Do you have Bitcoin (BTC) or other cryptocurrencies lying around in an unused wallet? Did you know that there are many platforms that you can invest your BTC or other cryptocurrency into, and earn a decent return? You can be earning in excess of 10% yearly on your online currencies. Here, I have listed 3 separate ways you can earn interest on your crypto.
- How Do I Compound my Cryptocurrency?
- What is Staking?
- How Does a Cryptocurrency Interest Account Work?
- Platforms to Earn Interest on your Cryptocurrency
- Summary of Cryptocurrency Earning Platforms
How Do I Compound my Cryptocurrency?
Maybe you have earned free cryptocurrency through coinbase earn, or maybe you want to earn interest on your recently bought bitcoin while waiting for the next project on the Sun Exchange to open. Either way, you are obviously here to find out some of the various ways of compounding your cryptocurrency. There are many ways that platforms can create returns, which are paid back to you, include lending cryptocurrency to other platforms and institutions, staking, and margin trading.
What is Staking?
Staking is known as storing cryptocurrency in an online wallet to support processes through the blockchain network. For transactions to be validated, there needs to be a set supply of cryptocurrency in the network. As a reward for helping you, you earn a reward (or interest).
Staking is known as one of the most simplest ways of earning interest.
How Does a Cryptocurrency Interest Account Work?
Many platforms now offer the ability to allow the storing cryptocurrency, which in turn earns interest. Basically what happens, is that you send your cryptocurrency to one of the platforms, where it will sit an earn interest (just like a bank account). The platform itself will be the custodian of your cryptocurrency, and will pay you interest so that they can use it. They may borrow it out, use it to supply liquidity, or any other number of ways to earn a return.
So, through my research, and various testing of platforms, I have come up with 3 great platforms that you can use to help grow your cryptocurrency empire!
Platforms to Earn Interest on your Cryptocurrency
Coinloan is a cryptocurrency borrowing and investing platform from Estonia in the European Union. CoinLoan offers two services being “obtaining a loan”, and “earning interest”. Both of these offerings involve the use of cryptocurrency.
What Security Does CoinLoan have in place?
CoinLoan uses strong security standards similar to other financial institutions. There is a bug bounty program, account take over protection, regular vulnerability scans, and two-fact authentication systems in place. You can find out more about the security of CoinLoan on their blog post here.
Cryptocurrencies that you invest into CoinLoan are stored in offline, cold, multi-signature wallets. Transaction signing only happens offline, and involves multiple people and multiple signatures. Encrypted keys are stored worldwide in safe deposit boxes to prevent loss in case of natural disaster or otherwise.
How Does CoinLoan Generate Interest?
When money is deposited on the CoinLoan account, the money is borrowed out and interest is paid as a return. Just like a bank deposit, the money lent to CoinLoan is partly used to create loan offers. Interest is accrued daily and deposited into your wallet on the first day of each month.
Benefits of CoinLoan
- Can earn interest on stable coins, other cryptocurrencies and also normal money (fiat) such as Euros
- Interest account is available to everyone no matter where you live
- Free withdrawals at any time
Drawbacks of CoinLoan:
- Must stake the CLT coin (CoinLoan token) to earn the higher interest rates
- Must invest for a set amount of time
MyConstant is an American P2P platform that offers many diverse avenues of investment ranging from a 4% Flex Interest account, to an 11%+ return through the loan originator investment. One of their products, Crypto Lend offers a
9.00% interest rate 8% (edit – from 23 December 2020) 6% APR (edit – from 1 April 2021) on cryptocurrencies such as Bitcoin (BTC), Etherum (ETH), and Binance Coins (BNB). If you choose to receive interest payments in PRV (the token for the exchange partner MyConstant use) you’ll earn 11% 9% (edit – 1 April 2021) APR.
All lending is backed by Constant Guarantee, which is a $3,000,000 fund that underwrites all investments in Crypto Lend, protecting you from losses.
