Best DeFi protocols for passive income

[MiddleEuroAsia]

For serious crypto "passive" investments, unfortunately, I still use "centralized" platforms to invest such as‌ nexo, youhodler, celsius, blockfi...etc, but for my playground money, i have 2 options:

1- gamble‍ it ( I loathe traditional gambling )
2- put it into defi projects.

and I⁠ obviously chose number 2, and I have made some great money but I lost some⁤ too, some projects that I like is pancakeswap, SharedStake, DAOventures plus Yieldly on Algorand because⁣ it's cheap.

but all on all, I'm still very very careful with Defi cause you⁢ find that a LOT of projects post nonsense filled with buzz words in their whitepaper︀ and no actual solutions, plus it's some times frustrating (and difficult?) to find a community︁ and devs that cares about the underlying technologies rather than making quick profit.

So I︂ like the concept behind defi, and the technology behind it, but I'm not that interested︃ in the 100s of immature projects that just appear out of nowhere with "Disruptive" and︄ "ground breaking innovations"

 

[SusanSharandon]

Actually as long as they don't pay dividends, they are ponzis as well.‍ You don't get any voting rights in the company or any share of the profit,⁠ you are just hoping somebody else buys them from you at the bigger price pa##¤

 

[JackAlabama]

Yep, and they occasionally dilute the shares at will too and issue new⁠ shares.

 

[legrant]

So Google, Amazon, and Facebook are a ponzis according to your logic?

 

[SusanSharandon]

The companies themselves? No, they have a business model that brings in profit.‌ Their stock? Yes, absolutely. When you buy (or receive) their stock, you get absolutely nothing‍ else in return except the hope that you can later sell at a higher price.⁠ There is not even a buy back guarantee price (*correction, for google there seems to⁤ be a buy back price of 0.001$/share). No dividends, no nothing. Pure Ponzi.
Check out⁣ this guys channel, his book is pretty good also.

 

[Silvio]

Technically you do get voting rights in proportion to the % that you⁠ bought. If you don't hold enough %, you won't get a seat on the board.⁤ The board represents the biggest shareholders and if you don't like how the board is⁣ acting or you think their interests differ than yours, you don't have to buy the⁢ share.

Ponzis are scams that are backed by nothing, whose whole reason of buying them︀ is to sell them later because they have no intrinsic value (= most crypto coins︁ bar a few). A share in a company is backed by the earnings stream that︂ the company generates. For example Google is one of the top cash generative businesses on︃ the planet and if for some reason they decide to close their company, all shareholders︄ are entitled to their relative % of the assets of the company, after the bondholders︅ are paid. By buying a share % you are a partner in a company- a︆ minor partner but a partner nonetheless.

Are there scams and pumps and companies with no︇ value and no earnings that explode in price? Tons of them.
Plenty of stocks are︈ nothing more than a pump and are run by crooks, dilute their shares and don't︉ produce any earnings. You don't have to buy any of these shares.
Also you probably︊ shouldn't buy any single stock as an investment, as any single stock can crash regardless︋ of the earnings it generates (i.e. MSFT in the 2000s, AMZN, etc).

And just a︌ reminder for all the guys here proclaiming a market crash every Monday, and saying one︍ should buy gold\farmland\fish\magic-internet-money:

 

[SusanSharandon]

Take for instance Google, who has two stocks: GOOGL (with voting‍ rights) and GOOG (without voting rights), they both trade at more or less the same⁠ price, the difference being negligible. I'm not an expert in stocks, but I don't know⁤ of any case in recent history when the average holders of a stock exercised their⁣ voting power in a meaningful way, nor do I know anyone who buys them for⁢ that power alone. Even when the voting power is there, it's usually limited in some︀ way, for instance in FB the majority of shares are controller by the ceo.
Regarding the intrinsic value argument, I'm not sure how much one would get paid on the︁ dollar if google closes its doors (if anything at all)?.
I'm happy to change my︂ mind if I'm wrong, I've been thinking about this topic quite a lot in the︃ past few months, and the only conclusion I have reached is that non-dividend paying stocks︄ are Ponzis.
It's quite fascinating (in a negative way) to think of some time in︅ history when the first non-dividend stocks started to be distributed. How did they even market︆ that thing? 'Hey, I know everybody else is paying you back a percentage of the︇ profit for your investment, but how about we pay you absolutely nothing? We won't even︈ guarantee a pay back price if you want to sell it to us. But maybe︉ somebody else will buy it from you in the future at a higher price!' 😵

