Best DeFi protocols for passive income

[legrant]

Wrong. USDT is a stablecoin backed by an equivalent in usd, treasury bonds and other papers. DAI and other are backed by a basket of other cryptos.

Wrong. You're confusing tokens. I'm talking about UST, not USDT, they're completely different tokens on different blockchains. USDT is backed with what you said, UST is an algorithmic stable coin.

DAI is backed by other cryptos (mostly ETH), but also other stable coins such as USDC.
USDC is backed by USD and US bonds
BUSD is backed by USD
USDT is backed by USD (less than 4%), corporate and government bonds, and other commercial papers. USDT is the least transparent.

 

[JackAlabama]

Ponzi that survived for 100 years* and is backed by military, ships, etc.
Meanwhile Crypto can't even go a few months without imploding

Let's see how many of these DeFi ponzis can survive after another 30% drop

100 years is wrong claim as that Ponzi had several changes already.
1971 was a "new version" due to the removal of Gold and changes were made after end of war in 1945 as well

Cryptocurrency is when following your analogy backed by the some of the smartest people with a very high technical literacy voluntarily coming together which dwarf the military warheads stuck in the last century where everyone is just stuck there by force or due to no alternative in the market economy.
Further, force and torture do not scale especially not in a time where wealth is not determined by land mass but "just" the power to innovate and the productive capacity of people. What good is your military when the whole wealth of a place is its innovation capacity and the creativity of its people? You can not effectively steal it.

Only 30%? I had 0 fatalities and they even survived a 50%+ drop in market including the bear market last summer. You just gotta know what you do.

So, the monetary system and also the political one is due to an extensive overhaul due to technical shifts. That is no mystery nor voodoo magic by some aliens but just the way of history. Big changes in technology are the precursor of big changes in society.

 

[EuroKiss]

Wrong. You're confusing tokens. I'm talking about UST, not USDT, they're completely different tokens on different blockchains. USDT is backed with what you said, UST is an algorithmic stable coin.

DAI is backed by other cryptos (mostly ETH), but also other stable coins such as USDC.
USDC is backed by USD and US bonds
BUSD is backed by USD
USDT is backed by USD (less than 4%), corporate and government bonds, and other commercial papers. USDT is the least transparent.

yeah, forgot we were talking about Terra, they have similar algorithmic stablecoins for other fiat as well.

 

[MiddleEuroAsia]

For serious crypto "passive" investments, unfortunately, I still use "centralized" platforms to invest such as nexo, youhodler, celsius, blockfi...etc, but for my playground money, i have 2 options:

1- gamble it ( I loathe traditional gambling )
2- put it into defi projects.

and I obviously chose number 2, and I have made some great money but I lost some too, some projects that I like is pancakeswap, SharedStake, DAOventures plus Yieldly on Algorand because it's cheap.

but all on all, I'm still very very careful with Defi cause you find that a LOT of projects post nonsense filled with buzz words in their whitepaper and no actual solutions, plus it's some times frustrating (and difficult?) to find a community and devs that cares about the underlying technologies rather than making quick profit.

So I like the concept behind defi, and the technology behind it, but I'm not that interested in the 100s of immature projects that just appear out of nowhere with "Disruptive" and "ground breaking innovations"

 

[SusanSharandon]

At least in the case of a stock you can buy a piece of a company that actually does something useful and is not just a ponzi

Actually as long as they don't pay dividends, they are ponzis as well. You don't get any voting rights in the company or any share of the profit, you are just hoping somebody else buys them from you at the bigger price

 

[JackAlabama]

Actually as long as they don't pay dividends, they are ponzis as well. You don't get any voting rights in the company or any share of the profit, you are just hoping somebody else buys them from you at the bigger price

Yep, and they occasionally dilute the shares at will too and issue new shares.

 

[legrant]

Actually as long as they don't pay dividends, they are ponzis as well. You don't get any voting rights in the company or any share of the profit, you are just hoping somebody else buys them from you at the bigger price

So Google, Amazon, and Facebook are a ponzis according to your logic?

 

[SusanSharandon]

So Google, Amazon, and Facebook are a ponzis according to your logic?

