8 Best DeFi Platforms To Earn Interest

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8 Best DeFi Platforms To Earn Interest

Decentralized finance (DeFi) has been a game-changer ever since its inception. With the many financial instruments the technology has introduced, reliance on middlemen such as banks has been greatly reduced. 

To note, DeFi is a collective term for financial products and services that are accessible to anyone courtesy of blockchain technology. In other words, DeFi provides borderless digital alternatives for traditional financial services such as borrowing, saving, and/or lending of money or assets. 

Interestingly, there are numerous decentralized finance platforms where crypto users can carry out these operations to earn interest.  

With the use of smart contracts, decentralized finance platforms allow individuals to lend or borrow funds from others, and speculate on price movements on assets using derivatives and also stake assets. 

In this article, we will be highlighting a few DeFi platforms that crypto users can leverage to earn interest. 

Aave Protocol

Aave is a community-governed protocol with a fully decentralized non-custodial liquidity market. The DeFi platform allows crypto users to participate as depositors or borrowers. 

While depositors provide liquidity to the market to make profits, borrowers get to borrow in an over-collateralized or under-collateralized fashion. 

Getting started with Aave protocol involves users first depositing assets in preferred amounts. Users then earn interests after depositing, based on the market borrowing demand. 

Also, using these deposited assets as collateral, users are qualified to borrow on the Aave platform. By borrowing, users can obtain liquidity (working capital) without selling their assets.

Interestingly, interest earned from depositing assets can be used to settle the interest associated with borrowing. 

Worthy of note is that each asset has its unique Annual Percentage Yield (APY) which changes with time. More so, depositors on Aave get continuous earnings from the interest paid by borrowers. Equally, depositors earn from flash loan fees. 

Compound 

The Compound protocol is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications. It is a series of interest rate markets running on the Ethereum blockchain.

The app.compound.finance interface remains open-source and maintained by the community. The DeFi platform claims to be the most secure protocol for money. 

One of the major ways of earning on the platform is by supplying assets to the Compound Protocol. When users provide liquidity to the Compound Protocol, they immediately begin to earn a variable interest rate. 

Also, liquidity providers (depositors) get to share in the interest that borrowers pay back to the liquidity pools. 

Take note, that interest accrues every Ethereum block (currently ~13 seconds), and users can withdraw their principal plus interest anytime. 

Equally, the Compound Protocol allows users to borrow crypto assets from the available pools. In doing so, supported assets are used as collateral. This gives borrowers the flexibility to settle a trade, or use an application, with an asset that they don’t already own. 

Those that borrow crypto assets from the Compound protocol pay a varying interest rate for every Ethereum block. In turn, the interest that borrowers pay produces the interest that depositors earn. 

C.R.E.A.M Finance

C.R.E.A.M. Finance is a decentralized lending protocol for individuals, institutions, and protocols to access financial services. 

More so, the C.R.E.A.M Finance protocol is a permissionless, open-source and non-custodial protocol that is available on Ethereum, Binance Smart Chain, Polygon, and Fantom blockchains. 

Interestingly, users who are passively holding ETH or wBTC can deposit their assets on C.R.E.A.M. to earn yield. Also, users can lend (supply) assets on the DeFi platform to earn interest. Likewise, users can use the deposited assets as collateral to borrow another asset.

Meanwhile, C.R.E.A.M. Finance offers a wide range of tokens on its money markets. They include interest-bearing stablecoins, DeFi tokens,  LP-tokens, stablecoins, and other cryptocurrencies like ETH. 

Read Also: Top 10 DeFi Applications on Avalanche

MakerDAO

Maker says it is unlocking the power of decentralized finance for everyone by creating an inclusive platform for economic empowerment; enabling everyone with equal access to the global financial marketplace. 

MakerDAO is an open-source project on the Ethereum blockchain and a Decentralized Autonomous Organization created in 2014. 

The Maker Protocol, also known as the Multi-Collateral Dai (MCD) system, is the set of smart contracts that make it possible for users to create the currency Dai. Meanwhile, MakerDAO governs the Maker Protocol by deciding on key parameters. 

To generate Dai, users deposit Ethereum-based collateral assets into Maker Vaults within the Maker Protocol. 

More so, the Maker Protocol employs a two-token system. The first is Dai, a collateral-backed stablecoin that offers stability. Second, there is MKR, a governance token that is used by stakeholders to maintain the system and manage Dai.

Interestingly, the Protocol was the first decentralized finance (DeFi) application to earn significant adoption and remains one of the largest decentralized applications (dApps) on the Ethereum blockchain.