 

[legrant]

How is it a weird thing that companies don't pay dividends? They just reinvest the︋ profits in order to grow the company amongst other stuff. If the company grows, well,︌ the stock price will go up and if it doesn't the stock will go down.︍

And when it comes to shares with zero or less voting rights, that's just a︎ way so the original owners of the stock maintain control and make the decisions, so,️ it's usually to prevent another company to perform a hostile takeover. (there could be other‌ reasons)

I personally own stock of some companies and every now and then I get‍ an email asking me to vote for certain things, so yeah, as @maxmmm said, you⁠ won't get a seat on the board unless you have a big chunk of shares⁤ but in some companies, you do actually get to vote even if you just have⁣ 1 share.

 

[Silvio]

Not all businesses generate profits. Imagine having invested a local donut shop that reinvests all︋ money in order to grow, and keeps opening and buying new shops in order to︌ expand. Such a business will not generate revenues, therefore can't pay any dividends for investors.︍ Of course the shop can also stop expanding and investing, and it will immediately generate︎ profits, but then it will stop growing. Assuming it's big enough - plenty of businesspeople\private️ equity funds will still be willing to buy it at a multiple of the revenues‌ (5-10x).
Hence that business has a value - it's the discounted value of all the‍ earnings it generates. If it generates more revenue, it will be worth more. If it⁠ generates less revenue, it will be worth less.

Nobody is forcing you to buy any⁤ company that you deem overvalued, or whose governance structure you don't like (FB), or even⁣ if you personally hate the CEO (FB again). Nobody is forcing you to buy companies⁢ that are unprofitable either. And to be fair there are lots of stocks that are︀ pure pumps and have no value (again since they don't generate any revenue).

However, when︁ a company is paying a dividend, in a way it is like saying "we can't︂ get a good return on this capital, so we're giving the capital back to the︃ investors". Personally if the company can generate 15% ROIC on the capital I'd rather the︄ company keep it and use it to grow their business (and therefore the stock will︅ be worth more) rather than get the capital back to me as dividend.

Berkshire Hathaway︆ is a massive company that has been growing for decades and generates billions in cashflow..︇ It's kinda funny to call it a ponzi just because it doesn't pay a dividend.︈ Clearly there are enough examples to disprove your opinion but I have a feeling you︉ won't be convinced...

 

[SusanSharandon]

Damn, I was enjoying your comment until‍ you decided to make it stingy 😛 I don't know why you think I'd be so⁠ stubborn as to not change my mind on this issue. Matter of fact, I really⁤ hope to change my mind if I'm wrong, it's a topic about money and I⁣ really don't want to hold a false point of view. I also kinda hope I⁢ wrong, because then I would be able to look at stocks with more trust and︀ that would expand my potential investment portfolio.

Your reasoning about the stocks/profit/etc is factual, but︁ I don't see how it contradicts the Ponzi perspective. We might be disagreeing on semantics,︂ I am not sure.

'A Ponzi scheme (/ ˈ p ɒ n z i /,︃ Italian: ) is a form of fraud that lures investors and pays profits to earlier︄ investors with funds from more recent investors. The scheme leads victims to believe that profits︅ are coming from legitimate business activity (e.g., product sales or successful investments), and they remain︆ unaware that other investors are the source of funds.'

Yes I agree that a company︇ that does not pay dividends can reinvest more money and become more successful. Yes I︈ agree that investors might prefer not to receive dividends precisely because they want to company︉ to grow. However, the only way they will make money is if somebody else buys︊ the shares from them at the higher price.

