Unlike the banking world, cryptocurrency platforms offer you quite lucrative returns on any deposits that you put inside a specific protocol.
Typically, you would be lucky if a bank would provide you with an interest rate above 0.5% in today’s climate.
Following is a quick list of the best US interest rates from some banks;
As you can see, 0.83% seems to be the highest rate from a relatively smaller bank. Funny money really. And if you consider the inflation rate, it's basically nothing.
0.83% is chump change in cryptocurrency.
Of course, cryptocurrency is still in the wild west era. However, there is an entirely new money economy that is emerging.
Crypto finance, whether centralized or decentralized, has way much better APY to offer than any of the banks.
I put together a list of platforms where to put your ETH or DAI. Why not Bitcoin? The problem is that Bitcoin doesn't function in its pure form in DeFi that's happening mainly on Ethereum.
Ok, let's dive into how to make money while you sleep with your idle assets.
Centralized Platforms
For some people, centralized platforms are the way to go. Users of these platforms do not need to worry about keeping their cryptocurrency safe as everything is handled by the respective platforms themselves - making them more secure. On top of this, these platforms typically have insurance coverage, so users are protected if anything does go wrong.
On the other side of the equation, users on centralized platforms must conduct KYC procedures and submit their Identification to use the platform - giving up any privacy in the process.
1. Coinbase
Coinbase does not need much of an introduction being one of the largest cryptocurrency exchanges on the planet. As of July 2020, the platform announced that they have over 35 million users in over 100 different countries. In the same month, the exchange announced that they would be introducing “Dai rewards” for customers in the US, UK, Netherlands, Spain, France, and Australia.
Dai rewards will see DAI holders earning a 2% APY for all customers (in the stated regions) holding DAI on their exchange. After an initial 5-day wait from depositing, the DAI rewards are distributed to users daily. On top of this, they also offer a smaller 0.15% on USDC staking and a whopping 5% on Tezos assets.
2. Nexo
Nexo is a centralized digital asset lending institution. It allows users to lend their cryptocurrency to earn interest and also offers cryptocurrency-backed collateral loans for borrowers. After launching in 2018, Nexo has managed to amass over 800,000 users and has already managed to process over $3 billion in loans so far.
The platform allows users to earn quite a high-interest rate, which reaches up to 10% for stablecoins such as DAI, TUSD, USDC, and USDT. On top of this, users can earn 5% by lending BTC, ETH, NEXO, and XRP.
The great thing about Nexo is that it has $100 million insurance from Lloyd’s of London. It is also ISO 27001:2013 Compliant and abides by all regulations. Interest is paid directly to holders every day, and it offers higher interest rated for those that stake NEXO tokens.
3. Crypto.com
Crypto.com is an all-in-one platform that encompasses crypto payments, an exchange to buy and sell cryptocurrencies, an MCO Visa card to spend crypto in-store, a crypto credit solution for loans, and a crypto lending platform to earn interest.
As of June 2020, Crypto.com has over 2 million users. They also have insurance coverage of up to $360 million led by Arch Underwriting at Lloyd’s Syndicate 2012.
Crypto.com allows lenders to earn up to 4.5% APY on cryptocurrency such as ETH and up to 10% APY on stablecoin assets such as DAI- assuming that 10,000 CRO is also staked on the platform. These rates are much higher than other centralized solutions.
They offer the option for a flexible interest rate, which providers a smaller yield - 6% for DAI and 2.5% for ETH - with this option, lenders can remove their assets at any time. However, if lenders lock their coins up for a minimum of 3-months, they can receive, as previously mentioned, a higher APY of 4.5% for ETH and 10% for DAI.
4. Celsius Network
Celsius Network is a peer-to-peer lending company that allows users to borrow loans and lend cryptocurrency to earn interest. The platform is geared toward the average mainstream user to make it easy for new-comers to enjoy interest earned on cryptocurrency.
So far Celsius has managed to process over $8 billion loans and has gathered around 188,000 active users.
