Top Crypto Debit Card for Rewards

Crypto.com: great for customers who want access to various cryptocurrencies and an excellent reward structure.

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Top Crypto Debit Card for Low Fees

Nexo: the Nexo Card gives users access to a crypto lending ecosystem that provides cash-back benefits with no annual fees

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Crypto debit cards are on the rise. Linked to your cryptocurrency holdings rather than a traditional bank account, these cards can provide an easy way to spend crypto, anywhere you use a debit card.

There are many different crypto debit card options, with varying levels of security, spending rewards, and supported tokens.

There are also important considerations for investors: most debit cards convert your crypto into another token behind the scenes, which can cause tax problems and investing headaches.

Based on reliability and user reviews, we’ll show you our top picks for the best crypto debit cards, rated and reviewed by our editors.

Crypto Debit Cards: Our Top Picks

Coinbase

Brian Armstrong and Fred Ehrsam founded Coinbase on June 1, 2012, and since then, it’s grown to become one of the world’s largest and most respected crypto companies. (See our piece on How to Invest in Coinbase.)

The company’s crypto debit card allows cardholders to spend cryptocurrencies like bitcoin (BTC) and Ethereum (ETH) anywhere Visa debit cards are accepted at 40M+ merchants worldwide.

The card highlights no fees for transactions or annual memberships. A simple rewards-earning structure is capped only by spending limits, and users can check their monthly allotment on the Coinbase App.

What makes the card especially appealing is that it is tied to one of the largest crypto exchanges in the world. The debit card links to your Coinbase account; all withdrawals come from there.

To get started, you just need to open a Coinbase account or download the app, load it up with crypto, and then request a debit card.

Pros:

• World-class security from a trusted crypto exchange.
• Contactless payments.
• Rewards and cashback.
• 250 crypto assets supported.
• No annual fees.

Cons:

• Unless you are using USDC, a 2.49% fee is charged to convert your crypto into dollars.
• Users need a Coinbase account.
• KYC required.

Conclusion: The Coinbase debit card is good for customers who need a user-friendly option backed by the leading U.S. crypto exchange.

Wirex Debit Card

Wirex is a UK-based company offering crypto debit cards for personal and business use. The company provides you with a contactless card and an app to manage it.

Wirex’s main product, the Wirex Visa card, allows you to convert between fiat currencies and cryptocurrency and use either at locations accepting contactless payments.

The card provides generous rewards, and many consider it among the best for consumer perks, like Wirex X-tras, which gives up to 8% crypto cashback in the form of WXT tokens, a 12% savings bonus on the balance of your WXT account, and access to exclusive merchant offers.

The Wirex debit card has additional benefits, including a wide range of cryptocurrencies and free or low fees, like free ATM withdrawals up to $200 per month, then 2% after that.

Wirex also offers the X-Tras program, a subscription service starting at €9.99 that offers bonuses for participants that include increased rewards (starting at 3%), savings bonuses, and interest-earning accounts.

Pros:

• No monthly maintenance fees.
• Cashback rewards.
• 41 crypto assets supported.
• Widely available globally.
• Easy to use.
• Free ATM withdrawals up to $200 per month.

Cons:

• Rewards only come through the X-Tras program, which could outweigh the benefits.
• Limited availability, primarily in Europe and the Asia Pacific regions.
• You need Wirex tokens, the company’s in-house crypto asset, to get the best rewards.

Conclusion: The Wirex debit card is good for customers who want a low-fee card and easy access to a wide range of currencies and fiat — if available in your country.

BitPay Debit Card

BitPay is an American company that provides bitcoin merchant processing services. It also offers bitcoin payment processing solutions to businesses.

With 15 supported cryptocurrencies, the BitPay Debit Card can process domestic and international transactions with cryptocurrency, so long as the processor accepts Mastercard.

BitPay offers cashback rewards with over 100,000 merchants; rewards vary depending on the merchant.

Its crypto debit card links to your wallet through the BitPay app. You can then top up your crypto debit card via the app to convert your crypto and start spending. You can also top up the card from your Coinbase account.

As of February 2024, there is a waitlist for the BitPay card, and the firm has paused applications while improving the service. Once they begin accepting new users, you can download the app, set up the wallet, and order your debit card to get started.

Pros:

• No exchange or conversion fees in the U.S.
• No annual fees. $2.50 ATM withdrawal fees apply.
• No withdrawal limits.

