Best platforms for earning DeFi interest today
With DeFi (decentralized finance) platforms promising as much as double and even triple-digit yields, DeFi is the current buzz of the fast-growing cryptocurrency industry. Here’s what DeFi is and where and how to start earning DeFi interest.
- What is DeFi and what’s with the high DeFi interest rates?
- Factors that affect DeFi rates of interest
- 5 places where you can earn DeFi coins (and a DeFi interest rate comparison)
- Try DeFi-inspired crypto lending for more stable rates
- Enjoy stable DeFi interest rates with MyConstant
According to industry website: DeFi Rate, there’s more than $14 billion locked up in DeFi contracts right now. It’s easy to see why; with platforms offering staggering rates of 8 to 90% or more on cryptos, it’s safe to say DeFi offers great returns by any metric.
If you are a crypto investor wondering where to grow your money at above-average interest rates, DeFi investing may be something you should look into.
In this post, we’ll discuss how and where you can start earning DeFi interest. Let’s get into it.
What is DeFi and what’s with the high DeFi interest rates?
DeFi, an acronym for decentralized finance, is a financial network where you can borrow, lend, or send money freely without an insitutional intermediary.
The spearhead of the modern DeFi movement is cryptocurrencies, specifically blockchain technology and smart contracts based on blockchains like Ethereum.
Smart contracts are blockchain-based tools that can perform complex transactions autonomously and securely. For example, releasing funds when certain criteria are met.
A DeFi system is a move away from the typical financial services systems like traditional banks, brokerages, and exchanges that have worked before as intermediaries.
Because DeFi eliminates the third party in transactions, it lowers the costs and fees. And investors can enjoy much higher rates of return compared to traditional financial systems.
Factors that affect DeFi rates of interest
While DeFi investing platforms promise very high-interest rates, most of the rates can fluctuate frequently based on:
- Demand and supply – Interest rates rise and fall with changes in demand and supply of a particular crypto.
- A platform’s business model – The business models of some of these platforms do not allow them to pay higher rates when more retailers join their networks.
5 places where you can earn DeFi coins (and a DeFi interest rate comparison)
There are a handful of DeFi platforms where you can invest your crypto, stablecoins, or even fiat money. Here are 5 categories of DeFi platforms and a list of top platforms under each category where you can earn above-average DeFi interest:
1. DeFi lending platforms
On DeFi lending platforms, you can lend crypto usually in the form of stablecoins to borrowers and earn interest.
These platforms usually follow a “lending pool” model, where you deposit stablecoins alongside other investors into a pool of funds that are distributed to borrowers. When borrowers pay back their loans, the interest is distributed evenly among all investors.
DeFi loans are normally over-collateralized, meaning borrowers must put up more than their loan’s value in crypto collateral. The collateral remains locked up in smart contracts until the loan is fully repaid. In case a borrower defaults, the DeFi lending platform sells the collateral to recover your funds.
Popular DeFi lending platforms include:
One of the first in the business: Compound allows you to lend: Basic Attention Token (BAT), Ether (ETH), USD Coin (USDC), Dai (DAI), Thethe (USDT), Ox (ZRX), Wrapped BTC (WBTC), Sai (SAI), and Augur (REP).
Compound currently pays the highest interest rates to USDT coin lenders at 20.14%. ETH pays lenders a return of 0.06% as of January 2021.
Aave offers interest on Kyber Network Coin (KNC), Chainlink (LINK), Synthetic USD (sUSD), and True USD (TUSD).
Currently, Aave is paying 16.94% for USDT lending and 0.29% for ETH.
dYdX only supports USDC, DAI, and ETH lending.
Here is a table showing the current DeFi interest rates on these three top platforms:
The average lending rate across DeFi lending platforms is about 6% right now.
2. DeFi staking platforms
Staking involves locking up certain types of coins known as Proof of Stake (PoS) coins for a specified time. It helps crypto networks to create and validate new blocks. When you stake your coins in a DeFi network, you can earn DeFi coins as interest for helping to keep the network secure. The more you stake, the higher your rewards.
While you usually need a personal node to stake, many platforms offer a share of staking rewards from using their personal nodes.
Some top DeFi staking platforms include:
- Stake capital: for Polkadot (DOT), Tezos (XTZ), and Cosmos (ATOM)
- Rocket Pool: for ETH 2.0
3. Decentralized Exchange (DEX) liquidity pools
The DeFi world struggles with liquidity (mismatch in crypto demand and supply). If you solve the liquidity problem by becoming a liquidity provider, you can earn DeFi coins.
