[Crypto Q&A] what are the right steps to take when lending crypto to earn intrest

Guest

Put simply, interest is the income that is received for lending out money and normally accrues daily or monthly. On the flip side, interest is the fee that is paid for borrowing money. Savings accounts are a great example of earning interest on your money. When you have money in a savings account, the account will generally pay you a specific amount of interest on a specific schedule. But why is your bank paying you interest in the first place? Well, when you have money sitting in a savings account you are in essence “lending” your money to the bank. The bank then takes that money and uses it to loan money to other customers. Basically, the time you spend leaving money in your savings will yield you more money and that yield is called interest.

Cryptocurrencies have long been heralded as the future of finance, but it wasn’t until 2020 that it finally caught on to an old idea: making money with money. In the crypto world, decentralized finance (or DeFi) encompasses a wide array of blockchain-based applications intended to enhance cryptocurrency holders’ returns without relying on intermediaries — to earn the kind of passive returns an investor might get from a savings account, a Treasury bill, or an Apple Inc. bond. The idea seems to be catching fire: Deposits in DeFi applications grew from about $1 billion in June to just under $40 billion by late January 2021, suggesting that DeFi could be a major element of crypto from here on out. In the tradition of disruptive innovations — as Clayton Christensen envisioned them — DeFi can be the evolution of blockchain technology that might launch it into mainstream. The premise of DeFi is simple: Fix the longstanding inefficiency in crypto finance of capital being kept idle at a nonzero opportunity cost. Now, most investors buy crypto with the hope that the value of the currency itself will rise, as Bitcoin has. In general, that strategy has worked just fine. The value of cryptocurrencies has appreciated so rapidly that there just wasn’t much incentive to worry about gains of a few percent here and there.

interest is the income 👌

The premise of DeFi is simple: Fix the longstanding inefficiency in crypto finance of capital being kept idle at a nonzero opportunity cost. Now, most investors buy crypto with the hope that the value of the currency itself will rise, as Bitcoin has. In general, that strategy has worked just fine. The value of cryptocurrencies has appreciated so rapidly that there just wasn’t much incentive to worry about gains of a few percent here and there.