The Chinese version was first released on June 5th, and it has now been translated into English upon users' requests.

My first bucket of "silver" came from accumulating BTC.

In 2017, I first encountered cryptocurrencies. After thoroughly studying the Bitcoin Whitepaper and translating the Ethereum Whitepaper word by word, I divided my spare money into two halves and bought BTC and ETH. At that time, BTC was around $7,500, and ETH was $500.

Distrusting centralized exchanges back then, I directly stored my BTC and ETH in cold wallets. Years later, as Bitcoin's price surged, I was thrilled to find out that the price increase alone could cover my son's overseas education expenses. It was truly astonishing.

Believing in the future of blockchain and cryptocurrencies, I started a WeChat public account and a Zhihu column named "BTC In-Depth." I began what I thought was "preaching."

Among all my experiences, the most striking was cloud mining with Bitdeer. I bought their cloud mining service with ETH, and daily earnings were credited to my designated Bitcoin address. Without involving a bank or anyone else, I completed a transaction with Bitdeer. This was my first purchase on the blockchain, and the transformation from virtual to real was truly magical. I deeply understood why "Bitcoin Pizza Day" should be forever remembered. Now, every May 22nd, I treat my colleagues and family to pizza.

Later, I realized that my experience with Bitdeer was just the simplest form of DeFi application—decentralized payment.

Now, seven years later, DeFi has flourished. As someone who started by accumulating BTC and ETH, I need to introduce some new and safe ways to accumulate cryptocurrencies. I’ve been waiting, and finally discovered Drift, a decentralized exchange.

Drift’s user experience is similar to FTX, allowing spot and perpetual contracts with cross-margin capabilities, and deposits earn interest. I always had high hopes for FTX, and if not for Sam’s downfall, its unique product design might have surpassed Binance.

However, unlike FTX, Drift is decentralized. This means your cryptocurrency remains under your control. Simply put, even if Sam gets out of jail, he can’t steal your money.

To make it easier for you to understand, I plan to do some live trading so you can follow along. But more importantly, I want you to grasp the principles, so you can learn and apply them yourself.

Of course, airdrops are part of the deal, as Drift’s airdrop is still ongoing.

1. My Live Trading

For this live trading, I initially invested less than 5500 USDT, including USDC, BTC, and ETH. I deposited a total of 8480 USDT, withdrew 3000 USDT, as shown below:

I then borrowed over 9100 USDC, increasing my BTC position to 0.1097 and ETH position to 1.9625, as shown below:

To further reduce risk, I sold the following contracts, each for 750 USDT. Why hedge? Why choose these 8? And why 750 USDT each? I’ll explain in detail later.

As you noticed, the initial deposit was just under 5480 USDT. As I write this, a little over a week has passed, and it has grown to 5830 USDT, with a floating profit of 350 USDT. Where did this profit come from? Besides the price increase, there’s also the DeFi dividend. Let me explain step by step.

2. Two Important Recognitions

Before talking about the DeFi dividend, I must share two important recognitions. Without these, such operations are impossible.

2.1 Recognition One: BTC and ETH Are Recognized Crypto Assets in Traditional Finance, with Long-Term Price Growth

BTC (Bitcoin) and ETH (Ethereum), as the "gold" and "silver" of cryptocurrencies, have been recognized by traditional finance and possess relatively stable market value. This means they have a certain level of investment security in the long run. Like buying blue-chip stocks, investing in BTC and ETH is a relatively stable choice.

Especially with the issuance of spot ETFs (exchange-traded funds) for BTC and ETH, the value of these assets could further increase. Spot ETFs include cryptocurrencies directly in the fund's asset portfolio, making them more accessible to both retail and institutional investors. Spot ETFs lower the barrier to investing in cryptocurrencies, increase market liquidity and transparency, and attract more capital inflows. Therefore, BTC and ETH spot ETFs are expected to further drive their prices up.

2.2 Recognition Two: Cryptocurrencies Without a Cap or Continuously Issuing Are Likely to Decline in Price Long-Term

Blockchain projects have short lifecycles, not because they are bad, but because the innovation speed of modular blockchain is too fast. This industry is like a high-speed tech lab, with new technologies and projects emerging daily.

The iteration speed of blockchain technology is astonishing, like the "Moore's Law" of the cryptocurrency world. Today's star project may be replaced by newer, more efficient technology tomorrow. As a result, many cryptocurrencies have very short lifespans. Even if some last longer, they may become zombie coins, like ADA.

Unlike most blockchain projects, BTC has the largest consensus and is the cornerstone of blockchain. Without BTC, there would be no blockchain today. ETH, built on this foundation, introduced smart contracts, with significant first-mover advantage. For instance, the ETH main chain still holds the highest total value locked (TVL), and ETH remains the second-largest cryptocurrency by market cap, indicating its significance.

In short, Bitcoin is the foundation of the blockchain world, like the "basic protocol" of the internet, while Ethereum is the "application platform" built on this foundation. Both have their unique importance and support each other, forming today's thriving blockchain ecosystem. This is why investing in BTC and ETH is considered a relatively stable choice.

Based on these recognitions, I chose to leverage BTC and ETH long positions while selling general cryptocurrencies as a hedge.

3. DeFi Dividend

The core of DeFi is decentralization. With decentralization, everyone can be a bank depositor, and everyone can also be a bank shareholder. The interest rate spread is shared among depositors. Unlike traditional financial institutions, the platform doesn't monopolize the interest rate spread.

A clear example is Drift. Once you deposit, you start earning interest, even if your cryptocurrency is collateralized. This is impossible with centralized exchanges. FTX once had it, but now FTX is dead.

