Nexo, a cryptocurrency lender, is increasing the amount of consumer funds it allocates to liquid staking DeFi protocols in order to boost returns. The lender started utilizing liquid staking a few years ago and has been steadily expanding its use since.
Lending Cryptocurrency to Investors and Traders is Becoming a Big Business
Nexo is a centralized service that allows customers to lend out cryptocurrency and receive a return. It generates this yield in a variety of ways, including lending funds to businesses, buying and selling tokens, and staking tokens. Staking is a significant part of its business and is used to generate yield for many newer coins, such as Solana, Luna, and Avalanche. It began experimenting with liquid staking a few years in the past as a way to not solely generate extra yield but also to unlock liquidity, particularly for ether. Since then, it has expanded its portfolio of liquid staking platforms across various blockchains and increased the amount of capital allocated to such protocols.
Lend $100 000 and Earn $50 Daily
Claim: Investors are making insane returns lending out their cryptocurrency, so Maxwell Maher , a cryptocurrency investor decided to invest $100 000 to see if it is actually real.
Question: Is it possible to make $50 per day doing essentially nothing?
He created a Terra Station Wallet for this purpose. The Terra Station web extension allows you to access decentralized applications (DApps) powered by smart contracts on the Terra blockchain. It also includes the official wallet from the desktop edition of Terra Station, which users can use to manage their Terra accounts (supports Ledger).
Then he went to KuCoin under Spot Trade and swapped 100 020 USDT for 0.9939 UST, linked his Terra Station Wallet with KuCoin, and used the LUNA network.
Next, he headed over to Anchor Protocol and connected his wallet, and then deposited the money.
If you do not have a KuCoin account, you should buy Bitcoin on Coinbase and send it to KuCoin. After, swap your Bitcoin for UST and send it to Terra Station which you had connected to Anchor Protocol.
How Much Did Maxwell Earn?
Anchor Protocol promised 19 - 20% APY. Did he get this amount?
He ran the trial for one month and here is the result:
As you can see from the above trial, Anchor Protocol lived up to its expectations. Maxwell did absolutely nothing after lending out his 100 004 UST via the Anchor Protocol platform and he reaped in return 101 708.554 UST with 19.36% APY.
Anchor Protocol
Anchor is a DeFi savings platform that provides stablecoin deposits with low volatility, and it is a dependable and consistent source of cryptocurrency yield. Anchor DeFi is powered by a diverse stream of staking rewards on major proof-of-stake blockchains.
Using diversified staking yields, money markets, and the ANC token incentives and governance, the Anchor Protocol composes a fully decentralized fixed-income instrument.
Protocol Participants
The Anchor ecosystem has four types of users: depositors (lenders), borrowers, liquidators, and ANC liquidity providers. Anchor also necessitates the use of Oracle feeders, which are critical for providing the necessary infrastructure.
Depositors are incentivized in Anchor Protocol to lend Terra stablecoins to Anchor's money market, which is borrowed out by borrowers via bAsset collateralized loans. Borrower interest is paid to depositors, along with subsidies generated by the rewards of deposited bAsset collaterals. Furthermore, by incentivizing liquidators to monitor and liquidate loans at risk of under collateralization, the protocol prevents borrowers from incurring liabilities above collateral value.
Borrowers are entities that establish bAsset-collateralized loan positions in order to borrow Terra stablecoins from the Anchor money market. Anchor-whitelisted assets can be deposited and locked to create a loan position. Positions must keep their loan-to-value (LTV) ratios below a certain limit.
A Liquidator looks for risky loans (loans with an LTV ratio greater than the maximum allowed) and requests that loan collateral be liquidated if necessary. Liquidators must submit a bid to the Liquidation Contract before liquidating a loan, offering to purchase the liquidated collateral in exchange for the liquidator's Terra stablecoins.
ANC Liquidity Providers are entities that provide liquidity to the ANC-UST Terraswap Pair. They are in charge of the initial bootstrapping of ANC token-to-UST exchange liquidity. Because ANC tokens are distributed as borrower incentives and are used to calibrate the stablecoin deposit rate, exchange liquidity is critical.
Cefi vs Defi
Before the introduction of DeFi, the standard for trading cryptos was Centralized Finance. It has a firm grip on the cryptocurrency industry. All crypto trade orders in centralized finance (CeFi) are processed through a central exchange which specifies which coins they list for trading and how much fees you must pay to trade with them. Funds are managed by specific individuals who run the central exchange. It means you don't have a private key that allows you to access your wallet.
When you buy or sell cryptocurrencies through a centralized exchange, you do not own them. So, you are bound by the rules imposed by a centralized exchange, and by the rules established by the centralized exchange.
On the other hand, the decentralized exchange does not involve any exchange. The entire process is controlled by automated applications built on blockchain platforms. Decentralized finance also creates an equitable and transparent financial system in which anyone can participate. It uses blockchain technology to provide unbanked people with access to financial and banking services.
DeFi's vision is to create an open-source, permissionless, and transparent financial services ecosystem. Borrowing, yield farming, crypto lending, asset storage, and other services are available through the decentralized financial system.
