How can I withdraw my earnings without selling my tokens?

With DeFi, you can withdraw your earnings even if you don’t sell your tokens!

How can I withdraw my earnings without selling my tokens?

How can I withdraw my earnings without selling my tokens?

Grasping market opportunities accurately is a difficult thing to do. You may be able to catch it from time to time, but it is impossible to do so forever.

People want to predict the highs and try to sell for profit before the next bear market cycle. Most people lose money when they do this because they sell either too early or too late.

At the other extreme are those who never sell cryptocurrencies. Why would we sell when we can pledge tokens, right?

For these people, they run into the conundrum that since they can’t accurately predict the market and don’t want to sell cryptocurrency, but in case we convert to fiat now, we could have a large sum of money, enough to change lives!

So what would your choice be?

Well, what if you could use DeFi to solve this problem?

You can explore the possibilities with DeFi, which is probably the most efficient way to use your capital, and DeFi can manage your earnings while giving you peace of mind. It’s risky, though, because DeFi is new territory and you could lose everything you’ve invested in the face of huge smart contract risks.

Nevertheless, DeFi is the future of finance.

The following article will explain how you can withdraw your earnings even without selling your tokens.

Hold on to it

Everyone wants to take advantage of the market, to reap the benefits of holding assets and to improve their lives and the lives of those around us, but as we all know, it’s not that simple.

Market timing is difficult. Some say it’s impossible to do so.

In a bull market, everyone wants to predict the highest point. But the following may happen.

  1. what will happen if it is not the highest point?
  2. what if the bear market never comes?
  3. what if the market trend really proves that cryptocurrencies have become mainstream and that this trend will continue?
  4. Will I be able to buy ETH in the future at the current sell price?

The DeFi app can help us answer these questions.

Can we capture the value of assets through the DeFi app without actually selling them? Based on the combinability of the DeFi app, I believe there are many viable ways to add some counter-risk funds to your bank account while retaining most, if not all, of your assets on Ether.

The following will describe a theory-based strategy by which one is able to never sell ETH or other assets on Ether while still capturing the internal value of the assets.

If you are like me and are afraid of selling super solid tokens, this strategy will allow you to withdraw your earnings and deposit them in your bank account without selling any ETH.

It’s all not magic, it’s DeFi!

This strategy is currently being developed. Just like with de-banking, everything is a risk. You can lose the money you put in. The strategy is not for everyone. deFi is growing fast. Things may change and this strategy may no longer work. But it works well today.

All things considered, this strategy becomes viable only after the following happens.

  1. Ethernet needs to be merged with the beacon chain so that BETH can become the same as ETH.
  2. Rocket Pool and rETH have to come online at the same time.
  3. rETH will be accepted as collateral by MakerDAO.

The above, although only three points, are all very reasonable goals that we need to achieve in order for this strategy to be implemented effectively. All of them may happen in the next 6-12 months.

This strategy is implemented in the following way.

  1. pledge ETH to Rocket Pool and mint rETH.
  2. Deposit rETH into MakerDAO.
  3. Borrow DAI via rETH.
  4. Deposit DAI into Alchemix.
  5. Borrow alUSD in Alchemix.
  6. Convert DAI to USDC for fiat currency and deposit it in your bank.
  7. Improve your life and the lives of those around you
  8. Wait patiently
  9. Pledge your ETH to Rocket Pool

Rocket Pool is a decentralized pledge service provider and an ethereum-based application that matches ETH node runners who need ETH with ETH holders.

What makes Rocket Pool unique compared to other pledge service providers is that it adheres to the core principles and values of Ether in terms of decentralization, de-trusting and no licensing required, which is why we can pledge ETH to the Rocket Pool protocol with confidence. This protocol is deeply rooted in Ether, and runs smoothly in order to get rid of human dependency.

The simple reason behind why we want to hold rETH or any token generated by pledging ETH is that rETH includes a pledge reward. In the case of ETH, the value of rETH rises over time. rETH is the upgraded version of ETH, capable of integrating rewards into a single asset. The value of rETH rises faster if the number of ETH pledged by an Ethernet verifier increases.