Cons:

• Limited to the United States.
• Deposited crypto is exchanged for USD and cannot be converted back.
• Only 15 cryptos are supported.
• 3% foreign transaction fee.

Conclusion: The BitPay debit card is good for U.S. residents who don’t want to pay exchange fees and are happy with a limited range of cryptocurrencies.

Crypto.com Debit Card

Crypto.com is a Hong Kong-based crypto exchange platform providing bitcoin debit cards, cryptocurrency wallets, and other products. They currently offer several cards, including the Obsidian card covered here.

The Crypto.com debit card uses Crypto.com’s Cronos (CRO) token. Funds added to the card are converted to CRO, and that token must be staked to earn cashback rewards – which are also paid out in CRO. Be sure you research CRO before investing in this token; Crypto.com has aggressively marketed its brand, but the price is volatile.

On top of its long list of benefits, the Crypto.com debit card also offers monthly reimbursement of up to one subscription per merchant or 10% of a specified limit to Spotify, Netflix, Amazon Prime, Expedia, and AirBnB.

The card allows you to spend your cryptocurrencies anywhere in the world that Visa is accepted.

Pros:

• Up to 5% rewards on the top-tier Obsidian card.
• No annual fees or monthly rewards cap.
• 110+ cryptocurrencies available for topping up.
• Several subscription benefits with services like Netflix, Amazon Prime, Spotify, and more.

Cons:

• 2% withdrawal fee past monthly ATM limits (limits range from $200 to $1,000, depending on the card).
• 3% on all non-USD purchases and ATM withdrawals for all tiers except Obsidian
• Cardholders must hold Crypto’s CRO tokens. (See historical price here.)

Conclusion: The Crypto.com debit card is good for customers who want access to various cryptocurrencies and cards with various rewards, but be careful about holding CRO long-term.

Nexo Debit Card

The Nexo Card is provided by Nexo, a crypto lending service that has grown into a large ecosystem that comprises exchange operations and a proprietary wallet and card. You can manage the card conveniently from the Nexo Wallet App.

Unlike other debit cards, there is no need to load the Nexo card. Instead, it uses a line of credit linked to your held cryptocurrencies. You can opt for APR repayments as low as 0% or increase your line of credit with rates as high as 13.9%. The line of credit functionality means that, unlike credit cards, there are no minimum monthly payments.

Nexo users can pay with the Visa-based card at over 40 million merchants worldwide. In addition, it supports up to 20 cryptocurrencies, including bitcoin, Ethereum, and NEXO (the platform’s native token).

With the card, Nexo provides a €10,000 limit for foreign transaction fees and five free ATM withdrawals of up to €10,000 each month. Additional withdrawals are charged €1.99 per transaction.

The great thing about the card is that it has no annual or inactivity fees. Interest rates on debit card mode reach 14% interest with NEXO tokens. You have to download the app and order the card to get started. Make sure to have Apple Pay or Google Pay ready to settle your outstanding totals quickly.

Pros:

• There is no annual or inactivity fees.
• Rewards and interest are generous, as are the ATM and international transaction limits.
• 14% daily compound interest with NEXO tokens.

Cons:

• Limited to the users on the Nexo system.
• Only available to residents of the European Economic Area (EEA).

Conclusion: For European consumers, the Nexo Card gives users access to a crypto lending ecosystem that provides cash-back benefits with no annual fees.

Monolith

Monolith is a specialized crypto debit card focusing on the Ethereum ecosystem. The Visa debit card allows users to exchange fiat for Ethereum-based tokens and load them onto the card. Real-time spending analytics and card information can be managed via the Monolith application.

It also has some limitations–for example, unless you’re using TKN, card top-ups made with this card are subject to 1% top-up fees.

This debit card is only available in the United Kingdom, the European Economic Area, and other Special Member State Territories, such as French Guiana, Gibraltar, and Guadeloupe.

Pros:

• Can be used anywhere a Visa card is accepted.
• Low ATM withdrawal fees.
• Based entirely on Ethereum.

Cons:

• Not currently available in the United States.
• Only works with Ethereum-based tokens.
• 1% fees for topping off with non-TKN crypto.
• 1.75% fees for making international purchases.
• No benefits or rewards.

Conclusion: The Monolith Visa Card could be the right option for someone based in Europe and the UK primarily interested in the Ethereum network.

Uphold

The Uphold Debit Card is a product of Uphold, a digital money platform providing a wide range of financial services that span crypto trading, storage, and day-to-day transactions. Since 2015, the company has powered more than $4+ billion in transactions.

