4 Ways DeFi Can Generate Passive Income | Best Decentralized platforms (Top 5 regulated brokers in the World)

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Method 1: Staking

Staking is the process by which you lock (or “stake”) tokens into a smart contract and earn more of the same token in return. The token in question is usually the native asset of the blockchain, such as ETH in the case of Ethereum.

Why would anyone give you free tokens simply for locking up your existing tokens? Well, there’s the rationale behind token incentives besides rewarding network users. Blockchains that are secured by Proof-of-Stake rely on users locking their assets into special smart contracts. These are controlled by network validators, who are tasked with upholding the blockchain’s consensus rules and ensuring that no one has tried to cheat the system. Validators who act dishonestly can be penalized by losing part of their stake.

Because cheating makes no sense from an economic perspective, stakers are incentivized to lock up their assets for an extended period of time and earn rewards for contributing to the network’s security and decentralization. With Ethereum, users who lock their ETH into the Ethereum 2.0 smart contract will earn additional ETH for playing their part in enforcing its consensus rules. Because this process is automated, it doesn’t require manual oversight. After depositing funds into the smart contract, you can leave the Proof-of-Stake mechanism to take care of the rest, while periodically claiming your rewards.

In the case of Ethereum 2.0, you are required to stake your funds for an extended period, so this approach is suited to users who have a low-time preference. Although the minimum requirement to stake in Ethereum 2.0 is set at 32 ETH, some platforms use a pooling mechanism that allows you to deposit a lesser amount.

 

Method #2: Become a liquidity provider

Decentralized exchanges such as Uniswap and SushiSwap support swaps between token pairs, like ETH and USDT. This liquidity comes from pooled tokens belonging to liquidity providers (LPs), i.e. ordinary defi users who place their tokens into the smart-contract controlling the pool in question. In doing so, you will earn a 0.3% fee from all swaps, proportionally to your pool share, on Uniswap’s DEX. The more trades that are conducted via that pool, the more you’ll earn.

LPing doesn’t always guarantee profit. When the price of one of the pooled tokens fluctuates significantly, you can actually lose money through a process known as impermanent loss (IL). There are ways to mitigate this, though, by choosing highly liquid pools that contain less volatile assets, such as WBTC/ETH.

To maximize your profits, you can analyze data from LP aggregators that pull real-time data and help you project potential returns from various pools.

Related: >> Top 5 crypto exchange platforms in the world (article beloew)

Method #3: Yield farming

When you LP in a DEX like Uniswap, you will receive tokens denoting your pool share. These tokens can then be locked into yield farms, which are essentially DeFi protocols that reward you with more of the same token or with a different token. This means that while your pooled assets are earning a share of all fees in Uniswap, your LP tokens can also be earned.

It’s important when yield farming to conduct due diligence on the platform in question, to ensure that it is scrupulous and that its developers have no intention of “rug pulling” by stealing LP tokens and using them to withdraw liquidity from DEX pools. Select established platforms that have a positive reputation and whose smart contracts have been externally audited.

Method #4: Lending

Lending platforms pay users an APY for locking their assets into a smart contract. These tokens are then utilized by borrowers, who pay interest, a portion of which is returned to the lender. Compound Finance, for example, currently offers an APY of 8.19% for lending DAI. Because the entire lending and borrowing process is governed by smart contracts, there is no risk of the borrower failing to repay their debt. Thus, you should always be able to withdraw your staked assets at any time.

Related: >> How to Mine bitcoin free in 2021 using application from Playstore.

Through entrepreneurs staking, pooling, farming, and lending their assets, DeFi provides a way to grow wealth for small businesses while playing a part in increasing the liquidity and value of the entire ecosystem. It’s never been easier to generate a steady income, whichever way the market moves.

Top 5 crypto exchange platforms in the world

Listed below are Best Decentralized Platforms
(Top regulated brokers in the world) where you can trade Crypto.

1.Exness : Exness is the #3 best rated forex broker in South Africa. They are regulated with top regulators i.e. FSCA, FCA (UK), CySEC (Cyprus). We like their low spread with Standard account, good support and instant withdrawal options.

2.StormGain : StormGain is a crypto trading platform for everyone. It’s a convenient solution for those who want to profit from either the growth or decline of the cryptocurrency market and from long-term investments in crypto assets.
Available on any device, StormGain allows you to start trading the most popular and most capitalized coins with leverage of up to 200x, or you can just buy and hodl crypto.

3. The Funded Trader : Funded Trader is a firm that aims to financially empower Global FX & Stock Traders with Funding. We provide consistent traders with the ability to take their trading to the next level by empowering them with a generous split of profits, incremental increase of funds to manage and the flexibility to utilise various trading strategies.

4.Binance : Binance is a cryptocurrency exchange that provides a platform for trading various cryptocurrencies. It was founded in 2017 and is domiciled in the Cayman Islands. Binance is currently the largest exchange in the world in terms of daily trading volume

5.WazirX : WazirX is India’s largest cryptocurrency exchange that provides a platform for trading various cryptocurrencies on its website and app. It was founded by Nischal Shetty in 2018 and has headquarters in Mumbai.