What is OSOM DeFi Earn and How does it work?
Chief Development Officer
Read on to find out how to mitigate risks in DeFi, why doing it with us might be smart, how we select the assets and the places where to lend, what the performance has been like, and how you can setup recurring deposits.
OSOM DeFi Earn allows you to lend multiple stablecoins in multiple places so you enjoy this new opportunity to grow your wealth while limiting the impact of fees and counterparty risks.
We use your EUR to buy stablecoins, deposit them to lending platforms and provide you a performance review. We don’t charge you any exchange or transaction fees, and we only take a 10% commission on your USD performance.
The pools we lend your assets into are very liquid, so you can reasonably expect that at any point you can withdraw your funds — we will sell your stablecoin portfolio & interests earned and send you Euros.
Why use multiple stablecoins and lend in multiple places?
Lending is generally deemed to be less risky than investing, and in DeFi in particular, since loans are usually over-collateralized (meaning a borrower needs to bring 150€ of one asset to borrow 100€ of another asset, so if they can’t repay the 150€ can be used to cover the 100€ debt).
But when lending stablecoins in DeFi you still expose yourself to some risks, and the biggest of all are counterparty risks. The main counterparties, here, are:
- The stablecoin issuer, because if they go out of business, the token you are holding is no longer redeemable for 1 USD, and is therefore useless
- The protocol/institution where you are lending that stablecoin. Because if there is a flaw in the smart contract and it gets hacked, or they take all the money out of it, or there is more lent out than in the pool, you could find yourself unable to withdraw for a while or forever.
You therefore also have to manage those risks. And taking multiple stablecoins and lending in multiple places is a good way to do that. You’ll generally want to lend a bit more where it’s more lucrative and a bit less where it’s less lucrative, but you will never want to lend it all in one place.
Those are the main risks in DeFi. If you want to understand all the risks, we have a webinar on how to diligently take part in DeFi..
But I could do it myself? Why should I rely on you?
You could, but unless you have millions to lend out, it’s cheaper and easier to do it with us. For the following reasons.
If you do it yourself:
- If you exchange Euros for stablecoins on an exchange, you will pay exchange fees. Taking them out will also incur a fixed fee.
- If you want to invest 100€ after you have converted them for USD stablecoins, you will need to cover the transaction fees on the Ethereum network. That transaction fee can easily be between 20€ and 40€ at times of high network utilization. It can be 3€-10€ when utilization is low (but it has been very high for over a year).
- All in all, you will probably end up paying a minimum of 40€ to 80€ in fees to invest 100€ worth of stablecoins on DeFi. That’s not very interesting.
If you do it with us: You pay 10% of your profits. That’s it! And that's because:
- You pay 0 to deposit with a Bank transfer
- We don’t charge you for the conversion to USD Stablecoins
- We don’t charge the individual Ethereum network transaction fees because we pool the transactions. When stablecoins are moved around the transaction fees get spread out to everyone who’s part of DeFi Earn so it might impact performance by a couple of basis points, but nothing like the hit you would take if you did it yourself.
Ease of use
Let’s compare the two flows when depositing multiple stablecoins in multiple places from Euros.
If you do it yourself:
- Send your Euros to a crypto exchange to buy USDC and BUSD.
- Buy BUSD and USDC.
- Send the stablecoins to your Crypto Wallet used to manage your DeFi investments -- make sure it’s secure.
- Make sure you have enough ETH on that wallet to cover the transaction fee. If not, buy some more on an exchange and send it to your wallet.
- Connect to the first place where you want to lend, send half of one stablecoin.
- Send half of the other stablecoin as well.
- Connect to the second place where you want to lend.
- Send the other half of the first stablecoin
- Send the other half of the second stablecoin
And you are done. Now make sure to backup your wallet and to never lose it.
If you do it with us:
- Send a bank transfer with the DFE00000XXXX code as description. Done.
So we save you 9 steps, just on the way in, and about the same on the way out. We save you a ton on fees. We save you the trouble of making sure you manage your wallet correctly. And we only profit if you do. What’s not to like?
How do you select what and where to lend?
We aim to select good stablecoins and good places where to lend. Currently, that’s BUSD and USDC for stablecoins, and we lend on AAVE and at Binance. But we are constantly evaluating other options to spread the risk out and increase returns.
For the places where to lend, we look mostly for:
- Security track record: has it been hacked in the past?
- Public audits: Has it been successfully audited by a reputable firm? Is the code the one that was audited?
- Code documentation: Is the code understandable? Can we work with it?
- Public teams: Are the people running this known or are they anonymous and we run the risk of not being able to catch them if they run away with the money?
- liquid pools: Have lenders mostly been able to withdraw when they wanted to historically? Are the pools big enough in regards to the ecosystem? Collaterals accepted: How likely is it that the collateral could be worth 0 before it is liquidated, therefore making the loan undercollateralized? historical yield: how lucrative has it been to lend there?
- Regulatory risk: what is the chance that it is going to get annoyed or shut down by regulators? Oracle Risks: Do they rely on oracles for price data, and if they do, are they at risk of being manipulated?
For what stablecoins to use, we mostly look at:
- The historical track record of being able to keep the peg: if an asset claims to always be worth 1$, how often did it fail, by being above or below?
- If it is asset-backed (so they keep something equivalent to 1$ for every 1$ issued): what is the makeup of the reserves? Would they be sufficiently “liquid” if a lot of people suddenly were to try and redeem their tokens with the issuer? (it’s known as a “bank run”)
- Security track record: any history of something going wrong with the stablecoins?
- The impact of historical black swan events on its system: in times of trouble, how good has the stablecoin been at remaining stable, liquid,...?
- Regulatory risk: what is the chance that it is going to get annoyed or shut down by regulators?
What has the Performance been like?
We launched in late March 2021. Since then the annualized performance has been 7.30% in USD.
Most DeFi protocols adjust the Annual Percentage Yield dynamically if they need to attract a lot of capital or not so much. So it has fluctuated quite a bit. As of Aug 31st, 2021 it’s sitting at 3.75%, but it has been as high as 12% at times. So don’t worry if you open the app and see 3% APY annualized. That’s the current rate annualized, but it is not stable. Similarly, if you see 10%, it might not last forever.
Can I do Recurring Deposits?
Well, yes! Some would say that’s the smartest way to do it. You can start from 30€ per transaction.
Here is how:
- Once you are signed up and validated, go to the “wealth” tab and select “DeFi Earn”
- Click “Add Funds”, “Bank Transfer”
- In your bank app, initiate a recurring payment/standing order with the information from the “Bank Transfer” page, the amount you want to send, and the frequency.
Please do make sure you mention the Deposit ID (which follows this format: DFE000000XXXX ) as communication/reference so we know to send it immediately to DeFi Earn.
That’s it! It should take you about 2 min and you will be on your way to “Dollar Cost Averaging” into DeFi Earn.
With OSOM you can buy, sell, hodl, send and request cryptos, get algorithmic exposure to top-performing coins with our Crypto Autopilot, or get a stable yield for providing liquidity to lending pools with DeFi Earn.
This is not investment advice, nor a solicitation. This is for information only. Crypto markets possess a high level of risk, including volatility and regulatory uncertainty. Past performance does not constitute a guarantee of future results in any way. You are solely responsible for doing your own financial, legal, tax, or investment research before taking any actions.
Chief Development Officer
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