You can become a liquidity provider by contributing crypto to decentralized exchange liquidity pools. Liquidity pools are platforms that lock up assets to facilitate trading and provide greater liquidity. The concept is very similar to market makers in the stock market.
When you store your digital assets in liquidity pools, you earn a share of the trading fees. Top liquidity pool platforms include:
With Uniswap, you have to deposit an equal value of any pair of coins that trade in the platform. Uniswap pays you a share of trading fees based on the proportion of liquidity you provide. If your crypto makes up 30% of the liquidity stake, you get 30% of the fee payout. You claim your interest when you withdraw your liquidity.
The Kyber network enables exchanges of ETH and ERC20 coins. You can provide liquidity to Kyber’s assets through the Bancor network. When you add an equal pair of the Kyber token, KNC, and the Bancor token, BNT, you receive ERC20 tokens (KNCBNT) representing your liquidity share in the pool. You are then entitled to a share of the trading fees.
Again, while rates on DeFi liquidity pools can be nice they also tend to fluctuate with the number of providers. If you stable returns on liquidity, you may want to try more centralized sources.
A more stable liquidity pool
Some liquidity pools offer fixed rates of return. MyConstant’s liquidity pool, Crypto Lend, for instance, offers liquidity providers a competitive, fixed rate of 8% APY on BTC, BNB, and ETH compounded and paid every second.
4. Yield farming platforms
Yield farming is the icing of DeFi, the investment path that’s promising crazy profits to DeFI investors.
What is yield farming?
Yield farming is DeFi’s solution to unstable interest rates from their tools. It’s an attempt to balance the returns from DeFi platforms either through providing easy transfers or paying out the difference in their own DeFi crypto. Top platforms providing yield farming are:
DeFi P2P crypto-lending platform, Compound Finance, introduced yield-farming on
On June 15, 2020.
To balance out rewards, Compound now rewards daily COMP tokens to anyone who lends or borrows from their platform. You can earn COMP just by having an active loan or investment on the platform.
Yearn provides automated yield farming by shifting your investments automatically between lending pools on platforms like Compound Finance. In the Yearn system, if your deposited crypto slips below your desired interest rate in a certain lending pool, then it will shift you automatically to a new one.
Yearn.Finance even has its own DeFi crypto (YFI) you can buy on exchange and earn more via staking.
Opportunities to earn more DeFi crypto through yield farming
Yield farming provides a great opportunity for investors to accumulate returns in the form of reward tokens by stacking products.
For example, you can lend your crypto on Compound, borrow it, then deposit what you’ve borrowed and earn free COMP token rewards each time. You can then create a complex chain of DeFi investments by investing your reward tokens in other platforms that pay different reward tokens. If you are lucky, you may accumulate tokens that shoot up in value in the future.
5. DeFi insurance platforms
DeFi works almost exclusively with collateralized debt positions that can be eliminated should the value of borrower crypto slip too low. While insurance is not often mentioned in DeFi it’s a better way to encourage investment if they know something is backing their principal.
Unlike the long and tedious insurance claims processes with traditional insurance, decentralized insurance provides a process that fairer and faster.
With DeFi insurance platforms, anyone can contribute to a loan insurance pool by purchasing specific tokens from issuers and in turn earn interest from premium payments from those buying insurance. They also include money from the returns that an insurance company gets from reinvesting the pooled funds.
Top DeFi Insurance platforms include:
- Nexus Mutual
- Cover Protocol
Try DeFi-inspired crypto lending for more stable rates
Most of the rates of return on DeFi lending platforms fluctuate drastically depending on supply and demand, resulting in unstable returns for the average DeFi investor. This means active management of your funds.
If you want stable rates you should check out modern crypto-backed P2P platforms with business models that enable you to earn stable rates.
Enjoy stable DeFi interest rates with MyConstant
As we’ve mentioned earlier, DeFi is great but with their great interest rates comes a lot of uncertainty. And because many of these platforms are decentralized, there is no one you can call if something happens to your funds.
MyConstant is one of the few platforms with a business model that enables you to enjoy stable DeFi interest rates and 24/7 customer service.
With us, you can earn up to 7% APR lending stablecoins (USDC, DAI, USDT, and pUSDT) and USD. If you want to buy stablecoins, we offer easy on-ramps into popular stablecoins like DAI and USDT as well as loans against DeFi coins like SOL and YFI.
You can also earn 8% APY on your BNB, BTC, and ETH compounded and paid every second by lending your money to our liquidity pool, crypto-lend.
Sign up on MyConstant and start earning DeFi Interest today.
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