Traditional savings accounts are underperforming and prone to inflation. Stablecoins offer a better capital management solution while maintaining low risk. Modern crypto solutions offer the liquidity, convenience, and security of traditional banking, with 100x the return.
Theodore Zipoy
Blockchain and DeFi Innovation Guru and Founding Team Member @Sch0lar.io
As inflation continues to soar, many people (myself included) are looking for ways to protect their capital while keeping risk low. We are looking for a unicorn asset – and in some ways stablecoins may be the unicorn we are looking for.
To understand the pivot to stablecoins, we must first understand why most people have a savings account in the first place. It boils down to three simple things: liquidity, convenience and security.
Before we dive into these metrics, we need to talk about returns. According to Bankrate’s February 2022 report, the average US savings account earns a measly 0.06%. This abysmal rate means that your funds lose 6-7% of their value due to inflation when you hold them in savings. To make matters worse, most banks take your capital and lend it out at much higher rates. A practical way to think about it is: Would you lend thousands of dollars to a stranger for just 0.06%? Most people wouldn’t. Why lend to your bank at these rates? As we will see later in the article, stablecoins offer many higher returns on your money, while maintaining low risk.
Now let’s dive into our basic metrics for savings accounts: liquidity, convenience, and security.
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Liquidity:
Savings accounts are about as liquid as the money comes in, which means that at any time a user can easily spend/transfer their funds. There is no sale/transfer on the user’s side to access usable funds. This is a big advantage for traditional savings accounts, but this competitive edge might not last long. Two years ago, stablecoins were very illiquid, which meant that it took a lot of work and knowledge to buy, sell and trade them. Today, this is not the case. Innovative apps such as Voyager, Celcius, and Crypto.com greatly simplify investing and managing crypto. (Think Robinhood for crypto) Just create a profile, link your bank and send funds, buy stablecoins and you automatically earn returns. All of this can be done in less than 10 minutes. Want to sell your stablecoins? It’s just as simple. The only caveat here is the variation in ACH transfer periods (1-3 days), but for most users this is quite liquid. Even better, some apps offer cards that allow you to spend your crypto directly like you would with a credit card, making it even more liquid.
-
Convenience:
Savings accounts are incredibly convenient to open, manage and spend. Most banks offer easy-to-use apps to move funds. Fortunately, crypto is also moving in this direction. The aforementioned apps and cards bring the convenience of traditional funding to higher performing asset options like stablecoins. The introduction of “crypto credit cards” also boosts the convenience factor for those adopting stablecoins as a liquid asset.
-
Security:
Most savings accounts are backed and insured by the FDIC and their associated banks. Although most stablecoin options do not have this formal support, they still tend to be safe and low-risk options. Security methods and strategies depend a lot on where you put your funds, so do your due diligence before proceeding. Many consumer apps offer insurance, guaranteed assets, and more to ensure your funds are safe.
The decisive factor – Flexibility and performance:
A final variable I would like to address is flexibility. Savings accounts are traditionally rigid with their rates. Stablecoins are portable and allow users to find return options suited to their risk tolerance. Easy-to-use crypto apps offer high rates compared to traditional savings accounts (9% on USDC with Voyager, 7% with Celsius, etc.), but stablecoins can be extended even further on DEXs thanks to cash mining and yield farming. Some popular options like Anchor Protocol offer 20%+ on stablecoins. This is something to keep in mind if you are looking to add stablecoins to your portfolio.
Although I have used most of my extra capital in stablecoins, I encourage new users to always start small. Find the options that work for you, start with funds you’re comfortable learning from, and dive in. (and stay tuned for another article on getting started with stablecoins)
As always, DYOR. Crypto is changing fast, but #web3.0 innovation is truly benefiting users of all backgrounds and levels of expertise.
Welcome to the Web3 Writing Contest
As inflation continues to soar, many people (myself included) are looking for ways to protect their capital while keeping risk low. We are looking for a unicorn asset – and in some ways stablecoins may be the unicorn we are looking for.
To understand the pivot to stablecoins, we first need to understand why most people have a savings account in the first place. It boils down to three simple things: liquidity, convenience and security.
Before we dive into these metrics, we need to talk about returns. According to Bankrate’s February 2022 report, the average US savings account earns a measly 0.06%. This abysmal rate means that your funds lose 6-7% of their value due to inflation when you hold them in savings. To make matters worse, most banks take your capital and lend it out at much higher rates. A practical way to think about it is: Would you lend thousands of dollars to a stranger for just 0.06%? Most people wouldn’t. Why lend to your bank at these rates? As we will see later in the article, stablecoins offer many higher returns on your money, while maintaining low risk.
Now let’s dive into our basic metrics for savings accounts: liquidity, convenience, and security.
-
Liquidity:
Savings accounts are about as liquid as the money comes in, which means that at any time a user can easily spend/transfer their funds. There is no sale/transfer on the user’s side to access usable funds. This is a big advantage for traditional savings accounts, but this competitive edge might not last long. Two years ago, stablecoins were very illiquid, which meant that it took a lot of work and knowledge to buy, sell and trade them. Today, this is not the case. Innovative apps such as Voyager, Celcius, and Crypto.com greatly simplify investing and managing crypto. (Think Robinhood for crypto) Just create a profile, link your bank and send funds, buy stablecoins and you automatically earn returns. All of this can be done in less than 10 minutes. Want to sell your stablecoins? It’s just as simple. The only caveat here is the variation in ACH transfer times (1-3 days), but for most users that’s pretty liquid. Even better, some apps offer cards that allow you to spend your crypto directly like you would with a credit card, making it even more liquid.
-
Convenience:
Savings accounts are incredibly convenient to open, manage and spend. Most banks offer easy-to-use apps to move funds. Fortunately, crypto is also moving in this direction. The aforementioned apps and cards bring the convenience of traditional funding to higher performing asset options like stablecoins. The introduction of “crypto credit cards” also boosts the convenience factor for those adopting stablecoins as a liquid asset.
-
Security:
Most savings accounts are backed and insured by the FDIC and their associated banks. Although most stablecoin options do not have this formal support, they still tend to be safe and low-risk options. Security methods and strategies depend a lot on where you put your funds, so do your due diligence before proceeding. Many consumer apps offer insurance, guaranteed assets, and more to ensure your funds are safe.
The decisive factor – Flexibility and performance:
A final variable I would like to address is flexibility. Savings accounts are traditionally rigid with their rates. Stablecoins are portable and allow users to find return options suited to their risk tolerance. Easy-to-use crypto apps offer high rates compared to traditional savings accounts (9% on USDC with Voyager, 7% with Celsius, etc.), but stablecoins can be extended even further on DEXs thanks to cash mining and yield farming. Some popular options like Anchor Protocol offer 20%+ on stablecoins. This is something to keep in mind if you are looking to add stablecoins to your portfolio.
Although I have used most of my extra capital in stablecoins, I encourage new users to always start small. Find the options that work for you, start with funds you’re comfortable learning from, and dive in. (and stay tuned for another article on getting started with stablecoins)
As always, DYOR. Crypto is changing fast, but #web3.0 innovation is truly benefiting users of all backgrounds and levels of expertise.
