A lot of crypto investors just HODL their crypto in crypto exchanges or cold storage wallets so they have easy access to them. Keeping your crypto in a cold storage wallet is similar to keeping your money under your mattress at home. It may be the easiest way to keep your money, however, it won't help to grow your assets. And what if that wallet stop working or goes missing? Will you be able to access your cryptos?
There are a lot of ways to grow your assets in the crypto market that offers the best savings opportunities. The chance is there for you to turn your crypto into something bigger.
You don't need to be good at crypto trading or do a lot of mining to make your crypto savings grow. And a lot of investors don't know how to trade, that is why the crypto market offers alternatives to let crypto investors who don't know how to trade still earn interest from their crypto holdings.
DeFi (Decentralized Finance) has emerged to offer different ways to earn interest on your crypto. Different DeFi sectors of the crypto industry allow crypto users to access decentralized banking services that are similar to traditional banks. The advantage of DeFi is that there are no strict criteria to participate and services are offered without a central authority.
DeFi is available to everyone and easily accessible. It also offers several services that even a person who is invisible to traditional banks can receive the same benefits as everyone else. Being a part of the crypto industry, DeFi also comes with high security, immutability, transparency, other benefits of distributed ledger technology (DLT).
Here are some ways of earning interest on your crypto without trading:
Staking involves holding users’ funds inside a cryptocurrency wallet while earning interest on unused crypto. Users stake their crypto to support the operation and security of a specific blockchain network and receive rewards in return.
This is somewhat similar to mining because PoS chains also produce and validate blocks. Basically, users stake their coins and become potential validators of blocks. The more money the user staked, the more money they get to earn. Rewards are calculated differently for each blockchain and there is no specific formula that applies to every staking protocol.
Crypto exchanges like Binance and Coinbase allows you to stake your crypto and earn interest from them. Other crypto wallets that offers staking are Trustwallet, Ledger, Exodus, Atomic, and more. Crypto lending platforms with higher interest rates in staking are: Blockfi, Nexo, Celcius, MakerDAO, and Compound Finance.
Yield farming also known as "liquidity mining," is putting crypto assets to work and generate the most returns possible on those assets. Yield farmers move their assets constantly between different lending marketplaces chasing pools with the best APY to maximize their returns.
The users just need to lock up their coins and offer them to the underlying mechanism that operates the liquidity pool and pays rewards. Liquidity pools are pools of tokens locked in smart contracts that facilitate trading by offering liquidity and are mostly used by decentralized exchanges (DEXes).
Yield farming is done with the use of ERC-20 tokens and stablecoins.
You can visit this article of Binance to know more about Yield Farming. What is yield farming in decentralized finance?
Here are the top 10 Yield Farming on CoinMarketCap with highest APY:
CRYPTO LENDING/CRYPTO LOAN
To simply put, crypto lending is the process of lending digital coins and tokens to another individual in the form of a loan. There are two involved parties here, the lender and the borrower.
The lender will receive interest from the borrower in exchange for the loan. The borrower must pay the loan with the interest and are required to deposit crypto-assets as collateral to secure the investor’s investment. If something goes wrong, the lender can use the collateral to compensate him/her.
Here's a step-by-step guide from Ledger Academy:
In crypto lending, you will potentially get back more crypto than the amount that you’ve lent out, therefore, you will be earning a profit without doing anything for it.
Crypto exchanges and other custodial platforms like Binance, Coinbase or Nexo, can provide lending services. These centralized services will be acting as a middleman, supervising the agreement between the lender and the borrower.
The last way of earning is through compounding crypto. Users can earn compound interest from their crypto and the simplest way of earning that anyone can do with both crypto and fiat. However, this method requires a longer time and patience. It may last from a few months to years even decades.
It is done by locking up their coins and earn interest on them over a certain period. The interest is then added to their initial deposit and can be earned on the larger sum.
Photo from Blockfi (This chart does not reflect on their current rates)
A user locks up his 1BTC on a platform with 6% compounding interest monthly. That means the user will earn 0.005 BTC (6%) per month and from his 1BTC principal, it will become 1.005 BTC the next month.
Then by next month, he will start with 1.005 BTC instead of the 1 BTC original deposit. The same process will take place every month. Therefore, the amount on which the interest is earned increases with each passing month. And at the end of the year, the user will get around 1.062 BTC.
(Sample chart from Blockfi)
This process repeats every month until you decide to withdraw your funds. The longer you save, the more interest you will earn, and the more you add over time, the higher your potential long-term earnings can be.
Blockfi, Nexo, Crypto.com, Celsius, and Binance are examples of platforms that allow you to earn compound interest on the cryptocurrency you keep in your account.
As a keen investor, you want to earn more profit from the crypto you have invested. There are many ways to earn interest and anyone who hodl cryptos and does not wish to trade can let their assets grow through these four ways of earning interest. These methods can generate monthly income and are not as risky as trading.
However, some risks still exist like scammers, security threats, and more. You should always apply the first step in investing, DYOR (do your own research). Educating yourself about any crypto investments and the platform where you want to invest in is a great way before putting your money at risk.
These methods are also helpful to make your portfolio grow while earning interest on them. Check this article to know more ways on how to grow your portfolio. Portfoliohttps://www.publish0x.com/crypthosiast/the-importance-of-diversifying-crypto-portfolio-xvwyvyj
Disclaimer: I am not a financial advisor and always DYOR (do your own research) before investing. Any strategies stated in this article are just based on my own understanding and research. Any risks based on this article are committed at your own risk.