Earning interest through De-Fi- Is it Possible?

The options for decentralized finance are wide, ranging from synthetic stablecoins to loans to a variety of other methods. However, learning about the many projects and how they operate, as well as regularly monitoring and caring for your investments, requires time and effort.

In order to better understand how these services can help us generate passive income, we’ll look at how they work, today.

Passive Source of Income

When it comes to accumulating cash through a series of investments, strategy is everything. It is the latter that helps you to maintain your composure in high-pressure situations while ensuring the optimal development of your assets and wealth. In order to achieve success, it is necessary to build up a system that generates the most amount of profit while requiring the least amount of time.

Because time is a limited resource and non-passive income strategies cannot generate endless returns, they are not recommended. It is for this reason that it is critical to put up systems that create passive revenue. This type of scheme frequently necessitates the use of seed cash and does not always give the enormous potential profits that the volatility of cryptocurrencies might provide. These incomes, on the other hand, are frequently more consistent, and the dangers are different, but not non-existent, as a result.

It is therefore critical to carefully organize your strategy and to become familiar with the procedures and services that will be utilized. We are only able to provide you with a high-level overview of these initiatives in this article. You will also need to conduct your own study on the services that appear to be relevant to you after reading this article.

Lending Cryptocurrency is a Good Idea!

In order to generate passive income through De-Fi services, the most basic and well-known approach is to simply lend your cryptocurrency to other users in order to receive interest on your investment. There are many various sorts of loans, including peer-to-peer loans and loans organized into pools, as well as a variety of interest rates that vary depending on the cryptocurrency used and the amounts granted.

Indeed, the most profitable cryptocurrencies are those that are in high demand, and the majority of these are stablecoins such as Dai or USDC, among others. There are a plethora of cryptocurrency lending platforms, protocols, and interfaces available, each of which provides a different set of services and interest rates. Furthermore, they tend to look similar, which makes it easier for you to distinguish between them: once you’ve tried one, the others will be less difficult to distinguish between them.

As a result, you will discover below a list of the most well-known players in the industry at the present time. Keep in mind, however, that the information required to comprehend these systems can be difficult to find at times, and you should proceed with caution when using these services.

1. Compound

Compound is a key player in the bitcoin lending market, specifically through lending pools. In other words, lending groups that work together. You deposit your monies into these pools in order to earn interest on the money you have in your bank account. Different cryptocurrencies can be lent over the Compound protocol, however some of the offers are absolutely unappealing to potential borrowers.

Indeed, at the moment, the site offers a return on investment of 0.01 percent per year, which is 70 times less than the return on investment of the pound. Indeed, the amount of money available for lending is far less than the amount of money actually borrowed; in other words, there is a large amount of supply and little demand. As a result, interest rates for lenders are currently at historically low levels.

2. Maker

Maker is a system for lending stablecoins, such as the well-known Dai and Sai, whose value varies around one dollar per unit of currency. Simply said, the formation of Dai or Sai is performed by pledging Ethers or BAT equal to up to 150 percent of the loan’s value in Ethers or BAT, respectively.

Under penalty of triggering a liquidation procedure, the assets pledged as collateral must maintain a value greater than a certain minimum value threshold, regardless of market movements. According to the latter, a portion of the guarantee is made available for purchase by other Protocol users at a discount of around 5 percent compared to the market price.

3. Celsius Network

Celsius Network is a lending platform available on mobile, which offers its users to earn interest with their cryptocurrencies, and to borrow dollars if they put cryptocurrency as collateral.

There is a plethora of cryptocurrencies accessible, each of which offers variable interest rates between 2 and 10% yearly (rather high rates compared to those of Compound). As a result, by lending your Dai, BTG, or USDC using the Celsius Wallet, you can earn passive income.

Provide Liquidity

The process of giving liquidity to exchange protocols between different types of tokens, while comparable to loans, is not same in terms of operation, and the incentives do not match in terms of value.

A similar number of alternative programs exist to provide liquidity in exchange for rewards, just as there are numerous cryptocurrency lending services available. The goal is to compare and contrast the various protocols and services in order to make the best option between the user experience and the advertised returns. Some of such programs are mentioned below.

1. Uniswap

Uniswap is a key player in the swapping (or instant exchanges) of Ethereum tokens. It was founded in 2013. However, it is not this characteristic that we are concerned with in this article.

Indeed, the efficiency of these exchanges is made possible by the fact that Uniswap relies on a variety of distinct pools of liquidity. In exchange for a portion of the protocol’s user fees, these users supply liquidity by putting their cash into smart contracts, which in turn provide liquidity.

2. Syntheix

Synthetix allows investors to invest in assets such as Bitcoin, gold, or stocks by “synthesizing” their way into those assets. To be more precise, it is the production of tokens that reflect derivatives pertaining to cryptocurrency assets rather than cryptocurrency assets itself.

And this procedure necessitates the usage of SNX tokens as collateral for the production of derivatives, which is necessary for the development of the derivatives. As a participant in the functioning of the protocol, you have the potential to earn passive revenue by lending your SNX to other participants.