The Latest Web3 Trend: DeFi & Node-as-a-Service (DaaS & NaaS) Earning Investors a Daily Yield

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Summary:

• Blockchains rely on nodes to broadcast, validate, and store transactions. They are not presently rewarded for their efforts.
• Node-as-a-Service projects offer a daily incentive for purchasing a node. Blockchains seek these nodes to secure and decentralize their networks.
• The NaaS concept has evolved into DeFi-as-a-Service, where new projects use investor funds to build a treasury that generates returns from a variety of DeFi opportunities. Investors who purchase these “nodes” receive a daily reward.
• Universe ($UNIV) is one of the latest DaaS projects, offering daily reward “nodes” in the form of tradeable NFTs that they refer to as Planets.
• The DaaS space has been criticized for its lack of sustainability. Each project has a unique take on how they’ll survive in the long-term.
• $UNIV is hoping their innovative NFT, Metaverse, and investment ideas will yield them enough to stay alive in the space.

Cryptocurrencies, at their core, rely on a distributed peer-to-peer network.

This acts as the foundation of decentralization across all digital assets and their blockchains. Take Bitcoin for example – the oldest (circa 2009) and most widely known cryptocurrency in the world. The Bitcoin network utilizes a consensus mechanism known as Proof of Work (PoW). As a PoW blockchain, Bitcoin trusts consensus from those who have performed the most computational work. As blocks of transactions become validated, this chain of work becomes more robust. 

So who is doing this work? And who is validating the work that they are doing? The answer: miners and nodes.

Miners are the supercomputers that bundle transactions into blocks and perform extensive computation as their proof of work. This is the process by which transactions are published to the blockchain. Miners are rewarded with a fixed amount of Bitcoin for their efforts in supporting the network.

Nodes are computers that run software associated with Bitcoin. These nodes are responsible for a few things. First, they broadcast transactions received to other nodes and miners in the network. This is when miners do the work detailed above. Nodes then receive the blocks published by the miners, validate the miner has performed the correct work, and share it with the rest of the network to remain in sync. Nodes store the full ledger of transactions, known as the blockchain.

The process is more technical, but a general overview will suffice to paint the picture needed here.

The problem with this process – nodes are not rewarded for their contributions to the network. There is no incentive for good actors to support the network as a node. It requires computational power and storage space, neither of which are free. 

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Nodes-as-a-Service

This is precisely why Node-as-a-Service projects came to be. The first and most established is StrongBlock ($STRONG). StrongBlock allows anyone to create a node for a non-refundable fee of 10 $STRONG tokens, in exchange for a daily reward of about 1%. The reward is paid out in the project’s native token, $STRONG. By doing so, StrongBlock has created a fleet of nodes that they leverage to support several blockchains. The more trustworthy nodes a blockchain has, the more decentralized and secure it is. This is the service that StrongBlock provides.

StrongBlock became very popular over the past ~14 months – not difficult to predict with a daily yield of nearly 1%. As they say, imitation is the sincerest form of flattery. Strong’s innovative idea and quick success drew many other players into the space.  

Most of these competitors took the NaaS idea and transformed it into a DeFi-as-a-Service model that requires investors to buy “nodes” to participate. Node has become a major buzzword that often no longer acts as a true validating node. These DaaS projects use the funds they raise to invest in a basket yield-bearing DeFi assets, and provide the returns to “node” holders. 

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Universe DeFi-as-a-Service

Universe ($UNIV) is one of the latest DaaS protocols to hit the scene. Their core offering remains similar to the many other DaaS projects ($THOR, $POWER, etc.). They stand out in their efforts to gamify the space. They refer to nodes as Planets, and these Planets are NFTs (ERC-721 standard) that serve as your access to daily rewards. Traditionally, most node investments are non-refundable, but $UNIV takes a different approach. Their Planets can be traded on a few NFT marketplaces atop the Avalanche blockchain. This means an investor can purchase or mint a new planet, benefit from the daily payout for a desired amount of time, and recoup their initial $UNIV through a sale of the NFT.

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DaaS Sustainability

Everyone’s biggest concern and focus in the emerging DaaS space? Sustainability. Many projects are offering a daily yield up to 3% and using a large portion of investor funds to supplement the node rewards. We’ve heard numerous warnings of “ponzinomics”. Realistically, no combination of yield-farming, staking, and moderate-risk DeFi magic can yield a large treasury upwards of 3% daily. 

This reality has rippled into several shake ups in the space:

• Projects slashing daily rewards within a few weeks/months of launching
• Boom and bust cycles in token’s value based on excess hype transitioning to concern for the long-term
• New projects launching with larger allocations to their treasury wallets and less to the rewards pool in the name of sustainability

Presently, Universe’s Planets offer from 0.87-3.05% daily, depending on the tier. The tiers are named after planets in the Milky Way, and the higher APY tiers can be reached by compounding your rewards a set number of times.

Despite their innovative gamification and NFT efforts in the DeFi space, $UNIV’s one month price action isn’t looking good:

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$UNIV one month price on CoinMarketCap

Keep in mind that the broader crypto market is down in conjunction with the traditional financial markets. NaaS and DaaS projects have followed the same trajectory, and $UNIV has been no outlier. 

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The Future of $UNIV

Despite their weak monthly performance, the team is pushing forward to expand their ecosystem and become a leader in the DaaS landscape. Their roadmap includes:

• Philanthropic endeavors for environmental causes
• Development of a play-to-earn game in the Metaverse
• Implementing a DAO for community governance
• Autonomy in their treasury investing to produce maximum returns

With all that in mind, is today’s price an attractive entry opportunity, or only a stop on the project’s road to zero?

We’re soon to find out. At this point, I’m hesitant to recommend investing in the project. The protocol is not yet established. Until they execute on the roadmap, lay out a path to sustainability, and reverse the downward price trend, I won’t be jumping in. This is certainly an attractive entry for some, but the current risk to reward ratio will keep me on the sidelines for now.