Notional 

Developed and launched in 2020, Notional is a protocol on Ethereum that facilitates fixed-rate, fixed-term crypto asset lending and borrowing through a novel financial instrument called fCash. 

fCash are transferable tokens that represent a claim on a positive or negative cash flow at a specific point in the future. More so, fCash offers a simple and reliable mechanism for Notional users to commit to transfers of value at specific points in the future. 

On Notional, there are lenders, liquidity providers, and borrowers. While lenders trade cash for fCash and earn a fixed interest rate, liquidity providers leverage the defi platform’s liquidity pools to earn irregular trading fees.

In other words, liquidity providers earn interests/ compensation as they facilitate lending and borrowing operations on the platform. Whereas lenders lend crypto with dependable returns – 3.929% fixed APY. 

On the whole, Notional brings fixed interest rates to the decentralized financial system on Ethereum and gives crypto users the same access to stable financing.

With the DeFi platform, users can lend, borrow, provide liquidity, withdraw liquidity or cash into their wallets, repay debts, withdraw loans, or roll assets from one maturity to another, all within a single transaction. 

DeFi Platforms

PolyCUB

PolyCUB is a yield optimizer platform that provides a safe and easy way for DeFi users to discover yield and earn on the Polygon Network.

PolyCUB borrows the essential aspects of 3 major DeFi platforms – Sushiswap, Adamant Finance, and Autofarm.

The protocol is tagged as Polygon’s most sustainable DeFi platform with multi-token bridging, curve-style staking, governance DAO, Protocol Liquidity, and lending. 

Earning interest in the PolyCUB platform is possible through different approaches. Majorly, users can earn income by participating in PolyCUB Kingdom Vaults, xPOLYCUB staking as well as bonding and Protocol Owned Liquidity (PoL). 

On the platform, users can bond assets with Protocol Owned Liquidity (PoL) and earn instant ROI while building the future sustainability of POLYCUB. 

Also, users can earn the native token of the defi platform (POLYCUB) by participating in any of the Kingdom vaults or by staking xPOLYCUB. 

PolyCUB Kingdoms are cross-platform yield farming vaults. It allows users to earn two forms of yields – users earn from both the base APY and POLYCUB APY.

By holding POLYCUB, especially staked as xPOLYCUB, users earn from both the POLYCUB rewards pool and the xPOLYCUB contract. 

Interestingly, staking xPOLYCUB also allows users to earn a 50% fee penalty generated by other farmers who harvest their yield before the X block locking period.

88mph

88mph is a non-custodial, fully on-chain protocol acting as an intermediary between users and third-party variable yield rate protocols. It is built to present users with the best fixed yield rate for various supplied assets such as DAI, USDC, WBTC, and ETH with a custom or preset maturity. 

The DeFi platform also offers a yield speculation instrument, called Yield Tokens (YTs). Yield tokens are fungible ERC-20/ERC-1155 tokens that allow users to speculate and profit from the rise in the variable yield rate of third-party lending protocols such as Compound or Aave. With Yield Tokens, users can hedge part of their borrowing costs of a loan. 

MPH is the native token of 88mph, distributed as an incentive to use 88mph fixed yield rate products. By staking your MPH, you are eligible to collect 88mph protocol’s revenues distributed as MPH.  

The currently available options for providing MPH liquidity to earn rewards are listed on 88mph.app/farm. Here, users can deposit assets and earn a fixed yield rate on their capital. 

Curve

Curve is an exchange liquidity pool and/or Automated Market Maker (AMM) on Ethereum. It is designed for extremely efficient stablecoin trading and low-risk, supplemental fee income for liquidity providers. 

To achieve successful exchange volume as an AMM, Curve needs a high volume of liquidity (tokens). This is where liquidity providers come in to earn interests. Curve offers users rewards for providing liquidity in the available pools. 

Meanwhile, hundreds of liquidity pools have been launched through Curve’s factory and incentivized by Curve’s DAO.  Users rely on Curve’s proprietary formulas to provide high liquidity, low slippage, and low fee transactions among ERC-20 tokens. 

Related: 10 Best DeFi Hardware Wallets

Are there Risks Associated with DeFi Platforms?

Yes, there are numerous risks associated with all decentralized finance platforms. Hence, it is pertinent to always carry out proper research before connecting your wallet to any DeFi platform. 

Conclusion 

Over the years, there have been many cases of hackers infiltrating and exploiting DeFi platforms. For this reason, users need to be security alert when interacting with decentralized finance protocols. Regardless, DeFi has been a very profitable niche in the crypto and blockchain industry.