A New Choice for Investment: The Rise of On-chain Stablecoin Investment

In recent years, the yields of traditional financial products have continued to decline, leaving many investors feeling confused and disappointed. Bank interest rates have fallen, and the returns on government bonds and money market funds are even struggling to outpace inflation, while insurance financial products are also quietly reducing their yields. In the face of this situation, some investors have begun to turn their attention to emerging on-chain investment methods, particularly investment strategies based on stablecoins.

Advantages of Stablecoin Wealth Management

A stablecoin is a digital asset pegged to fiat currency, characterized by price stability. Stablecoin wealth management refers to lending, staking, or participating in protocol investments with idle stablecoins on the blockchain network to earn annualized returns. This approach is similar to traditional banking, but in the on-chain world, profit distribution is more transparent, and returns are more reasonable.

Currently, the annualized interest rates for USDT/USDC in mainstream decentralized finance (DeFi) lending protocols typically fluctuate between 2.5% and 4%. Some DeFi platforms may offer total annualized returns of up to 8% through additional incentive mechanisms, but this often comes with higher risks and locking period requirements. In contrast, fixed income products, while not yielding the highest returns, show stable overall performance with an upward trend, reaching up to around 5%. These products have become the preferred on-chain wealth management method for many users due to their stability and lower entry barriers.

Stablecoin Wealth Management vs Traditional Fixed Income Products

Compared to fixed-income products in traditional financial markets, stablecoin wealth management has the following advantages:

1. Higher yield: Usually higher than bank deposits and money market funds.
2. Flexible redemption mechanism: Most support deposit and withdrawal at any time, interest calculated daily, no lock-in period required.
3. High transparency: Most platforms disclose the sources of income, risk explanations, and capital flows.
4. Reasonable profit distribution: The platform distributes actual profits to investors in proportion, reflecting the value return concept of on-chain finance.

Sources of Income

The returns on stablecoin wealth management mainly come from three aspects:

1. On-chain lending interest: Lending the stablecoins deposited by users to other users to earn interest rate spreads.
2. Staking rewards or node income: especially in Staking-type products.
3. Profit distribution for participating in options or yield stacking strategies.

For users, as long as the platform's product structure is transparent and asset custody is secure, these products can be regarded as "on-chain quasi-fixed income products."

Market Trends

The number of on-chain active addresses for stablecoins continues to grow. Although there are no exact statistics on user participation, the scale is rapidly expanding based on on-chain activity and the influx of funds. Especially in regions where local currencies are unstable and financial systems are inadequate, stablecoins have become an important tool for residents to avoid depreciation of their local currency and to gain returns on dollar assets.

It is worth noting that institutional investors are also beginning to pay attention to this field. Institutions such as insurance companies, family offices, and funds have incorporated stablecoin wealth management into their liquidity management tools as part of their dollar asset allocation. This trend has driven the platform's continuous improvement in risk control, transparency, and compliance, providing individual users with a more mature product environment and service experience.

Risk Warning

Despite the many advantages of stablecoin wealth management, risk identification remains crucial as an emerging field. Some stablecoins may face de-pegging risks due to clearing mechanisms or anchor asset management issues. Additionally, the security of smart contracts and their audit status can also affect fund safety.

For ordinary users, it is recommended to choose well-known platforms or products from regulated institutions, prioritizing stablecoin investment methods with clear return structures and flexible redemption options. Products with annual returns exceeding 10% should be approached with caution, avoiding blind pursuit of high yields. Stability, transparency, and compliance are key to long-term participation.

Conclusion

In the current low-interest-rate environment, stablecoin wealth management offers investors a new and robust investment option. While it is not necessary to fully embrace the entire cryptocurrency world, through stablecoins, investors can have a transparent, secure, "digital savings account" with an annualized return of about 5%. This provides an attractive choice for those looking for certainty in returns amidst uncertainty.