Are you interested in earning interest?
Everyone loves when their crypto rockets to the moon - but that may not be how most money is made in the market.
Disclaimer: I am not a financial advisor.
Everyone seems to be on a rocket to the moon lately. Who can blame them? It’s not only fun, it has made a lot of people rich. But if you have been around crypto as long as I have - you know moon rides are rare and hard to time - and if you do happen to cash in early on a coin, eventually you will want to move your stack to something that is more stable like Bitcoin, Ethereum or other proven coins.
After all, it’s not like the more established coins are slacking. Ethereum has increased 400% in the last year. That aside, how do you make your coin make more coin?
Its takes Money to make Money
There is a reason why banks are rich - Interest. They make money off our money. It’s only logical that since crypto is replacing the bank as a utility - that the opportunity to earn interest on crypto is being routed to the holder.
Of course, it’s not exactly apples to apples on how the interest is generated. Crypto (as usual) has a few different ways they payout interest to holders - unlike a bank who takes our money, the governments money and then loans it back to us at a higher rate. With crypto it is based on the principals of decentralized finance.
Who’s paying Interest on Crypto?
There are a few ways you can earn interest on your crypto. One way is through your exchange. Here are some examples (in no particular order):
BlockFi - pays 5% APY on Bitcoin and 8.6% on USDC.
Coinbase - pays 6% on Ethereum if you stake it in their pool.
TrustWallet - pays 30% on BNB and offers high rates on other crypto too.
Nexo pays 8% to 12% on crypto.
Of course, you can also find actual crypto that pays interest as well.
Ethereum is moving to proof-of-stake, and is paying out 8% if you setup as a validator (but it does take 32 Ether and tech knowhow to run the servers)
HEX - HEX has become a leader in the idea of paying interest on stakes. It operates much like a Certificate of Deposit, where you stake your HEX for a period of time of your choice and earn interest. The interest on HEX can range from 12% up to 40% depending on how long you stake and how much you stake. What makes HEX unique is that it’s built in Interest payment in the actual Ethereum Contract.
Either way compound interest is a great way to grow your stack and hold at the same time.
Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
Staking may be a good thing for everyone
One of the major benefits for staking coins is that it removes the need for continuously purchasing expensive hardware and consuming energy.
The system offers guaranteed returns and a predictable source of income unlike the proof-of-work system where coins are rewarded through a mathematical process with a low probability of paying out. Another benefit is that the value of your staked coins doesn't depreciate unlike with ASICs and other mining hardware. Staked coins are only affected by market price fluctuations.
How is this possible?
The initial reaction when you hear 10%, 20%, 30% Interest - is to ask the question - “How is this possible?”. After all, banks pay less than 1% in most cases - so these numbers seem impossible.
It’s possible, because the entire decentralized financial system is being built from ground up where there are no banks - and instead there is a need for liquidity in the market. So when you stake your coins, you are supporting the security, operations and liquidity of the market.
Of course, the exchanges need coin to support their growing user base. Much like a bank needs depositors to support their loans. So paying high interest is how they stay competitive and get more users to join and stake.
Don’t feel bad for them, they are making a ton of money on transactions.