While most crypto investors tighten their belts in the current bear market, crypto millionaires have benefited from innovative decentralized finance (DeFi) products, including Uniswap, Aave, PancakeSwap, DAO Maker, and auto-wallets — repositories like MetaMask.
The bear market wreaks havoc on the average crypto investor. However, why not learn how professionals in the decentralized finance (DeFi) industry are making millions using tools you may not have heard of?
Crypto Millionaire Tip #1: Find Uniswap Gems
Uniswap is a decentralized exchange (DEX) based on the Ethereum blockchain that offers DeFi enthusiasts the opportunity to earn transaction fees by contributing to its liquidity. Anyone can create markets by depositing both assets of a trading pair into a smart contract, removing the middleman in creating liquidity.
The DEX charges a 0.3% commission on all trades. Thus, liquidity providers earn passive income from these fees, which is proportional to the amount of liquidity they provide, less any impermanent losses.
Suppose you deposit 4 DAI and 4 USDC. The ratio between them is 1:1. Any change in the price ratio between the two cryptos results in a transient loss. Liquidity providers prefer high trading volumes and low transient losses.
Sometimes traders create markets with lesser-known altcoins, called “gems”. These are crypto assets with a market cap of less than $20 million, but with strong fundamentals and the potential for a 100x price increase. Traders can use Uniswap to trade ahead of the market, before these coins are listed on crypto exchanges and rise in price.
A crypto trader turned $800 into $1,000,000 by trading assets less than a day old and making a profit in less than 3 hours. This trader discovered these assets via Uniswap list bots and Telegram pre-sale marketing.
Crypto Millionaire Tip #2: Aave
To generate passive income, crypto millionaires also use Aave, a borrowing and lending protocol that allows dedicated users of the DeFi platform to earn passive income.
Lenders who deposit money into a smart loan contract earn interest that is determined by an algorithm. Borrowers, for their part, deposit a crypto asset collateral in a smart loan contract to earn returns or borrow other cryptocurrencies. They can generally only borrow assets up to 75% of their collateral.
One way to use this to their advantage is to deposit an asset like Bitcoin, which has low returns in DeFi due to its large ownership, to borrow a stablecoin. Traders can then earn higher returns on stablecoins by depositing them in a DEX liquidity pool. Aave also offers an 8% annual rate for borrowing the USDT stablecoin.
If your collateral drops below a certain threshold, Aave will liquidate your position and seize your collateral. Because of this liquidation risk, many people do not want to participate in this activity.
Crypto Millionaire Tip #3: Yield Farming
Another more complex strategy used by crypto millionaires is yield farming, which can be done on a decentralized exchange like PancakeSwap.
On PancakeSwap, traders earn tokens for liquidity providers by contributing a crypto pair to a liquidity pool. So, with the LP (liquidity provider) token, they can enter a FARM on the DEX, i.e. a yield farm, and where they can stake their LP tokens with other traders to earn annual percentages between 2% and 200%. They are then paid in CAKE tokens through a “harvest” or “haversting” process.
To maximize revenue, CAKE Tokens can be harvested automatically or manually and reinvested in the same pools using Syrup Pools.
Crypto Millionaire Tip #4: IDOs
An Initial DEX Offering (IDO) is the new method discovered by crypto millionaires. A decentralized protocol raises money from investors by issuing a token, which can represent a newly listed asset on their platform.
DAO Maker is an incubation and fundraising platform for new decentralized autonomous organizations and distributes DAO tokens to investors in these projects. DAO token holders, who are proven investors, can participate in an IDO Strong Hold Offer (SHO) token sale.
Since launching in 2021, the DAO token has created returns of up to 41x for early investors.
Crypto Millionaire Tip #5: Self-Keeping Wallet
To use DeFi products, it is often necessary to have a self-custodial crypto wallet.
A crypto wallet is software or a device that, in short, stores strings of unique numbers and letters called keys that authorize your access to cryptocurrencies. Each wallet contains both a public key and a private key. The public key is used to send cryptocurrencies to someone, while the recipient can use a private key to spend cryptos in their wallet.
When a user wants to spend cryptocurrencies in their wallet, they present a public key and a signature created from the private key. These two pieces of information tell the blockchain network that the issuer owns the funds they use.
While some crypto users relinquish control of their keys to companies like Coinbase, Binance, or Kraken, users who are heavily involved in DeFi generally retain control of their keys. So they store them in a self-custodian wallet instead of a custodial wallet managed by a company.
The responsibility for the control and management of these keys then lies solely with these users. If they lose their private key, they lose access to their crypto because they cannot create a public signature to spend the digital assets they receive. Hence the mantra “Not your keys, not your crypto”.
The most popular self-custodial wallets
The most popular self-custodial wallets are MetaMask and LedgerNano. MetaMask is a software wallet that can be downloaded as an extension to the Google Chrome browser.
Once installed, the MetaMask software will ask you to enter a password and create a wallet for you. It then displays a 12-word mnemonic that will help you get your money back if something happens to your device. It is critical to store this phrase securely, as anyone who finds it will have access to your wallet.
Ledger Nano is a USB-based hardware wallet that works through a companion app. You can buy it from Amazon or directly from Ledger, although the latter is a safer option.
After installing the app, you will be asked to answer a few questions to ensure that the device still has the same security programmed in the Ledger factory. The device will then give you a mnemonic code to keep in a safe place.
As with MetaMask, the mnemonic is the only way to access your funds. After saving it, you can move your crypto from the exchanges by creating an account on the partner application for each of the currencies you want to move.
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