A Different "DeFI"
As part of my research around the assumptions to retire early, many discuss the use of a 4% interest rate for generating income once you create your asset base. For example, if I would target $120,000 of annual income for retirement (I know, ambitious), I would need to accrue $3 million in an income generating portfolio to generate the returns for me. That is obviously are large amount to accrue and save over time!
However, in my research of the DeFi space, I have seen how returns are abnormally higher. While this is due to the inherent risks associated with the platforms and the price volatility in crypto in general, I think it is balanced due to the possible returns. The importance of this in my combining concept, is that it significantly reduces the amount of assets needed to generate the same income! For example, achieving a 12% return from a DeFi platform (i.e. Liquidity Pool, Farm, etc.) could reduce the asset amount needed in the example above to $1 million instead of $3 million which is a significant reduction.
This surely demonstrates why traditional institutions are concerned with DeFi and what has been achieved. While I think that this will not be a smart move for a retirement income flow as a whole, diversification is your friend and as the platforms around DeFi mature and improve, it should be considered as a component of the such; particularly considering the already popularity of Stablecoin Liquidity Pools and the returns they achieve. I know it will be a part of mine!
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