Lenders can earn up to 7% for lending ETH on the platform. They can enjoy a further 9.65% APY if the lender chooses to earn rewards in CEL. For stablecoins, Celsius Network pays 11.55% for deposits in DAI, PAX, USDT, USDC, and GUSD. They have the most comprehensive range of cryptocurrencies to earn from amongst the centralized lending platforms. They also pay 4.51% APY on all Bitcoin deposits.
It is important to note that Celsius Network is insured by Fireblocks and PrimeTrust - their custodians. However, when assets are lent out to borrowers - there is no insurance. Instead, the borrowers overcollateralized their loans by 150%, which acts as a safety mechanism.
Decentralized Platforms
The other side of the coin is Decentralized platforms. These are lending platforms with no centralized party, and it is up to the lenders to keep their coins safe and secure. Lending on decentralized platforms is much riskier as they can be subject to hacking attempts. They are not as tightly insured as centralized platforms like Coinbase - unless the lender takes out their decentralized coverage from platforms such as Nexus Mutual and Opyn.
There are 2 advantages of decentralized platforms over centralized ones. First, they tend to offer higher APYs. Secondly, they are anonymous - no KYC needed.
1. Compound
Compound Finance is one of the pioneers of decentralized lending. Launched in September 2018, it has already managed to attract over $2 billion worth of assets onto its platform. It is known as an algorithmic money market that allows users to borrow and lend assets.
Compound currently offers around 2.89% APY for DAI deposits. it's important to note that this number is flexible. It can go up to 8% the other day, while it's not the case on centralized platforms. The stablecoins account for more than half of their total deposits as there are approximately $1.2 billion DAI deposits so far. They offer a higher 4.13% APY for all USDT deposits - their highest APY provided as of October 2020.
Their ETH APY is relatively lower as it sits at just 0.25%; however, there are still over $225 million ETH deposits on Compound Finance.
2. Aave
Aave is another pioneer in the decentralized lending industry after launching under ETHLend in 2017 and later rebranding to Aave. So far, Aave has attracted around $1.32 billion in assets. They offer both borrowing (against collateral) and lending on their platform.
Their highest APY is for the DAI stablecoin in which users can earn up to 4.9% APY - although it is essential to note that it is continuously changing depending on the number of active deposits and loans borrowed. Their largest market is in USDC, in which users can earn around 1.35% APY, followed by USDT in which users can make 2.65%.
Users can also earn around 0.96% APY by depositing ETH into the Aave smart contract.
3. Yearn Finance
Yearn Finance is a DeFi yield aggregator that automatically hunts for the best APY on different decentralized lending platforms. The platform will automatically find the best APY for each asset from platforms such as Compound, Aave, dYdX, and Fulcrum, and automatically switch between each of them.
Currently, you can only earn with stablecoins (and wBTC) on Yearn Finance. The platform offers around 4.7% APY for DAI deposits and 2.64% for USDT deposits. Additionally, there is also a 3.44% APY for any Synth sUSD deposits.
As of mid-October, Yearn Finance has attracted over $500 million in deposits to earn interest.
4. Curve
Curve Finance is a stablecoin trading platform that allows users to earn a low-risk yield from depositing cryptocurrency. The platform has several different stablecoin pools that will enable users to deposit and make an APY. As you can see on the screenshot above, DAI is bundled with other stablecoins into a pool.
Each time a pool is used to make a stablecoin trade, the depositors (lenders) earn. There is no borrowing on Curve Fi; instead, all the interest is accrued through stablecoin swaps that occur on the platform.
So far, Curve Finance has managed to attract almost $1.5 billion in deposits, and all lenders have earned a total of around 5.67% APY since the platform was launched. The APY varies daily for each pool.
5. DeFi Money Market
DeFi Money Market is slightly different from the rest of the Decentralized earning protocols here. While the APY for all of the other protocols varies, DMM offers a standardized 6.25% APY rate on all ETH, USDC, and DAI deposits.
Once a user lends these assets to DMM, the team will purchase real-world assets such as automobiles, houses, and even airplanes. This is what is used to pay the fixed 6.25% interest that DMM pays on all deposits.
So far, DMM has managed to attract almost $9 million in deposits on its platform, and all their real-world purchases are viewable on their dashboard.