The companies themselves? No, they have a business model that brings in profit. Their stock? Yes, absolutely. When you buy (or receive) their stock, you get absolutely nothing else in return except the hope that you can later sell at a higher price. There is not even a buy back guarantee price (*correction, for google there seems to be a buy back price of 0.001$/share). No dividends, no nothing. Pure Ponzi.
Check out this guys channel, his book is pretty good also.

 

[Silvio]

Actually as long as they don't pay dividends, they are ponzis as well. You don't get any voting rights in the company or any share of the profit, you are just hoping somebody else buys them from you at the bigger price

Technically you do get voting rights in proportion to the % that you bought. If you don't hold enough %, you won't get a seat on the board. The board represents the biggest shareholders and if you don't like how the board is acting or you think their interests differ than yours, you don't have to buy the share.

Ponzis are scams that are backed by nothing, whose whole reason of buying them is to sell them later because they have no intrinsic value (= most crypto coins bar a few). A share in a company is backed by the earnings stream that the company generates. For example Google is one of the top cash generative businesses on the planet and if for some reason they decide to close their company, all shareholders are entitled to their relative % of the assets of the company, after the bondholders are paid. By buying a share % you are a partner in a company- a minor partner but a partner nonetheless.

Are there scams and pumps and companies with no value and no earnings that explode in price? Tons of them.
Plenty of stocks are nothing more than a pump and are run by crooks, dilute their shares and don't produce any earnings. You don't have to buy any of these shares.
Also you probably shouldn't buy any single stock as an investment, as any single stock can crash regardless of the earnings it generates (i.e. MSFT in the 2000s, AMZN, etc).

And just a reminder for all the guys here proclaiming a market crash every Monday, and saying one should buy gold\farmland\fish\magic-internet-money:

 

[SusanSharandon]

Technically you do get voting rights in proportion to the % that you bought.

Take for instance Google, who has two stocks: GOOGL (with voting rights) and GOOG (without voting rights), they both trade at more or less the same price, the difference being negligible. I'm not an expert in stocks, but I don't know of any case in recent history when the average holders of a stock exercised their voting power in a meaningful way, nor do I know anyone who buys them for that power alone. Even when the voting power is there, it's usually limited in some way, for instance in FB the majority of shares are controller by the ceo.
Regarding the intrinsic value argument, I'm not sure how much one would get paid on the dollar if google closes its doors (if anything at all)?.
I'm happy to change my mind if I'm wrong, I've been thinking about this topic quite a lot in the past few months, and the only conclusion I have reached is that non-dividend paying stocks are Ponzis.
It's quite fascinating (in a negative way) to think of some time in history when the first non-dividend stocks started to be distributed. How did they even market that thing? 'Hey, I know everybody else is paying you back a percentage of the profit for your investment, but how about we pay you absolutely nothing? We won't even guarantee a pay back price if you want to sell it to us. But maybe somebody else will buy it from you in the future at a higher price!'

 

[legrant]

Take for instance Google, who has two stocks: GOOGL (with voting rights) and GOOG (without voting rights), they both trade at more or less the same price, the difference being negligible. I'm not an expert in stocks, but I don't know of any case in recent history when the average holders of a stock exercised their voting power in a meaningful way, nor do I know anyone who buys them for that power alone. Even when the voting power is there, it's usually limited in some way, for instance in FB the majority of shares are controller by the ceo.
Regarding the intrinsic value argument, I'm not sure how much one would get paid on the dollar if google closes its doors (if anything at all)?.
I'm happy to change my mind if I'm wrong, I've been thinking about this topic quite a lot in the past few months, and the only conclusion I have reached is that non-dividend paying stocks are Ponzis.
It's quite fascinating (in a negative way) to think of some time in history when the first non-dividend stocks started to be distributed. How did they even market that thing? 'Hey, I know everybody else is paying you back a percentage of the profit for your investment, but how about we pay you absolutely nothing? We won't even guarantee a pay back price if you want to sell it to us. But maybe somebody else will buy it from you in the future at a higher price!'

How is it a weird thing that companies don't pay dividends? They just reinvest the profits in order to grow the company amongst other stuff. If the company grows, well, the stock price will go up and if it doesn't the stock will go down.

And when it comes to shares with zero or less voting rights, that's just a way so the original owners of the stock maintain control and make the decisions, so, it's usually to prevent another company to perform a hostile takeover. (there could be other reasons)

I personally own stock of some companies and every now and then I get an email asking me to vote for certain things, so yeah, as @maxmmm said, you won't get a seat on the board unless you have a big chunk of shares but in some companies, you do actually get to vote even if you just have 1 share.

