DeFi assets are many things.
They are disruptive to the financial industry.
They are dynamic as their values ebb and flow with cryptocurrency currents.
And, they can be distressing for the investors who need to keep track of them.
Modern high-net-worth individuals (HNWIs) know that portfolio diversification is the key to successfully growing investment returns while minimizing risks. But organizing, monitoring, optimizing, and understanding the return on investment (ROI) of a diverse roster of assets is a tall order. This is even more true when DeFi assets come into play.
What is it that makes DeFi ROI a little more difficult to understand compared to other asset types — and what are today’s best tools for DeFi ROI tracking, DeFi trading, and all-around DeFi management?
We’ll fill you in on all of the above in this article.
Breaking Down DeFi, DeFi Assets, and Why It All Matters
The term “DeFi” is short for “decentralized finance.”
And, like many elements in the crypto universe, there are multifaceted meanings for DeFi.
At a high level, “DeFi” is a descriptor used for tools that democratize the financial process. DeFi technology moves transactions away from the banks and the brokers and instead creates trusted platforms where peer-to-peer transactions can take place.
DeFi products are created on blockchains, which are decentralized databases for recording transactions. The defining feature of blockchain databases is that they are not managed by centralized administrators (like national banks or governments), which is where the “decentralized” terminology comes from. Right now, Ethereum is the most common blockchain upon which to create DeFi technology.
Big DeFi platform creators will often create DeFi coins, or DeFi assets as they’re typically called and we’ll call them often in this article, that people can use to interact with their software. Today, some common DeFi assets include Ether (ETH), Cardano (ADA), and Solana (SOL).
Other DeFi assets include stablecoins, like USD Coin (USDC), which help even out volatility and tokens, like UniSwap and Compound.
With that very basic breakdown of DeFi and DeFi assets complete, let’s explore why DeFi is so, to quote ourselves and many others, disruptive in today’s financial space.
With DeFi, the groundbreaking development is in the decentralization.
Decentralization puts people back in touch with their finances and helps them move out from under the thumb of the too-big-to-fail brokers who have come to rule the wealth world.
Imagine — getting a loan or even being able to make a loan without wading through hundreds of pages of paperwork, meeting a bunch of arbitrary requirements, waiting days if not weeks for approval, or paying fee on top of fee for ridiculous things like vague maintenance tasks.
DeFi is about removing the gatekeepers to improve access and affordability when it comes to financial programs. And, at the same time, DeFi has become a pivotal asset class in which individuals can invest to diversify and prepare their portfolios for an increasingly digital future.
And with the growth of DeFi as an asset class comes the necessity for tools that help investors trade and track it. So we’ll talk briefly about why DeFi ROI is an essential yet complex metric to measure before diving into the best tools for tracking, trading, and pulling off all the other functions that come with adding DeFi to your portfolio.
What is DeFi ROI?
At its core, return on investment is a metric for finding whether an asset has grown or decreased in value. ROI does this by comparing the current monetary worth of an asset to the price that was paid to acquire it.
ROI is a quick and common calculation for uncovering how the value of an asset has changed over time — which helps an asset holder determine whether they’re happy with their investment and if they want to keep it, sell it, make another similar investment, etc.
Most investors will be looking for a positive ROI number, which indicates an asset has grown in value since purchase. The opposite is true for a negative ROI number, which is why most investors tend to avoid or dump holdings with ROIs that are low or in the red.
To find DeFi ROI, you simply subtract the initial monetary value of an asset from its current monetary value, divide that number by the initial value, then multiply the whole thing by 100 to display your ROI as a percentage.
Here’s what that looks like:
Return on Investment Percentage = [(Present value of investment - Initial value of investment) / Initial value of investment] x 100
What is It That Makes DeFi ROI Difficult to Understand at a Glance?
There are a few factors that make it difficult to get a usable ROI for DeFi assets manually.
First, when you’re looking at ROI on an asset, you probably want to understand it in the context of your entire portfolio. That probably means seeing the metric in your native currency. Since DeFi assets are purchased using cryptocurrency, a simple ROI calculation isn’t enough to also convert its value to your preferred currency.
Speaking of crypto, the volatile nature of this currency is the second thing that makes manually finding the ROI of a DeFi asset almost pointless.
Even if you’re fine just knowing the ROI of a DeFi investment in crypto, by the time your calculation is complete the value of the currency has probably changed drastically — and will do so again several times in the next hour alone.
Factors like these make automatic ROI calculation such a valuable feature in the DeFi management toolbox. So let’s explore the best tools for getting into the DeFi game before finishing up on the best DeFi all-around tracker — and ROI calculator — for modern DIY investors.