Additionally, if you want to test MyConstant before putting any money down, we have negotiated a deal to reward you with a trial $2,000 in a Flex account which you get to keep for a month. After the month, the $2,000 is returned, but you get to keep the interest. *Must be an citizen of the USA. Get your trial $2,000 here!
How is Interest Earned?
The cryptocurrency that is supplied to MyConstant is used to supply liquidity in multiple decentralized exchanges (DEXs) and swapping platforms. When others trade cryptocurrencies, you earn a cut of the trading fees. MyConstant was able to obtain a rate of 10% APY, since they are working with select partners only.
Benefits of CryptoLend:
- 6% APY return on on Bitcoin, Ethereum, and Binance Coin
- Interest compounded and paid every second
- Unlimited free withdrawals
- No minimum investment
- Available worldwide (non-US currencies converted to USD)
Drawbacks of MyConstant’s CryptoLend:
- MyConstant has capped investments at $3 Million, to ensure investors are covered in case of issues with partners
- There is an additional personal limit of 5 BTC, and a platform limit of 100 BTC (or equivalent) for other supported cryptocurreneis (i.e. ETH, BNB)
BlockFI offers their BlockFI Interest Account which is available to most countries worldwide. Investors can earn interest on their BTC, ETH, LTC, USDC, GUSD, PAX, PAXG, and USDT. Annual percentage yields range from 3.2% to 8.6%. A full list of rates can be found here.
Interest accrues the day after the deposit has been received, and interest payments are compiled on the first business day of each month.
How Does BlockFI Generate Interest?
BlockFI generates interest by lending your cryptocurrency to institutional and corporate borrowers. They ensure that borrower payments are met, by requesting over-collateralisation on their loans, and tracking the positions constantly.
Benefits of BlockFI
Benefits of BlockFi include:
- Interest compounded and paid every second.
- No withdrawal restrictions or lock up periods
- One free withdrawal a month
Drawbacks of BlockFI
- Interest rates are subject to the yield able to be generated through lending, and rates may be adjusted monthly
- There are some fees associated if you plan to withdraw more than one time a month (see fees under rates here)
If you open an BlockFI account using this link, you will receive $10 once you have deposited $100 or more. That is an instant 10% gain!
Summary of Cryptocurrency Earning Platforms
|Date Commenced / Founded||March, 2018||January, 2019||August, 2017|
|Return (General)||5% – 10.3% (with CLT staking)||6%||3.2% – 8.6%|
|Return (BTC)||6.4% (with CLT staking)||6%||6%|
|Return (ETH)||6.4% (with CLT staking)||6%||4.5%|
|Compound Rate||Every Day||Every Second||Every Day|
|Deposit Period||7 days|
|Withdraw anytime||Withdraw anytime|
|Stablecoins Available||USDT, USDC, DAI, PAX, TUSD||N/A||PAXG, USDC, GUSD, PAX, USDT|
|Cryptocurrency Available||BTC, ETH, BCH, BUSD, LTC, XMR, XRP, LINK||BTC, ETH, BNB||BTC, ETH, LTC|
|Security||$100 million underwriting fund.||$3 mill underwriting fund.||Industry-leading insurance policy through Gemini|
Additional Compounding Platforms
The number of companies offering ways to earn cryptocurrency passively is booming. However its important to understand how the platforms are earning interest on your cryptocurrency, their security standards and insurances, and also how trustworthy they are. Additionally it can be good to find out if they are audited, and if you can see a copy of the audit report. Always do your own due diligence, as the level of risk can be quite high in some of these investments.
Compounding is on the the best ways to make your money grow. It is therefore important to find the best rates available, to speed up the growth process. While some platforms offer better rates for certain cryptocurrencies (like the 6% interest on BTC from MyConstant), it doesn’t mean they offer the best rates for all products. Through Coinbase Earn, I have managed to acquire cryptocurrencies such as DAI and therefore find it useful to have multiple platforms to earn compound interest.
However, depending on your outlook on certain cryptocurrencies, it may be wise to swap the DAI to something like BTC and then earn a set interest of 9% through MyConstant, rather than keep the DAI by itself.