The Ethereum gas fees have been reaching ridiculous levels recently. For small investors it is costly to survive on the Ethereum mainnet. So like many others I had been on the lookout for an alternative solution. Scanning the internet I found the Binance smart chain defi platforms. My purpose was to create a passive income source where I could generate some money every month or quarter, within the volatility and uncertainty of the crypto world. I will share with you what I have started and hopefully it stands the test of time even when when bear market hits.
For this I added the binance smart chain network in metamask. Also you will require a binance account or you can get the binance chain chrome extension.
I started buying Binance coin (BNB) from my exchange in India, as it is the base coin with which you will have to pay the transaction fees. In Binance chain the BNB address start with bnb….. . In binance smart chain the BNB address starts with 0x... just as Ethereum address. From the second half of January 2021 I started accumulating BNB in my Indian wallet and send them to my Binance chain wallet (chrome extension). The transaction cost on binance chain is about 0.50 cents.
After transferring those BNB to binance chain wallet, I converted the BNB from binance chain (the original bnb... type address) to binance smart chain (the 0x... type address) and send it to matamask binance smart chain network. Up till now the basic work is done.
Now I opened pancake swap website and connected it with metamask choosing the binance smart chain network (instead of Ethereum mainnet). I converted the BNB to Cake token and staked the cake token in the syrup pool. I chose to deposit cake to stake them and get more cake. The APR is currently 138%, though it keeps varying in the range of 141 to 137%.
I bought 61 BNB at the average price of around 65 dollars and when I converted them to cake token I got 1378 cake tokens at about 2.9 dollar a piece. It cost me about 3965 dollars to buy BNB and the average cake price comes to around 2.9 dollar. Now the price of one BNB is about 275 dollars and price of one cake is more than 15 dollars. So as it is I am in a good amount of profit by price increase.
Now in staking I am getting around 5 cake tokens per day, which would make it 175 cakes per month with current APR. I am compounding these cakes every 2 days to generate more cake token. Even after paying fees for compounding I will get about 170 cakes per month. 170 cakes multiplied by 15 dollars would make 2550 dollars per month.
Now everything must be looking hunky dory but 2 situations will develop ultimately. First, as more people shift to Binance network and start staking the APR will reduce. Second, in bear market the cake price like all other coins and tokens will reduce drastically. To offset these two situations I will be compounding for few more months. My target is to have 2000 cake tokens before I start taking monthly income. With compounding my average cake price has now reduced to 2.74 dollars.
In the first case, even if the APR reduces to 50% then also with 2000 cakes I will be able to generate 80 cakes per month. Secondly in bear market the cake price will fall drastically like all other coins. The all time high of cake price is 20 dollars and even if the cake price corrects till 2 dollars (90% correction), I will be making 80 multiplied by 2 dollars that is 160 dollars per month. This in my currency would be 11500 Indian rupees. My pension is now 40000 rupees. So even in worst case scenario I will be making one fourth of my pension as passive income without doing anything. This I consider not bad. In better times the earning will be much more.
Defi is gaining popularity especially on the Ethereum side, but with high gas fees many are shifting to binance side. As of today pancake swap has toppled all other except Uniswap and the margin is very less between the two. The 24 hours volume on pancake swap is 1 billion dollars. Though there are other defi’s on binance like Venus, autorun network, beefy swap, bakery swap etc but pancake swap is the most popular.
Defi has its inherent risk and I might lose everything in case of a rugpull but considering the risk reward ratio I decided to do it. Mentally I am prepared if I lose everything, that’s why all my crypto investment is not in it. I wish with BCH also there was some defi opportunity.
Thank you Telesfor sir.