This makes rETH a very competitive pledged asset, even beyond ETH itself. Because rETH is an ETH, but it is an ETH derivative, its supply grows faster than ETH by capturing the pledge rewards of ETH.

  1. Deposit rETH into MakerDAO

If Rocket Pool’s code is correct, rETH should be a very popular collateral type in every DeFi application that accepts ETH.

If the application accepts ETH collateral, that application would also be interested in rETH-like derivative assets. If the smart contract risk can be controlled, i.e. the possibility that the Rocket Pool may be vulnerable or exploited, then rETH should actually have better risk parameters than ETH, as it was originally designed to be better than ETH.

We should expect some assets like rETH to be added to MakerDAO as collateral, which means that the collateralized ETH can be used to borrow DAI!

rETH is a derivative based on ETH, so rETH is usually better as collateral with better risk parameters. This means lower collateral ratios and stabilization fees, but these are determined by the manager of MKR.

  1. Borrowing DAI via rETH

Once MakerDAO can accept rETH as collateral, rETH holders can collateralize in that application if Rocket Pool usage is very high, which I believe is likely to happen and Rocket Pool usage will be high in the future.

In this strategy, we specify borrowing DAI as to take into account the DeFi application involved in the next step.

The only type of USD collateralized asset that Alchemix accepts is DAI, so it makes sense to borrow directly from the issuer of DAI. aave and Compound also have their own advantages, as for borrowing DAI and collateralizing rETH, these platforms can offer different attractive rates.

All channels that can pledge rETH and borrow DAI are able to implement the strategies mentioned above.

But using Maker directly eliminates the need for intermediary applications for rETH and DAI conversions, and it is often considered the most reliable and secure protocol. Implementing the strategy above requires a long-term view and therefore a protocol with high security, of which MakerDAO is a good representative.

  1. Deposit DAI in Alchemix

Alchemix is an ethereum credit tool, and other similar tools are available in applications such as Compound, Aave and Maker. What makes alchemx different is that Alchemix can offer USD loans with USD as collateral.

This is key to the strategy. Essentially, you are borrowing DAI through MakerDAO to arbitrage based on the maximized returns Yearn can generate, which generates a risk-free rate, the latter returns are denominated in USD and are compatible with Alchemix’s return maximization engine.

The DAI you deposit into Alchemix is deposited into Yearn, which maximizes returns in the DeFi space.

  1. borrowing alUSD through Alchemix

After your DAI is deposited to Alchemix, you can withdraw 50% of the deposit value in alUSD. alUSD is a synthetic stablecoin of Alchemix and can be exchanged 1:1 for DAI.

Your DAI deposit is transferred to Yearn, which is able to find and capture earnings at DeFi. The proceeds generated automatically repay your alUSD loan. alchemix automatically earns the proceeds generated by depositing DAI and does not charge interest on the USD loan, it only repays your loan.

Alchemix charges a small fee to manage this process, and you get a free loan that you never have to pay back, just wait long enough.

You do not have to repay this loan. You can also choose to repay the loan if you want to get the proceeds generated by the DAI collateral faster, or, you can simply wait for the proceeds from your DAI deposit to repay the alUSD borrowing.

  1. Convert alUSD to USDC and deposit the fiat currency in the bank

Once you have deposited your DAI into Alchemix and borrowed USD against it, you can convert alUSD into USDC. this USDC can then be transferred to a bank account and, finally, your bank balance goes up, all because the ETH you have deposited in DeFi over the past months and years has generated significant gains.

  1. Enhancing your life and the lives of those around you

You make money through cryptocurrency and are able to speak to others about how you did it. You now have cash in the bank. While using traditional banks is not a popular thing to do in crypto circles, in the physical world we live in, this money is liquid and can help change lives.

You need to use this money responsibly, and others don’t have the opportunity to seize the opportunities that the crypto revolution brings like you do.

Money has the power to change the world, and with that power comes the responsibility to use it for good, to improve your own life, and the lives of those around you, and to improve the quality of life for all others.

  1. Patience

The last step of this strategy is the most difficult to do, before explaining this step, let’s review the current positions.