Their debit card is designed to be accessible and flexible. Users can enjoy traveling abroad without worrying about hidden costs with 0% foreign transaction fees and low FX rates. On top of that, users can also keep their payment processes secure by incorporating their Uphold card with Apple Pay and Google Pay.

The downsides to the card would be the £9.95 fee to order the physical card and the ATM withdrawal fees of up to £3.50.

Pros:

• Support for over 250+ cryptocurrencies
• 0% foreign transaction fees
• 1% cashback paid in GBP

Cons:

• Only available to UK users
• £9.95 ordering fee
• £2.50 fee for national ATM withdrawals and £3.50 for foreign withdrawals.

Conclusion: While the rewards system leaves something to be desired, the low foreign transaction fees make this card perfect for crypto users on the go.

Choise Crypterium

The Choise Crypterium card is a crypto wallet and VISA card in virtual and plastic formats. The Choise card is provided by Choise.com, a company aiming to gather multiple DeFi and TradFi banking solutions under a single marketplace.

The Choise card does not offer a compelling rewards program. Instead, it focuses on providing its users with high-level compliance and security protocols. The company uses certified custodians, Layer-3 security measures, and offers up to $150M in insurance against loss or theft.

Pros:

• Layer-3 security protocol.
• EU compliant since 2017.
• BTC, ETH, and 30+ cryptocurrencies supported.
• Withdraw up to €2,500/mo from ATMs in 200+ countries.

Cons:

• Only available to UK users.
• KYC Required.
• Monthly fee of €2.99. Users with €299 or greater will have this fee refunded in the form of CRPT.

Conclusion: This card is perfect for those who may be on the fence about the crypto ecosystem. Uphold is compliant with all EU virtual asset operation regulations.

Cryptopay

The Cryptopay Debit Card is a Visa prepaid card that allows users to make purchases or withdraw cash by converting their cryptocurrency into fiat. The card is provided by Cryptopay, a comprehensive crypto service offering a user-friendly solution for individuals and businesses to bridge the gap between traditional financial systems and the emerging digital ecosystem.

The Cryptopay Debit Card can convert 30 crypto assets into fiat, highlighting a low monthly fee of $1 and no transaction fees for purchases in the card’s currency.

Pros:

• Access to 30+ crypto assets.
• Pay anywhere Visa is accepted.
• Maximum single spend of €30,000.

Cons:

• No rewards program.
• Limited to 5 ATM transactions per day.
• 3% foreign transaction fee.
• Limits to withdrawing crypto outside Cryptopay.

Conclusion: The Cryptopay debit card is great for those looking for an everyday carry item, with low monthly fees and no transaction fees for purchases in the card’s currency.

If you’re looking for a more visual breakdown of the best crypto debit cards for you, check out this video from Minted Max:

What is a Crypto Debit Card?

Crypto debit cards (sometimes called bitcoin debit cards) allow you to spend your crypto assets in the real world like a standard debit card.

These cards work following some basic steps:

• They link to a crypto wallet or online account where you hold your bitcoin or other crypto assets (like the Coinbase card).
• They convert your fiat to their token that’s held on the card until you use it for payment (like the Crypto.com card).
• When you use either card to purchase, your crypto is converted to fiat currency before the merchant processes it.

These debit cards let you quickly spend your crypto assets like cash. And, unlike crypto credit cards, you are not spending money you don’t have: think of these as prepaid or gift cards loaded with crypto instead of cash.

Note that a crypto debit card is different from a crypto credit card. Be sure to check out our article on the best crypto credit cards.

Crypto Debit Cards vs. Crypto Credit Cards

Here’s a quick breakdown of the differences between a crypto debit card and a crypto credit card. 

Why Use Crypto Debit Cards?

Crypto debit cards offer an array of benefits that include:

• Flexibility: With crypto debit cards, users can spend their cryptocurrency in real-world scenarios, even at places that traditionally don’t accept cryptocurrency.
• Convenience: Handing a debit card is more convenient than fumbling for cash or checking your pockets for direct change. Because they draw funds directly from a wallet, transactions are processed quicker than a credit card.
• Push for adoption: Using crypto debit cards helps promote the mainstream adoption of cryptocurrencies. If more institutions were to adopt crypto, your coins would be worth more.

Tips for Choosing a Crypto Debit Card

There’s no perfect crypto debit card; only the right one for you. Consider these factors when choosing a card that matches your spending patterns, lifestyle, and choice of cryptocurrency.

