If you own cryptocurrencies and if you are a HODLer, here is the great news for you. Park your HODL Crypto where it earn impressive double digit interest rates – the smart way is to earn interest on crypto for HODLers. This blog post offer insights on ways to earn on crypto and associated risks before jumping into more details on crypto interest account and best crypto interest rates.

How To Earn Interest On Crypto

There are fundamentally 3 ways on “how to earn interest on cryptocurrency” based on your knowledge curve and expertise.Tying it to the expertise just to make it simple to get started with. I am restricting recomemndations to Top 5 products in each category based on detailed market research conducted. Once you gain basic insights DYOR to find the right product for you needs. Let us dive in and assess these cyrpto growth opportunities.

1) Deposits (Best CeFi Interest Rates):

This is a bigginer friendly method. Just hold your crypto with a bank-like platforms or crypto exchanges to earn interest, It’s like a savings account. That interest is earned and compounded daily. You can withdraw money at any time and the company promises no fees to transfer or redeem your holdings in most of the platforms.

As most of the bank savings and CDs offer less than 1% yield, dollar pegged stable coins (USDC, DAI, UST, PAX, BUSD etc.) and gold pegged coins (PAXG) are a great fit for earning interest in this way. Crypto platforms or exchanges are offering 10%+ APY on stable coins. You can also deposit other crypto assets beyond stable coins and earn APY. For example, recently Binance exchange offer 45%+ APY for short term MATIC deposits.

2) Staking:

It is for an imtermediatery crypto expert. It involves holding funds in a cryptocurrency wallet to support the security and operations of a blockchain network. Simply put, staking is the act of locking cryptocurrencies to receive rewards. These rewards can be earned in many different ways including staking, inflation, savings rates, etc. Depending on what coin users deposit (bitcoin, ethereum, dogecoin, or other tokens), you can earn interest rates ranging from 2.25% to 10%+ APY.

All blockchains have one thing in common: transactions need to get validated. Bitcoin for example does this in a process called mining which is known to use a lot of electricity (Proof-of-Work). There are, though, other consensus mechanisms that are used for validation. Proof-of-Stake (PoS) is one such consensus mechanism that has several variations of its own, as well as some hybrid models. To keep things simple, we will refer to all of these as staking. Coin staking gives currency holders some decision power on the network. By staking coins, you gain the ability to vote and generate an income. It is in a way similar to how someone would receive interest for holding money in a bank account or giving it to the bank to invest.

Assets such as Algorand (ALGO) earn rewards via inflation, or community rewards. With inflation, new tokens are added to the network at a rate determined by the protocol, and those tokens are then distributed to holders as rewards.

You can stake your crypto storing in Wallets – hardware, desktop, or mobile, which allow you own your private keys (in a decentralized way) OR store in Crypto Centralized Exchanges – Coinbase, Binance etc, where custody of crypto lies with an exchange.

3) Providing Liquidity:

This is for advanced crypto investor and can make high returns proportionate to their risk. It is common that many Decentralized Finance (DeFi) platforms offer 3 DIGIT APY. Crypto owner either can become a liquidity provider on a decentralized platform by providing the liquidity to lend their crypto and earn APY or become a user who funds a liquidity pool with crypto assets they own to facilitate trading on the platform and earn passive income on the deposit. For this reason, liquidity providers are seen as trade facilitators and paid with the transaction fees paid for the trades that they enabled.

Liquidity pools are leveraged by the decentralized exchanges that use automated market maker-based systems to allow trading of illiquid trading pairs with limited slippage. Instead of using traditional order book-based trading systems, such exchanges use funds that are held for every asset in every trading pair to allow trades to be executed.

While trading illiquid trading pairs on order book-based exchanges could lead to suffering from great slippage and the inability to execute trades, the advantage of liquidity providers is that trades can always be executed as long as the liquidity pools are big enough. For this reason, liquidity providers are seen as trade facilitators and paid with the transaction fees paid for the trades that they enabled.

How much liquidity providers are paid is based on the percentage of the liquidity pool that they provide. When funding the pool, they are usually required to fund two different assets to enable traders to switch between one to the other by trading them in pairs.

For instance, a liquidity provider may provide a liquidity pool with $5,000 worth of Ether and $5,000 of USD-pegged decentralized stable coin DAI to allow trading back and forth between the two. This way, every time a trade on the ETH/DAI is executed, the liquidity provider in question would receive compensation for having funded the pool in question.

