Invest and Earn Passive Income, Positively!
April 19, 2021 (Investorideas.com Newswire) In the last few years, we have gotten closer to the define of passive income from cryptocurrencies. To compare DeFi with traditional investment channels, the distinct advantage of DeFi is quite clear. A normal bank can only pay an average interest rate of 0.1% / year. Bonds, with a lower risk, pay around 5-6%. Stocks can give you about 10%, although the risk is higher. And real estate can bring profits of 10-12%. However, all of these types require a large investment in the first place. Along with that, there's also a bureaucracy and a bunch of costly middlemen.
Decentralized finance (DeFi) has opened up a whole new world for users who, in traditional finance, have been starved of returns for decades. The potential to earn passive income from DeFi is vast, and opportunities abound in this exciting space of ever-evolving platforms, protocols and exchanges. However, this new testing ground is not without its pitfalls and requires a steady hand to navigate. To help you find your way, we have broken the process down to its core elements.
Also, if your money is already in digital currency and is simply being stored in a regular crypto wallet. Then you will earn nothing more while waiting for your currency to appreciate. Conversely, instead, the percentage of your annual return if you invest that cryptocurrency in DeFi applications could be a lot higher. What's more, since the dApps are fully automated, you can earn a steady passive income without wasting time monitoring the markets and managing your portfolio.
A Comprehensive Guide to DeFi, Yield Farming and Passive Income for Crypto Investors
DeFi stands for Decentralized Finance, which means "decentralized finance". This is a concept that refers to a new type of electronic banking system that is making a big splash in the crypto community. Its influence could go far beyond. For this candle, the DeFi market has attracted more than $ 4 billion in crypto assets. And it is shaping the future of digital finance.
DeFi applications can run on smart contract blockchain and possess all the advantages of a peer-to-peer network. The democratization of the financial sector made the dapp accessible to everyone with an internet connection. A third party is no longer the same as traditional finance. That not only reduces transaction costs. But these applications can also serve those who were previously "excluded" by the banks. There is no single entity like government, financial institution or business that has the authority to control or interfere with the movement of property. In addition, through tokenization (tokenization), even a person with a small amount of money can also invest to own a part of the "cake". By buying tradable tokens, the coin holder is allowed to buy a portion of a larger investment that they cannot yet afford. These DeFi or dapp applications are fully automated. They do not require human intervention to function. So unnecessary bureaucracy can be avoided. DeFi applications are inherently characterized by speed, efficiency and security, thanks to complex encryption. They use smart contracts to execute transactions in the blink of an eye. Activate the deal immediately after the preset conditions are met. And because they use open source, they are completely transparent. Transactions are also publicly available on the network. You can identify DeFi services at the best rates. And confirm their reserve status.
However, what sets DeFi apart from other blockchain initiatives is its incredible versatility. DeFi has not only made a significant contribution to the financial sector, but has also changed the way we do business online. A wide range of activities promoted by DeFi include borrowing, lending and insurance purchase as well as storing, exchanging and trading digital assets ...
Choose your token and protocol
Most DeFi protocols will require you to deposit an Ethereum (ERC-20) token to earn an APY. This could be Ethereum's native currency, Ether (ETH), or - more commonly - a stablecoin like DAI or USDT since you don't need to worry about market volatility. There is also an Ethereum version of Bitcoin, wBTC, whose price is pegged to the biggest cryptocurrency. To find out which coin or token you want to deposit, you might first take a look at the different returns being offered for different assets.
The growth of DeFi over the past year has led to a proliferation of protocols, and it can be difficult to know which to choose. DeFi Pulse's 'Earn Income' tool allows users to search platforms by asset, so that would be a good place to start. Once you've decided which token you want to deposit, you can buy and trade on a centralized or decentralized exchange. There are now a number of aggregators that can help you find the best swap rate for your cryptocurrency, such as 1inch.
