Practical DeFi: How to generate passive income?

14 June, 2021

In these moments that we are living, we can fall into the feeling of mistrust in the structures we know, the entities that control finances, our governments and see blockchain, and especially decentralized finance, as an opportunity.

Outside of ideals or philosophy, we think that we are at a time where technology already offers security, transparency, accessibility and enough automation to really see a change in something as extremely important as being able to execute actions as if we were a bank.

We have already talked about the operation of Lending platforms, DEX platforms, swaps, how Flash Loans work and we have shown you from Block Impulse how we are “playing” with them, already on the mainnet.

Our idea is to open up a tool step by step so that you can explore this world and its possibilities, which are not few.

All theory, but …

Why don’t we go in to play? How can i play? How can I earn passive return using DeFI decentralized finance?

We are already thinking of creating a platform in this sense but for now we are going to indicate some steps and platforms so that you can start using your coins.

Step number 1: Create a wallet.

Almost all projects are non-custodial and at no time do they own your money. They simply obtain it, you in your wallet have another currency generating interest that are the guarantors of your loan. Therefore, without going deep, we need a wallet. Our advice is to use Metamask.

It is a chrome extension that works in other browsers, the truth is very simple and very friendly.

Here is a step-by-step guide on how to install it in case someone has a problem: https://medium.com/@shuffledex/c%C3%B3mo-instalar-y-usar-metamask-para-enviar-y-recibir-ethers-95e732503cc3

Metamask can hold ETH and Ethereum network tokens (all erc20s). Everything from the same public address, if we want to send tokens and they do not come out automatically we can create the option to check that token and our balance will come out.

Having Metamask (also others) we can make use of many platforms without logins or passwords just by saying that we want to connect, very simple.

Step number 2: Get crypto

This step can be done in a thousand ways. The most comfortable thing is to buy ETH from €, in different exchange houses (in Spain you have several well-known ones) and send it to your metamask address.

Step number 3: Evaluate which Lending we like the most.

Here we can see if we are interested in a CDP in Maker, Uniswap … Our choice for simplicity will be AAVE. With 3 simple clicks you are already inside and have full access to lend your money, request a loan, know the different options.

We enter https://aave.com/and we give Access

We chose to connect with our Browser Wallet, in this case metamask with some cryto.

We connect to the platform. This will be our account from now on, to enter or access our balance, finances, we will need to have access with our open metamask wallet.

Go to the menu on the left and enter Deposit. There we can already choose the currency that we have (the platform will show it to us automatically through the interconnection with metamask) and be able to put it to generate income by lending it.

We can also see the entire interest graph depending on the currency, we are also interested in lending another, the historical graphs … we will see this later.

In my case I have put more than 80 DAIs to lend, and I have also activated the button to use it as collateral in case I want to borrow, which is as simple as going to the Borrow button and see what they offer me without compromising my financial health .

We can also choose to return the money in a variable way (the interest is lower but it adds up over time) or in a stable way (it is more expensive but you guarantee a percentage).

There are many ways to value each of the platforms although they all start from the same base.

Possible step number 4: Exchange my ETH for another crypto before lending on AAVE or another platform

We have many Swap platforms, which do the same, from our metamask wallet, we can instantly search for the best DEX and make the change, for example, to DAI.

For example we enter 1linch https://1inch.exchange/

https://1inch.exchange/

As simple as pressing connect wallet, giving access to metamask, putting aside the amount of ETH to change (it is always good to keep something since all the sending of coins from our wallet will need GAS, and that is paid in ETH) in another the DAI that you are going to receive and you unlock the change. You click on create Swap when you verify in which exchange it works best and directly in your metamask wallet you will have the change done.

Now we access AAVE again, we enter deposit and we will have the option to deposit DAI.

To wait for your passive returns …

In the next post we will see how we can take other paths, such as leverage in decentralized exchanges, request a CDP, execute a Flash Loan, buy a token with which you give access to a trader to take control of your investment, play the lottery. ..An infinity of options.

I hope that little by little you will like this world as much as we do.

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