A little bit about me
Hi, I'm Rohan.
I'm a medical student from the UK with an interest in technology and entrepreneurship, particularly when it comes to Web 3.0.
Apologies for another clickbait title, but today's blog is going to be a quick showcase and overview of a cool little DeFi strategy that I’ve been using as high interest, small savings account, that even most people in crypto don't know about.
I’m gonna go over the play, how it’s actually possible that someone can offer 50% interest on stable coins (digital USD/Euros) and what sort of risks you have to take into consideration when using this.
NOTE: NOTHING IN THIS BLOG COUNTS AS FINANCIAL ADVICE. ALWAYS DO YOUR OWN RESEARCH. THIS IS JUST MEANT TO BE FOR EDUCATIONAL PURPOSES.
A bit about Celo 🖥
Celo is another blockchain, similar to Ethereum or Bitcoin. Its unique selling point is that it’s a mobile-first blockchain. It has all the capabilities of other blockchains such as the ability to send money, create smart contracts but all of the dApps on Celo are built around mobile phones, with much larger, more simple UI/UX designs. Transactions are also super quick on Celo and there are virtually 0 gas fees (transaction fees)
Celo's wallet is a bit different to other blockchains as not only do you have a random string of letters and characters but it’s also linked to a mobile phone number so it makes sending money to contacts super easy.
The main wallet is the Valora wallet. The main currencies that you can interact with on the wallet are CELO, cUSD and cEURO.
Think of cUSD and cEuro as digital euros and dollars. These sorts of currencies are often referred to as Stable coins in the crypto world, as the value doesn't fluctuate and are pegged to 1 USD or 1 Euro.
The actual mechanism of how cUSD and cEURO maintain their pegs is a bit complex but I've included a link here if you want to get into the technical details.
The Play 🏈
The play itself is very simple.
At the moment the Valora wallet is running their supercharger program and giving 50% interest on both cUSD and cEURO. Interest is paid out weekly and all you need is $10 / 10 Euros in your wallet. So essentially you're getting a free $500 and 500 euros for just holding your money in the Valora wallet. You don’t even need to interact with any dApps or anything. This is way better than any savings account that any banks offer (you'd be lucky to get 0.5% these days in the UK). The catch is that this reward only works on up to $1000 and 1000 euros but since most of the people reading my blogs are students, this is probably not going to be an issue for most people.
What I do is with the interest I get from my $1000 cUSD, I convert them to cEURO which allows me to slowly build up some $cEURO and compound the rewards even further.
When you want to cash out into fiat (real) currencies, the easiest way is to convert the cUSD/cEURO into Celo tokens, then withdraw them and send them to an exchange like Coinbase (or Binance, FTX or Crypto.com) then convert the CELO to your fiat currency of choice e.g. GBP/USD/EURO etc.
If you haven't got a Coinbase account, feel free to use my referral link.
You'll get $10 in free Bitcoin when you buy or sell $100 or more in crypto.
https://www.coinbase.com/join/aziz_hre?src=android-link
How is this even possible?
Hang on a second Rohan, my bank is offering me 0.5%. How do these guys offer 50% ?!!
It’s quite simple actually. There’s no lending or borrowing involved. It's all just VC funding as a way to incentivize users. Celo is backed by some big VC funds like a16z and Polychain capital and so have plenty of money to spend to get users onto their platform. They're currently using this massive war chest to give out $100m in funding to projects and developers that build on their blockchain. The thing is, no one knows how long this supercharger program will last but may as make use of the free money whilst you can.
Are there any risks to this?
Like all investments and crypto, there are a few things to be mindful of.
Your keys and Your crypto
When you first make your Valora wallet you'll get a series of random words. This is your seed phrase and it's what allows you to access your Celo funds on the blockchain.
Even if you delete the Valora wallet app or want to use one of the other wallet apps, as long as you have this phrase you can.
If you lose your seed phrase you're fucked. Your funds are lost forever, so make sure you write it down somewhere safe.
No Insurance
Since this is DeFi, there's no government regulator/ customer support to contact in case anything happens to your funds. This, combined with the chance to lose your seed phrase, are the cons of being your own ban like you do in DeFi.
The reality is that unless you're sharing your seed phase you're not really going to get hacked.
De-peg risk
Since cUSD and cEuro aren't exactly backed 1:1 but are based on a complex algorithm and market dynamics, there is always a chance that they can de-peg and are no longer worth $1 or 1 Euro.
Usually, this stuff is very rare and although the price of coins can fluctuate to around $0.98 but quickly recovers. Just something to be mindful of
Currency fluctations
Most people don't use Euros or USD so there's also a chance of some foreign exchange fluctuations. This shouldn't really be an issue with only $1000/1000 euros but something to be mindful of.
The Celo blockchain itself
If something was to happen to the Celo blockchain itself, there's a chance that your funds could get lost or stuck on the blockchain if it slows down.
Again this is quite unlikely as there have not really been any reports of issues with the Celo network and when issues have happened on other blockchains like Solana, the developers usually fix them within the same day
Tutorials
How to set up a Valora wallet
How to add money onto your wallet
🧠Final Thoughts 🧠
I decided to share this strategy because I often get asked, I have a bit of money lying around and I want to get into crypto. What should I do?
I used to recommend buying some actual crypto and just HODLing for the long term but I don't think it's the best play for most people anymore.
Whilst I still believe that crypto is only going to grow and in the long term, the price of BTC and ETH will trend upwards, it's no longer "up-only" like it was a few months ago. The market is maturing and it's very hard to be a passive investor now. You won't make the crazy gains that everyone advertises. We've started to see altcoins decouple from BTC and some altcoins go up even whilst BTC goes down. The market has also corrected heavily and BTC is back to the price it was a year ago (maybe even less now depending on the time you're reading this). The game is now all about rotating capital and moving from one blockchain to the next. That's how you're going to get those 10x+ gains but for most people, this requires too much time and effort.
Celo is a pretty underrated blockchain IMO and most people in crypto don’t even know about this play or use Celo. There are some cool yield farming opportunities on some of the dApps like mobius.money (70% on EURO stable coin pools! ) and with Kickstarter trialing some blockchain-based startup funding on Celo, I expect big things to come to the network. It just needs some more creative dApps to get users onto the platform.
This play using the Valora wallet is a simple way to get a good return with very low risk (perhaps the lowest risk you can get in DeFi), particularly if you're a student or someone with not a lot of money. VCs are literally giving away free money so why not take it.
Hopefully, this blog helped you. If it has given it a share and a like.
Too long? Too complicated? Or anything else. Just leave a comment below and let me know what you think !