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Defi Finance – Alternative Savings Apps

Defi Finance – Alternative Savings Apps

As the world moves towards negative interest rates, people are having to take more risks in order to generate a return on their money. Before the financial crash in 2008, you could put money in the bank and generate a respectable interest rate of 2-5% depending on the term of the deposit. However, since the housing crash, we have headed to 0% interest rates, which means that the money in your bank is losing value against inflation.

The best savings rates in the U.S. right now pay around .5% for a long term deposit of 18 months. Think about that. You put your money in the bank for 18 months and it only grows by .5%. With interest rates that low, it is no wonder more and more people are turning to invest in the stock market to try and achieve the 5-10% growth rate that the market has kept up the past decade.

There is a better way for you to save money: Defi Savings Apps

What are De-Fi Savings Apps?

Defi savings apps are designed to be a bridge to connect normal investors/savers in the world of crypto, without having to deal with the risk of losing your money.

How they work is you deposit money into the app, and the app will automatically convert your USD deposit into a crypto equivalent of a USD Stablecoin. A stablecoin is essentially a cryptocurrency that is pegged 1 to 1 with the US Dollar. The company that runs these stablecoins mints new coins when someone deposits money into their account, and when someone withdraws money, the coin gets burned. Each dollar you deposit creates a cryptocurrency version of your USD. And when you withdraw your money, they will automatically convert that cryptocurrency from the USDC (Stablecoin) to your US Dollar.

While most people have heard about Bitcoin and cryptocurrency, they usually don’t want to take the risks associated with market swings up and down of 50-80%. Investing directly in cryptocurrency is a very risky affair and something you should not do unless you understand some of the technology behind what you are investing in.

What Defi Savings Apps do is allow normal users (You and Me) to access cryptocurrency interest rates, without knowing how to deal with cryptocurrency. You are not investing in cryptocurrency, you are depositing your money into a savings account that allows you to access the cryptocurrency ecosystem, from the safety of a stablecoin.

Unlike traditional banks, decentralized finance accounts allow anyone who has access to online banking to access them. It is important to point out that a DEFI savings account, should be used in additional to your regular bank. Think of it as your bridge to the world of crypto currency and your real money account.

How De-Fi Savings Apps Work

Most Defi savings apps require you to register with the app and provide appropriate ID and do a KYC (Know Your Customer) to verify your identity. The reason you need to register with your identity for the account, is to prevent bad parties from access the savings rates. Unfortunately, this means that you will get taxed on the interest you accumulate, so you need to keep records of your deposits and withdrawals like any other interest rate account.

Once you have registered with the service, you then send a wire transfer to their account of the amount of money you would like to put in your digital savings account. When the wire transfer process is completed, the defi app will add the equivalent amount of digital dollars in your online savings account. These dollars will then be used to generate interest rates through lending platforms that provide upwards of a 1-5% interest rate depending on the floating rates.

After you have generated enough interest and want to withdraw your money, you can then submit a request and the initial amount of money that you wired to the service plus the accumulated interest rate will be wired back. The longer you keep your money in your digital savings account, the more interest you will accumulate. With Defi-Savings apps, there are no restrictions on your deposit, and they can be withdrawn at any time.

As of this moment, there are two main Defi savings apps that allow real world customers to access higher interest rate accounts.

Linen App – Interest on Dollars

Linen App is one of the most popular Defi Savings apps that is integrated with They offer a floating interest rate that allows investors to get a good return on their investment. Linen App uses UDSC as their stablecoin, which is a digital currency that is physically backed 1 to 1 with US Dollars in the account. There is no risk of using Linen App since all of your assets are fully secured.

In order to register with Linen, you need to be living in America and have an American bank account. When your account is verified, you will be given wire transfer information for you to send money to start the process of creating your online digital dollars. Don’t worry, you will be wired the same amount of money back (minus wire transfer fees) when you decide to withdraw the money from the app.

The benefit of Linen App is that you utilize USDC stablecoin, which is one of the most trusted digital stablecoins in circulation. The company circle is registered in New York and has to comply with all the strict standards from the federal government.

Dharma App

Dharma App uses a stablecoin called DAI as its main asset. Unlike the USDC coin that is backed 1 to 1 with a USD, Dai is backed with cryptocurrency. This means there is more risk associated with Dharma, if the collateral behind the app swings down during a market crash. With that being said, the current savings rates are Dharma is slightly higher than Linen App.

The advantage of Dharma is that the interest rates are generally higher than Linen app, however, both interest rates are floating so this can change in the future.

Voluto App

For people who are living in Europe and don’t have access to Linen or Dharma App, Voluto is your savings solution. This platform allows you to send money from any European bank account after you have registered, and start earning higher interest rates on your money. The Voluto App also takes advantage of to invest your money and earn you a higher interest rate.

Earn a Real Return with DeFI Savings

If you stick your money in a traditional savings account at the bank, the maximum interest rate you can earn is around .5% in long term savings accounts. With interest rate at .5%, you will barely earn anything on your money at the bank. Instead of earning close to zero interest, you should consider depositing your money into a Defi savings account. This will allow you to take advantage of higher interest rates in crypto, without being exposed to the higher risk associated with Crypto Currency.

By using stablecoins, the money that you put into your Defi Savings account will always stay on par to the USD one to one. Any interest that you accumulate during this period of time, can be withdrawn from your Defi account directly into your bank account. The main benefit of the Defi savings accounts is that you don’t need to understand cryptocurrency in order to take advantage of it. The only thing you need to do is wire money into the app savings account, and start accumulating interest. The money will be wired back to your account whenever you decide to withdraw it.

About The Author

Ben Todd

Ben was a seriously broke graduate student with bad credit who after finding himself rejected for any sort of credit card or loan for most of his adult life, finally decided to get his financial life in order. ' He spent several years reading as many financial advice books and blogs as he could. And suprisingly, Ben found he actually LIKED the topic of personal finance; after fixing his own finances, starting his own successful work at home website business, and using his earnings to get out of debt, created to help others do likewise!

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