Best Crypto Interest Accounts

The easiest way to stake for a non tech savvy person would be to use deposit and staking services supplied by central exchanges or bank-like platforms. The downside to it is exchanges have the custody of your cyrpto assets and there by owing your private keys. But this is a quick and easy way to get started with earning interest on your crypto.

It is important to note the crypto saying “not your keys, not your coins”. So the recommended option to earn interest on your crypto is staking in wallets owned by you and/or lending in DeFi platforms, owing your private keys.

Eitehr the path you take to start with, here are the recommendations on various crypto interest offering products in the marketplace. Crypto exchanges and bank-like platforms are referred as CeFi (Centralized Finance). The following CeFi platforms offer the best CeFi interest rates.

Crypto Excahnges:

Coinbase: If you are in the USA, Coinbase is for you. Coinbase allows you to securely buy, store and sell cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, and more. Earn up to 6.0% APR on your crypto. Put your crypto to work by staking your crypto with Coinbase. Find the details on Coinbase staking here. Staking your own crypto is a challenge for most investors. To stake on your own requires running a node on your own hardware, syncing it to the blockchain, and funding the node with enough cryptocurrency to meet minimum thresholds, including providing a sizable deposit and bond. On Coinbase, they do all this for you. Go ahead and earn interest on crypto coinbase. While Coinbase stakes, generates and signs blocks on your behalf, you retain full ownership of your tokens and earn rewards.

Binance:  Binance Staking lets you earn rewards in an utterly simple way – all you have to do is hold your coins on the exchange. In a way, you could think of holding your coins on Binance as adding them to a staking pool. However, there are no fees, and you can also enjoy all the other benefits that holding your coins on Binance brings!The only thing you have to do is hold your PoS coins on Binance, and all the technical requirements will be taken care of for you. The staking rewards are usually distributed at the start of each month. You can check the previously distributed rewards for a given coin under the Historical Yield tab on each project’s staking page.

BinanceUS: If you are a US resident, you can stake in Binance US.

KuCoin: Enjoy daily Staking returns with freely trade and withdrawal services. During the subscription period, all KuCoin users can go to the ‘Staking‘ page of the Pool-X website and choose their desired product to stake. Pool-X is the world’s pioneer that created Staking Mining. Participate in Staking and you will obtain both Staking rewards and POL Credits (calculate by Total Output of Staking Mining).

Bank-Like Crypto Platforms:

Top pick is BlockFi. Its platform provides wealth management products such as BlockFi Interest Account, Trading Account and Crypto Backed Loans. The old way of doing things doesn’t cut it anymore. With BlockFi, you can use cryptocurrency to earn interest at up to 8.6% APY, borrow cash, and buy or sell crypto. There are no hidden fees, no minimum balances, and no reason to wait. Check BlockFi interest rates here

The next in the row is Celsius Network. The platform that earns you up to 17% yield on your crypto, rewards you every week and lets you borrow cash at the lowest rates. On Web, iOS, and Android. Giving back is fundamental to how Celsius works. Up to 80% of our revenue is paid back to the community as weekly rewards on crypto. And, you get up to 25% more when you choose to earn in CEL token. Everyone wins. Join Celsius Network using the referral code 1638418720 when signing up and earn $40 in BTC with your first transfer of $400 or more!

Nexo is the next platform. You can earn 12% on your stablecoins and up to 8% on BTC, ETH, XRP, XLM, LTC, BCH, EOS, TRX & LINK. 24/7 Live Support. Borrow in USDC and USDT. 40+ fiat currencies. No fees. 200+ jurisdictions. Nexo maximize the value of digital assets by offering tax-efficient ‘Instant Crypto Credit Lines’, high-yield ‘Earn Interest’ products and ‘Send & Pay’ capabilities for our clients, while ensuring the $375 million custodial insurance and military-grade security of the Nexo Account. Nexo currently manages $15+ billion in assets for 1,500,000+ users across 200 jurisdictions.

