Solving the problem of passive income with Davos
Cryptocurrency brings several use cases that allow users to find benefits that were gatekept by traditional finance. The advancements in technologies surrounding cryptocurrency are only bringing more benefits, pushing the crypto ecosystem toward mainstream utilization.
A use case that is quite popular, acting as the cornerstone of the DeFi segment, is the ability for users to earn passive income through their cryptocurrency holdings. To be clear, passive income began with Proof-of-Stake (PoS) staking but now encompasses the entirety of DeFi protocols that offer yields to those locking up their tokens in them.
While earning passive income from PoS and DeFi participation may seem attractive, they are not without problems.
Problems with a passive income stream
Staking cryptocurrency on PoS blockchains allows the participants to earn rewards in exchange for their efforts in securing the network. While validators are actively involved in securing blockchains, delegators deposit their funds in validators’ staking pools. Larger stakes bring greater benefits to validators, so those accepting delegator funds channel a portion of their block rewards as passive income to delegators.
Nevertheless, depositing tokens with validators often comes with lockup periods during which staked funds remain inaccessible, making the deposits and rewards illiquid. Moreover, delegator income gets overshadowed by that offered by DeFi protocols. Passive income from PoS blockchains may not seem like an attractive strategy for those looking to gain considerable sums after all.
DeFi, on the other hand, is known to offer upsides that are astronomical – depending on the strategies that users adopt based on their risk appetite. For instance, yield farming protocols are known to churn out insanely high APY (annual percentage yield) as passive income for those staking their tokens in farming applications. Tokens can get farmed in several layers – every layer generating farming rewards. Consequently, the rewards from all of them become highly significant.
But this remains the case only when market trends are on the up. During falling markets, the passive income offered by DeFi protocols dwindles due to crashing cryptocurrency prices. Several DeFi protocols often go bust in such situations and leave their users’ staked funds and earned yields a fraction of what they used to be worth. Sometimes users are left with no value at all.
The volatility of cryptocurrency, alongside the existing staking process on blockchains and DeFi protocols, can potentially do more harm than good for those looking to earn passive income. Issues like inefficient usage of funds, inability to generate consistent yield, and high risks involved act as barriers to using cryptocurrency for income generation purposes.
Constant rewards to solve woes
Davos Protocol, a cutting-edge DeFi ecosystem, addresses the specific issues that plague DeFi protocols by offering its users an avenue to constantly earn substantial yields at significantly lower risks. The protocol’s most important component, the DAVOS Stable Asset, is a stablecoin whose value is pegged to the US dollar. Users holding the stable asset stand to receive the rewards issued by the protocol.
They can participate in the protocol’s staking measures and earn passive income amounting to up to 9% APY. The low-risk revenue generation practices followed by Davos Protocol allow DAVOS stakers to earn no less than 7% APY even when markets are in a slump.
Davos Protocol taps into PoS liquid staking measures to generate the revenue needed to constantly offer its users rewards. Users staking DAVOS in the protocol’s staking pools acquire it by getting into collateralized debt positions (CDPs), over-collateralizing their DAVOS tokens by up to 150% with MATIC tokens.
The over-collateralized borrowing helps in keeping DAVOS’ value stable despite the volatility of backed cryptocurrency while maintaining complete decentralization. Regardless, DAVOS remains capital-efficient, allowing users to profit tremendously even after the need for over-collateralized deposits and borrowing costs.
The MATIC collateral deposited with Davos Protocol will be used in liquid staking applications to generate yield-bearing tokens for the protocol. Davos Protocol presently routes its MATIC reserves to Ankr Protocol’s liquid staking services, where they further get staked to secure the PoS Polygon network. In return, Davos Protocol receives an equivalent amount of ankrMATIC receipt tokens that compound in value, thanks to the yields offered by Ankr.
Furthermore, the protocol generates additional income in the form of borrowing interest received from DAVOS borrowers. The aggregated income from the protocol’s efforts lumps up to impressive proportions. The protocol converts its income to DAVOS tokens and routes it to DAVOS stakers as rewards, enabling them to earn assured passive income.
DAVOS liquidity providers, too, stand to make passive income 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, those with affinity to greater risk can use the liquidity provider (LP) tokens received as proof for depositing DAVOS in liquidity pools for increased benefits. LP tokens can be staked in yield farms to generate risky yet high APY rewards.
Davos Protocol is ushering in an era of constant cryptocurrency-related passive income by rising above the shortcomings present with the current DeFi landscape. Using the ingenuity of PoS liquid staking, it is able to present a DeFi ecosystem that can generate attractive low-risk yields. All users need to do is acquire the capital-efficient DAVOS Stable Asset to get started.
Learn more about Davos protocol here.
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Disclaimer: This is a paid post and should not be treated as news/advice.