This New Savings Account Yields 20% Annual Interest!
Introducing the easiest route to passive income.
Sometime around the start of the pandemic, I came to an understanding of passive income. The reality is, it’s not as easy as people make it out to be online.
So many influencers are pushing the idea of earning money while you sleep, but very few ideas actually coincide with the narrative.
Most forms of ‘passive income’ need up-keep. Staying relevant on social media, advertising on Google, or keeping your SEO in-check — among many other variables. There are very few forms of passive income. Rather, these influencers are referring to scalable income.
What avenues do I see as having potential for genuine passive income?
Although I’m not well-versed in real estate, I see rental properties as an avenue of truly passive income. Though, I imagine you years of learning the business to get there.
Dividends from stock shares are also a route to passive income. This requires a little bit of research but otherwise could be great. The only problem is, with most dividends yielding around 2% or less annually, it will take a while to grow the capital needed for passive income.
As a matter of fact, traditional finance won’t yield you passive income any time soon. Instead, I’ve turned my sights to the future of finance. Decentralized finance. Or, DeFi, as most people are calling it.
What is DeFi?
It’s financial systems without institutions. No big banks. No government interference (except for taxes). And no companies own the platforms.
Instead, DeFi runs on computer code. That means, generally, DeFi is built around cryptocurrencies.
But wait! Before you click away because you’re unsure about crypto and this new wave of finance, let me tell you why that might be a mistake. Let me tell you how you can open a savings account yielding 20% annually.
DeFi vs CeFi
Generally speaking, there are two ways of investing in cryptocurrencies.
Decentralized finance, which I’ve briefly explained, is relatively new. It is going to take another year or so before we see this type of financing hit the mainstream.
Centralized finance is similar to DeFi in that there are no major institutions governing, but there are still people in charge. There are still people who govern interest rates and policy.
* Please note: Just as traditional financing goes, neither of these forms of financing is without risk.
In DeFi, you are reliant on highly-developed and stress-tested coding to keep your finances safe. In CeFi, you are usually betting on the company you’re staked to.
Alright, let’s cut the crap. All this technical jargon is probably confusing you anyway. Time to show you how to get 20% compounding interest on a savings account.
The holy grail of passive income
In today’s world, getting a long-term, stable 20% yield without risk* is almost unheard of. If you’re like me when I first heard this news, you’re seriously in doubt.
“It’s got to be a scam,” I said.
I didn’t want to trust that passive income could be so easy. There’s no way passive investing can return such high yields. Right?
Treasury bond rates are historically low now, but we forget that in the 80s, bond rates were over 15%.
When I realized that, I thought maybe this idea wasn’t too far-fetched. I started looking more into it.
Terra Money & the Anchor Protocol
In DeFi, there are no central companies — only what are referred to as protocols a part of ecosystems. The Terra Money ecosystem was my introduction to high-yielding savings accounts using DeFi.
A new Terra product, Anchor protocol, was launched a few months ago gunning for high-earning yields on stable coins.
What are stable coins?
Stable coins are the cryptosphere’s safety net. In Anchor’s example, UST is a stable coin.
Just as investors can sell shares on the stock market when things look iffy, crypto investors can sell their crypto coins. The difference is, when stock investors sell shares, they get fiat currency. When crypto investors sell, they get stable coins. Stable coins can then be converted to fiat currencies.
The value of stable coins is pegged to the value of various fiat currencies. In the example of UST: 1 UST will always equate to the value of 1 USD. If you want to buy 100 UST, you’ll need $100. If you want to sell 100 UST, you’ll get $100. Simple, right?
If you want to know more about the intricacies of stable coins, check this out.
Anchor is offering the ability to earn a 20% annual yield on UST. Meaning, it’s not an investment at all. It’s more like a savings account because the value of 1 UST is as stable as a United States Dollar.
Of course, to earn 20%, you must have your UST staked in the Anchor protocol. While staked as UST, you’ll earn 20% without a holding period.
You will have liquid access to your UST at all times. Just as you would any regular savings account.
Still, there isn’t anywhere in the world that accepts UST payments currently. To spend what you earn, you’ll have to re-convert your UST into USD (or any other currencies).
It’s 100% liquid, but transfer times may be more than 3–4 days.
How I’m using Anchor protocol
Like I mentioned before, Anchor protocol is brand new. Hot off the press, only a few months old. I’ve decided not to rush into DeFi until I completely understand it.
I do have faith in it. I believe it’s the financing system of the future. However, like every new system, I want to make sure it’s 100% safe.
I’ve staked roughly 15% of my capital into UST on Anchor, with no issues so far. It’s now the largest savings account in my portfolio. But, rather than looking at it as a savings account, I prefer to see it as a liquid bond.
Since I can’t spend my UST as I can with fiat from a normal savings account, I only keep money there that I don’t immediately need.
I have separate savings accounts in traditional banks for everyday spending. Those accounts are earning me a measly 0.15% interest.
How to turn this into a passive income
As I said, I only have 15% of my net worth staked into Anchor. It’s not enough to derive full passive income for my lifestyle yet.
As time goes by and Anchor continues to prove itself, I will feel comfortable moving more money. Until then, I’ll move slow.
At a 20% compounding yield, it’s easy to build capital. It’s also easy to derive passive income. Especially when it’s a stable 20%.
As I move more of my capital into Anchor, I’ll be able to achieve full passive income almost instantly.
A lot of DeFi systems have offered high-earning yields before. The 20% mark set by Anchor is by no means the highest I’ve seen. Seeing interest rates in the triple digits is relatively common in DeFi.
However, what I like about Anchor is their commitment to making this a savings account for the masses. To do that, they know they need to provide stability.
Whereas other protocols offer triple-digit yields, those returns often diminish, sometimes quickly, into single-digit yields in the blink of an eye. They’re not dependable — especially for passive income.
Do Kwon, the Korean American who got his start with Microsoft, founded Terra Money and Anchor protocol. He made it his mission to provide stability to passive income earners. That has been his goal for Anchor along with mass adoption.
Anchor will only become more trustworthy and easier to use as it grows. You may choose to wait until it’s proven, but I want to take advantage of it right now.
Not to mention, there are tons of other rewards for early adopters! I suggest you look into what you can earn as an early adopter, too.
To get started on Anchor, The Defiant has made the most helpful video to-date. Check it out here.
If you have any questions, I’m here to help point you in the right direction.
*** This is not financial advice. I’m not a financial professional. Anything in this article should be checked with independent research. ***
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** This article was originally published at www.adamcheshier.com **