Late last year I started hearing about flexUSD, a new stablecoin on SLP that would actually pay you interest every day! Honestly I was intrigued and the people talking about it had good reputations, so my scam detector was only at yellow alert instead of red. I really wanted to learn more about it and get firsthand experience. So I did the only sensible thing: I got some and observed. So if you've been curious about flexUSD (or if this is the first time you're hearing about it) and haven't yet taken the plunge, hopefully you'll gain some useful insights from this article.
FlexUSD is a stablecoin that lives on the Simple Ledger Protocol of Bitcoin Cash. It is backed by USDC deposits at CoinFLEX, a cryptocurrency exchange. CoinFLEX uses USDC deposits for repo auctions (essentially very short-term lending) and CoinFLEX shares the interest gained through flexUSD interest payments, sent out to current flexUSD holders, three times per day. Whether you actually deposited USDC on CoinFLEX to mint flexUSD or you obtained flexUSD some other way, you receive the interest payments regardless. I think that's pretty amazing! Take note, though, that a minimum of $10 flexUSD is required to qualify for interest payments.
Okay, I might have lied a little in the title. I didn't actually start with $1000 of flexUSD. I started with an amount between $10 and $10,000 of flexUSD. Why did I lie? And why am I being super vague? To maintain financial privacy, of course. I don't need you people finding my SLP address and digging around in my transaction history!
Once I had my indefinite initial amount of flexUSD, I let it sit in my SLP address for 90 days. I meticulously recorded each interest payment so I could analyze the results. I am pleased to present those results to you in this article. So if you love numbers and money, keep reading!
While I won't reveal the true amount of flexUSD I started with, I multiplied the actual amounts by a certain number to simulate a starting amount of $1000 flexUSD and to proportionally simulate all the interest payments. I assure you everything presented here is based on very real numbers. So if you had started with $1000 flexUSD at the same time I started my experiment, my data shows exactly what would have happened to you (assuming all flexUSD balances are treated the same).
All my data and some basic analysis can be found in a Google spreadsheet here. I'll briefly explain everything on the spreadsheet. I should warn you that I don't specialize in finances so it's very possible I'm not using precisely the right jargon with the things I discuss here.
Column A tracks the sequence of payments. The first entry is my initial purchase or minting (I'll never tell which) of flexUSD. Interest payments happen three times per day. Because the experiment ran for 90 days, there are 270 interest payments.
Column B tracks the amounts of the flexUSD transactions that went into my SLP address. The first amount of $1000 flexUSD is what I started with (or did I?).
Column C records the APR for each individual interest payment. It is simply the interest amount multiplied by 1095 (365 * 3) divided by the prior flexUSD balance. So if an individual interest payment were applied to the entire year, that would be the rate of return, not taking compounding into account.
Column D shows the total amount of flexUSD at the end of the experiment. I ended up with $1034.103888 after the 90-day experiment. So I made a profit of just over $34. Not bad!
Column E shows the cumulative APR for the duration of the experiment, which was 13.83%. It is calculated by multiplying the sum of all the interest payments by the quotient of 1095 and 270 and then dividing the result by 1000 (if that didn't make sense just keep reading). If the cumulative results of the experiment were somehow proportionally applicable to all 1095 interest payments over a year, that would be my annual rate of return.
Column F shows the mean APR, which was 13.6%. It is simply the average of all the individual APR's for the interest payments.
Column G shows the median APR, which was 10.3%. Same as above, but the median instead of the mean.
Column H shows the highest APR of all the interest payments, which was 143.82%. That single interest payment was over $1 flexUSD while no other payment came close to that! CoinFLEX must have been raking it in that day!
Column I shows the lowest non-zero APR of all the interest payments, which was 0.03%. I'll cherish that milli-quarter forever.
Column J shows the expected flexUSD balance after one year, which is $1,138.310212. That's the result of multiplying my starting amount by the cumulative APR. Who wants an extra $138 in a year for simply saving $1,000? I know I do!
Column K shows the number of interest payments that simply didn't happen, either because there was no interest to share or CoinFLEX somehow failed to execute a payment. All payments that didn't happen are assumed to be a payment of $0 flexUSD in column B. Over the course of the 270 payment periods, seven interest payments (2.6% of all the payments) never showed up. Oh, what could have been!
