secured against fraud, hacking, etc., up to 100 million USD in assets. Nexo also distributes yearly dividends from their profit to all Nexo token holders. And there’s also the prospect of a Nexo debit card, giving me the possibility to actually spend money in the real world.

Liquidity mining

Liquidity mining is an interesting way to earn passive income in the crypto ecosystem. You provide liquidity to a liquidity pool, and in turn, you get rewards with a token specific to that pool, with various degrees of usability. That liquidity pool helps facilitate lending, borrowing, and token exchanges mainly on the Ethereum blockchain, and fees generated from these activities are distributed based on the share you have in the liquidity pool.

The biggest platforms offering liquidity mining (or yield farming) are Compound Finance, Aave, MakerDAO, Synthetix, Uniswap. And there are hundreds more spawning every month.

I have serious doubts most of these bring any actual value to the crypto space and I honestly think most of these are just hype and disasters waiting to happen.

Although liquidity mining was the biggest hype in 2020, it’s still a very dark cloud for me. I’ve only provided liquidity for a month for GeoDB, a platform that promises to democratize personal data and help users get paid by marketers when using their data. I’ve invested in GeoDB on Seedrs, and I was trying to understand how it works and how it could work.

One thing I did learn is that paying things with crypto on the Ethereum blockchain is a lot more expensive than paying with real money. For example, exchanging ETH to GeoDB token on Uniswap did cost me around 10 USD. Creating a liquidity pair for GeoDB on Uniswap cost me another 10 USD. Another 20 USD I had to pay when I dismantled the currency pair and exchanged back Geo tokens to ETH. I did end up with around 100 USD in profits after exiting the pool, but moving funds around did cost me a lot.

4 simple transfers and exchanges in a normal bank account would never cost me 40 USD and most of the time I’d manage to do this almost for free. Crypto space is still far away from a decentralized world where transfers happen instantly and at almost no cost.

Staking

The biggest problem of Bitcoin was that it became the biggest consumer of electricity in the world and hence one of the biggest polluters and contributors to global warming. Early blockchains like Bitcoin and Ethereum were built based on proof of work, and this could also be their downfall sometime in the future.

Newer blockchain protocols like Polkadot, Cardano, Neo, Cosmos, Stellar, and a few hundreds more, were all built on proof of stake. Meaning that if you hold tokens you have the right to validate transactions. If you try to trick the system and alter transactions, you risk losing your staked funds. Hence, you are motivated to do the right thing.

I had to dip my feet into staking as well and I’ve added some funds to Ethereum staking on Binance. My funds will be locked for the next 2 years, so I’ll have to wait and see if it was a good idea or not.

I’ve also moved some of my funds to Elrond network and delegated it. It’s supposed to earn me around 8% per year while in the delegation queue, or 29% if my funds get moved to the active delegation.

Elrond is one of the many new blockchain protocols on the market, saying it can manage tens of thousands of transactions per second and saying it can offer a simple and intuitive way for making crypto space available and attractive to the masses. It only started 3 years ago and only recently managed to release their main network and gather hype around it.

The bigger world of crypto

All the things I’ve tried to far around crypto are just attempts of using my crypto in a way that generates some income. I can’t say I’m really making use of my crypto assets actively, as I’m still planning to convert my funds into “real money” before spending it.

To mitigate this, and start becoming more crypto-friendly, I did some changes.

First, I’ve ordered a debit card from Binance, which means I can now spend my crypto on a day-to-day basis if I want to. Even more, because I hold 10 BNB tokens in my account, I get 2% cashback on all my purchases, which is more than my current credit card is offering.

Second, I’m trying to use Brave browser. It’s an interesting alternative to Google’s Chrome, centered around privacy, with ads blocked and rewards based on websites I visit and ads I decide to see. I don’t earn much with it, but it uses less memory and CPU on my laptop, so I have nothing to complain about.

Third, I’ve linked my Binance account to Travala, and next time I’ll be able to book a trip I won’t use Booking.com, but instead use this crypto-friendly website and pay with crypto for my next vacation.

But this is where crypto and I depart.

There’s a whole world related to crypto that doesn’t attract me yet.

Non-fungible tokens (NFTs) are getting big in the gaming world. CryptoKitties attracted thousands of players trading “unique” pictures of kittens, raising and breeding them. A dozen other games powered by blockchains spawned meanwhile, with various degrees of success. But there’s going to be an explosion in the NFTs space when big game producers will start to partner with blockchain providers and include a decentralized marketplace in their games. Until then, the crypto gaming world will just be dominated by buying virtual land and gambling games.

Selling tickets through a decentralized platform would also help eliminate fraud and provide better tracking on how these tickets are traded further. Startups like Aventus are working on this, although 2020 was not a good year for selling tickets.

Platforms like Blockimmo and MaxCrowdfund try to tokenize real estate and make investing accessible from all over the world. While it sounds interesting and promising, the biggest problem with these platforms is the lack of regulations, hence the lack of trust an investor could invest in them.

And there are many other use cases where blockchains are perfectly suited for the job:

What I learned so far

The crypto world seems to me like a parallel world continuously evolving, until it will reach a critical point and replace the current one. Leaving aside the speculative bubbles around Bitcoin, the potential applications involving blockchain are cool and have the potential to transform the world we live in.

It’s an interesting time to live in, and in a way, I don’t want to be left outside, so I’ll stay in this space until it unfolds.

It wouldn’t surprise me if in 10 years all states would use in a way or another a digital currency, helping prevent fraud, collect taxes easier and provide more accurate detail on the size of their economies.

Meanwhile, I’ll let my funds collect interest and watch how the crypto world slowly leaks into the real world.

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