How can you earn money with DeFi apps?

Yield farming, staking, lending: how can you benefit from all this?

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In our blog, we’ve already talked about the capacities of DeFi to win the leading role in the financial industry and even to become the next step of the industry development. DeFi apps are powered with blockchain which is the key precondition of the majority of benefits that these solutions can bring to service providers and users.

But there is one more awesome thing about DeFi that really inspires many people to come into the space. And this thing is that DeFi offers a wide range of opportunities for users to get a good passive income without risking to lose everything. Sounds interesting? Then, keep reading as that’s exactly what we are going to cover in this article.

Unlike the world of traditional investments and centralized finance, DeFi ensures a rather low entrance barrier which means that you can start investing and getting profits regardless of the amount that you are ready to allocate for these purposes.

So if you are ready to earn money without huge investments, welcome! DeFi is waiting for you. And we’ve prepared some really working methods for doing that.

Staking

What if we say that you can get tokens for “staking” or locking up your existing tokens into smart contracts? Even if it seems weird, it is absolutely real. As a rule, you need to stake the native token of the chosen blockchain. For example, in the case of Ethereum, it will be ETH.

Actually, users are rewarded not just for locking up their assets but for making their contribution to the security and decentralization of the network. That’s how it works. The Proof of Stake (PoS) concept that was used for building EOS, Cardano, Ethereum 2.0 presupposes that users have mining power in accordance with how many coins they hold. Stakeholders also act as validators and should control the execution of consensus rules and detect cases of cheating. Those validators who try to cheat the network themselves can simply lose their stake.

One of the most popular staking options preferred by many members of the crypto community today is Ethereum 2.0 and the Eth2 Launch Pad platform. Users who want to help the network to grow and expand by becoming one of its validators should make a stake of at least 32 ETH (which is a quite impressive sum given the fact that at the end of April 2021 ETH set a new ATH price of around $2,800). However, some platforms offer pooling options, so that you can make a stake even with a smaller amount.

Among other attractive options for staking there are Algorand (ALGO), Tezos (XTZ), Livepeer (LPT), Cosmos (ATOM) and many others. 

Users can stake:

  • on crypto exchanges (such as Coinbase or Binance), 
  • on cold wallets (like Trezor, Trust Wallet, Ledger),
  • or on staking-as-a-service platforms that are dedicated only for staking (MyCointainer, Stake Capital).

Yield farming

Yield farming can be described as a way to earn more money on your own money. This product is quite similar to bank deposits or bonds. In traditional systems, investors make deposits or invest in bonds so that their money ensures liquidity for banks or governments. 

In yield farming, an investor can place crypto on a DeFi protocol, ensuring liquidity for the platform. And a protocol will give a reward to this user.

The first thing that yield farmers usually do is adding their funds to a liquidity pool of the platform. These funds can be further used by other users for exchanging their tokens, borrowing or lending. For example, if you hold ETH, you can lend it out on a DeFi protocol like Aave and then receive your reward. Quite often yield farmers deposit their reward tokens in other liquidity pools for getting higher yields.

Among the most popular yield farms we can name:

  • Compound
  • Maker
  • Aave
  • Uniswap
  • Balancer
  • Synthetix
  • PanCake 

It’s interesting to note that you can earn income not only from the assets that you already own, you can also borrow crypto for these aims and in some cases, it will be really feasible if interest rates are aligned in your favor.

Lending

And yes, as for lending itself, it’s also a good option for a person who holds crypto and is ready to act as a bank in the traditional financial system. You can lend your crypto to borrowers and earn interest on it as DeFi platforms offer an APY to lenders.

For example, if you lend DAI on Compound Finance, you can get an APY of around 8%.

Other popular platforms for crypto loans are:

  • Aave
  • dYdX
  • Maker
  • Cream Finance
  • TrueFi

You can read more about DeFi lending in our blog following the link.

Lending, staking and yield farming are beneficial not only for users but for the ecosystem in general as they help not only users to earn money but also DeFi platforms to increase their liquidity and value.

As of May 1, 2021, the total value locked in decentralized finance was $67.43 billion, according to Defipulse.com. Just compare, in February this figure was around $40 billion while in January it was around $20 billion which shows quite impressive rates of ecosystem growth. It means that DeFi can be an excellent choice as a source of your steady income. But please be very attentive as the high volatility of crypto assets still remains to be an issue!

And if you are ready to enter the DeFi space with your own project, our team will be always happy to support you and to provide a full scale of blockchain development services.

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