For you and me, coming to Drift is not just for a bit of interest, but for leveraging "safe" leverage.

3.1 Safe Leverage

There are misconceptions about leveraging in the crypto community. Many people suffer huge losses due to improper leverage usage, demonizing leverage. However, leverage is just a neutral tool; the key is how to use it.

The crypto market is highly volatile and risky, making leveraged trading more challenging. If misused, it can indeed cause significant losses. But this doesn't mean leverage is inherently bad. In fact, leverage is a tool that can amplify returns. When used properly, it can help investors gain more profits in the market.

Ethereum’s founder Vitalik Buterin (V God) once said, "Don't exceed 2x leverage." This makes sense. Low leverage can amplify returns while keeping risks manageable. It's like driving; moderate speed gets you to your destination faster, but speeding can be disastrous.

The first principle of using leverage is safety.

Safety is achieved in two ways: quantity and quality.

Safe quantity means not over-leveraging. Follow V God’s advice, don’t exceed 2x. Safe quality is simple—only buy BTC and ETH.

Before leveraging, set the leverage ratio to 15x. It’s an option, not an obligation. You can leverage up to 15x, but for safety, use only 2x. I had 5500 USDT, borrowed 9100 USDC, and didn't exceed 2x.

Remember, after borrowing USDC to buy BTC and ETH, you earn interest on BTC and ETH, but you pay interest on the borrowed USDC. Don’t worry; the USDC interest can be offset, which I’ll explain later.

3.2 Risk Hedging

Looking at the spot position, I have a price risk exposure of 14,000 USDT. With a 9100 USDT loan, a significant drop in asset prices (BTC dropping to 28,026 USDT, ETH dropping to 1542 USDT) would trigger forced liquidation of my position.

Currently, it's almost impossible for BTC and ETH to drop that low. But remember, the crypto community is still the Wild West; extreme price swings are common, unlike the safer A-shares. I’m not just guessing but basing this on serious research. You can check out "Don’t Take Bitcoin’s Price ‘Seriously’" if you have time.

To ensure safety, I chose to hedge 50% of the price risk exposure by selling perpetual contracts. I sold Sui, Op, Arb, Apto, Avax, Xrp, Matic, and Inj perpetual contracts, which are blockchain projects related to ETH, providing some correlation.

Choosing 8 instead of fewer is for diversity—similar to not putting all eggs in one basket, but in reverse. I wanted to sell 20, but due to Solana blockchain's limitation, an account can only have 8 contract positions, so I could only sell 8.

This completes the price risk prevention. The benefit of price hedging isn't just this; there’s also the funding rate income.

3.3 Funding Rate

After setting the hedge position, over the past 8 days, I earned approximately 63.97 USDT in funding rate income.

Why this income?

The funding rate is a unique mechanism in the crypto perpetual contract market, balancing the forces between long and short positions.

In perpetual contracts, the balance between long (buy) and short (sell) positions isn’t always maintained. If there are more longs than shorts, the funding rate is paid by the longs to the shorts, and vice versa. This ensures the contract price stays aligned with the spot price, preventing excessive deviation.

You might ask, can buying perpetual contracts earn funding rate?

It depends on the market.

In a bull market, investor sentiment is high, and most buy perpetual contracts, making longs outnumber shorts. In this case, the funding rate is paid by longs to shorts. So as a long, you not only don't earn funding rate income but also pay it.

Conversely, in a bear market, more people sell, making shorts outnumber longs, and the funding rate is paid by shorts to longs. Here, investors buying perpetual contracts can earn funding rate income.

Therefore, obtaining funding rate is closely related to market sentiment and trends. Understanding and leveraging market sentiment can help investors better strategize, using the funding rate mechanism to increase profits or reduce costs.

Additionally, perpetual contract markets usually have more buyers than sellers.

Perpetual contracts have become speculative tools. Buyers exceed sellers because price increases are theoretically unlimited, offering infinite potential gains for buyers. Sellers’ gains are limited to the current price of the contract’s underlying asset, while potential losses are infinite, as price rises have no upper limit.

This asymmetry makes most speculators prefer buying contracts.

Based on an initial 5500 USDT, an 8-day income of 63.75 USDT translates to an annualized return of 52%. Adjusted to match the loan base, it’s about 26%, much higher than the USDC borrowing rate of 14.78%.

Thus, my live trading is set up.

To summarize: 5500 USDT principal, 9100 USDT USDC loan, buying 7500 USDT BTC and ETH, hedging by selling 8 perpetual contracts of 750 USDT each.

Conclusion

This cross-margin operation can also be done on Binance, Gate, Bybit, and OKX. DEXs are learning from CEXs. Binance has a minimum deposit requirement of $50,000; Gate’s is about $10,000, OKX also has limits. Bybit has no limits but restricts mainland China users.

I must say, FTX excelled in cross-margin, so although Sam deserves condemnation, FTX is still missed.

You can track the real-time value changes of my live trading on Step via this link. ( It seems that there might be an issue with Sonar, as it sometimes doesn't work properly. Please use this Step Link. )

The Sonar platform views Drift as a lending protocol, so perpetual contract changes aren’t visible. The profit and loss of perpetual contracts are reflected through USDC loans.

Practice is the sole criterion for testing truth. How far this live trading goes and whether it’s profitable remains unknown.

One thing is certain: this live trading won’t remain unchanged. I will make minor adjustments based on circumstances but generally keep it stable. The principle is minimal change, minimal impact.

On the first Wednesday of each month, I’ll post a review, analyzing gains and losses. If all goes well, by the next review, the Discord server for "Airdrop Reference" should be up, making it easier for you to track various airdrop projects.

[More content can be found at the Airdrop Project Base]