 

[Silvio]

Take for instance Google, who has two stocks: GOOGL (with voting rights) and GOOG (without voting rights), they both trade at more or less the same price, the difference being negligible. I'm not an expert in stocks, but I don't know of any case in recent history when the average holders of a stock exercised their voting power in a meaningful way, nor do I know anyone who buys them for that power alone. Even when the voting power is there, it's usually limited in some way, for instance in FB the majority of shares are controller by the ceo.
Regarding the intrinsic value argument, I'm not sure how much one would get paid on the dollar if google closes its doors (if anything at all)?.
I'm happy to change my mind if I'm wrong, I've been thinking about this topic quite a lot in the past few months, and the only conclusion I have reached is that non-dividend paying stocks are Ponzis.
It's quite fascinating (in a negative way) to think of some time in history when the first non-dividend stocks started to be distributed. How did they even market that thing? 'Hey, I know everybody else is paying you back a percentage of the profit for your investment, but how about we pay you absolutely nothing? We won't even guarantee a pay back price if you want to sell it to us. But maybe somebody else will buy it from you in the future at a higher price!'

Not all businesses generate profits. Imagine having invested a local donut shop that reinvests all money in order to grow, and keeps opening and buying new shops in order to expand. Such a business will not generate revenues, therefore can't pay any dividends for investors. Of course the shop can also stop expanding and investing, and it will immediately generate profits, but then it will stop growing. Assuming it's big enough - plenty of businesspeople\private equity funds will still be willing to buy it at a multiple of the revenues (5-10x).
Hence that business has a value - it's the discounted value of all the earnings it generates. If it generates more revenue, it will be worth more. If it generates less revenue, it will be worth less.

Nobody is forcing you to buy any company that you deem overvalued, or whose governance structure you don't like (FB), or even if you personally hate the CEO (FB again). Nobody is forcing you to buy companies that are unprofitable either. And to be fair there are lots of stocks that are pure pumps and have no value (again since they don't generate any revenue).

However, when a company is paying a dividend, in a way it is like saying "we can't get a good return on this capital, so we're giving the capital back to the investors". Personally if the company can generate 15% ROIC on the capital I'd rather the company keep it and use it to grow their business (and therefore the stock will be worth more) rather than get the capital back to me as dividend.

Berkshire Hathaway is a massive company that has been growing for decades and generates billions in cashflow.. It's kinda funny to call it a ponzi just because it doesn't pay a dividend. Clearly there are enough examples to disprove your opinion but I have a feeling you won't be convinced...

 

[SusanSharandon]

Clearly there are enough examples to disprove your opinion but I have a feeling you won't be convinced...

Damn, I was enjoying your comment until you decided to make it stingy I don't know why you think I'd be so stubborn as to not change my mind on this issue. Matter of fact, I really hope to change my mind if I'm wrong, it's a topic about money and I really don't want to hold a false point of view. I also kinda hope I wrong, because then I would be able to look at stocks with more trust and that would expand my potential investment portfolio.

Your reasoning about the stocks/profit/etc is factual, but I don't see how it contradicts the Ponzi perspective. We might be disagreeing on semantics, I am not sure.

'A Ponzi scheme (/ ˈ p ɒ n z i /, Italian: ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds.'

Yes I agree that a company that does not pay dividends can reinvest more money and become more successful. Yes I agree that investors might prefer not to receive dividends precisely because they want to company to grow. However, the only way they will make money is if somebody else buys the shares from them at the higher price.

Take real estate investment for instance. Even assuming the price will remain still, the house can generate rental income or at least provide shelter. It has value.
Bitcoin - even if the price remains the same, I would still hold it just because I don't trust banks, there is value in its freedom-oriented implementation.
A stock that pays dividends whos value remains the same is still an investment that can pay me regularly.
A non-dividend stock whose value stays the same is meaningless (for the average investor who doesn't hold a position in the company). It has to maintain its pyramid inflow of investors in order to generate a profit. It would hold some degree of value if there was a guarantee of dividend paying at some point in the future(when the growth slows down, for instance), but that is not usually the case.
The only thing that would save it from the 'Ponzi scheme' label is its transparency (sort of). The companies don't lie about profit sharing or other things. Warren Buffet is not rubbing his hands with an evil laughter thinking how good of a scam he was able to create with his stocks (at least I hope he isn't).
The pyramidal aspect of the stock market is so foggy in the public's eyes that it's not even being properly discussed. It might even be silently accepted on a subconscious level by the gambling addicted masses who simply like to bet on the growth of a company, mutually accepting the structure by the default, in order to keep themselves busy with the rush of making a profit, sugarcoated by the business-like intellectualism that cannot be found a normal casino.
And there is intellectual merit in picking up the right stocks, even with the Ponzi element involved.

