- DeFi staking is a popular way to make significant crypto returns.
- Investors can make up to $10,000 per month from DeFi staking.
- Also, Anchor Protocol is one of the most profitable staking platforms.
Cryptocurrency is a fast-evolving industry with many lucrative opportunities to earn significant investment returns. Popular money-making crypto initiatives include Non-Fungible Tokens (NFTs) which rose to fame in 2021. One of the things that fueled interest in NFTs was Beeples selling an NFT for $69 million through a Christies auction in March 2021. While most of us might not have the artistic skills to create million-dollar NFTs, there are fortunately other ways to gain income from crypto. One of these ways is through DeFi staking. In fact, popular crypto analyst and YouTuber Sheldon Evans claims that you can easily make $10,000 a month from DeFi staking. Before we jump into how you can earn passive income from crypto, let’s first define some key terms.
What is DeFi?
Decentralized Finance (DeFi) is built on blockchain and utilizes the technology’s decentralized, immutable, and transparent properties. Ideally, this means no single entity has control over transactions. DeFi aims to challenge traditional centralized banking. Specifically, centralized banking is not accessible to everyone. The stringent requirements for opening bank accounts or gaining loan approvals make it hard for some members of society to access financing. DeFi removes these bottle necks, allowing for equal financing for all.
DeFi allows users to earn interest rates in minutes in exchange for lending money. At the same time, supporting peer-to-peer trades without the need for a broker or guarantor. DeFi also allows users to earn better interest rates compared to traditional investments like stocks, options, and futures. DeFi staking is locking your crypto holdings in a DeFi smart contract to earn more of that crypto. Also, DeFi staking differs from traditional staking in that instead of depositing your crypto onto a platform, investors deposit onto a decentralized exchange built on top of a PoS blockchain. Will share more on that later.
What is Proof of Stake (PoS)?
Currently, the largest DeFi ecosystem in on the Ethereum network with over 3 million DeFi wallets. This is partly because DeFi provides financial services using cryptos and smart contracts. Notably, Ethereum was the first blockchain to support these functions. Ethereum also has the advantage of being the leading Proof-of Stake (PoS) blockchain. This is despite the platform being in the process of migrating from a proof-of-work protocol with Ethereum 2.0. Blockchains use different protocols to validate transactions. One such consensus protocol is PoS which is perhaps one the most efficient existing protocols. Blockchains that use PoS, other than Ethereum, are Polkadot, Cardano, and EOSIO.
What is Staking?
In short, staking is how crypto holders actively participate on blockchains by being validators. Validators are an essential part of how blockchains operate as they help secure the blockchain. Of note, validation is automated which means stakers earn a passive income in return for their “deposits”. While many blockchain enthusiasts are proud “hodlers”, true crypto experts know that staking is much better. Hodlers show their faith in the chosen crypto by promising to hold it even if the world ends. Stakers, however, prove their loyalty in more practical ways and are rewarded for their efforts.
Staking is proof of faith in the underlying blockchain. By staking participants not only help the blockchain function but also have their tokens “locked” for a long period of time. Ethereum stakers, for example, are staking into a smart contract and will not be able to withdraw their cryptos until ETH 2 launches.
Staking remains one of the best ways to earn passive income from cryptocurrency but what is staking and why is it so profitable?
How do you make money from staking?
On proof-of stake (PoS) blockchains, anyone with the minimum required crypto balance can validate transactions and earn staking rewards. Stakers make a deposit onto the blockchain, usually the deposit is in the form of the blockchain’s native currency. On Ethereum, potential validators need to deposit at least 32 ETH. Staking pools are similar to saving accounts and give returns ranging from 5 to 20% per annum. The rate of return depends on the network you stake on, how much you stake, as well as how long you choose to stake for. Additional staking rewards include a part of the revenue earned by the platform. For instance, stakers earn rewards from liquidity pool transaction fees for things like swaps.
In the world of finance, a common rule of thumb is that the “higher the risk the higher the return”. This rule also applies to DeFi staking. As such, it is important to be well informed before participating in a DeFi liquidity pool. Cryptocurrency is largely unregulated, and its decentralized nature makes it challenging to hold scammers to account. DeFi, in particular, has a high incident of “rug pulls”. A rug pull occurs when the owner of a project withdraws all the currency deposited on their platform and disappear. Not only DeFi pools are vulnerable to this scam, crypto exchanges can also suffer from a rug pull. Of note, most DeFi projects discourage staking withdrawals by charging a penalty or processing withdrawals only after 21 days. The last one also helps protect projects from liquidity problems resulting from mass withdrawals and price manipulation.
Nonetheless, there are a lot of good DeFi projects. Here is how you can make you $10,000 per month from DeFi staking.
Anchor protocol is essentially a decentralized on the Terra ecosystem. The platform allows users to lending and borrow on the platform. Also, Anchor allows users to deposit USDT and gives upto 19.47% annual percentage yield (APY. With traditional banking, only a fraction of the interest earn is passed on to depositors, this is one of the imbalances decentralized finance (DeFi) aims to correct. Of note, USDT is a stable coin which makes it a less risky digital asset to hold and invest in comparison to other cryptocurrencies.
Orion.money bridges the Anchor Protocol to other ecosystems such as Ethereum. Thus, allowing for cross chain interoperability. The protocol offers 15% APY for USDT, USDC, and etc by investing across chains using Anchor protocol in the backend.
Abracadabra.money allows the deposit of assets as collateral to borrow Magic Internet Money (MIM). By depositing USDT, for example, you can borrow MIM. Also, you can leverage your loan to borrow more money which significantly increases your potential returns upto about 40% APY. Notably, MIM is a stable coin in the Abracadabra ecosystem pegged at 1:1 to the US dollar. Here is how the platform works, if you deposit USDT as collateral and your USDT losses value your position will be liquidated. This has the benefit of limiting your potential losses.
YeFi Staking dApp
YeFi allows users to earn passive income by staking their cryptos. Specifically, YeFi.one is a project that combines DeFi and decentralized data storage. Users stake decentralized data storage tokens like Filecoin. In addition, users can stake traditional cryptos like BTC, ETH, BNB, and USDT and earn up to 80% APY.
The Synthetix platform allows users to create synthetic assets by staking SNX. Users can then use smart contracts to trade the synthetic assets.
Centralized Exchanges (CEX)
You can stake your assets on centralized exchanges (CEX) like Coinbase, Crypto.com, Binance, and more for lower APY. The advantage of staking on reputable exchanges is that they are easier to navigate for new investors. CEX have centralized wallets that makes them a convenient on and off ramp. Specifically, you don’t need to transfer your crypto from one wallet to another on a different platform to stake. You can easily stake different cryptos all on one platform and wallet.
As previously mentioned, you can stake directly on different blockchains. Different platforms offer different rewards. You can use Staking Rewards.com to learn which networks offer the best staking rewards.
In conclusion, several DeFi pools offer high returns that could easily earn you $10,000 in passive monthly income. Remember to do your research before investing and only stake in projects you have confidence in. Also, avoid DeFi projects that over unrealistic returns like 900%. Never invest more than you are willing to lose. Happy trading!
Disclaimer: The views expressed in this article does not necessarily reflect the views of CryptoNewsLand (CNL). Readers of this article should not take this as financial advice. CNL strongly recommends that all users do their own in-depth research before investing in cryptocurrency.
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