The launch of Decentralized Finance technology brought a lot of changes at an economic level, convincing people to join the crypto community.
And thats not even surprising since it made many bank activities possible on the blockchain - eliminating the need for third parties.
In other words, you no longer need to wait for your transactions to be confirmed by the bank, nor do you have to worry about being charged additional transaction fees.
However, at the base of DeFi‘s mass adoption in recent years is not only the blockchain’s safety and efficiency. An important role is played by the ability to generate passive income.
So how can you earn passive income on DeFi？
There are three main methods you can use to generate additional assets DeFi:
Staking - the simplest way possible
Yield farming
Decentralized exchanges
Staking cryptocurrencies means locking your assets into a PoS consensus protocol. This will give you daily rewards, as long as you dont use your deposit.
And you don't even have to check it every day since the rewards are accumulated anyway.
With the continuous rise in cryptocurrencies value, many people started to use this method, increasing the demand. Therefore, crypto companies like vTrader have adapted and plan to provide this feature to their users soon.
Also known as liquidity mining, yield farming is the perfect solution for business enthusiasts with strong negotiation skills.
The process starts from lending cryptocurrencies in exchange for an interest rate. The debtor lends the coins to someone else, with the same intention. Ultimately, you get compound interest.
Decentralized exchanges, also known as DEX, are almost exclusive to the forex market.
The mechanism is pretty simple on the surface. You buy a cryptocurrency when a price is low and sell it when its value increases. In reality, you need to regularly check the market since the value of cryptocurrencies is changing day after day.
But if you are dedicated, that shouldnt be a problem. Plus, you can focus on stablecoins and follow the changes of fiat if you want to play it safe.
Is DeFi better than banks when it comes to interest？
You bet! Besides providing you with stronger cybersecurity and faster processes, DeFi stands out with its high-interest rates, making the lending and deposit market a lot more profitable.
So far, people are usually resorting to bank deposits to be sure they are not spending their money excessively and not to gain additional assets. And thats not surprising since their annual percentage rate is around 2%.
That means an addition of just $100 for a total of $5,000 deposited at the end of the year.
However, DeFi makes from those types of bank services a source of real additional income.
Take Yield Farming, for example, which provides lenders with an annual percentage rate of 6-12% from the total amount of stablecoins. And staking can also go up to 8% of interest - which means an additional $400 in our example.
Ready for the next step？
Regardless of the method you choose to increase your income, it is certain that DeFi offers many possibilities. And the fact that everything takes place in a decentralized way, without third parties, makes everything better.
So, what are you waiting for？ Pick your card and start the game!