In the past two years, most of the investment tools that allow crypto asset holders to obtain income have shown exponential growth. On some decentralized finance (DeFi) platforms, anyone can obtain passive income through multiple channels. Mortgage verifiers, DeFi lending services, and interest-bearing accounts provide digital currency holders with a means to “make money” with assets.
Cryptocurrency income and passive income
Encrypted assets are actually an investment in future currencies. Many people have earned millions or even billions of dollars in income just through early holdings or long-term transactions. Today, the cryptocurrency market has 5,700 digital assets. People can use mortgage verifiers or wallets to store digital currencies in custodians that can provide interest payments. In addition, people can also accumulate income from certain cryptocurrency mortgage loans. Profit. According to encryption industry data and analysis portal stakingrewards data, there are currently more than 666 mortgage and income service providers on the market that can provide interest-generating mortgages and income.
Mortgage validator and wallet
Mortgage service providers are similar to an investment platform that allows users to mortgage Proof-of-Stake (PoS) tokens. These platforms pay their users weekly or monthly. Mortgage verifiers will be responsible for processing equity proof payment transactions. They can obtain corresponding fee income when processing these transactions. Some digital currency wallets will also provide equity proof token mortgage services. Users only need to store tokens through these wallet clients. Obtain mortgage income.
The current mortgage service providers on the market include Mycointainer, Staked, Just Mining, Hashquark, Figment Networks, Everstake, Infstones, Stake Fish, SNZ Pool, Stake Cube, MXC, Hotbit, and Stakin (as shown in the figure below). It should be noted that the mortgage rate of return is variable and also depends on the type of tokens the user is mortgaged, but the mortgage rate of return that users can obtain is basically between 1-100%.
For example, the crypto tokens that Hashquark users can staking include DASH, Cosmos, Irisnet, QTUM, and Tezos, etc., but the yield of each token is different. At the time of writing this article, Cosmos can allow token collaterals to get up to 8.09 % Yield, and Tezos allows token mortgagers to get up to 5.5% yield.
People who are interested in token mortgage can also use some digital currency wallets that support equity proof token mortgage, such as Cake Defi, Atomic Wallet, Atomex, Chainode Tech, Math Wallet and Gaurda Wallet, etc. (as shown in the figure below), among which Atomic Wallet currently supports the most types of mortgage tokens, including assets such as TRON, Cosmos, Tezos, NEO, Vechain, Algorand, Komodo, and Band.
Of course, Band Protocol seems to be doing very well in terms of pricing and income. Mortgage BAND assets in the Atomic Wallet wallet can get a yield of more than 17%.
Custody of interest-bearing accounts and decentralized finance
In addition to the aforementioned, digital currency holders can also use the DeFi platform of cryptocurrency exchanges and custodial interest-bearing accounts to obtain passive income. Today, many DeFi applications are popular with users, and cryptocurrency investors use platforms such as Aave, Nuo Network, Bzx, Compound, and Dydx every day (as shown in the figure below).
The picture above shows the Aave platform, which allows people to earn 0.02-4.92% of income and supports about 15 different digital assets, such as USDC, ETH, DAI, REP, LINK, TUSD, etc. On the Dydx platform, people can earn 0.10-14.45% of income and support the injection of crypto assets such as Bitcoin (BTC), Tether (USDT) and DAI. It should be noted that in the entire field covering DeFi platforms, exchanges, and custodial service providers, stablecoins are currently the most popular commodity. Due to strong market demand, stablecoins such as DAI, USDT and USDC have much higher yields .