The advantage of DeFi over CeFi is that you have complete control over your assets and you own the key pair for your wallet. Furthermore, users who want to participate in DeFi must access DeFi services through decentralized applications (dApps) built on blockchain platforms.
You May not Earn a Lot of Money if You Don't Choose Well
An anonymous faceless YouTube channel called Plutus Knowledge released the following screenshots to prove that cryptocurrency lending works.
He lent 1 450 USDT.
Total earning after 5 months is $77. This is a bit low, so you need to choose wisely to earn more, and also make sure the platform is safe so you don't lose your money.
Here is the proof of earning from settled loans.
Which DeFi Yield Platform Is Best for You?
When it comes to earning a passive income from crypto tokens, each crypto investor usually has his unique strategy. Some may prefer to deposit their funds for a longer period of time in order to earn a higher DeFi yield over time, whereas others prefer flexible deposits.
There are several factors to consider which include:
- platform's current interest rates,
- risks associated with that particular trading platform and platform track record,
- assets supported,
- deposit limit (is there a minimum amount),
- fee,
- lending duration (is it fixed on not),
- collateral (how much crypto collateral borrowers need to have compared to the amount of money they are borrowing).
It's critical to make sure you have the right assets in your wallet and that you understand the terms of the DeFi lending platform you've chosen.
How Much Interest Can I Earn on DeFi?
Interest rates on DeFi platforms vary widely. It all boils down to the DeFi project chosen, its blockchain, and the cryptocurrency deposited.|
Recommended Lending Defi Platforms with the Best Lending Rates
We've talked a lot about Nexo and Anchor, so now it's time to go over some other lending platforms you might want to look into if you decide to give it a shot.
Alchemix is a cutting-edge DeFi protocol that offers self-paying crypto loans. The protocol enables you to repay your loans using collateral from other DeFi applications. Alchemix takes self-paying loans a step further by determining the future yield of your collateral, which will determine the amount of crypto loan may yield in the future. Alchemix collects user deposits and deposits them in other DeFi protocols. The profits are then used to repay everyone's debts over time.
Aave is one of the most well-known and widely used DeFi lending platforms. Aave, which began in borrowing markets for a diverse range of assets across multiple networks.
Oasis is an app that allows users to lock up their tokens as collateral in order to generate DAI, a stablecoin backed by the US dollar. MakerDAO's native stablecoin is DAI, which is a popular decentralised governance platform. MakerDAO has a decentralised governance group in charge of DAI creation. To enable the development of DAI, this community makes use of the embedded governance mechanism found in the Maker protocol.
Fulcrum is a DeFi lending platform where users can lend and borrow ERC20 tokens. Polygon and Binance Smart Chain networks were recently added to its platform. When a new deposit is made, the Fulcrum Protocol will also generate iTokens (interest-earning tokens). These DeFi iTokens can be traded in the same way as any other token. The iTokens become more valuable as interest in them grows over time. Furthermore, the tokens can be used as collateral for protocol borrowing. For lenders, the Fulcrum protocol provides a wide range of popular cryptos. It has one of the highest DeFi rates for a stablecoin, with DAI earning 8.4 percent APY (on the Ethereum network).
Compound is an Ethereum-based DeFi borrowing and lending protocol. The Compound protocol can assist you in diversifying and growing your cryptocurrency portfolio. As long as your money is deposited, the protocol will assist you in earning interest. At the same time, if you want to invest in other assets, you can borrow money from the protocol.
There are many more platforms available; all you have to do is conduct thorough research to find the one that is right for you.
Caution
Nexo primarily uses Lido Finance, the most important liquid staking supplier on Ethereum (and other chains), and it is experimenting with newer liquid staking protocols on other chains, but it begins with small sums and builds up over time as the protocol demonstrates it is secure.
Beyond liquid staking, Nexo has put its personal funds to work in DeFi protocols, but has largely avoided experimenting with consumer funds — purely due to the levels of risk involved.
It should be noted that rival crypto lender Celsius, which has a dedicated DeFi group, lost approximately $50 million when the DeFi protocol Badger DAO was exploited. The BadgerDAO exploit was a front-end attack that allowed attackers to gain access to the main website. When users attempted to complete transactions, the attacker altered the nature of the transactions in order to steal the funds. The protocol ended up losing $120 million in total. As a result, the possibility of your coin being stolen is a significant risk that you should consider before using any platform.
Conclusion
Some lending platforms allow you to earn passive income by lending your cryptocurrency. You may also want to consider a Defi, which is a decentralized platform that gives you some control over your asset.
We have also listed factors to consider if you want to pursue this option, particularly the security of your investment. We believe that Anchor Protocol is a very nice way to earn passive income while doing nothing, with the potential to earn around 20% APY. Although Nexus and other platforms pay less, their rewards are still more profitable than traditional bank deposits, fixed deposits, or T-bills. As shown in one of the case studies in this article, if you lend $100 000, you can earn $50 daily passive income.