Columns L, M, and N are the same as columns E, F, and G except they exclude the zeros. They are 14.2% (cumulative), 13.96% (mean), and 10.7% (median), respectively.
Column O is the estimated total if there had been no gaps in payments, which is $1035.011596 flexUSD. It assumes that the missing payments were supposed to come through but CoinFLEX failed to send them for whatever reason. It also assumes that the missing interest payments would be comparable to the existent payments. I could have been about $1 richer!
Column P is the expected flexUSD balance after 1 year without any gaps in payments, which is $1,141.991473. It makes similar assumptions as those in the above paragraph. $142 is nothing to sneeze at!
Surely many of you are smarter than me when it comes to stuff like this. The data is now available to you, so feel free to discover more insights and share them in the comments!
So, what did I learn after this fun experiment with flexUSD?
The main drawback is that flexUSD completely depends upon CoinFLEX. Of course it didn't take this experiment for me to understand this. It's just part of the nature of this type of scheme. If CoinFLEX were to disappear, I can't imagine that $1 flexUSD would continue to equal $1 USD. If that were the case, my guess is that flexUSD would quickly approach a value of 0. That's always the danger of centralized exchanges, even if a fantastic decentralized tool is being utilized. I should say that I don't expect CoinFLEX to disappear any time soon.
CoinFLEX sometimes had a difficult time staying consistent with the expected interest payment schedule. Most of the time the payments arrived in a predictable manner. Other times, though, there would be no payments for a few days and then a surge of payments close together or even all at once. I believe all the payments that failed to materialize were during these stutters. Because of these anomalies, it was impossible to exactly reconstruct the order of payments you see in the spreadsheet, though the result is mostly accurate and good enough for the purposes of the experiment.
While the interruptions in payments are a bit of a concern, I suspect that flexUSD interest payments will see fewer stutters or failures after the May 15, 2021 Bitcoin Cash upgrade. The upgrade will eliminate the 50 unconfirmed transaction chain limit. It is my understanding that this limit has been getting in the way of efficient distribution of flexUSD interest payments since the genesis of flexUSD. Therefore flexUSD might get even better very soon!
Overall flexUSD is a fantastic financial product! I love how the interest payments simply follow flexUSD balances wherever they are and no matter who owns them or how they were obtained. The stablecoin is backed by USDC deposits and the profits from loans are distributed to the minted flexUSD balances, no matter how far removed they are from the users who actually did the initial deposit and minting.
The interest rate is really great overall. The average consumer would have a hard time finding something better to invest in. Of course, cryptocurrency users are not average consumers. Lots of people have made incredible gains just holding cryptocurrencies. Additionally, the DeFi space is growing rapidly. I myself am not well-versed in the DeFi space so it's very possible there are other DeFi products out there that do much better than flexUSD.
But the sheer simplicity of flexUSD cannot be beat! Even if there are other DeFi products that beat it on yield, I can't imagine anything simpler than flexUSD. You simply obtain it and the interest payments come three times per day. No action is needed on the user's part. There is no need to keep track of any accounts outside of your own wallet. You can just set it and forget it.
Additionally, you cannot lose your principal or any of your flexUSD once it is paid to you. Let me rephrase that to try to make it clear: It is impossible to have a negative day when using flexUSD! That's because no one can deduct from your balance once flexUSD is sent to you. A very high yield combined with the complete inability to lose is monumental!
I strongly support what CoinFLEX is doing with flexUSD. It certainly seems to be the stablecoin with the most utility. In my experience most other stablecoins cost an arm and a leg just to send anywhere. Thank goodness for cheap Bitcoin Cash transactions! Transaction fees are so cheap that CoinFLEX can send interest payments that are less than 1/1000 of $1 flexUSD! Anyone who is interested in trying out flexUSD should obtain some, store it in an SLP-aware wallet (e.g. bitcoin.com wallet, Electron Cash SLP edition), and enjoy seeing the interest payments pour in.
You can mint flexUSD directly by having an account with CoinFLEX and depositing USDC (I imagine you can buy the required USDC from CoinFLEX's own exchange). You can also get flexUSD through sideshift.ai. It is technically possible to buy flexUSD on memo.cash, but that depends upon memo users offering it for sale. If you know any more ways to get flexUSD, let us know in the comments!
Of course, none of this is financial advice.