by Cryptocurrency offers several use cases that allow users to find benefits that were protected by traditional finance. Advances in cryptocurrency-related technologies are only bringing more benefits, pushing the crypto ecosystem towards mainstream use.
A fairly popular use case that is a cornerstone of the DeFi segment is the ability for users to generate passive income through their cryptocurrency holdings. To be clear, passive income started with Proof-of-Stake (PoS) staking, but now covers all DeFi protocols that offer profits to those who lock their tokens in them.
While earning passive income from participating in PoS and DeFi may seem attractive, they are not without their problems.
Problems with the stream of passive income
Putting cryptocurrency on PoS blockchains allows participants to earn rewards in exchange for their efforts in securing the network. While validators are actively involved in securing blockchains, delegates deposit their funds in validator pools. Higher stakes benefit validators more, so those who accept funds from delegates channel a portion of their block rewards as passive income to delegates.
Nevertheless, depositing tokens with validators often comes with lockup periods during which the staked funds remain unavailable, making deposits and rewards illiquid. Moreover, the income of the delegate is overshadowed by the income offered by DeFi protocols. However, passive income from PoS blockchains may not seem like an attractive strategy for those looking to earn substantial sums.
On the other hand, DeFi is known to offer astronomical benefits – depending on the strategies adopted by users based on their risk appetite. For example, crop farming protocols are known to generate an incredibly high APR (annual percentage yield) as passive income for those who bet their tokens on agricultural applications. Tokens can be grown in several layers – each layer generates farm rewards. As a result, the rewards from all of them become very significant.
But this only happens when the market trends are bullish. During downturns in the markets, the passive income offered by DeFi protocols decreases due to falling cryptocurrency prices. Several DeFi protocols often fail in these situations and leave users’ staked and earned profits a fraction of what they were once worth. Sometimes users are left with no value.
The volatility of cryptocurrencies, along with the existing process of staking on blockchains and DeFi protocols, has the potential to do more harm than good to those looking to earn passive income. Issues such as inefficient use of funds, inability to generate consistent profit, and high risk are barriers to using cryptocurrency for income generation purposes.
Fixed rewards for solving problems
Davos Protocol, a state-of-the-art DeFi ecosystem, addresses the specific issues that plague DeFi protocols, offering its users the ability to consistently earn significant returns with significantly lower risk. The most important element of the protocol, DAVOS Stable Asset, is a stablecoin whose value is pegged to the US dollar. Users with stable assets can receive rewards provided by the protocol.
They can participate in the protocol’s staking measures and earn passive income of up to 9% APR. Low-risk revenue generation practices under the Davos Protocol allow DAVOS participants to earn no less than 7% APR, even when markets are in crisis.
The Davos protocol uses liquid PoS staking measures to generate the revenue needed to continuously offer rewards to users. Users staking DAVOS in the protocol’s staking pools acquire it by entering collateralized debt positions (CDP), hedging their DAVOS tokens by up to 150% with MATIC tokens.
Oversecured loans help keep the value of DAVOS stable despite the volatility of the secured cryptocurrency while maintaining full decentralization. Regardless, DAVOS remains capital efficient, enabling users to make huge profits, even after having to hold over-collateralised deposits and borrowing costs.
The MATIC collateral deposited in the Davos protocol will be used in smooth staking applications to generate profitable tokens for the protocol. The Davos protocol currently directs its MATIC reserves to Ankr Protocol’s seamless staking services, where they are further stacked to secure Polygon’s PoS network. In return, the Davos Protocol receives an equivalent amount of ankrMATIC receive tokens, which increase in value with the profits offered by Ankr.
In addition, the protocol generates additional income in the form of interest on loans received from DAVOS borrowers. The aggregate income from the protocol efforts is impressive. The protocol converts its income into DAVOS tokens and distributes them to DAVOS players as rewards, allowing them to earn some passive income.
DAVOS liquidity providers can also earn passively in DAVOS tokens for their efforts. They can access rewards by locking their DAVOS tokens in liquidity pools on Uniswap and Quickswap, some of the most popular DEXs. Additionally, risk-takers can use the Liquidity Provider (LP) tokens they receive as proof of depositing DAVOS into liquidity pools for greater benefits. LP tokens can be staked on profitable farms to generate risky but high APR.
The Davos protocol ushers in the era of fixed passive income associated with cryptocurrencies, rising above the shortcomings present in the current DeFi landscape. Using the ingenuity of liquid PoS staking, it is able to showcase a DeFi ecosystem that can generate attractive returns with low risk. All users need to do is acquire the capital-intensive DAVOS Stable Asset to get started.
Learn more about the Davos protocol Here.
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Disclaimer: This is a paid post and should not be considered news/advice.
