How To Earn 10.79% APY on Bitcoin With Cake DeFi!

The recent crypto meltdown spurred by the collapse of the Terra ecosystem has indeed been an eye-opener to the cryptocurrency industry. Few fintech platforms have survived the crypto winter and remained standing firm; one noteworthy mention that has stood the test of time is no other than Cake DeFi, a reliable all-in-one investment platform that lets you generate high returns on your cryptocurrency, yielding passive cashflow so that you can sit back and relax! Indeed, Cake DeFi has been quick to establish a solid reputation for itself and to garner the trust of many happy users like myself.

There are several ways to generate passive cashflow on Cake DeFi, such as

• Liquidity Mining
• Staking
• Freezer
• Lending
• Borrowing

A new recent addition to this list is the Earn feature, which is the focus of the article today.

Imagine that, as an early investor, you had only Bitcoin. Stumbling upon Cake DeFi, you are overwhelmed with its many (exciting) offerings, such as staking, liquidity mining and lending — you become unsure of which service you should avail. You are attracted to the high yields of liquidity mining that promises returns of up to 50% APY, but at the same time are perplexed about how liquidity mining works, and why it involves a pair of coins, the other mainly being DFI. On doing a Google deep dive, you become hesitant to participate in liquidity mining on hearing the term ‘impermanent losses’, which imply that the quantity of your Bitcoin could actually dwindle! You become demotivated to invest. After all, all you need is a simple solution to grow your Bitcoin — but at the same time the investing process seems rather complicated!

Liquidity Mining (LM) is the process whereby users supply liquidity to decentralized financial applications, and in return receive lucrative rewards for doing so. These collection of assets are known as liquidity pools which comprise 2 unique assets in equal proportions. When investors swap one asset for the other, the fees charged for this transaction gets paid to the investors who contribute assets to these liquidity pools, incentivizing participation in liquidity mining.

When the price of an asset moves differently from that of the other in the liquidity mining pool, impermanent losses occur. This occurs because the decentralized exchange (automated money maker) always tries to maintain an equal proportion between the 2 assets; if the price of one asset increases rapidly relative to the other, the quantity of the former has to reduce, to maintain a constant ratio (50:50) between the 2 assets.

To roughly illustrate this concept, have a look at the following scenario.

Let’s make the following assumptions:

1 DFI = 1 USD

1 Bitcoin = 1000 USD = 1000 DFI

You participate in the BTC-DFI liquidity mining (LM) pool, which contains 10 BTC and 10,000 DFI, which is worth 20,000 USD in total.

By contributing 1 Bitcoin and 1,000 DFI into the pool, you own a 10% share (worth 2000 USD) of the…