Earning Interest on Cryptocurrency
Several platforms allow you to earn interest on your crypto holdings, similar to a traditional savings account.
How It Works
- Deposit cryptocurrency to a platform
- Platform lends your crypto to borrowers
- You receive a portion of the interest charged
Types of Interest Accounts
CeFi (Centralized Finance)
Advantages:
- Simple user experience
- Customer support available
- Often insured deposits
Considerations:
- Counterparty risk
- KYC requirements
- Platform may restrict withdrawals
DeFi (Decentralized Finance)
Advantages:
- Non-custodial (you control keys)
- No KYC required
- Transparent protocols
Considerations:
- Smart contract risk
- Higher complexity
- No customer support
Typical Interest Rates
| Asset | CeFi Range | DeFi Range |
|---|---|---|
| Bitcoin | 2-6% | 0.5-3% |
| Ethereum | 3-7% | 1-5% |
| Stablecoins | 6-12% | 3-15% |
Risk Management
- Diversify across platforms
- Don't deposit more than you can afford to lose
- Use established, audited platforms
- Understand withdrawal terms
Conclusion
Earning interest on crypto provides a way to generate passive income, but requires careful platform selection and risk management.