• Know the Supported Cryptocurrencies: Not all crypto debit cards support every cryptocurrency. Make sure to double-check that your card supports the specific crypto you own.
• Understand the Fees: Fees can quickly eat into your funds if you use your card often. Before applying for a debit card, examine its fee structure. Cover the basics and be aware of all associated costs. Also, understand your debit card’s annual, transaction, withdrawal, and conversion fees. Some cards operate with a native token, which might offer holders lower fees if they choose to stake.
• Geographical Availability: With crypto regulation varying heavily between countries, you should check if your card is accepted in the regions you plan to frequent. Country-specific restrictions also apply online, so check if the card can be used for online and physical merchants.
• Consider Staking or Holding Requirements: If you want to maximize your crypto debit card, check out if they offer enhanced rewards or reduced fees if you stake a certain amount of the provider’s native cryptocurrency. Some cards even require you to stake with their native token to use the card at all.
• Optimize Rewards and Benefits: Optimizing for cashback rewards programs and incentives can add significant value to your transactions. Make sure to compare different rewards programs from the cards, comparing the percentage of cashback, how rewards are paid out, and if certain conditions are required to earn the maximum reward.

Investor Takeaway

Just as people use credit cards for everyday purchases to earn reward points (travel rewards, cashback rewards, etc.), crypto investors can use crypto debit cards to earn rewards.

In addition to the fees of transferring your fiat into crypto (the “on-ramp”), think about the costs of opening the card, loading the card, and using the card (the “off-ramp”).

Before opening any crypto debit card, do a back-of-the-envelope calculation to figure out your average monthly spend and all the fees that will be associated with it – be sure the rewards outweigh the costs.

Additionally, crypto debit cards pull directly from your account, and crypto debit cards convert your crypto into their native token.

For more smart crypto investing tips, don’t forget to sign up for our free crypto investing newsletter.

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If you’re looking to earn interest on your crypto – like earning interest in the bank – you’ll likely want to do it through a crypto lending platform. Here are the best rates as of February 2024:

What is Crypto Lending?

In the traditional banking system, you keep your money in a savings account, and the bank uses your money to make loans. As the loans are paid back (with interest), some of that interest is passed along to you:

Crypto lending platforms work the same way, except you’re storing your crypto in a “lending platform” rather than a “savings account.”

The difference is that banks pay an average of .06% interest, where crypto platforms can pay 6% or more. That’s a 100x improvement over banks.

Finding the crypto lending platform, then, can help your wealth work for you – but in the rapidly changing world of crypto, it’s tricky to trust. That’s why we’ve pulled together the best crypto lending rates for you.

Types of Cryptocurrency Lending Platforms

There are two main types of crypto lending platforms: centralized finance (CeFi) platforms and decentralized finance (DeFi) platforms. Think of CeFi like a traditional bank: there’s a company behind the platform, so while they are not regulated like a bank, they are still responsible for your funds. DeFi platforms are more like the Internet itself: rather than one company being in charge, it’s a distributed network of lenders and borrowers, with blockchain-based smart contracts handling all the money.

CeFi Platforms

If you choose CeFi lending platforms like Coinbase or Binance, you entrust your crypto to a central entity or company. Most CeFi platforms implement KYC (Know Your Customer) and AML (Anti Money Laundering) practices, and thus require clients to share personal information. CeFi platforms operate similarly to online banks or traditional lending services.

Despite the more rigorous rules compared with DeFi platforms, many choose CeFi services due to convenience and generally higher interest rates. CeFi services provide the security that “someone is in charge,” and are also easier to use. Also, some CeFi platforms enable users to borrow fiat against their cryptocurrency, with the fiat money being sent directly to their banking accounts.

DeFi Platforms

DeFi platforms are websites that handle the lending and borrowing automatically, using smart contract-based algorithms. Typically you install a Web3 wallet like MetaMask, then connect it directly into a  DeFi website like Uniswap. (Watch our DeFi Hands-On Workshop for step-by-step walkthroughs.)

Lenders and borrowers go to DeFi platforms because they don’t require KYC verification, enabling users to maintain more privacy. However, DeFi users entrust their crypto funds to algorithms, which connect directly to their crypto wallets. There’s no “complaint line” if things go wrong.

Best CeFi Lending Rates

Nexo

Nexo is one of the largest crypto lending platforms in the market. Founded in 2017, it boasts over $12 billion in assets under management, and over 3 million users worldwide. If you have never used a crypto lending platform, Nexo may be the best place to start, due to its easy-to-use interface.

