Are you an investor in DeFi? Then it would be helpful for you to understand how to earn passive income from DeFi.
What does DeFi refer to?
In simple words, DeFi refers to the financial services executed with the help of smart contracts without the involvement of intermediaries, like lawyers or banks. These contracts use online blockchain technology.
As the name suggests, DeFi is a community-driven financial services platform decentralized, designed to be trustless and permissionless.
As there are no AML and KYC requirements, DeFi targets banked and non-banked participants in smart contracts.
Like traditional investment options, DeFi investors can also earn passive income from their investments along with active income. Investors can earn active income by trading the assets on Decentralized Cryptocurrency Exchanges (DEX). In contrast, they can achieve passive income where crypto holders and investors earn income without active trade.
Participants can earn passive income in four ways:
● Yield Farming
● Liquidity Mining
Let us review these theories in more detail.
● Yield Farming: In this method, the investors earn cryptos with their cryptos. In simple words, they lend their funds as cryptos using smart contracts. They make fees as cryptos as income.
● Liquidity Mining: Some decentralized exchanges like SushiSwap and Uniswap allow swaps between token pairs like USDT and ETH.
● Staking: Staking involves locking funds in a Cryptocurrency wallet to enhance the security and operations of a blockchain network to receive rewards. In most cases, the investors can stake their cryptos directly into a Trust wallet. Whereas, some exchanges also provide staking services to their investors.
● Lending: The users earn an APY (annual percentage yield) from the lending platforms for bolting their assets into a smart contract. Borrowers then use these tokens who pay interest for operating funds.
For a detailed understanding of these concepts: Click
This blog is first published on www.blockchainshiksha.com
Written By Shubhada Pande