In a world with literally a thousand and one investment platforms vying for your urgent 2k, it’s hard to trust. It’s even harder to trust a service that promises you 6% returns on your savings. What’s even crazier is that this service claims you can take out your money anytime you want without penalties. Yet, that’s what we’re offering your business with Fluidcoins Earn.

Before you close the page, take a quick scroll down to see how we make Earn work.

Lending & Borrowing

It all starts on the Earn page right on your Fluidcoins dashboard. Whenever you make a deposit, we convert it into USDT stablecoins, which we then lend out on decentralized money markets known as DeFi protocols. If you’re wondering how lending works in these DeFi protocols, don’t worry we’ll get to that in a second.

Let’s begin by understanding lending and borrowing. At some point in life, most people are exposed to borrowing, usually through a mortgage, car loan, or school loan. This forms a very crucial component of any financial system.

The idea itself is rather straightforward. Depositors, also known as lenders, lend money to borrowers in exchange for interest on their savings. And in exchange for receiving a lump sum of money right away, borrowers or loan recipients are willing to pay interest on the amount they borrowed. Traditionally, a financial institution like a bank would enable lending and borrowing, but with DeFi, lending and borrowing can take place without the presence of a central intermediary.

Lending & Borrowing in DeFi

Using open blockchains and smart contracts, DeFi enables lending and borrowing for anyone without requiring them to divulge personal information or put their trust in a third party to manage their money. Users (such as ourselves) who want to become lenders supply tokens to a specific money market and begin earning interest on these tokens according to the current supply APY. The supplied tokens are put into a smart contract and are made accessible for borrowing by other users.

Furthermore, it’s important to note that almost all of the loans in the DeFi market today are overcollateralized. This implies that a user seeking a loan must provide tokens as collateral, with the value of these tokens being greater than the loan itself. Overcollateralization protects you as it typically covers over 125% of your funds. If the collateral value falls below the 125% mark, borrowers are “margin called” and must top up or repay a portion of their loan. If they do not, they will be liquidated. This safeguards your capital and interest generated in the event of borrower failure or a crypto price fall.

Risks associated with DeFi

Like almost every other investment opportunity, DeFi carries some form of risk. Even the most common investments are subject to market failure, losses, and fluctuation. DeFi isn’t exempted from these risks; it’s a growing industry in its early stages with lots of complicated moving parts. Potential investors should have disciplined habits, maintain diversity, avoid overexposure, and of course, understand dangers and their risk tolerance.

When investing in DeFi, there are three categories of risk to consider:

1. Underlying Technology Risk

Decentralized finance (DeFi) is essentially an umbrella term encompassing any financial system and product that uses smart contracts to verify transactions. The countless number of businesses that use DeFi rely on the underlying infrastructure (i.e., blockchains like Ethereum or Solana) to provide value to customers. Consequently, if a smart contract (such as the one governing a lending-borrowing arrangement) were to fail or break as a result of a bug, all businesses relying on it would also be affected.

However, given that blockchains enable yearly transaction volumes in the billions of dollars, this kind of failure is extremely unlikely. However, it’s crucial to remember that any financial service in this area would be impacted if this underlying technology were to fail.

2. Lending Risk

In every securities lending market—where someone borrows an asset, offers up collateral, and pays interest on the loan—there is a risk that a borrower defaults. With Fluidcoins Earn, your funds are lent out on DeFi protocols to generate interest. One risk inherent in DeFi lending protocols is the possibility of default. What happens to your funds if a borrower is unable to repay the loan?

DeFi mitigates this risk in the form of collateral, which provides coverage for your invested funds. The trusted DeFi protocols we use collateralize all our digital asset loans by over 125%. This protects your principal, even when the borrower fails to pay back.

3. DeFi Protocol Risk

Various lending protocols exist within DeFi to assist borrowers access funds and lenders earn greater interest rates. With Fluidcoins Earn,  we only partner with secure and validated DeFi protocols with proven track records. These partners employ the most stringent measures and carry out audits to continuously ensure that your funds are safe and secure. Still, there’s a rare chance that one of our partners becomes compromised.

Whew. That’s a lot of risks. So how exactly do we generate interest while keeping your funds safe and sound?

How we work to keep your funds safe

I like to sleep with both eyes closed. We assume you prefer that as well, so we’re always working round the clock to ensure that your funds and personal information are as secure as possible.

Since day one, we’ve been committed to working with industry-leading partners. Our lending partners follow stringent security measures and conduct regular smart contract audits to ensure the safety of your funds while earning the best possible rates. 

On the bank account side, we securely handle each bank connection via Mono, the market leader in bank integrations. Through its infrastructure, Mono makes the link possible whenever you fund your balance with a bank account.

To provide extra user protection, we adhere to strict KYC requirements to avoid fraudulent users. We also continuously monitor activity on our platform to detect suspicious behavior.

Real Talk

Regardless of how conservative your investments are, the only location where you can be guaranteed near-zero risk is in an NDIC-insured bank account. It’s also the spot where your funds will most likely lose value owing to inflation.

There are many factors to take into account when making your first investment in DeFi, and we hope this article has helped to guide you through some of the potential risks. We urge everyone to exercise caution when making financial decisions and to be aware of all associated dangers, no matter how unlikely they may seem.

We’re here to show you innovative approaches to save more, fight inflation, and build wealth.

We honestly can’t wait to onboard you into the world of DeFi. Visit fluidcoins.com/products/earn to get started.

If you’d like to experience how Fluidcoins Earn works, but don’t have a business, then the Flip App is just the right thing for you. Flip is an easy and accessible way to save and earn interest in USDT. It’s also powered by Earn’s APIs so you’re pretty much getting the same thing. If you have any questions, you can always message us on social media or shoot a note to [email protected].