  1. rETH deposited with MakerDAO as collateral.
  2. borrowing DAI from MakerDAO to generate interest.
  3. deposit as DAI in Alchemix to generate income from Yearn.
  4. Borrow alUSD from Alchemix and buy a Lamborghini with USDC.

The position now has the following three characteristics.

  1. rETH is a risk-free, interest-bearing ETH derivative. Its value is based on the huge exposure to the growth of the Ether economy.
  2. DAI is pegged to the US dollar, which will depreciate in line with central bank monetary policy.

You borrow DAI using the “risk-free rate” protocol MakerDAO, and make the DAI available to Yearn, the revenue maximization engine, where you can repay the loan based on the difference between MakerDAO interest and Yearn revenue, with time being the only input. This is not pure arbitrage, you get a higher return by taking higher risk.

ETH as collateral

Your collateral is ETH, which is not just ETH, but a derivative of ETH that captures ETH pledged earnings and miner extractable fees. In DeFi, the inherent scarcity and usefulness of this derivative may make it the best collateral in the world.

US Dollar Debt

You own U.S. dollar debt. The U.S. dollar is heavily influenced by central bank monetary policy, as it is necessary to control the size of global debt. Central banks and the fiat financial system depend on debt devaluation for their operations.

Therefore, you will have many advantages if you obtain dollar debt through scarce digital assets as collateral. On a theoretical level, dollar debt will slowly depreciate in real terms, while the value of the collateral will at least rise in nominal terms, if not in real terms.

Active repayment

In addition to devaluing the USD debt and increasing the value of the rETH collateral, Alchemix is actively repaying your USD debt. This process will short the dollar and long crypto assets, and you’ll be able to achieve your goal slowly, but there’s also a solid income engine in Alchemix that generates income at a much faster rate.

All you have to do is wait. The debt will slowly disappear, the collateral will appreciate forever, and there is a gain machine that accelerates loan repayment.

Loan payoff

The biggest advantage of this strategy is that you have full control of the liquidation risk.

You never actually sell the DAI after you borrow it from MakerDAO. you still have ownership of the borrowed money. The 10,000 DAIs you borrow from MakerDAO are deposited directly into Alchemix and do not lose ownership.

The worst case scenario is that you only get 50% of your DAI back from Alchemix.

  1. Borrow 10,000 DAI from MakerDAO.
  2. Deposit 10,000 DAI in Alchemix.
  3. Borrow $5,000 in Alchemix.
  4. Spend $5,000.
  5. The price of ETH plummets and you need to take out emergency funds to maintain rETH collateral in MakerDAO.
  6. You close the position in Alchemix and get 5,000 DAI as 10,000 DAI is used to pay off the $5,000 debt.
  7. You immediately repay 5,000 DAI of the 10,000 DAI MakerDAO loan.
  8. You should now have enough funds to maintain the collateral in Maker. You can decide to liquidate the rETH stop loss, or continue to hold.

The combination of MakerDAO and Alchemix is a very beneficial risk management tool even if ETH prices plummet, and if managed properly, you can capture the internal value of ETH without selling it. One of the spin-offs is the ability to earn more ETH through rETH thanks to Rocket Pool!

The most important thing is that DeFi is modular, which means that the Lego in the structure can be interchangeable with.

  1. MakerDAO can be swapped for Compound, Aave, Cream, Liquity.
  2. rETH can be swapped for ETH, stETH, WBTC and other DeFi tokens.

The core of the strategy is Alchemix, as the protocol is self-repaying for loans, which is the most efficient way to borrow USD capital today.

There are a growing number of options for leveraging the value of DeFi digital assets. deFi capital is becoming more efficient and a better risk management tool that would not be possible in the traditional financial space.

This is a core feature of the new paradigm of finance emerging in DeFi and ETH. with DeFi capital efficiency generating competition and ETH getting the most exposure from that competition, I see many new ways to increase bank account balances in the future while increasing ETH on Ether.

All this requires is good risk management, de-trusted DeFi apps and time.

I hope to never sell my tokens.

This article is from Bankless

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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