In addition, many well-known cryptocurrency exchanges, mortgage income service institutions and custodians are providing interest-bearing accounts for almost all digital assets under the sun. Here we can look at a few examples in the industry:
1. According to the data given by the Crypto.com platform, people can earn up to 8% of the annual rate of return, and the interest rate of stable currency is even higher, reaching 12%. The figure below shows the interest rate of Crypto.com. plan:
2. Blockfi claims that the platform allows investors to earn interest, borrow and trade cryptocurrencies, and customers can make money from their Bitcoin, Ethereum, Litecoin, USDC, GUSD and PAX tokens at an annual rate of return of 8.6%, And there is no minimum balance requirement for accounts that use the Blockfi platform to earn interest:
3. Another popular interest-bearing account platform is Cred. They allow people to earn interest monthly, users can also earn compound interest every day, and they can also mortgage Bitcoin, Ethereum, Bitcoin Cash, LINK, USDT and A large number of other cryptocurrencies (assets). At present, Cred’s business covers more than 60,000 customers in 196 countries/regions around the world, and promises to provide more than 200 million US dollars in encrypted assets. The Cred website also provides a “calculator” personalized service that can calculate how much money users can make based on the encryption project they choose. For example, if a user selects a six-month period project and subscribes for 50 BCH, and then selects 3% “daily compound interest”, then the user can receive a net compound interest of US$218 per day.
Cryptocurrency benefits and related risks
There is no doubt that trying cryptocurrency mortgages, loans and income acquisition projects may increase risks. Some of the platforms mentioned above are essentially exchanges and custodial service providers, so if you deposit assets in them, it means depositing assets. Entering a “third-party provider”, so there will be corresponding risks, such as: exchanges and custody solution providers may be hacked, funds may be lost, or these third-party providers may go bankrupt, etc. .
Of course, people can store their proof-of-stake tokens in a collateralized wallet in a non-custodial manner, but this approach is still not foolproof, because many DeFi tokens still face the risk of price changes in the cryptocurrency market. No DeFi platform is perfect-on March 12, 2020, “Black Thursday”, the cryptocurrency market encountered a black swan event. The price of Ethereum once fell to $160, causing a large number of loans to fall below the mortgage threshold and triggering the largest scale in the world at that time The DeFi project MakerDAO clearing mechanism, the clearing process is carried out in the form of a mortgage auction. Users can obtain collateralized Ethereum by bidding for DAI. However, due to the market collapse this time, some liquidators won Ethereum collateral with a price of 0 DAI. The auction of the liquidation process also caused MakerDAO to have $4 million in outstanding loan debt.
As Coinbase pointed out in a recent DeFi industry analysis report, the current income farming and risks have shown synchronization. Although the current DeFi market is still relatively small, the excessively high yield highlights the additional risks in the market. These risks mainly include:
1. Smart contract risks: DeFi smart contracts are easy to be used by hackers. There have been several examples in 2020, such as bZx, Curve and Lendf.me. The explosive growth of the DeFi industry has led to a large amount of funds being injected into new protocols, and attackers can easily find loopholes in these immature protocols;
2. System design risk: Many DeFi protocols do not operate for a long time, but they provide a lot of incentives, such as Balancer. With a simple loophole, FTX can obtain more than 50% of the benefits;
3. Liquidation risk: The encrypted collateral in the DeFi agreement is susceptible to market fluctuations, and there is a risk of insufficient mortgage of debt positions in market fluctuations, which in turn induces a liquidation mechanism, causing users to suffer further losses;
4. Bubble risk: The price dynamics of some underlying network tokens (such as COMP) will be relexive, because the expected future price is usually related to the degree of network popularity and application, and the network usage is in turn inspired by the network in the future. The impact of price.
However, although market risks are inevitable, the loan interest rate and compound rate of return provided by the DeFi agreement are still much higher than the interest rates of many traditional banks. Another important factor is that compared with the traditional financial system, people are in the crypto ecosystem. The gains in the system are faster. Since it is not necessary to obtain wealth through bank fiat currency accounts, lending funds can obtain considerable benefits from DeFi services. Although most people still store their cryptocurrencies for a long time, more and more people have begun to earn Use passive income” to explore the value of cryptocurrency.
What do you think of the DeFi platforms and DeFi services on the market today? Is it reliable for people to earn passive income by storing their own encrypted assets?