12% Annual Returns Account Disrupts Banks | Revix Blog

Brett Hope Robertson


Brett Hope Robertson


May 18, 2022

12% Annual Returns Account Disrupts Banks | Revix Blog

The recent launch by Revix of a savings vault paying out 12% a year on USDC, a US dollar-backed stablecoin, is a prime example of how decentralised finance (DeFi) and blockchain technology are upending the traditional finance markets.

The beauty of this product is that the returns are paid out in USDC, which is backed 1:1 by US dollars.

“Not only is this a way for South Africans to protect their wealth by earning more than inflation but the return is paid out in USDC, instead of rands,” says Brett Hope Robertson, Head of Investments at Revix.

The chart below compares the Revix Savings Vault annual returns with that of the average bank in SA and the US.

The average SA bank is paying just shy of 5% a year, while consumer inflation is running at 5.9%. That means you are losing value in real terms by investing in a traditional banking savings account.

“That’s not even taking into consideration that over the past 10 years, the South African rand has depreciated at roughly 4–5% a year against the US dollar. The direct result is that the average South African’s wealth, measured by international standards, has depreciated by 4–5% every year for the past 10 years,” says Hope Robertson.

The corrosive effect of inflation on the rand is shown in the chart below.

“In practical terms, if you’ve held your Rands for 10 years, it has lost around 46% of its international value against the dollar and we haven’t even factored US inflation into this calculation yet. At a US inflation rate of 2% a year, this further adds another 18% loss in international purchasing power. At a 64% loss in purchasing power it becomes starkly evident that the long-trusted South African savings account offering around 4–5% a year just doesn’t cut it as a viable way to preserve wealth” says Hope Robertson.

Traditional offshore savings accounts don’t offer much refuge from this plight either, given the technical and legal challenges in investing in offshore accounts. That prompted Cape Town-based crypto investment company Revix, which is backed by JSE-listed financial services group Sabvest, to launch its 12% a year Savings Vault.

“It’s a perfect example of combining the power of crypto and DeFi to bring a solution to South Africans. The Revix Savings Vault makes it possible to save in a US dollar-denominated account, without having to jump through any hoops, while delivering a 12% return,” adds Hope Robertson.

How is this possible?

DeFi has rewritten the rules of the savings account.

To most people, the word cryptocurrency still just means Bitcoin, but the crypto landscape has expanded exponentially to become about much more than just Bitcoin. DeFi is an entire ecosystem of financial services that operate without any central authority and is available to everyone. DeFi may indeed become the next phase in the evolution of the global banking and financial system, but it is already changing the way that investors think about one of the oldest and most trusted investments, the humble savings account.

To understand how DeFi has turned the concept of the savings account on its head, you need only look at the numbers. Let’s imagine a bank offers its customer a +1% return on their savings. Behind the scenes, that bank then lends that money to another customer at +5% interest and pockets the +4% profit.

What if it was possible for that customer to securely lend their savings directly to others, earning the full +5% return in the process? Facilitating exactly this kind of direct transaction between people while eliminating intermediaries, is what DeFi is making possible.

By making use of decentralised applications built on DeFi protocols (D’apps), you can lock your crypto into the vault and earn an APY [annual percentage yield] for the duration of the lockup period. Unlike a traditional savings account, savings vaults use these protocols to provide you with the full return that you deserve.

This new generation of savings accounts has largely been enabled by a specific type of cryptocurrency, called a stablecoin. Understanding stablecoins is key to understanding savings vaults.

What is a stablecoin?

Stablecoins are different from traditional cryptocurrencies because they’re backed by an asset, such as the US dollar or gold. In other words, they are simply tokenised versions of the US dollar, gold, or other reserve assets. This helps keep their prices stable, so they’re not subject to the same level of volatility as other cryptocurrencies.

Stablecoins are designed to be a middle ground between traditional cryptocurrencies and fiat currencies like the US dollar. While they’re still a type of cryptocurrency and can be used as a form of payment, they don’t experience the rollercoaster of ups and downs.

Stablecoins and savings vaults are therefore a viable solution to wealth erosion as a result of a depreciating local currency. A USDC-based savings vault makes it possible to effectively convert your savings to US Dollars while earning a 12% return on your stablecoins.

In this way, you’re avoiding the depreciation that you would suffer as a result of holding rands (+4.3% gain) while also earning an additional 12% on these assets. Assuming you got 12% on the balance of your Savings Vault, this two-fold gain would translate into a +16.3% net return on your South African rands. Compare this to the actual return on your average traditional savings account, and the difference is astounding.

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