The APY on Nexo can reach up to 18% on various digital assets. Today, the platform supports 29 cryptocurrencies, including BTC, ETH, BNB, ADA, LINK, DAI, DOGE, LTC, USDT, and USDC. The interest rate on stablecoins is sometimes above 10%, far higher than traditional savings accounts.

U.S. customers are no longer accepted.

Users can also earn interest on fiat currencies – like a traditional bank – and borrow fiat against crypto. Nexo supports USD, EUR, GBP, and several other currencies.

Many investors choose Nexo because it offers compound daily payouts, flexible earnings, and $375 million insurance on all custodial assets.

Users who choose to use NEXO – the platform’s native token – have additional privileges, such as better interest rates and more free crypto withdrawals.

Crypto.com

Crypto.com was founded in 2016 and has become one of the largest cryptocurrency services. It provides exchange, non-fungible tokens (NFTs), payment, and lending services to over 10 million users worldwide. In addition, its assets are backed by $750 million in insurance. The fact that it was picked by Visa to settle transactions on the fintech giant’s payment network tells a lot about Crypto.com’s potential.

The platform’s Crypto Earn product has offered an APY of over 10%. In total, about 40 digital assets are supported, including the native token Crypto.com Coin, which makes users eligible for additional rewards. If you stake more of the Crypto.com coin, you can receive a higher interest rate.

CoinLoan

CoinLoan is a specialized crypto lending platform launched in 2017. The platform enables users to earn daily interest with their funds never being locked. At the time of writing, CoinLoan supports over 20 assets, including:

Stablecoins like USDC, USDT, TUSD, BUSD;

Cryptocurrencies like bitcoin, Ethereum, Ripple, Stellar, and Monero;

Fiat currencies, including the pound and the euro.

The annual interest rate for popular coins like bitcoin and Ethereum is 7.2%, and it goes as high as 12.3% for stablecoins.

CoinLoan relies on a series of security measures to keep the funds safe, including insured custody, vulnerability scans, 2FA (two-factor authentication), security alerts, and cold crypto storage, among others.

Binance Savings

Binance Savings is the crypto lending offering from the largest crypto exchange in the world by trading volume.

Binance offers two options for its users: flexible savings and locked savings. The former allows investors to simply deposit their crypto assets and redeem the funds at any time. Locked savings are suitable for those who are ready to deposit their crypto funds for longer periods. The great thing about locked savings is that they come with higher interest rates on most occasions.

It’s worth noting that Binance provides high interest rates on its proprietary stablecoin – BUSD, which is pegged to the US dollar. Depositors should expect an APY of 10% on BUSD with flexible savings. The interest rate on USDC is only 0.5%, as Binance regards Circle’s dollar-pegged stablecoin as a competitor.

Youhodler

Youhodler is a Swiss-based fintech platform focused on crypto lending and exchange services.

Users can earn interest on deposits in BTC, USDC, TUSD, PAX, and more. The interest is paid weekly, and the APY figure has rated from 5% for BTC and ETH, to over 12% for stablecoins. The minimum deposit amount is $100 worth of crypto.

The Crypto Loans service enables users to borrow BTC, stablecoins, or fiat currencies against 50 supported cryptocurrencies. Youhodler offers loans with 90% LTV for 30 days, 70% LTV for 61 days, and 50% LTV for 180 days.

Best DeFi Lending Rates

Aave

Aave is one of the major players in the world of DeFi. It allows users to borrow and lend money without intermediaries. As mentioned, no KYC or AML verification is required, which is true for all DeFi platforms listed here: just connect your Web3 wallet and go.

Aave enables users to lend and borrow in about 30 cryptocurrencies, including ETH, USDC, DAI, and USDT. The protocol is fueled by the native token called AAVE.

Here are the interest rates for lenders and borrowers:

Compound

Like Aave, Compound is one of the most popular and influential DeFi lending platforms; it sparked the initial DeFi craze back in 2020. Compound is extremely user-friendly, and easier for new users to navigate. The platform supports over 20 cryptocurrencies for lending and borrowing.

Additionally, Compound allows its users to earn its native token, COMP, which gives holders the right to participate in the governance process (like shareholder voting in a traditional company).