Take real estate investment for instance. Even︋ assuming the price will remain still, the house can generate rental income or at least︌ provide shelter. It has value.
Bitcoin - even if the price remains the same, I︍ would still hold it just because I don't trust banks, there is value in its︎ freedom-oriented implementation.
A stock that pays dividends whos value remains the same is still an️ investment that can pay me regularly.
A non-dividend stock whose value stays the same is‌ meaningless (for the average investor who doesn't hold a position in the company). It has‍ to maintain its pyramid inflow of investors in order to generate a profit. It would⁠ hold some degree of value if there was a guarantee of dividend paying at some⁤ point in the future(when the growth slows down, for instance), but that is not usually⁣ the case.
The only thing that would save it from the 'Ponzi scheme' label is⁢ its transparency (sort of). The companies don't lie about profit sharing or other things. Warren︀ Buffet is not rubbing his hands with an evil laughter thinking how good of a︁ scam he was able to create with his stocks (at least I hope he isn't).︂
The pyramidal aspect of the stock market is so foggy in the public's eyes that︃ it's not even being properly discussed. It might even be silently accepted on a subconscious︄ level by the gambling addicted masses who simply like to bet on the growth of︅ a company, mutually accepting the structure by the default, in order to keep themselves busy︆ with the rush of making a profit, sugarcoated by the business-like intellectualism that cannot be︇ found a normal casino.
And there is intellectual merit in picking up the right stocks,︈ even with the Ponzi element involved.

 

[MiddleEuroAsia]

I read all your guys arguments and I agree with certain things and disagree with‌ others, and as I always say, diversification is the key.

putting that aside, what I‍ don't get with stock maxis is that they tend to forget that not All companies⁠ reinvest their shares to grow the company, R&D and the likes, and they just simply⁤ buyback their shares to increase the stock price and benefit the people at the top⁣ (who owns the most shares).
in 2018-2019, more than 1 trillion dollar was spent on⁢ buyback programs with more than 60% of companies buying their share back at a relatively︀ high price, with apple leading the way as always with their "innovative" way of thinking,︁ but it declined to more than 700 billion dollars in 2020 due to the pandemic︂ (still, it's a big number)

sounds familiar? 🙂

So let's not pretend that stock purchase is︃ the only way to go, we are in the longest bull run and the only︄ thing that holds this bubble from bursting is time, but I'm not stressing it, since︅ I diversify, and I'm admitting that not all my investments are growth-focused investments and that's︆ ok, sometimes I like "risky" investments and testing the waters on exotic places, and sometimes︇ I like the piece of mind that comes with investments that just hold it's value︈ over time, not increasing, not decreasing, just stays afloat.

Stock, bonds, land, crypto, gold, art,︉ collectibles....all hold certain values for the right people, if you're not ok with investing in︊ one instrument that's fine but don't force it on others, you can share you opinion︋ as much as you like, but be objective and form your opinion around facts and︌ logic, not useless emotion, and people will listen to you.

 

[Silvio]

I think that's the key sentence here.

Berkshire\Google\Apple etc actually have a legitimate business activity that generates billionas of profits and that's where⁠ the value is derived from. Let's imagine that these companies decide to delist their shares⁤ and become a private company thus removing the "ponzi" aspect as you call it, you're⁣ telling me you wouldn't want to be a partner (own a share) in any of⁢ these companies?

Pseudo-intellectual mumbo jumbo. As︅ I wrote before, as is the case with most of the conspiracy people flooding this︆ forum, you mostly want to show us that you are so smart and have uncovered︇ a hidden truth that escaped the masses of sheep investing in the stock market, and︈ you don't really want to be convinced. If you would be honest with yourself about︉ it maybe you would be able to see it more clearly.

Full disclosure: I used︊ to think 100% exactly like you and I wish someone would have convinced me of︋ this 10 years ago, I would have had 3x my current net worth...

So you think the stock market is a ponzi but Bitcoin isn't? OK... I really️ have nothing to say to that.

Totally agree, there⁣ are plenty of asset classes and many of them have a place in a balanced⁢ portfolio. Nobody has to buy stocks or gold or crypto. But claiming that non-dividend stocks︀ are a "ponzi" because they are tradable is pretty much wrong. Over 200 years, buying︁ the stock market index you would have beat any other investments in real terms by︂ far, and this includes Gold, Bonds, Art (even the Mona Lisa made only 5% annually︃ since it was painted). By completely ignoring an asset class you are causing your portfolio︄ a disservice (and I guess that applies to me as well with my dislike of︅ crypto).