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As the crypto industry continues to revolutionise the way we think about and interact with money, more and more people are considering not only how they invest, but also about how the coins they buy can work for them. One of the growing ways to utilise digital currency right now is DeFi (decentralized finance) and the good news is that right now there are a host of ways to maximise profit potential.
How can you make money with DeFi?
When you’re looking into how to invest in DeFi, it quickly becomes clear that there are a host of worthwhile methods. What is attractive about this is that investors will be able to choose the endeavours that best suit their needs. With this in mind, let’s take a look at the 3 most popular ways to make money using DeFi principles.
1. Yield farming
Yield farming is one of the top ways to start making money via DeFi – and with some knowledge, a little capital and the right platform, it can be incredibly profitable. Investors can choose a DeFi project to invest in, lock in their chosen amount and wait for the rewards (these are usually set up to provide collateral for loans and when interest is made, it is distributed between investors).
It can be important to note that while an income can be made and investors can withdraw funds at any time, there are a host of scam projects out there that get investors on board before withdrawing everything and disappearing. As entry thresholds can be high, these investments will need extra research and caution.
2. DeFi Loaning
As one of the more secure options for earning money via DeFi, plenty of investors are turning to these protocols to put their assets to good use with loaning. Platforms that support this method connect those with funds with those who need them, and profits for investors come from the interest that is made on the loan itself.
3. DeFi Airdrops
This is one of the newer methods for earning cash using DeFi, but it can be profitable and fun at the same time. This is one of the ways that companies in the crypto community like to give back to investors and what happens is that a participating decentralized exchange (for example Uniswap) will automatically ‘drop’ a lump sum into supporter’s accounts as a thank you for their backing. There are giveaways and competitions too, and if you spend some time researching the best platforms, you could potentially make some decent gains.
As you can see, it’s certainly viable to make money with DeFi, and these three examples are not the only ones available. There are even DeFi protocols out there that don’t require initial outlay, ones that support traditional trading endeavours, games that allow users to buy, play and earn (like the game CryptoKitties) and so much more.
As with crypto in general, the niche is volatile and profits are not guaranteed, but there is certainly potential if you do your research and pick the right methods for your needs. The amount you invest should always be what you can afford and it’s okay to test the waters before diving in.