A personal goal of mine is to help thousands of people learn about crypto whether it's with buying, securing, tracking, trading, or sending it. So when creating content about crypto, I always try to put myself in the minds of others who are just starting out in the crypto space as I think that they can benefit the most. In order for me to do this, I look out for frequently asked questions posted on cryptocurrency related subs on Reddit that I think would be an interesting topic to cover. Now a question that I've seen often is, "How can I earn interest on my crypto?" or some variation of it. I think that this is a great question because who wouldn't want to earn some crypto on their crypto especially with what banks pay these days?
But before I talk about the platforms out there though, let's first take a look at how these platforms work. Essentially, these platforms act as a financial institution such as a bank. When money is deposited in to a bank, the bank pays the depositor interest (let's say 1%). The bank then takes the depositor's money and loans it to borrowers for interest payments in return (let's say 3%). The bank then profits the 2% difference on what they pay out to depositors and what they earn from borrowers. This is exactly what these platforms are doing. You deposit your crypto in to their platform, and in turn, the platform lends it out to whoever needs to borrow from them. They then profit the difference between what they've paid out to depositors and what they've earned from borrowers.
So now that we understand how these platforms work, let's take a look at the options. When looking online, there are a handful of platforms where you can earn crypto on your deposits. For myself though, I only use a few of them as I don't trust some of the other platforms. This isn't to say that these platforms aren't trustworthy, I just haven't done my due diligence on them for me to use their platform. The three platforms that I've used or am currently using are Celsius Network, Binance, and Compound.
Let's first take a look at these platforms and why I use them. After, I'll tell you where you can find a list of platforms where you can earn crypto on your crypto if these platforms don't interest you.
Celsius Network has been around in the crypto space for a few years now. The founder, Alex Mashinsky (who also invented VOIP (Voice over IP) and was the CEO of Arbinet) came up with the idea of Celsius in the summer of 2017. Shortly after in June 2018, Celsius launched their first version of the app. Celsius is based out of London but they've got offices in the USA and Tel Aviv. They even have their own CEL token which gives holders of it better borrowing and lending rates.
One of the reasons why I trust Celsius more than the other platforms out there is because of the founder's history; he has an outstanding track record of building different businesses. In addition, he's out there showing his face and wants to be seen. I could be wrong but people who have something to hide or have an ulterior motive don't present themselves to the public and don't put their face out there. If something were to happen to Celsius, we would know exactly who to turn to for answers. This is unless he exit scams and disappears like the founder of OneCoin did which I don't think will be the case. Lastly, upon looking online for reviews or what others have said about Celsius, I wasn't able to find a post that talked negatively about them. Most posts were either positive or talked about the risks of giving your coins to a centralized platform. I can attest to some of the positive reviews as I've been using Celsius since last year and I've never had a single problem with accessing my account or withdrawing my crypto from them.
Here's a snapshot of the rates offered per annum (this week only at the time of writing) for depositing your coins with them:
The numbers in dark blue are if you decide to earn interest in whichever coin you've deposited with them. This means that if you deposit, for example Ethereum, and you decide to earn interest in Ethereum you will get 3.82%. However, if you decide to earn interest in Celsius' CEL token, you will get 6.2%. I personally just earn interest in whichever coin I've deposited out as opposed to the CEL token to simplify things.
With Celsius, everything is done through their user friendly and easy to navigate mobile application. This means that you can't log in to your account on a computer if you wanted to. I wouldn't necessarily look at this as a con however as I would say that most people have a mobile device anyway. What I like the most about Celsius though is that they pay out interest every Monday; it's quite satisfying to get the notifications on my phone that I've received my interest payment. By receiving interest payments weekly, you can compound or grow your coins faster as the frequency of compounding can make a difference. If you're interested in joining Celsius, get yourself a $10 BTC bonus after depositing $200 and leaving it with them for 30 days.
Binance, founded by Changpeng Zhao (CZ), initially started out as a crypto only exchange in 2017. However, over the years they've expanded their exchange to offer more services such as fiat on ramp, borrowing, and they even have a crypto debit card in the works. I'm not exactly sure when they started allowing their users to earn interest on coin deposits but I believe that it's within the past year or so.
