At Donut, we believe in providing you with new ways to work your money smarter. Variable Pro, our newest strategy, does just that, earning you up to 15% APY.
In 2021, we’ve seen the DeFi sector grow astronomically. Billions of dollars are transacted every quarter, and new technologies are creating more opportunities to earn every day.
Our team has been hard at work building a new way to earn interest that’s as simple as everything we do at Donut. Enter Variable Pro. It’s our highest yield offering yet, and works a little differently than Fixed or Variable, so it’s worth taking a closer look.
What is Variable Pro? ⚡️
Variable Pro is a yield-optimized DeFi lending opportunity powered by yearn.
yearn is a trusted service in the DeFi space, where over $2 billion in assets are safely earning at any given time. It's unique in that it applies an algorithmic strategy to optimize your yields across several DeFi protocols (including Compound, Aave and dydx).
The interest rates on Variable Pro can reach as high as 15% APY, depending on the dynamics in digital asset markets.
How do I use it? 👋
Variable Pro will be available to all Donut users the week of May 24th, but it will take a few simple steps to unlock it.
First, you'll need to maintain a Donut account balance of $5,000 or more in order to access the strategy.
Also, you'll have to complete a brief learning module in the app before investing. It only takes a minute, but it ensures that everyone understands the Variable Pro strategy, how it works and its unique risks.
Then, you're all set to invest!
Why are the interest rates higher with Variable Pro? 📈
It all comes down to the engine behind Variable Pro: yearn.
You can think of yearn like a robo-advisor for DeFi lending. Their technology automates the yield generation process by constantly rebalancing your allocation across various lending platforms. This ensures that you receive the highest possible APY on your funds.
In essence, yearn allows you to passively invest your cryptocurrencies in the highest-yield opportunities within DeFi, while abstracting certain fees and technical complexities.
Donut lets you access yearn directly from your bank account, making it super simple to earn interest rates upwards of 15% APY.
Is Variable Pro higher risk? 🔐
With higher yield comes higher risk. We want to make sure all users understand the difference between our three strategies.
Fixed mitigates risk by working directly with institutional lenders and prime brokers. Variable works a single lending partner, Compound, ensuring your funds have minimal exposure while they earn.
When earning with Variable Pro, your funds move across many DeFi lending partners, which leaves your principal more exposed compared to low-risk strategies like Fixed and Variable.
Technical failures or bugs are highly unlikely, but it’s important for all users to understand that the technology and platform risks are slightly higher with Variable Pro.
If you’d like to learn more about the 3 types of risk in DeFi lending, check out our blog here.
Is my principal safe? 🛡
Donut and our lending partners use overcollateralization to protect your principal while it earns. For Variable Pro, we leverage various lending platforms, all of which are highly collateralized.
When you earn with Variable Pro, your principal is typically collateralized or "covered" over 125% — which means that borrowers must put up $1.25 of digital assets for each $1.00 they borrow. High collateralization covers your principal in the case that a borrower defaults.
Coverage is not the same as insurance and funds on Variable Pro, as with all digital assets, are not FDIC insured.
How do I invest existing funds in Variable Pro? 💰
Once you've unlocked Variable Pro, you will be able to select it from the Strategy screen to allocate your funds instantly.
As with all strategies on Donut, you may add funds, switch between strategies (Fixed, Variable and Variable Pro) and withdraw funds to your bank at any time. There are no lock-ins.
Can I split my allocation between Fixed and Variable Pro? ⚖️
Not yet, but it this feature is coming soon. For now, you’ll have to choose which single strategy you’d like to use. As always, you can change strategy as often as you want.
So when can I start? ⚡️
Variable Pro will be available on Donut the week of May 24. Remember to keep an eye out and update your app!
We hope that this article has helped clarify Variable Pro. If you have any further questions, don’t hesitate to reach out by e-mail or DM us in-app.
Real Talk 🚨
Any saving and investment strategy puts your capital at risk.
The above information is intended for informational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.