I get a lot of questions from my friends about digital finance – most likely because I won’t stop talking about it with them. But that’s neither here nor there.
I thought it was time to chronicle my expedition into this new frontier of money in as much detail as possible, all while keeping it simple to understand and applicable to the lay person that, let’s be honest, know’s they should be doing more with their money but can’t tell and APY from an ROI.
My goal today is to introduce you to the incredible new universe of digital finance. Like an alien world you might find the way things are done alien, yet strangely familiar. The bottom line is that I’m currently making 90% per year on my money. When I tell this to other people (hmm maybe I do talk about it too much) they’re floored, shocked – how is that even possible? Is it a scam?
Today, let me show you the incredible power of digital finance in the simplest, lowest cost way I know how. Now granted, it’s not that simple and it’s not that straight forward (yet) – we’re still on a new frontier here. But trust me, it’s worth it. This is my favorite path for generating relatively high returns from a relatively stable position in digital finance.
And after you do it once, and once you see the potential, you’ll agree you can do it too.
This guide omits several key underlying concepts you should absolutely understand before taking any action. They aren’t included on this page – otherwise I’d publish it as a book – but please take the time to click the links to other background posts so you’re an informed participant.
Step 1: Convert USD to USDC
Before we can get very far in the world of digital finance, we need some digital currency. You need air to breath right? You need currency to work in finance.
So we’re going to convert your regular old Dollars (or any other currency) to it’s digital equivalent. You might have heard in the past about Bitcoin, and its famous volatility. It’s price can move several thousand dollars in any given direction in just a few minutes. This is a bit too adventurous as we just begin our voyage.
Enter the Stablecoin – USDC
As you might have guessed, Stablecoins exist to offer a stable way to hold value in the digital space. They are usually “pegged” to another value, most frequently the US Dollar. This gives us the confidence to know that when we have a digital dollar, it’s value will always be the same as a fiat (traditional) dollar. This might seem fairly obvious – but it’s actually quite a recent innovation in the digital currency space.
There are a number of solutions out there, but for now we’re just going to use USDC – or US Dollar Coin. USDC is minted by the Circle consortium. Circle is made up of some of the largest companies in the digital finance space, and is backed by 1 traditional dollar in a traditional bank. So it’s “price” is pegged to exactly 1 dollar. There are more than $2 billion in circulation and millions more are being added each week – a lot of people are into digital finance!
How to buy USDC
Head on over to Coinbase to create an account. We’ll use Coinbase because you can use your existing bank account to transfer money to Coinbase and purchase USDC without paying any fees. As you might already know from the traditional investing world, paying fees of any kind kills your ROI. So Coinbase is a great way for us to build up our digital currency reserves.
The downside is it will take 5 days for the funds you transfer to become eligible to transfer out to the next stop on our expedition. This is very sad, but the old school financial system won’t let go that easy. At least you’ll earn a small interest rate on your deposit while you wait for the funds to arrive.
Step 2: Move USDC to your Wallet
Ok – your USDC is now finally able to move out of Coinbase. Why would we want to do that? Well, as a general rule you don’t want to keep your funds on an exchange longer than you need to for security reasons – even though Coinbase is as secure as it gets. But perhaps even more importantly it’s because the patly 0.15% APY they are paying out means you’re losing value on your funds due to inflation. Avoiding that, and flipping it around to actually make money on our money is the whole point of this exercise.
So we need to send this USDC somewhere – and where do you keep our money? In our wallet. Imagine your wallet as your personal spaceship on this journey through the digital finance universe. It’s your home base. It’s your headquarters. It’s your safe haven – and you need to keep it secure.
Again there are many, many tools we could use as our wallet – but I’ve gone ahead and chosen one for you – Metamask. Metamask is a browser extension that makes interacting with digital finance sites as easy as it gets right now. Oh and by the way nearly all of these sites still require you to access them via desktop interface rather than mobile. So go ahead and install that extension.
The MOST important thing you’ll get from Metamask is an address. This is going to look like a long string of letters and number – and nonsense. And it is – machines don’t need street numbers and recognizable city names to direct money where it’s supposed to.
What you need to know is that this is where your money will live. You just installed a wallet on your browser, and it was pretty easy, wasn’t it?