How to make money with DeFi? And what kind of profits does DeFi bring?
Liquidity mining 101
While earning interest on your assets is pretty great, that is by no means all you can do in DeFi. The next step in the passive income journey is to get involved in liquidity mining, aka yield farming. There are a number of avenues to begin with. The first might be to stake or trade any rewards that you get for depositing your crypto: typically the native token of whatever protocol or platform you have deposited with.
These governance tokens often give holders the right to vote on changes to that protocol, a facet that has made many of them valuable on the secondary market. You usually have two options: stake these tokens with the issuing protocol for further rewards, or trade them on an exchange (DEXs like Uniswap will have all of them listed, while some centralized exchanges support the most popular ones). You might choose to trade a token because you can swap it for a stablecoin that you can earn more interest on, for example.
The highest demand for dapps with interfaces that connect directly to crypto wallets. Virtual wallet or crypto wallet is a software application or a hardware device ... This connection allows them to borrow or earn interest by lending their own capital. This is being taken advantage of by the "yield farmers" (these productive farmers are understood as the user "sowing" their money to get interest), and the owners of electronic money. These yield farmers exploit the maximum of DeFi technology protocols to provide market liquidity, in return they receive a significant profit The "yield farmers" lend money to someone else through a DeFi application. Use money to maintain operations, which can be traded or loaned to customers, giving the dapp the ability to offer exceptionally high interest rates.
The simplest way to earn a passive income through DeFi is to deposit your cryptocurrency onto a platform or protocol that will pay you an APY (annual percentage yield) for it. This is almost identical to how you might deposit cash into a savings account at a traditional bank, although in much of the developed world interest rates are now a thing of the past thanks to prolific money printing by central banks over the past decade.
Depositing on a DeFi platform can be done with a large variety of coins and tokens, but not fiat (traditional currency). And so, your first step will be to buy some cryptocurrency using a fiat on-ramp (i.e. buying crypto with cash). Before you buy your crypto, though, bear in mind that because the vast majority of DeFi operates on the Ethereum blockchain, Bitcoin (BTC) is typically not accepted.
What are the potential risks of investing in DeFi?
The advantages of using a DeFi application are undeniable. But there are also some disadvantages that need to be taken seriously. Remember, no investment is completely safe. Dapps such as blockchain-based protocols also pose a number of dangers.
For example, a significant risk for DeFi applications is that many loans come with unusually high collateral requirements, and excessive conditions attached. For example, demanding full liquidation of the pahir means that you lose all your capital if the price of the currency you offer falls below a certain threshold. In addition, there are other risks such as loss of private keys or passwords. There are even very "silly" risks such as typographical errors in your crypto wallet address. That could mean your money will be lost forever.
Of course, the regulatory policy remains unclear for DeFi applications. Because governments around the world are still building the legal framework for this emerging asset class. So its future is uncertain and its protection is not yet completed.
In the end, you must also accept the fact that. Unlike traditional systems, smart contracts are vulnerable to multiple attacks. In just the first few months of 2020, DeFi applications were successfully hacked at least 5 separate times, resulting in significant losses.
DeFi doesn't have to be difficult
In short, in order to fully participate in earning a passive income through DeFi, a user needs to be highly experienced and often capital rich to take advantage of high volume opportunities and be resilient to losses. And, importantly, this is a far cry from the founding ethos of DeFi, which was envisioned as a space that anyone could take part in depositing, borrowing and lending for wealth creation that for so long has been the preserve of wealthy elites in traditional finance.
We at YIELD App don't think it should be this way, which is why we have founded our platform: a place where users can participate in DeFi from depositing traditional currencies to off-ramping profits without the need to enter into a complex and risky web of exchanging and trading. Through our innovative investment funds that pool assets to achieve the highest returns at any one time, our users will be able to take advantage of the best of DeFi at accessible levels. We believe this is the next stage of DeFi's evolution and we invite you to come along with us.
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