Crypto.com is the world’s fastest growing crypto app. You can grow your portfolio by earning up to 14% interest on your crypto assets. The platform supports 30+ cryptocurrencies and stablecoins. At present 10m+ users are buying and selling 100+ cryptocurrencies at true cost. You can even get Crypto.com Visa Card and get up to 8% back on spending. It also offers advanced trading options and earning interest from DeFi protocols. Crypto.com is an alll around Crypto Platform In One.Even without the CRO bonuses, it’s a solid low-fee crypto exchange

Blockchain.com is the Easiest and Most Powerful Crypto Platform. It’s the world’s leading crypto finance house serving people, projects, protocols and institutions since 2011.You can earn up to 13.5% interest by funding an Interest Account with crypto and watch it grow. In 2020 the company had 31 million users and as of 2021, there were 65 million Blockchain.com wallets and 28% of bitcoin transactions since 2012 were initiated or received by a Blockchain.com wallet.

Crypro Wallets:

Ledger: Ledger hardware wallets combined with Ledger Live app gives you full power over your crypto: the best security, ownership and control over your assets. Stake crypto to passively make money from your assets. Like getting interest payments from a traditional bank. Blockchain creates trust with reliable consensus mechanisms that help to reach agreement in a network. Proof-of-stake (PoS) is one of the consensus mechanisms that helps to determine who validates the next block. With PoS, crypto owners running on that blockchain stake their coins, then use this stake to get the right to validate transactions and create new blocks. For crypto owners, staking is a way of being rewarded for participating in the network.

Trezor: Go offline. Store your coins with Trezor. Hardware wallet is the safest way to manage & trade your cryptocurrencies. Barriers to participation are further reduced because users are not required to hand over custody of their funds to an external party. They can simply stake them using an existing offline storage wallet such as those manufactured by Trezor 

KeepKey: The Next Frontier of Crypto Security. KeepKey is the premier wallet in the new ShapeShift Platform, a web-based interface that consolidates your many crypto tools into one, beautiful environment. Experience a new era in hardware security. KeepKey protect your cryptocurrencies, store your private keys offline, and safeguard your assets from hackers. It’s time to achieve financial freedom in the most secure way with KeepKey.

Beyond the hardware wallets mentioned above, desktop and mobile wallets alos provide staking. Top picks include Exodus, Atomic Wallet, TrustWallet etc.

Earning With DeFi:

In this blog post, my focus is on the Ethereum DeFi and this no way undermines the other DeFi layer 1 which are evolving including Solana, Cardano and Polkadot. Binance Smart Chain (BSC) is also doing very well and with 21 validators BSC is categorized as a pseudo DeFi or CeFi. Baselining the views from experts in the field, I foresee a multi-chain ecosystem for DeFi evolving in the future. Layer 2 DeFi solutions like Polygon is not covered here. I will publish a separate blog post focusing on non-Ethereum Layer 1 and Layer 2 solutions.

I am covering two aspects of earning from DeFi platforms. DeFi lending and decentralized exchanges for offering liquidity pools. Also the person providing the liquidity and lending their crypto, as well can borrow against that collateral and this leads to another great arbitrage opportunity [which is not covered in this article] .The top ranked DApps are described below.

DeFi Lending Platforms:

The following platforms offer best DeFi interest rates.

• Aave: Aave is a decentralized non-custodial liquidity market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an over-collateralized (perpetually) or under-collateralized (one-block liquidity) fashion. This video offers the overview of Aave https://youtu.be/48nxw6fVTRE

• MakerDAO.: The Maker Protocol, also known as the Multi-Collateral Dai (MCD) system, allows users to generate Dai by leveraging collateral assets approved by “Maker Governance.” Maker Governance is the community organized and operated process of managing the various aspects of the Maker Protocol. Dai is a decentralized, unbiased, collateral-backed cryptocurrency soft-pegged to the US Dollar. Resistant to hyperinflation due to its low volatility, Dai offers economic freedom and opportunity to anyone, anywhere. The Dai Savings Rate (DSR) allows any Dai holder to earn savings automatically and natively by locking their Dai into the DSR contract in the Maker Protocol. It can be accessed via the Oasis Save portal or through various gateways into the Maker Protocol. Users aren’t required to deposit a minimum amount to earn the DSR, and they can withdraw any or all of their Dai from the DSR contract at any time.

• Compound: An algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications. Compound Finance is an algorithmically-operated, decentralized, interest rate protocol for lending and borrowing cryptocurrencies. It is a platform where users can frictionlessly supply (lend) cryptocurrencies as collateral, to borrow crypto assets based on interest rates set by real-time supply and demand.Compound (COMP) is an ERC-20 asset that empowers community governance of the Compound protocol; COMP token-holders and their delegates debate, propose, and vote on all changes to the protocol.

