Kirill Blockchain enthusiast developer and writer. DeFi and passive income Decentralized finance DeFi is the Ethereum ecosystem composed of financial DApps, smart contracts and protocols that are looking to revolutionize conventional banking by replacing its services with trustless code.
The main idea is that without a middleman the bank the fees are much lower, no centralized authority has access to your funds, and everyone will be able to take advantage of these services regardless of where they leave.
Today, we are already having decentralized exchanges, lending markets, tokenization platforms, prediction markets, payment networks, and many more to come. Cryptocurrency is the perfect response to the current broken financial system.
Anyway, things are not as different as you might think. DeFi gives you access to your tokens in the same way a bank is giving you access to conventional money more info about the market. You can deposit, you can withdraw, you can spend them at your nearby store by using a payment card.
Trading or investing in projects is one way to make money in the blockchain industry. Even the best investors can experience prolonged periods of loss, and one of the ways to survive them is to have alternative sources of income. There are other methods than trading or investing that can help you increase your cryptocurrency holdings. These can pay ongoing income similar to earning interest, but only require some effort to set up and little or no effort to maintain.
And these services are extended to borrowing, lending, managing an investment portfolio. Banks are usually offering interest on your deposit which btcon earnings and stable income it appealing to keep your savings into their account. The actual interest rate that banks are offering is.
In the US the inflation in was 2. In it will be even more than that due to the current global pandemic situation. In other words, even if you are earning interest on your money, in the end, it is still worth less than the year before.
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DeFi solutions are looking to take these working financial models and adjust them to the current reality: offer better interest rate, capital protection, and more investment options.
Anyway, neither of these is a good option for users who are looking to create a passive income stream. Gekkoin is one solution that merges the advantages of both markets by letting you choose your preferred investment strategy across them. The result?
Even the lower risk strategy offers better returns than any bank can offer for a deposit at this time. The winning packages can be accessed under the form of a structured deposit.
In banking terminology, a structured deposit is a financial account where funds are placed into fixed deposits with an investment on particular assets. In this case, part of the investment will be made in securities and bonds providing a stable and secure income. While the other part of a cryptocurrency chosen by you. If the cryptocurrency shows significant growth, you can earn substantially more. If its price drops, the stable investment could compensate for it.
In this way, Gekkoin provides guaranteed returns at a higher rate than banks and the possibility to significantly increase your earnings if the cryptocurrency market is growing. There is no other platform allowing its users to earn both on the growing and on the falling of the already full of risks cryptocurrency market.
The financial background of the platform can be seen in the overall user experience.
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Starting with Gekkoin is not different than making a bank deposit. The minimum deposit amount is EUR and there is no maximum limit which could lead to serious income with the right amount.
Once the deposit is in the platform acts as a fully-featured financial portfolio giving you access to instruments that are currently associated with conventional financial systems.
Actually, within the platform, your investment is always tied to conventional currencies. Even if your investment is managed in cryptocurrency, you are always having access to your funds in the same way you would access your funds in the bank.
DeFi and passive income
While having all the advantages of a conventional banking service, you are also having the same opportunities as a professional investor: the ability to regulate risk and generate profit with your deposit. By default, the platform will give you the option to choose between three investment strategies: Safe strategy - for conservative investors who are looking for full capital protection Balanced strategy - for those investors who are looking for stable income with a minimum risk Dynamic strategy - for investors who are looking to take advantage of the high potential of cryptocurrencies despite the increased level of risk.
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With Gekkoin, investing can be more flexible and less risky, making cryptocurrency investment less of a gamble and more of a way to generate passive income. Lenders are earning interest similar to a financial institution, while borrowers need to deposit cryptocurrency as collateral.
What is passive income?
Similar services were available before. Anyway, Compound is not a peer-to-peer matchmaker. You are not borrowing directly from a lender. Interest which is collected from borrowers then split between lenders. The whole system makes it profitable for both parties, and particularly lenders which are looking for a steady passive income for their deposited amounts. A steady income is nice.
Anyone who would lend or borrow on their platform would also earn a small amount of COMP tokens. It was seen by the team as a great way to distribute their token. At this rate, the token returns are higher than the interest returns. When the token reached its peak, around 2, COMP tokens were issued a day. What was supposed to be a passive earnings-generating platform became a get-rich grab. However, that ended fast. Under the new rules, users will earn COMP on the dollar value of assets they have put in or borrowed from the system.
But the initial purpose of the platform of offering their lenders a way of generating passive income is still there. If their interest rate is attractive to you, you can check it out. Lend for interest Lending capital on a lending market is a way to earn income and you should know that Compound is not the only one.
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And, without the high income from the bonus COMP, the interest rate is the most important variable. As mentioned on Compound platform the rate is dynamically adjusted by their internal algorithm. Sometimes you can earn more, sometimes you can earn less.
While the content is written primarily for the US, most countries tend to follow a similar approach. You can find guides for other countries here. Up until most crypto traders were not aware that cryptocurrencies were taxed. Even fewer knew that crypto to crypto trades could result in taxes. And far less - if anyone - knew that things like airdrops and forks could make you liable for income tax.
What if you are looking for a more stable income? Aaveor ETHLend, as it was previously called, is a btcon earnings and stable income platform which offers flexible rates.
This platform mostly differentiates itself from its competitors through the vast range of DeFi collateral. There are many lending platforms and most of them are limiting their users to their fixed interest btcon earnings and stable income just to be able to promise higher income rates. Anyway, with fixed interest, if borrowing is getting too expensive borrowers will go away, leaving lenders with no earnings until the market cools down.
Passive income from crypto: ways to earn it
This leads us to the second option, variable interest rate as seen in Compound. It solves the initial problem, but it brings new problems. The high swings in the demand-supply ratio are now translated into the interest rate. Sometimes you are earning a good income, sometimes you are earning very little income.
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There is no predictability, making it an awful tool for generating passive income. Aave changes it with a system where the lender can switch between the two types of interest rates.
Depending on the market conditions you can choose a stable or a variable interest rate. This change made the platform very attractive and a real contender for passive income.
Due to the stable rate usually being higher than the variable rate, the lenders are generally seeing higher returns. But the returns are marginal and you are always forced to choose a side.
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When you are lending you are hoping that the price of your asset will go up. While, when you are borrowing, you are thinking that the price might go down.
This being said, always make sure you understand the position you are taking when making an investment, placing it in a structured deposit or lending it on a decentralized market. As Andreas Antonopoulos, blockchain educator said in one of his streams : "Passive income is when you put your capital to work, and that carries some risks [ As long as you are aware of the risks and you know how to manage them you might be sitting on the best way to put your money at work at the present time!
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