$$$ KPO and CZM $$$: DeFIRE - FIRE using DeFi

Saturday, May 1, 2021

DeFIRE - FIRE using DeFi

Traditionally, in order to retire, one will need a relatively large investment where one can either live off the dividends or sell the investment based on an x% withdrawal rate. For example, if I need SG$5k per month for retirement, I will need SG$60k per year and depending on whether I lived off a 5% dividend portfolio or a 4% withdrawal rate, I would need SG$1.2 million or SG$1.5 million. That's a lot of money and most people would rather not think about it, YOLO and enjoy life.

What if I tell you now that there is a much faster way to generate the same amount of money with a much smaller capital/investment? Yes, it is in the crypto space and I am mindblown by it. The world we lived in currently is different from the world our parents/grandparents lived in. 

Screenshot taken from macrotrends

Back then bond yield was much higher so there will be a place for it in everyone's portfolio. Now bonds can barely keep up with inflation and I personally don't see any value in owning it. Back then there was no ABSD and our parents' generation could invest in multiple properties. If you ever wonder why didn't your parents buy multiple properties when they could, in the future, your children will probably wonder why didn't you invest in crypto when you could too. lol. 

This word DeFIRE came from this YouTuber - The Defiant (I am not so creative) and it simply means using DeFi to FIRE. Disclaimer, I am still pretty noob and new to this space but I do see the potential/feasibility of generating passive income through DeFi. Before I dived into the details/strategy, let me share explain the difference between APR and APY which is very important! Annual Percentage Rate (APR) is what we are all familiar with e.g. bank interest (1% APR), REITs dividends (5% APR). Annual Percentage Yield (APY) will always be higher than APR because it includes the effect of compounding. We have been trained/conditioned in such a manner that the default compounding period is monthly but in the world of crypto, the default compounding period is daily which makes thing even crazier!

Let's just discuss this strategy using the safest coins in the crypto world - the stablecoins

Screenshot taken from https://app.beefy.finance/

If I put my money in this liquidity pool, the APY would be 75.99%. 

Using a simple converter, we can see that the APR is 56.57%. If we take 56.57% divide by 365 days, we will arrive at the daily yield of 0.15%. Assuming I need SG$5k or US$3.7k (but let's use US$4k to simplify the maths), I will need just ~US$89k of capital (US$4,000 / (0.15% x 30 days)) to do that. Compare this to the million-dollar investment/portfolio required in the traditional world in order to achieve the same objective, this is so much less daunting!

Screenshot taken from https://app.alpacafinance.org/farm

If one is willing to take on even more risk by using leverage, the APY can go as high as 144.99% or an APR of 89.71% for stablecoins pair. This will further lower the capital required to ~US$54k (US$4,000 / (89.71% / 365 x 30 days)). You might be thinking that the yield is crazy high but I can assure you it is not. If I were to look at non-stablecoins, the APR can go even higher!

Screenshot taken from https://pancakebunny.finance/pool

This is my personal favourite - CAKE and where most of my money is currently in. The CAKE pool has an APY of 248.38% or 125% APR. The capital required would be ~US$39k (US$4,000 / (125% / 365 x 30 days)). It is a lot more complicated because the price of CAKE plays a part too unlike in stablecoins pair/pool where each coin is around US$1. All these are not without their risks and you should read up and research more on your own if you are planning to invest/throw your money into the crypto world.

I tried explaining to CZM how interesting it is to farm CAKE and with a capital of SG$5k, I am able to generate around US$20+ daily. Guess what's her response? She asked me to give her SG$5k and every day, she will give me SG$50 written down on a piece of note and said my CAKE is similar to that piece of note - worthless until I am able to encash them to buy a real cake to eat -.-" 

There is this saying in the crypto world to people not in crypto - have fun staying poor. Personally, I find that pretty rude and I will not use it in my article when I share about crypto. After all, we all have a very different risk appetite and of course, you are free to be as sceptical as CZM :)

Anyway, I have blogged about different ways to leverage crypto to build wealth for people with different risk appetites:
The safer approach using stablecoins
Risky approach but more hassle-free
Highest risk and you are on your own
- DeFi apps such as PancakeSwap and PancakeBunny
- DeFIRE with DeFi

Huat ah!

On a side note, Futu's moomoo app attractive sign-up bonus (one free Apple Share besides other benefits) has been extended to 31st May 2021 (1500hr SGT)! Find out what has changed here.

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  1. I saw similar comments in Genneva Gold forum some time back too, something like those who don't believe in it (Genneva Gold) are destined to be poor. No right or wrong, only time will tell.

    1. Hi HK,

      Haha. I had to google Genneva Gold to know about what happened. Anyway, Genneva Gold is a scam but does it mean gold itself is a scam and will bound to fail? Are stocks safer because it is listed in an exchange where it is regulated? I am sure we can always find some examples such as Enron or more recently Wirecard.

      I hope you understand that the same applies everywhere. In crypto, there are probably a lot more scams going on given that it is not regulated but there are also legitimate use cases/coins too. At the end of the day, I am just sharing that other alternatives do exist and one just got to do their own research and decide if they would want to venture out of their comfort zone.

      Like you said, only time will tell. Maybe one day I will lose all the money I have put into crypto or maybe not ¯\_(ツ)_/¯

  2. Hello KPO, I am also recently new to crypto. May I know any recommended Defi which are credible and safe for stablecoins for >20% APR?

    1. Hi Terence,

      There are risks once you move to the DeFi space and it is just how much you are willing to accept. I have not try this personally but for 20% APR, you might want to check out Anchor Protocol. The Babylonians blogged about it and even has a youtube channel to explain why it is sustainable and how to go about setting it up - https://www.youtube.com/watch?v=_02qSGaSsC4.