Promised APRs Are A Constant Repeat

One thing I learned over my years of investing is if someone or a platform promises you a set APR or a APR that seems too good to be true. Well, It almost always is given enough time.

For some reason people continue to fall for this time and time again. We are seeing yet another repeat of this from platforms like Voyager and Celsius declaring bankruptcy and it seems to stem from offering crazy high APRs that honestly was primarily fueled by more investors injecting more funds into them.

Some Basics to Learn and Watch For

Now some platforms can offer some rather good APR rates and run little to no risk. Many crypto tokens offer up APR rates for staking your crypto. This is called the proof of stake tokens. By staking you vote governance and witnesses etc as a way to control and decentralize the platform.

The issue?

Most people don't know how to stake it themselves and instead turn to 3rd party solutions to do it for them. These systems collect a fee on top of the APR being generated. There's nothing wrong with that. In fact it's actully a stable way for that company to earn revenue and have little risk involved.

As a rough example let's use Polygon(Matic) which offers up a massive 4.5% or a little higher APR (of course this will change from time to time and depends on other factors) however a platform could honestly offer up 3% APR to people and collect a easy 1.5% fee on top of everything. Stake 1,000,000 Polygon and that company is now generating a decent fee every month for doing very little work.

However this has two negative effects.

The first you lose control of the tokens themselves and they are locked up by the company. This is why I feel a DPOS system like HIVE has should be implemented in some way to protect and allow users to remain in control of their core assets.

The second negative is you're not earning as much as you possibly could be by doing it yourself.

Simple Rules Everyone Should Follow

If a person or company is offering you above the staking rewards then there's something else going on that I would consider a risky investment. While some cases this might be ok and the company can take a beating if it needs to by only allocating a percent of the funds to these riskier investments most wont. It also starts to come down to a battle of who is offering the highest APRs.

APRS should change, market conditions never stay the same so the print rate or emissions should be adjusted to meet market conditions. A promised 10% APR can't always be promised. (Currently one thing that worries me about HBD at 20%) the money has to be generated from somewhere it doesn't simply appear like the USD fiat system lol.

So there you have it some basic rules to keep you save and to remember during the next bull cycle. In all cases I would highly recommend you always stay in control of your core assets and only risk investing them into these higher APR systems etc with funds you'd be ok with lossing 100% of because as we have seen that's happened to many.

Unfortantlly I don't feel sorry for the people who say they lost it all. You shouldn't have invested all your life savings like that in the first place which is the NUMBER ONE RULE!

Posted Using LeoFinance ^Beta