With the sudden exit of DFX-Swiss from the Defichain service, regular investing with a savings plan for community members became significantly more complicated. However, several companies immediately offered to provide an "On-Off-Ramp" service, which is the term for the ability to buy crypto with fiat currencies. Vanilla-Labs is already working on a solution. But - as we all know - the regulatory hurdles in our time are quite high. Even though Switzerland and Liechtenstein, in principle, allow for such services, the legally sound setup is time-consuming and expensive.
So how was it possible for BAKE to offer savings plans after just a few days? I would like to preface this by saying that I have no contacts in the top management of the Cake Group, so my opinion here is only an informed speculation.
From my perspective, three points are essential for the swift solution:
Farsighted and decisive management
Long-term, customer-oriented behavior
Dedicated development team
Because even Julian at BAKE can't perform magic, and thus, an On-Off-Ramp solution also requires a lot of time for BAKE. This also explains why we've only received "On-ramp" so far.
For quite some time, the Cake Group had a problem: Due to customer orientation, compensation for various services is always only through profit sharing. I won't discuss the exact percentage of profit sharing here, but despite being customer-oriented, BAKE is not a Samaritan, but a strictly profit-oriented company - and that's a good thing. A sensible investor wants a healthy partner to manage their assets.
The expenses of the Cake Group, such as personnel costs, rent, servers, marketing, etc., are high with 185 employees and a location in expensive Singapore, as well as 2 million customers. These expenses, however, are not in DFI, BTC, or ETH, but in Singapore Dollars or US Dollars, which means that the Cake Group would need to sell most of their earnings on the market. However, for over a year, we have been in a bear market with very low crypto demand and especially low liquidity. Only a farsighted and customer-oriented management in a healthy company with sufficient reserves is capable of making the decision to temporarily forego sales of thinly-traded cryptos to avoid alienating its own customers. In early 2023, the Elite Membership was established as a win-win solution, providing income to the Cake Group in fiat dollars and expenses through the cryptos held in the portfolio. Customers benefit in two ways: firstly, because these cryptos were not sold on the market, and secondly, through net higher returns.
The recently implemented Dollar-Cost Averaging solution leverages the Elite Membership's established partnership with payment processor Stripe, so no new construction was needed in the short term. Additionally, the group holds a very large supply of DFI. Looking at the Staking service alone, we can see immense inflows:
Bake hosts around 11,121 Masternodes. Of the 3,655 Nodes fixed for 10 years and the 919 frozen MNs for 5 years, cake will surely have about 2/3 in customer holdings (Defichain-Analytics has not published exact figures for this). Let's roughly calculate:
2,500 MNs for 10 years with 25% yield = 12,500,000
600 MNs for 5 years with 18.5% yield = 2,160,000
8,000 MNs with 12.5% yield = 20,000,000
Out of these nearly 35 million customer earnings, BAKE receives between 3% and 15%. Assuming an average of 11%, BAKE receives around 3,850,000 DFI per year - and the previous year's earnings were significantly higher, as we all know. My estimate assumes a total Cake Group supply of nearly 10 million DFI. In addition, regular monthly earnings exceed 300,000 DFI.
Now, if BAKE doesn't need to sell these DFIs on the market because customers can purchase them through regular savings plans at the best market rate, it benefits both customers (with a quick and easy savings plan solution), the Defichain community (by avoiding sales on the open market and thus preventing a steep decline in prices), and the Cake Group by converting income into the spending currency.
Before the critics start saying that BAKE is just using customers to "unload" their holdings, they should realize that Cake could have sold DFI at much higher prices of up to $3 per DFI since spring 2022 - but they refrained from doing so to mitigate the effects of the bear market, benefiting the community (not themselves).
The development team should also be praised for quickly integrating monthly purchases into the new app.
Am I a BAKE fanboy? No, absolutely not. I was quite annoyed about the 15% profit sharing for my 10-year Masternodes at Cake because I consider the level of profit sharing too high, especially when one could operate full Masternodes oneself. However, for DFI amounts under 20,000, 15% is certainly reasonable, as otherwise you wouldn't receive anything. Nevertheless, I appreciate good management and a dedicated team of employees.
Will the savings plan purchases by BAKE customers have positive effects on the Defichain price in the future? I believe YES, because, on one hand, I believe customers will buy more DFI than BAKE earns monthly, and on the other hand, the Cake Group certainly will not sell their entire supply at current prices, as their financial situation is rock-solid and not under duress.
No rational management would sell at rock-bottom prices without reason when in two years, they could potentially sell at 15x or 20x.