For myself, I trust Binance because I've been using them ever since late 2017 and haven't had any major issues or problems with them. Whenever I did have a problem with a deposit or a withdrawal though, their support team always got back to me in a timely manner and would have my problem solved. I also trust Binance because CZ is always putting his face out there in the public. Again, if something were to happen to them, people would know who to turn to for answers which you can't say for other exchanges.
As I know that there are some people in the crypto space who don't like CZ because of some apparent shadiness behind some of the things he does such as with the manipulated pump and dump of some coins, I personally don't care about that stuff because I don't trade those coins. The way I see it is, it's like someone goes to a casino, losses his or her money and then complains that the casino took it. But really, whose fault is it though?
Here's an example of what their rates look like at the time of writing this:
As you can see from the photos, Binance's earn program offers two types of deposits (savings): flexible, and locked. They also offer "staking" but I'll leave that out for now and write about it in another post as that's a little bit different from lending.
Just as the name suggests with flexible savings, you can deposit and redeem any time you want. Interest is paid daily starting from the second day and you can opt-in for "auto-transfer" which then takes the remaining balance in your spot account to earn interest. This means that you won't be able to make limit orders with those funds though. But this is great when you've got some extra funds and you're just waiting for the market to make a move. The photo above shows only some of the coins that you can earn interest on. There are a bunch of other coins that you can earn interest on them though.
With locked savings though, you have to select the period that you want to lock that crypto up for prior to lending it. After the lockup period, your principal is paid back along with any interest accumulated. This option may be a better alternative than the flexible savings option depending on your outlook on the market, how much extra funds you have, and whether or not you'll need those coins in the future as you can earn more.
As Binance is primarily a crypto exchange, users can interact with them from either a computer or on mobile device. This means that you can access your account to lend your coins out through either method. If you're interested in signing up with Binance, here's a link where you can save 10% on your trading fees.
The first two platforms that I just wrote about are centralized platforms. This means that there's a single entity that's in control of the coins you deposit. Just as a reminder, "Not your keys? Not your coins." Having said that, a good rule of thumb in crypto is to never leave more than you're willing to lose on any centralized platform as trustworthy as they may be. With Compound however, it's a decentralized platform. This means that there's no single entity that controls your funds because you have full ownership. You remain in full control over your keys and coins as the platform works off of smart contracts just like with KyberSwap. As it works off smart contracts, Compound is an Ethereum only platform. This means you can only supply tokens that run on Ethereum's blockchain.
Here are some of the coins you can supply to earn interest on:
After every block, Compound pays out interest and adjusts the interest rate accordingly for the next block. This makes sense as the amount of suppliers and borrowers change and fluctuate. It wouldn't make sense to pay the suppliers the same amount when all of a sudden there's a surge of inflow capital.
I will say though that those aren't very attractive rates if you ask me. I remember that I was earning roughly 8% on USDC late last year. I guess this is because there's been a flood of people supplying and there aren't very many people borrowing from them these days.
One thing that's great about Compound is that you can connect a Ledger hardware wallet to the platform to execute the smart contract. When doing so, your private keys never leave your device so you don't need to worry about them gaining access to it. This isn't to say that there aren't any risks involved with Compound though. A potential risk is that someone finds a bug and exploits the code with the smart contracts. In terms of interacting with Compound, you can only do so on a computer. Perhaps there is a way to do so on a mobile device but I just don't know about it. Check them out here at app.compound.finance/.
I hope that I've been able to give you some insight on how you can earn some passive income on your crypto by lending them out. As you can see, the centralized platforms pay better than the decentralized platform in general. If you're okay with giving up control of your coins and taking on some risk, then it might not be a bad idea to lend them out to either Celsius or Binance. However, if none of the three platforms that I've just talked about interests you though, check out this website here where you can get a full list of platforms where you can earn crypto on your crypto: https://interest.coinmarketcap.com/.
Here are some videos on the three platforms that I've talked about:
If you're thinking of signing up with either Celsius, Binance, or Compound here are some links again to help you out:
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