Let’s face it, Everyone loves a good perk! The first concept of a “cashback program” emerged in 1986 from Discover Financial Services, the Morgan Stanley-owned business entity responsible for Discover cards. The idea was straightforward enough: cardholders were entitled to some amount of money back at the end of the year based on some percentage of the total annual charges they placed.
This caught on like crazy: some 60% of total credit card companies now offer a version of this program as a means for rewarding customer loyalty.
But the mainstreaming of blockchain technology holds major implications for how money moves through the world. It’s suddenly possible to conduct a successful financial transaction no matter what any third party or national government says! That fintech shockwave should have sufficient force to reshape the everyday cashback rewards program. A number of decentralized finance projects today are already exhibiting this.
If you lock up your crypto collateral in order to take advantage of a decentralized finance project’s offerings, then the savviest DeFi projects are going to reward you for doing so.
Here’s what you need to know about some of the DeFi projects operating at this level:
Nexo is a platform for obtaining a crypto-backed loan for sums between $100 and $2 million. From major cryptos like Bitcoin, Ethereum, and Lightning to lesser-known projects like KIN and IOTA, Nexo supports 23 different cryptocurrency collaterals. APR starts at 5.9% when you’re either repaying your loan using NEXO tokens, or paying for the part that is backed by NEXO tokens. For loans that are removed from Nexo’s ecosystem, APR is 11.9%.
The company has an associated debit card that functions around the world like a credit card without any monthly or annual fees. Users aren’t actually spending their crypto, but transacting on credit with the company. And yep, that card offers a cashback program that will deposit up to 5% of your total charges right back into your associated NEXO wallet, instantly raising your available level of credit.
Just one problem: this project is in active development and isn’t live yet, so it remains to be seen exactly how the card will perform or what the full extent of its capabilities will be.
Filling a niche quite like Nexo, Celsius offers ways to earn, borrow, and make payments on the blockchain. Users can earn up to 10% APR on their crypto collateral, and obtain a crypto-backed loan for rates starting at 4.95% APR. They can also take advantage of the project’s payment network, Celpay, which lets users conduct transfers for zero fees and without messing with addresses or private keys.
The platform supports 25 total cryptocurrencies, many of which are stablecoins pegged to some major fiat currency. If you should happen to have quite a bit of crypto, then you could potentially use Celsius to get a conventional USD loan using that crypto as collateral.
The platform has an associated CEL cryptocurrency that grants users access to lower interest rates on crypto and fiat loans, higher earned interests on non-CEL deposits, and a cashback rewards program — users will earn 1% on all BTC and ETH CelPay transactions, and 2% on all CEL CelPay transactions.
Ethereum-based MakerDAO is the popular protocol behind the DAI stablecoin, a cryptocurrency that maintains a 1:1 USD peg by overcollateralizing Ether. That overcollateralization rate is presently set to 150%, and MakerDAO’s governance structure allows for the community to change that parameter as it sees fit. For now it only supports pooled Ether, and it operates at a 0.5% APR.
MakerDAO is highly limited in how it offers cashback options — it doesn’t have any!
BlockFi offers an interest account that lets you earn monthly interest payments on your crypto holdings. People using a BIA (“BlockFi Interest Account”) can earn compound interest in crypto, significantly increasing their Bitcoin, Ether, and Gemini Dollar balances over time while paying around 6.5% APR.
BlockFi calculates loan-to-value ratios as the loan amount divided by collateral value. They lend at a 35% initial loan to value ratio to remain sufficiently conservative.
The company is in the process of developing a BlockFi credit card that will offer a number of conventional perks like air miles and cashback, but until it actually launches, it will remain theoretical.
EOSDT is a decentralized stablecoin and flagship product by the Equilibrium team. It offers a decentralized finance development framework for anyone seeking to start a project that can take advantage of liquid USD-pegged stablecoins right out of the box.
EOSDT is collateralized by at least 130% EOSDT collateral, and support for cross-chain assets is in the works. Users pay just 1% APR for access to this price-stable asset.
Equilbrium offers a Resource Exchange integration that makes it possible for users to earn passive income on the EOS blockchain. The superfluid collateral that backs every EOSDT in circulation can be staked to REX, letting the framework distribute REX rewards back to Equilibrium users.
So it’s not just the credit card companies that can offer consumers financial products that they want to use. This is just as doable with crypto technology, and the savviest projects are taking advantage of it.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
I am an entrepreneur and a writer with a bachelors degree in Computer Science. I manage the blockchain technology and crypto coverages at Coingape. follow me on Twitter at @arya_achal or reach out to me at achal[at]coingape.com.