You may be tempted to skip over the part about your recovery pass phrase. DO NOT DO THIS. If you every got your computer stolen, somehow lost access to your browser or some other calamity befalls you, this is the ONLY way you’ll get your money back. It serious business. Keep it somewhere VERY safe (hello 1Password) and secure. Imagine it’s the keys to your house.
Step 3: Move your money to the Vault
OK – phew. That was a lot of work and waiting just to get the equivalent of an ATM withdrawal to your wallet. But good things come to those who wait. Now the fun starts.
Whoever decided to name this product the Vault was smart. What lives in Vaults? Lots of money. And that’s where we’re about to deposit your freshly minted funds to starting earning an incredible APY.
The destination for your funds in this particular tutorial is Yearn.Finance. Why? As I’ve mentioned already several times – there are a lot of planets in the digital finance system, but this is one the larger ones. Well run, organized and with a strong track record. And a top performer to boot.
You can see as you look down this page that there are several Vaults available in a variety of different currencies. You’ll even see one listed for USDC – the same currency we happen to have stashed in our wallet. You might think that’s the Vault we’ll be depositing to – and you’d be wrong.
We’ll actually be using the yUSD Vault instead – you’ll notice it has a much higher return. The reason is fairly lengthy and is in fact the subject of a whole different post, which you should absolutely read before depositing.
You might also think we’re going to deposit our USDC on this page. But again – you’d be wrong. We’ll be using a service called Zerion for so we can save our time, reduce complication, and most important reduce the gas we spend in the process.
Through the Wormhole
Zerion is like a wormhole in the time-space continuum of digital finance. What would otherwise take us several steps, each using gas and costing us lots of moolah, can now be accomplished in just one transaction. In most cases this saves us gas, and in all cases it will save us a lot of time.
So head on over to Zerion and connect your wallet. You can think of Zerion as a kind of Mint.com or Quicken for the digital finance space. It will track everything currently in your wallet, as well as where you’ve made deposits or investments, and report on how well those investments are doing. It seems so obvious that this kind of services should exist, but it’s just now that it’s incredible power is being unleashed on the digital finance scene.
Depositing into the yUSD Vault using Zerion
So you’ve connected your wallet. Now, click on the “Explore” tab and select #yEarn. Now click the Y Curve Vault row.
On the right side you’ll see a widget that allows you to buy and sell yUSD directly with your USDC.
Once you picked your amount, click the “Buy” button. This will cause Metamask to popup and make double triple sure you really really want to do this.
First, you’ll be asked if Zerion has permission to spend your USDC. Select Yes. Next you’ll be asked to actually do the thing. ie deposit your funds to the Vault.
After you’ve approved the transaction, Zerion is going to swap your USDC for yUSD – tokens that represent your deposit in the yEarn Vault. The tokens you have on your wallet won’t change in value – but the stake they have on the Vault will. So when it comes time to withdraw your funds you’ll end up receiving more USDC tokens in return.
Step 4: Profit!
It might happen instantly, it might happen in a few minutes, but your transaction will be confirmed – that makes it all official. You’ll see Zerion pick up that instead of having USDC in your wallet, you now have yUSD – or a claim to the tokens you just deposited in the vault – in your wallet instead. It will helpfully track the value of those tokens as your interests starts piling up.
You will be tempted to refresh your browser nearly every minute.
Are my tokens still there? Yes.
Is the number going up? Yes.
It might increase in value so quickly that you’ll actually see a change if you do. But more likely not. Rest assured your deposits are starting to accrue interest.
If you want additional confirmation you can also check out Yearn Stats, which will give you a more detailed look at the APR you’re earning.
Now, funnily enough, comes the hard part – waiting.
The magic of compound interest is hard at work. And your goal is to do – nothing. You need to wait.
You’ll see the APY reported by the Vault increase and decrease every day. This is totally normal. Unlike a bank that has a fixed APY, the Vault is employing an active management strategy to always generate the highest yield on it’s deposits possible. This means that it has some good days, some bad days, and some home run days.
There will come a time in the future when you wish to withdraw those funds and use them for something else. And by that time your funds will have grown considerably in the yUSD Vault. But now sit back and go grab a Tang. You’re now firmly a part of the digital finance revolution. Was it that hard?