 

[MiddleEuroAsia]

I read all your guys arguments and I agree with certain things and disagree with others, and as I always say, diversification is the key.

putting that aside, what I don't get with stock maxis is that they tend to forget that not All companies reinvest their shares to grow the company, R&D and the likes, and they just simply buyback their shares to increase the stock price and benefit the people at the top (who owns the most shares).
in 2018-2019, more than 1 trillion dollar was spent on buyback programs with more than 60% of companies buying their share back at a relatively high price, with apple leading the way as always with their "innovative" way of thinking, but it declined to more than 700 billion dollars in 2020 due to the pandemic (still, it's a big number)

sounds familiar?

So let's not pretend that stock purchase is the only way to go, we are in the longest bull run and the only thing that holds this bubble from bursting is time, but I'm not stressing it, since I diversify, and I'm admitting that not all my investments are growth-focused investments and that's ok, sometimes I like "risky" investments and testing the waters on exotic places, and sometimes I like the piece of mind that comes with investments that just hold it's value over time, not increasing, not decreasing, just stays afloat.

Stock, bonds, land, crypto, gold, art, collectibles....all hold certain values for the right people, if you're not ok with investing in one instrument that's fine but don't force it on others, you can share you opinion as much as you like, but be objective and form your opinion around facts and logic, not useless emotion, and people will listen to you.

 

[Silvio]

The scheme leads victims to believe that profits are coming from legitimate business activity (e.g., product sales or successful investments), and they remain unaware that other investors are the source of funds

I think that's the key sentence here.

Berkshire\Google\Apple etc actually have a legitimate business activity that generates billionas of profits and that's where the value is derived from. Let's imagine that these companies decide to delist their shares and become a private company thus removing the "ponzi" aspect as you call it, you're telling me you wouldn't want to be a partner (own a share) in any of these companies?

The pyramidal aspect of the stock market is so foggy in the public's eyes that it's not even being properly discussed. It might even be silently accepted on a subconscious level by the gambling addicted masses who simply like to bet on the growth of a company, mutually accepting the structure by the default, in order to keep themselves busy with the rush of making a profit, sugarcoated by the business-like intellectualism that cannot be found a normal casino.

Pseudo-intellectual mumbo jumbo. As I wrote before, as is the case with most of the conspiracy people flooding this forum, you mostly want to show us that you are so smart and have uncovered a hidden truth that escaped the masses of sheep investing in the stock market, and you don't really want to be convinced. If you would be honest with yourself about it maybe you would be able to see it more clearly.

Full disclosure: I used to think 100% exactly like you and I wish someone would have convinced me of this 10 years ago, I would have had 3x my current net worth...

Bitcoin - even if the price remains the same, I would still hold it just because I don't trust banks, there is value in its freedom-oriented implementation.

So you think the stock market is a ponzi but Bitcoin isn't? OK... I really have nothing to say to that.

Stock, bonds, land, crypto, gold, art, collectibles....all hold certain values for the right people, if you're not ok with investing in one instrument that's fine but don't force it on others, you can share you opinion as much as you like, but be objective and form your opinion around facts and logic, not useless emotion, and people will listen to you.

Totally agree, there are plenty of asset classes and many of them have a place in a balanced portfolio. Nobody has to buy stocks or gold or crypto. But claiming that non-dividend stocks are a "ponzi" because they are tradable is pretty much wrong. Over 200 years, buying the stock market index you would have beat any other investments in real terms by far, and this includes Gold, Bonds, Art (even the Mona Lisa made only 5% annually since it was painted). By completely ignoring an asset class you are causing your portfolio a disservice (and I guess that applies to me as well with my dislike of crypto).