Sunday, April 17, 2022

Will this Quick and Dirty FIRE for desperate people work in practice?


I was contemplating whether this post should be shared in the Dr Wealth blog but thought otherwise because this idea can be very controversial and I expect a healthy round of debate around this idea I have.

One of the things I do above and beyond training and investing is to challenge myself to see whether I can invent new ways to attain financial independence. And one of the things I teach my students to be wary of is liquidity pools. The idea is that for exchanges to be run in the cryptocurrency world, some folks need to provide liquidity in the form of currency pairs, those who are willing to do so can be rewarded. For obscure pools that need liquidity, rewards can be over 100%. The catch is that yields fluctuate and you get rewards in the form of tokens which can be volatile.

Naturally, I've been playing a few pools myself and after putting about $5,000 into a mix of these random currency pairs, I'm getting about $10 UST a day.  When these pools hit about $50, I would farm it again to an attractive pool that yields over 100% and I will see a gradual increase in my daily earnings over time. 

Do note, however, that this is chump change to me and I do this for fun, much like what folks will do at blackjack tables in casinos although I think that I'm doing much better than most casino customers. Sometimes I do this because I can warn my students and tell them not to. 

I think that once you can accept that yields are not sustainable and you can even be subject to possible fraud, it may be possible to invent a new quick and dirty form of FIRE. This form of Liquidity Pool FIRE may lack the sustainability of real FIRE, but with small amounts, you can skip other forms of FIRE like CoastFIRE or Barista FIRE and "zerg rush" your way to financial independence.

The math is very simple. If you can live on $24,000 a year :

  • A REIT/Bluechip portfolio yielding 6% needs to be $400,000 to sustain your lifestyle.
  • A stablecoin portfolio yielding 10% needs $240,000.
  • A diversified liquidity mining operation yielding 100%, needs only $24,000.
So I think a new form of lifestyle design can revolve around LPFIRE.

You save aggressively to hit $24,000 in your liquidity mining operation. Once you hit this target ( some fresh graduates can do this in 6 months ), you immediate pivot your full take-home pay into other FIRE buckets :
  • The first bucket is to maintain $24,000 in your LP operations which can lose value quickly due to currency fluctuations and impermanent loss. There will be months you need to plug the leaky holes on your ship, how else can you get >100%?
  • The second bucket is to start building a REIT/stablecoin portfolio to build a more stable version of FIRE. I prefer a 90/10 mix of traditional assets to stablecoins, but you can choose your own allocation. 
The benefits are largely time-based. Imagine getting some form of financial independence within 6 months of starting work and farming your entire paycheck into a more stable form of savings in your mid-20s.

The real benefit is to decouple yourself from an earned income in your mid-20s so that you can really hit your FIRE target using more stable assets. It will take 2.5 years to cover $2,000 via stablecoins if you earn $100,000 a year. After that getting that $400,000 in REIT/stocks would be easy because you have an extra $4,000 every month to build your real estate hoard. 

Of course, there is a high probability that over time some pools will fade away without making you money, you also may have to shift your funds around liquidity pools over time. 

The element of luck may still play an important role in your journey. 

I think in practice, the biggest weakness of this plan is whether any investor who gets drunk on 100%+ yields would have the willingness to buy real estate at 6%. The other issue is whether he can maintain his interest in regular employment when money can be obtained so easily. For this to work, you need to promise yourself that this is not real FIRE but merely an accelerator towards FIRE using traditional assets. 

But I think this idea sure beats putting into a 2% short-term endowment when inflation is twice that amount right now. 





  1. Hi Christopher,

    Totally agreed!
    Usually the ridiculous high APR will fade overtime and no matter how high the APR is, if the coin price crash, one will still lose money! Stablecoin farming generally is more safe than degen farm. Of course for some excitement, can put small amount in these.

    Of course there are exception, perhaps can take a look at MMF and MMO.

    Thanks for the post!

  2. There is a better way of doing LP without suffering any loss. Haha

  3. What abt instead of allocating to traditional assets yielding 6%, take a portion to DCA into the major crypto and sit through volatility? No need to do super conservative 6% REITs and then super degen for 100% yield... barbell strategy? haha

    1. This is basically what I am dong right now. But the lure of 100%+ is so tempting.

    2. I dont understand, DCA-ing into the majors is what you're doing right now? But writing about a portfolio of collecting a 6% yield from reit and farming 100% apy? haha i may have misunderstood your reply..