How to earn passive income through DeFi?

The financial world as you know it is full of finance that concentrates an enormous amount of power into a small number of hands, centralising it. The world of DeFi (which stands for “Decentralised Finance”) was created as a financial playground for ordinary folks, away from the control of Governments and the big banks.

In the early days of DeFi, there were many opportunities for people, but there were just as many pitfalls. If it were a playground, it would still have concrete flooring and sharp metal edges, and the swings would go right over the top pretty easily.

As the market has matured, increased amounts of regulation and a wave of serious financial companies have effectively sprinkled some wood chips and smoothed off some edges to make the playground more welcoming to newcomers. However, it still pays to stay off the highest climbing frames: falling is falling, and it still hurts.

The inviting playground roundabout in this scenario is “stablecoins”. They’re designed to mirror or track real-world assets. This requires the company issuing them to have enough assets to justify the stablecoins they issue.

There are stablecoins that track gold, some that track the Yen, or the British Pound, and the most popular ones track the dollar: USDC (US Dollar Circle – Circle is the company that issue the coins), a virtual dollar that’s backed by other Cryptocurrencies such as Ethereum.

Everyone knows that Cryptocurrencies such as Bitcoin and Ethereum change value a lot (it’s why some people love them), and stablecoins, by design, don’t show that kind of “volatility”, unless the underlying asset is also volatile.

To make passive income through DeFi, you need to decide whether you want to go Crypto or stablecoin. With Crypto, the asset value can change. This means you could make out like a bandit or lose your shirt depending on when you finally sell. Stablecoins don’t change in value against the real-world asset they’re shadowing.

Most DeFi is based on Ethereum, which is both a token and a platform. The “Ethereum” platform is where thousands of tokens live, including the most popular stablecoins.

Once you’ve made that decision, you would use the assets, or “tokens” you buy, and send them somewhere to make income.

Whatever solution you choose, you need to check what tokens they accept. Quite often, you can buy assets in an app itself, which saves a lot of hassle, time and transmission fees, and ensures compatibility.

Showing interest

The least risky approach to earning a passive income through DeFi is to store your assets on a lending platform such as AQRU. In order to do so, you lend us your assets, and we use them for DeFi activities such as lending to Crypto businesses while giving you high-interest rates compared to those you would get on the high street.

The “stablecoins and interest” route is by far the most conservative investment approach in Crypto, but can still generate up to 7% returns. “Crypto and interest” is riskier in the short- and medium- terms compared to the long term, and platforms can give decent interest on that too, such as 0% – which is better than leaving it in your wallet earning nothing. You’ve got to make sure the company is trustworthy though: don’t be fooled just by a friendly app or nice-looking website. If you check out our credentials, you’ll see we’re leading the way in security.

Staking out

Another alternative approach to passive income through DeFi is “staking”.

It’s actually quite similar to the interest approach. The difference? To earn interest, you lend your money to a company, which then use it in DeFi activities and give you a reward. “Staking” involves you taking your coins out of circulation in exchange for rewards from the issuer of the coin.

Why on earth would an issuer of a coin want less of them in circulation? To increase demand and to make sure you can’t sell them and drive down the price.

Staking is certainly a viable way of earning passive income through DeFi. But it’s not as “passive” as the interest route, and it locks your assets into one coin for potentially substantial amounts of time. Even choosing the coin is difficult: there are a myriad of tokens you could stake that exist purely to play you for a sucker. And you know what they say about putting your eggs into one basket…

What’s more, the rewards for staking are also not markedly different from the rewards on interest-bearing deposits being offered by companies such as AQRU.

Farming ‘dem yields

Some people just aren’t satisfied with the returns generated by just one strategy, so they join a lot of strategies together (including some very risky ones like P2P lending, in which anonymous people loan to other anonymous people – yes, that’s a thing).

Yield farming is using the benefits from one strategy to invest in another strategy so you can optimise profits.

The problem? Well, everything changes so fast in DeFi that today’s optimum solution is tomorrow’s problem child. It’s not really passive income if you have to spend all your time managing it! (the only thing that makes it passive is that the returns aren’t related to the many hours you spend doing it – you could earn nothing from many hours of work, or even lose money!).

“Aha”, I hear you say. “You’re only describing the problem so you can offer a simple solution!”. Well, yes, there are companies that do all the yield farming for you: but that functionally is no different to giving a company your money and them giving you interest in return, but with a much less transparent explanation of what they’re doing with your money. (“Hey, we do DeFi things. It’s too technical for you to understand!”).

Think about this, too: if a company such as AQRU is paying interest per day: then that interest is compounded per day – interest being paid on interest. That’s true, passive yield farming.

Though actively looking at your assets increase in real-time is kind of addictive, so be careful!

There are a ton of eccentric, clever and esoteric other ways to make money in DeFi, but they often have a few things in common: they’re not as easy as they sound, they’re less profitable than you think (because every time you move money around or make a trade you pay fees), and it’s very difficult to tell who’s honest from who isn’t unless you’re in the know.

AQRU offers a no-strings, simple way to earn passive income from Decentralised Finance. With a website and an app, you get 10USDC invested immediately for signing up. You can mix and match Crypto (which you can buy in the app through trusted provider MoonPay and save a ton of hassle – though like everywhere else, a transaction fee would apply for a Crypto purchase).

There’s also a $75 USDC referral bonus (subject to terms and conditions). You can withdraw your money at any time (free into regular currency, and a $20 fee for withdrawing into Crypto), and the minimum deposit is only 100 euros or equivalent. There are no deposit fees, so you can benefit from everything sent in. So, don’t miss out, earn interest with AQRU today.

 

Capital at risk. You must be satisfied that this crypto offering is suitable for you in light of your financial circumstances and attitude towards risk. The price or value of cryptocurrencies can rapidly increase or decrease at any time. The risk of loss in holding cryptocurrencies can be substantial. Funds received by us in relation to cryptocurrency transactions are not safeguarded (under the UK Electronic Money Regulations 2011) or covered by the Financial Services Compensation Scheme. Cryptocurrencies are unregulated in the UK. Profits may be subject to Capital Gains Tax.