DeFi or decentralized finance covers different types of financial services that use blockchain technology. Ethereum is an example of it. Users of DeFi receive the same benefits for their funds as they get with the banks. Some of these benefits include earning interests, lending, borrowing, trading assets and buying insurance. These services do not require any third party service. Everything is handled through a decentralized app. Users can start transferring assets even without opening an account.
Why DeFi Delivers High Return?
The reduced middleman fee combined with increasing demand deliver high reward opportunities. Decentralized finance has opened up many new ways to earn passive incomes. A high demand created by leverage and available through protocol fees and negative tokens deliver high yields.
How to Use DeFi to Earn Passively?
Staking, lending and yield farming have made DeFi a profitable passive earning method. Many new smart contract and decentralized protocol options have come up since DeFi emerged three years back. Each option offers its own reward opportunities. Staking, lending, and yield farming are the most popular passive income options with DeFi.
DeFi asset holders can lend their asset to others who want to borrow it. The borrower has to pay an interest on the borrowed asset. Lenders get the interest after paying the fee to the platform that handles this process. For example, if the asset is lent at an interest rate of 9%, the lender will get 8% interest after paying the platform fees.
Platforms to Use for This Purpose
Investors must first have a good knowledge of AMM or Automated Market Maker. They should know the way blockchain works. Only experienced investors should participate in any DeFi lending activity. Those interested in generating yields from their cryptocurrency assets can use platforms like SingularityDAO.