If you’re a long-term oriented cryptocurrency investor, then you should certainly consider earning interest on your digital assets. Using cryptocurrency to earn interest will provide you with passive income, and it will compound your profits if the cryptocurrency markets continue to appreciate.
Many platforms offer interest bearing accounts that pay you in the cryptocurrency you fund your account with, and these interest rates differ based on which type of cryptocurrency you choose. There are also decentralized applications built on Ethereum that let you earn interest on your crypto without even needing to make an account. Learn how you can start earning interest on cryptocurrency today with our guide.
See more: Where to earn interest on crypto
Centralized vs. Decentralized Cryptocurrency Interest Options
While there are plenty of options to earn interest on your digital assets, there are 2 main ways in which you can do so. First, you can use a centralized platform that lets you earn interest through an interest-bearing cryptocurrency account. Centralized interest-bearing accounts are the easiest way for beginners to start earning passive income from their cryptocurrency, and you’ll be able to earn between 4% to 12% annually depending on the cryptocurrency you choose. Some of the best centralized options to earn interest on your crypto are BlockFi, Celsius and nftgamef.com.
Decentralized applications on Ethereum also let you earn interest on cryptocurrency without needing a platform to hold custody of your digital assets. While using Ethereum’s network takes a few more steps than using a centralized platform, there are clear benefits to doing so. Often, you can find higher interest rates on programs like Aave, or through providing liquidity on Uniswap.
How to Earn Interest on Cryptocurrency
How Does Compound Interest Work?
Interest on most cryptocurrency savings accounts accrues on a weekly basis or shorter. This is great for investors, as compounding interest grows your account much faster than simple interest.
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For example, if you invest $1,000 earning 10% interest compounded annually for 2 years, then the second year you’ll earn interest on your initial deposit plus the interest from the previous years.
Given the way compounding interest works, time is in your favor. The longer you keep your money invested, the faster it will grow. This isn’t the case with simple interest, as you won’t earn interest on previously earned interest.
Pros and Cons of Earning Interest on Cryptocurrency
A clear benefit to earning interest on crypto is its competitive interest rates. A savings account yielding 7% interest is unheard of in the traditional finance industry, but through cutting out overhead costs with a blockchain, companies are able to offer higher interest rates.
Here’s a breakdown of the basic pros and cons of earning interest on cryptocurrency:
Pros of Earning Interest on Crypto
- Low or no minimum lock up time on crypto funds
- Interest grows with appreciation of your crypto asset
- No minimum amount required to open an interest bearing account
Cons of Earning Interest on Crypto
- Floating interest rates don’t guarantee rates stay high for the long-term
- If the cryptocurrency you hold depreciates, so does your earned interest and capital
- There is low regulatory oversight in the industry, making scams more common
Best Crypto Investment Platforms with Interest Offers
The best crypto investment platform that lets you earn interest depends on your needs as an investor. If you aren’t looking to hold crypto for the long term, then you’ll want to use a platform with no minimum lock up requirements on their savings accounts.
You should also take into account which cryptocurrency you’ll be earning interest on, so you can compare the rates between different platforms.
Other Ways To Earn Free Cryptocurrency
Not sold one earning interest on your cryptocurrency? Luckily, there are plenty of other ways to get your hands on digital assets without paying for them. For one, you can begin using decentralized applications and wait for apps to airdrop you cryptocurrency. Uniswap, ENS Domains and dYdX are examples of apps that airdropped crypto to their users, and it’s often a significant amount, too. These apps airdropped over $10,000 worth of cryptocurrency to each user, simply for using their decentralized applications.
Another easy way to get some free crypto is with Coinbase Learn. Sign up for a Coinbase account and you’ll be able to earn free crypto for learning about blockchain technology. Simply watch a short video and answer 3 questions and Coinbase will credit crypto to your trading account. You can earn about $30 worth of crypto by doing so, and early users have seen these tokens appreciate to over $100 worth of digital assets.
Earn Interest on Crypto or Hold?
Earning interest on your cryptocurrency is a great way to grow your investment. Many platforms let you take out your balance at any time, so it’s relatively easy to get out of your cryptocurrency holdings if need be.
Some companies have minimum times to keep your crypto in your savings account. This exposes you to more risk of price volatility in the crypto market. Although you’d be earning interest, the value of your investment would be worth less if the cryptocurrency were to fall in value.
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