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Six ways to utilize ETH that you don't want to sell!

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Six ways to utilize ETH that you don

Recent news of the Ethereum merge delay has caused a stir in the community, with the resulting currency tightening seen as a bullish factor for ETH prices. Cryptocurrency researcher Covduk has recently compiled six ways to profit from holding ETH. Let's take a look at what they are!

Various Ways to Invest in ETH

This article will explore the following methods:

  • Staking
  • Lending
  • Yield Aggregators
  • ETH Liquidity Pools
  • Riskier ETH Liquidity Pools, with IL
  • Leverage

1. Staking ETH

After the transition of ETH's consensus mechanism to PoS, staking ETH can generate income. This method is considered the simplest and relatively secure, with the current APR at around 4.4%.

Direct staking advantages: Low risk, direct support for the ETH network
Direct staking disadvantages: Requires 32 ETH, difficult to set up, unlocks after merge

If the total ETH amount is insufficient and liquidity preservation is desired, consider using Lido protocol. Users can stake any amount of ETH with Lido without setting up a validator and receive liquid stETH in exchange.

stETH is pegged to ETH and can be used for lending or providing liquidity, with the current APR around 3.9%.

Lido advantages: Low risk, easy operation, holds liquid stETH, no need for lock-up, high depth
Lido disadvantages: Approximately 10% less yield compared to direct staking, protocol risk

Rocket pool is another option for staking, allowing users to stake any amount of ETH and receive rETH in return. As the staking time increases, the amount of ETH that rETH can be redeemed for also increases, with an APR of approximately 4.03%.

Additionally, in Rocket pool, users can set up their own node with just 16 ETH. The current APR is around 6.36% + platform token RPL rewards.

Rocket pool advantages: Low risk, easy operation, holds liquid rETH, setting up a node only requires 16 ETH, the most decentralized choice
Rocket pool disadvantages: Protocol risk

In addition to decentralized protocols, centralized exchanges also offer staking services. Users can stake ETH on exchanges like Coinbase to earn approximately 3.67% APR.

Centralized exchange advantages: Low risk, easy operation
Centralized exchange disadvantages: Requires KYC, lower APR, inability to self-custody

2. Lending ETH

ETH can be lent out on platforms like Compound, Aave, and Rari, but the APY is much lower than staking as the funds deposited on the platform are primarily used for collateral loans.

  • Aave APY around 0.27%
  • Compound around 0.05%
  • Rari's pools are more diverse but generally less than 1%.

Lending advantages: Low risk, easy operation, utilize deposits for collateral loans
Lending disadvantages: Low yield

3. Yield Aggregators

Yield aggregators like Yearn collect user deposits and maximize them through a series of strategies. However, the yield is typically lower than staking, with Yearn's APY at around 1.25%.

Yield aggregator advantages: Low risk, easy operation
Yield aggregator disadvantages: Low yield

4. Stable ETH Liquidity Pools

Users can deposit ETH into liquidity pools and earn rewards, for example, by pairing ETH with USDC. However, if using the Ethereum mainnet and the funds are not of a certain scale, Gas Fees may consume most of the profits.

At this point, switching to other blockchains like Arbitrum, Polygon, AVAX, and FTM can solve the issue.

In addition to pairing with stablecoins, users can choose to pair with other coins pegged to ETH. Alchemix's alETH is a synthetic asset pegged 1:1 to ETH, where 1 alETH can be exchanged for 1 ETH.

The APY of the ETH-alETH liquidity pool on Convex is around 4.86%; the RocketPoolETH pool rETH-wstETH has an APY of around 6.16%, and with the additional rETH earnings, the APY can reach around 10%.

Aside from Convex, platforms like Yield Yak or Beefy are also good options.

ETH Liquidity Pool advantages: Easy operation, no impermanent loss
ETH Liquidity Pool disadvantages: Asset detachment risk

5. Riskier ETH Liquidity Pools

To earn over 10% returns, higher-risk liquidity pools that pair ETH with volatile assets must be used. These pools are affected by impermanent loss. Coindix can be used to observe various liquidity pools on different chains conveniently.

However, impermanent loss may erode some profits. If another token significantly appreciates or depreciates relative to ETH, it may result in losses.

Before depositing assets into these higher-risk liquidity pools, calculate potential impermanent loss using the deficalcs platform.

Riskier ETH Liquidity Pool advantages: High returns
Riskier ETH Liquidity Pool disadvantages: Steep learning curve, impermanent loss, protocol and smart contract risks, returns from various coins

6. Leverage

Using leverage is a good way to increase returns. For example:

  • Stake on Lido and receive stETH
  • Deposit stETH into Aave as collateral for borrowing
  • Borrow stablecoins equivalent to 50% of the total deposit, put it into stablecoin yield platforms like Anchor to earn around 20% APY

The total yield will reach 13.9%, with 3.9% from Lido + 10% 1/2 x 20% from Anchor. However, the returns come from layered steps, so ensure to understand the risks and operations involved.

Leverage advantages: High returns
Leverage disadvantages: Steep learning curve, complex asset movements, protocol and smart contract risks, compound risks involving multiple steps and protocols

Conclusion

Through these six methods, there are diverse ways to utilize ETH. However, before using any platform, research and understand the operations thoroughly. When it comes to ETH operations, Covduk prefers low-risk operations and assigns high-risk operations to other asset portions or games.