How to Make Money with DeFi?

Grow the Empire

One of the amazing features of decentralized finance is the tremendous amount of opportunities it offers to earn a passive income. Many users and investors are now enjoying the benefits of accessing alternative financial products and services that DeFi provides. The unique nature of decentralized finance enables users to choose a strategy through a variety of means to gain financial rewards.

Today, we are here to explore some of the strategies to make money through DeFi. Let’s get started!


Strategy 1: Earn Annual Percentage Yield

One of the simplest ways of earning through DeFi is to deposit or lock your cryptocurrency into a pool to earn an annual percentage yield from it. It is a similar concept to traditional finance where you can deposit your extra funds into a savings account and can earn annual interest for keeping your funds in the account. However, the dynamics of a cryptocurrency are significantly different from fiat currency. Therefore, a cryptocurrency can provide higher returns than funds stored in banks.

There is a specific term referring to the process of earning interest through crypto, which is known as staking. The interest earned can be in the form of any token supported by blockchain. The person who performs this process is called the transaction validator for the network. It is a crucial step for blockchain security and functionality; therefore, DeFi stakers receive financial rewards for performing this task.

It is the investor’s choice which cryptocurrency, platform, staking period, and interest rates he chooses to earn through his or her deposit.


Strategy 2: DeFi Mining

This strategy is similar to any other DeFi passive income source with minor differences. A liquidity miner earns rewards in the native token of the blockchain that they use. They also can also earn governance tokens that optimize their participation in a particular project. Just like other passive incomes, liquidity miners earn financial rewards proportional to the amount they have invested in DeFi mining.


Strategy 3: DeFi Lending

DeFi lending is a similar concept to traditional financial lending. One can lend one’s cryptocurrency to others in an exchange for fixed-interest payments over a period of time. There are a variety of platforms that operates on crypto lending protocols. You can simply lend your crypto funds to a platform from which another borrower can utilize and pays interest payment on the amount of borrowed crypto. By lending, you can lease out your funds to crypto borrowers. Smart contracts will distribute the accrued interest according to the number of digital assets locked in.

The best part of this strategy is that the default risk is zero because the whole lending and borrowing process is done through the smart contract. One can withdraw all his lending assets at any time without paying any withdrawal fine.


Strategy 4: Yield Farming

Yield farming is yet another way of earning a passive income by storing your crypto in a liquidity pool. The tokens are locked through a smart contract in dApps and users will be provided with financial rewards for letting their funds be used across the platforms for selling and borrowing purposes. The yield farmers ensure a high liquidity ratio of digital assets in the DeFi space. The farmers can switch from one liquidity pool to another to maximize yield on their investments.


Strategy 5: Act as a Liquidity Provider

A liquidity provider ensures that tokens swap takes place more rapidly and efficiently on decentralized exchanges. Think of a liquidity provider as a trade intermediator that is being paid for conducting the trade smoothly between two transacting parties. However, you have an inactive role as a liquidity provider in this process. Many decentralized exchanges use automated market maker (AMM) algorithms to process and fill orders automatically. However, a bearish market is a setback for this strategy so make sure to study the risks.


Earning through Empire Token

Empire Token is a decent option to earn passive income by enabling users to increase the number of tokens they own just by simply holding them. Every time a user swaps or transfers funds between wallets, 2 percent of this amount is redistributed to the holders. Moreover, Empire Token will soon set up staking and farming pools, offering holders and investors more passive income opportunities.


Final Talk

As evident from the abovementioned strategies, there are several ways by which you can make money in the crypto space. As a prerequisite of any investment, a due diligence process is mandatory. Rely on your own research and opt for the best option available. The current market situation compels us to go slow and focus more on passive income strategies.

Keep Climbing!