Decentralized finance (DeFi) is a field in blockchain tech that has gained traction even throughout crypto’s price bubble. A primary reason for this is how everyone can identify with the urge to lend and borrow. There are many ways to earn interest on crypto assets, but these four polished platforms are safe (not financial advice) starting points.
Earning interest with USDC on Coinbase
Not all blockchain tech is decentralized, especially not Coinbase and USDC. The massive spot exchange seemed to follow the “earn interest on your coins” wave after DeFi lending had been long established. Regardless of whether or not this method is for blockchain purists, people are going to use it off the strength of Coinbase’s brand.
Coinbase is the easiest place to start earning interest. All you need to do is buy some USDC with debit card or bank account and Voilà! You are now earning 1.25% APR. It’s the least you’ll earn from platforms on this list, but probably more than your bank’s savings account will give you.
USDC is backed 1:1 by the USD and was founded by Coinbase and Circle. The two companies created what is called the CENTRE Consortium where they look for other institutions to “help change the global financial landscape.” Coinbase is able to offer interest likely because they are earning more than 1.25% with the cash that they back USDC with.
Earn even more on Dharma
Now, Dharma is a gateway into contributing USDC and Dai to the Compound lending pool. The change means that users can deposit and withdraw their tokens at any time. Earning interest on Dharma is as simple as purchasing DAI or USDC from a spot exchange and sending it to your Dharma address.
Right now, USDC earns 4.66% APR while DAI earns 7.39%. As the lending pool becomes more used, APR increases for lenders. As more lenders contribute or less is borrowed, interest decreases.
Compound is a decentralized protocol and Dharma is a centralized organization that acts as a forum for users to connect with the protocol.
Lend to margin traders
DyDx is one of the only decentralized exchanges that lets users trade with leverage. They are able to lend money to traders by using protocols similar Compound.
Interest rates currently don’t differentiate much from Dharma. This could change throughout time since it uses the 0x protocol and along with a proprietary one. It’s also worth noting that users can earn interest by holding Ethereum, but only a measly .06% right now.
Earning interest on DyDx might be appealing to someone who actively trades DAI/ETH pairs on decentralized exchanges. The liquidity on their DAI/ETH pair is pooled with Maker’s own Oasis exchange, so it’s not horrible compared to other DEXs.
DyDx requires one extra step that Dharma doesn’t have. You will need a MetaMask wallet with an Eth balance. Eth is required for gas fees when withdrawing from the wallet which usually costs 10s of cents.
So, in order to get your DAI or USDC onto DyDx there are a couple of steps:
- Buy at least $5 of eth for gas. Send that to your MetaMask wallet.
- Buy your DAI or USDC. Send that to your MetaMask wallet.
- Deposit DAI or USDC onto the exchange with the MetaMask wallet.
Now might be the best time to lend
These platforms are in their infancy and decentralized credit ratings aren’t in existence yet. If more people learn how to lend their crypto assets, the lending pools get bigger and interest earned will decrease.
Trading crypto is dangerous if you don’t have the time to learn, or aren’t in the position to take risk. Lending is a good way to earn interest without converting back to FIAT.
To learn more about risk on said platforms and currencies, check out our information on that here.