4 Modern Tools for Trading Crypto and Tracking DeFi ROI
This section will guide you through the main platforms you need to get started with trading and tracking DeFi.
MetaMask: Powerful Crypto and DeFi Wallet
The first thing every DeFi investor needs is a wallet, which is a portal that enables you to interact with DeFi assets.
Wallets are where DeFi investors receive, send, and store their assets. MetaMask is a wallet, exchange, and browser extension all in one, and it works on the Ethereum blockchain. This enables it to link with a variety of DeFi programs, coins, tokens, and so on.
And, importantly, MetaMask is capable of connecting with various other elements of your DeFi toolkit, including Kubera — the all-in-one DeFi ROI tracker we’ll walk you through a bit later.
To learn more about how to use MetaMask as an essential DeFi tool, read our guide: DeFi Tools: Essential Tools for Decentralized Finance Investors.
Balancer: An Index Fund-Like DeFi Protocol for Beginner Investors
Balancer is a DeFi protocol. Protocols are autonomous computer programs where smart contracts live, which enable digital transactions like borrowing, lending, etc.
Balancer is what’s known as an automated market maker (AMM), which is core DeFi technology functionality. AMMs are responsible for close to 90% of the trading on decentralized exchanges (DEXs).
Balancer’s liquidity pools essentially rebalance portfolios, enabling anyone to create or join a decentralized “index fund” — to use a traditional finance term. With Balancer, DeFi investors can trade supported tokens, generate liquidity pools to facilitate affordable trading, or invest in pre-existing pools to earn yields.
Learn more about the ins and outs of Balancer in this guide from Gemini.
Celsius: Your App for Lending, Loaning, and Staking DeFi Assets
Celsius is a platform that embodies the goal of decentralized finance.
Celsius is known for its robust DeFi services, namely those that enable users to engage in person-to-person transactions like borrowing, lending, and investing for interest, which is known as “staking” in the crypto world.
With ease of use, insurance for assets, accessibility around the globe, and low to no fees for various transactions — Celsius is an excellent tool for beginners as well as investors interested in passive income. For those who feel they want access to an exchange and/or a wider variety of coins and tokens, Binance is a popular alternative to Celsius.
To learn more about the pros, cons, and features you can expect from Celsius, we found this Celsius review helpful.
Kubera: Top Tool for Tracking Crypto and Calculating DeFi ROI
As we mentioned above, manually finding the ROI for a DeFi asset is an involved process because the value of a DeFi asset is typically pinned to the cryptocurrency in which it was purchased. And the value of this cryptocurrency compared to your native or preferred currency changes hourly, making it hard to understand your true DeFi ROI or accurately compare it to the rest of your portfolio.
So we recommend you don’t do it manually.
Kubera is the best crypto tracker and all-around wealth tracker that empowers global investors to organize, understand, manage, and maximize their portfolios — no matter how many international currencies or unconventional assets they contain.
With Kubera, you will be able to automatically calculate the internal rate of return (IRR) — a more detailed version of ROI that takes holding time into account — on any asset in your preferred currency, even if it was purchased in a volatile currency like crypto.
All you have to do is use the spreadsheet-like interface to add information about your DeFi asset like its name, what you paid for it, and what it’s currently worth. If you invest any value into or take any value out of an asset, you can also track that in Kubera. The platform will automatically account for holding time when displaying the IRR of your DeFi asset — in whatever preferred currency you choose! In addition, Kubera even provides insight into performance from indices and cryptocurrencies such as the S&P 500, Bitcoin, etc. to help you understand your IRR in light of other popular investments.
For a walkthrough and an animated breakdown of how exactly to use Kubera to find and track IRR, check out our help center article.
But remember, Kubera isn’t only for DeFi ROI tracking. The same clean interface can be used to track the value of any asset. One-offs like heirlooms, collectibles, metals, and so on can be added manually, just like DeFi assets. For account-based assets — we’re talking stocks, Fiat bank accounts, real estate holdings, crypto wallets, and beyond — you can add your account details to Kubera to have our platform automatically display the value of each in real-time.
Just like that, you’ll finally have a complete view of your modern, diverse portfolio.
If you work with a financial advisor, wealth manager, or some other type of financial pro — Kubera could be just the tool you’re looking for to upgrade that relationship. When your financial professional white-labels Kubera to use it as their client portal, you’ll finally have an effortless resource for seeing and sharing your assets. This will empower your financial pro to provide even more informed and insightful wealth management recommendations.
Take a tour of how Kubera works and sign up to start your affordable subscription today. Or, to bring your financial pro on board, have them request a demo and contact our team at email@example.com to create a custom package.