While BitcoinVN has offered our user base the opportunity to provide liquidity to the instant swap platform via our staking feature for quite some time, all existing vaults have solely covered various volatile cryptocurrencies.
This option may be great for “fans” and investors of these cryptocurrencies who are seeking extra yield on their holdings. However, if you’re feeling bearish about the market, you might want to reduce your exposure to these underlying cryptocurrencies.
Until now, BitcoinVN did not offer a possibility to save in stablecoins for times of market upheavals.
This has changed as of this month with the launch of our new DAI staking vault.
What is DAI?
DAI is a stablecoin backed by a variety of other assets and investments, which aims to maintain the value of 1 DAI at the equivalent of 1 USD.
Will it work in the long term?
So far, DAI has managed to recover and readjust its strategy at previous depeg events.
However, past performance is not necessarily indicative of future performance!
What are the risks of holding DAI?
DAI initially attempted to be “fully decentralized” and backed solely by digital assets.
In DAI’s case, first and foremost Ethereum (ETH).
Of course, this didn’t work.
As with Bitshares USD, the original “algorithmic stablecoin” before or TerraLuna thereafter, doom is guaranteed.
Math is a real thing, and no matter how much you wish to make it go away with fancy-sounding marketing claims, math ultimately still wins.
In every case without exception for a decade, resulting in the loss of billions of dollars of investor dollars who thought, “Maybe this time math won’t be real!”
(As a sidenote: Anyone who tells you that “Terra Luna could have worked” just discloses their own mathematical inabilities)
What is DAI backed by today?
Nowadays, DAI is backed for a significant part of its holdings by a variety of “Real World Assets.”
What are “Real World Assets”?
If you are the type of person who gets excited and bamboozled by fancy-sounding buzzwords, then this might sound extremely alluring and “innovative.”
However, in practice, a whole lot of the collateral seems to be invested pretty much in “black box” investments.
Danger, danger.
It might work out well if the investment decisions have been conducted with prudence and thorough due diligence.
However, with a decade of experience in this space, we can say that this is far from the standard behavior of how investment decisions are made—especially once easy money becomes available—so we would advise proceeding with caution.
Is DAI a better stablecoin than USDT or USDC?
While DAI claims to be “decentralized” in all their marketing, we cannot confirm that this is the case.
In practice, the backing of DAI seems to be—similar to USDT or USDC—managed by a centralized entity/team, which allocates the capital with the goal of preserving it.
This sounds like a hedge fund?
To a degree, yes.
And while with normal hedge fund investments, you are rewarded with, on average, 80% of the upside, this is not the case here.
You are providing capital for the team to invest with a guaranteed return of 0%.
While taking on the risk that if the team mismanages the capital and conducts bad investments, your initial investment will face losses.
In our opinion, this is not an attractive investment proposition.
What is the upside for me of staking DAI with BitcoinVN?
Ok, now after all the risk disclosures and “buyer beware” reminders:
Why would you want to stake DAI with BitcoinVN?
If you’re “bearish on the market” and want to go “into cash” (commonly still referred to as converting assets into USD and USD derivatives), DAI might, over the short and medium term, be one suitable alternative for doing so.
At the same time, as you stake your DAI, you can start “earning yield” by being provided with a cut from every transaction on the BitcoinVN platform that involves DAI.
The more DAI usage on BitcoinVN increases, the higher the distributed rewards to participants in the DAI staking vault.
How much can I earn from staking DAI with BitcoinVN?
You can view the actual statistics and estimations on our staking page.
Generally, we will only display statistics for vaults with a minimum deposit equivalent to $1,000 in the vault to show representative estimations.
As an example:
If there are only 100 DAI staked and the monthly staking vault distributions equal 150 DAI, the APR would be estimated at 1,800%.
People then get disappointed when they stake 10,000 DAI and see the APR drop down to ~18%. 🙂
Can I withdraw my staked DAI at any time?
Yes.
You can withdraw or convert your DAI to any asset or fiat currency on the BitcoinVN platform at any time.
However, please be aware that unstaking within the first three months comes with a 0.5% unstaking fee. This fee has been implemented to prevent people from toying around and manipulating the APR at no cost.
Generally, we would recommend utilizing the staking vaults only for a mid-term time horizon.
What are the risks of staking with BitcoinVN?
It is a fully custodial solution; you are giving up control of the keys and hence your money.
While we do have, in our view, a decent track record of ten years in business, you do trust us not to abscond with your money.
For any long-term and life savings:
Please get a hardware wallet.
Our colleagues at BitcoinVN Shop are official suppliers of all common types from Trezor, Ledger, Blockstream, and Coinkite, and also have some solid steel plates to back up your seed phrases handy.
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Further reading:
How does staking on BitcoinVN work?