• InstaDApp: Decentralized Finance. World’s most advanced platform to leverage the full potential of Decentralised Finance. It offers an intuitive interface built to provide an easy-to-use application to interact with other popular DeFi protocols. InstaDApp allows the user to access all the functions such as lending, borrowing, etc. in one place. It could be considered the same as a banking portal that allows managing crypto finances in an efficient manner. It facilitates users to tackle complex tasks such as leveraging, buying, or selling in a single transaction. Also, a unique feature of InstaDApp is its Bridge. This feature allows users to migrate debts. It is done between Compound Finance and Maker Vaults. Furthermore, it also has features that allow users to add liquidity, lending assets, and more. 

• Liquity: Offers interest-free liquidity at your fingertips. Borrow LUSD against ETH at 0% interest. The highly efficient liquidation mechanism of the Liquity Protocol enables you to get the most liquidity for your ETH. Take advantage of interest-free loans to achieve your goals. The protocol’s algorithmic governance and the direct redeemability of LUSD ensures that the stablecoin remains pegged to the US Dollar. Holders of LUSD can provide stability to the system, while benefitting from liquidation gains and LQTY rewards.

DEXES – Decentralized Exchanges:

Curve Finance: An automated market maker protocol designed for swapping between stablecoins with low fees and slippage. It’s a decentralized liquidity aggregator where anyone can add their assets to several different liquidity pools and earn fees. AMMs work with a pricing algorithm instead of an order book. Due to the way the pricing formula works on Curve, it can also be extremely useful for swapping between tokens that remain in a relatively similar price range.That means it’s not only great for swapping between stablecoins but also different tokenized versions of a coin. As such, Curve is one of the best ways to swap between different tokenized versions of Bitcoin, such as WBTC, renBTC, and sBTC.At the time of writing, there are 17 Curve pools available to swap between many different stablecoins and assets. These are, of course, constantly changing based on market demand and the ever-changing landscape of DeFi. Some of the most popular stablecoins available include USDT, USDC, DAI, BUSD, TUSD, sUSD, and more.

Uniswap: A fully decentralized protocol for automated liquidity provision on Ethereum. Uniswap is a protocol for creating liquidity and trading ERC-20 tokens on Ethereum. It eliminates trusted intermediaries and unnecessary forms of rent extraction, allowing for fast, efficient trading. Where it makes tradeoffs – decentralization, censorship resistance and security are prioritized. Uniswap is open-source software licensed under GPL.

Sushiswap: A software running on Ethereum that seeks to incentivize a network of users to operate a platform where users can buy and sell crypto assets. Similar to platforms like Uniswap and Balancer, SushiSwap uses a collection of liquidity pools to achieve this goal. Uniswap and SushiSwap are competing decentralized exchanges (DEXs) built on the Ethereum blockchain. While Uniswap handles more volume and has been around for more time, SushiSwap does have some unique benefits such as a yield farming platform and bonuses for token holders.

Bancor: The first decentralized trading protocol, empowering traders, liquidity providers & developers to participate in an open financial marketplace with no barriers to entry. No one needs permission to use the open-source Bancor Protocol. You can trade tokens and earn interest on your favorite tokens by staking them in Bancor’s decentralized exchange. Bancor is owned and operated by its community as a decentralized autonomous organization (DAO). The Bancor Protocol is governed via a democratic and transparent voting system which allows all stakeholders to get involved and shape Bancor’s future.

Balancer: The Protocol is a core building block of DeFi infrastructure—a unique financial primitive and permissionless development platform. Your portfolios generate yield and rebalance automaticallyBalancer turns the concept of an index fund on its head: instead of paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders who rebalance your portfolio by following arbitrage opportunities. Balancer enables efficient trading by pooling crowdsourced liquidity from investor portfolios and using its Smart Order Router to find traders the best available price. Exchange any combination of ERC-20 tokens permissionlessly, with ease.

Size of the DeFi in Q1 2021

The first quarter of 2021 saw remarkable growth in the DeFi sector, as the total value locked in DeFi protocols tripled, from $15 billion to $46 billion. Lending and decentralized exchanges are the two largest DeFi segments, with a combined market share of over 85%.

In Summary…

Earning interest on crypto is a smart way to get passive income from cryptocurrencies you already own. Picking the best options from the above recommendation is like selecting the best bank account for cryptocurrency.

Disclaimer: The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the crypto industry.

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