Alchemix

Alchemix is an interesting DeFi lending protocol, as it offers self-paying loans. For example, a borrower deposits DAI to take a loan with up to 50% LTV, which is disbursed in the form of alUSD, Alchemix’s native USD-backed stablecoin. The 50% LTV loan is eventually paid off over time automatically using the net returns from staking the initial DAI principal, which is staked by the protocol into one of the pools operated by Yearn.

Thus, Alchemix is designed for borrowers rather than lenders. In a way, it lets users borrow from themselves, as the loans are paid from the interest generated by the principal.

Mango

Mango is a decentralized cryptocurrency exchange that includes a DeFi lending service. The latter is used to provide liquidity on the Mango market.

Users can easily borrow multiple cryptocurrencies, including the native MNGO token, and pay low annual interest rates. Lending is also possible; however, the rates offered on most cryptocurrencies aren’t too competitive.

Mango Markets protocol is currently not working (since October 2022), but a v4 upgrade is expected to bring the platform back online in the first half of 2023.

How to Select the Best Crypto Lending Platforms

Selecting the right crypto lending platform is not an easy task, considering the speed with which the industry moves. Nevertheless, there are several factors that can help:

• Longevity: Look for platforms that have been around for at least two years, with a growing user base. If they have reached this level of “critical mass,” even if things go wrong, they’ll generally try to make it right.
• Costs and fees: CeFi platforms may charge fees for withdrawals, accessing loans, and other operations, so check all commissions and fees. Don’t forget Ethereum gas fees, which can eat away your profits. (See our guide on How to Avoid Crypto Fees.)
• Platform risks: CeFi platforms are run by centralized entities, so you should ensure they are trusted and legal to use in your country. In the case of DeFi platforms, make sure they have a solid reputation over at least two years.
• Collateral Amount: Note how much borrowers are required to put into the system as collateral, as this can be used to protect lenders in the case of market crashes. Look for collateralization of at least 100% of what they are borrowing.
• Minimum Deposit: Note how much you need to “buy in” to the platform. Use our Crypto Interest Calculator to figure out what your real interest rate will be, after taxes and fees.

What is Crypto Lending?

Crypto lending is a type of Decentralized Finance that acts as a bridge to allow investors to lend money to borrowers in exchange for interest on the original amount. A crypto lending platform is, therefore, the channel that connects the two parties.

How Does Crypto Lending Work?

Like we have just seen, there are three major players in the crypto lending framework: lenders, borrowers, and a platform that connects the two.

• Lenders – These are investors who want to earn passive income on their digital assets. They lend their digital assets to crypto lending platforms in order to earn interest.
• Borrowers – Borrowers need funds and use their digital assets as collateral to get a loan.
• Platforms – These are third-party platforms that could be either decentralized or centralized. They connect the borrowers to lenders and handle the transactions.

DeFi vs. CeFi Lending: What’s the Difference?

Even though both DeFi and CeFi lending involves exchanging various digital assets, the platforms that facilitate them have different underlying infrastructure that determines whether the platform is centralized or decentralized.

DeFi Lending

In DeFi lending, transactions are not handled by people but rather by smart contract codes. Additionally, DeFi platforms are non-custodial, meaning that only the user can touch or control their own funds.

Moreover, many DeFi platforms do not adhere to KYC (Know Your Customer) or AML (Anti-Money Laundering) regulations, thus helping their users maintain anonymity and privacy.

DeFi Lending Pros

• Peer-to-peer transactions with no third party involved.
• User sovereign as only the user has control over their assets.

DeFi LendingCons

• Since there is no centralized authority, DeFi platforms lack accountability. For instance, losing private keys will result in the loss of digital assets since no intermediary will intervene to aid recovery.

CeFi Lending

CeFi platforms emulate traditional banking infrastructure and regulations, whereby third-party intermediaries keep custody of funds and profit by lending funds to borrowers. They additionally ensure that collateral is securely stored.

CeFi platforms integrate KYC and AML, among other protocols, into their system.

CeFi Lending Pros

• Regulatory protocols like KYC protect the integrity of the system from illegal activities.
• Offer a broader range of financial services like direct support for fiat currencies.

CeFi Lending Cons

• Users have to trust a third party with their funds.

Is crypto lending still safe?

The cryptocurrency market was shaken by the downfall of Celsius, one of the largest centralized crypto lending services. With about $25 billion in assets under management as of October 2021, Celsius filed for bankruptcy following the steep decline of the crypto market during 2022, with bitcoin losing more than half of its value from April to June.

The collapse of Celsius begs the question: is crypto lending still safe?

Well, there are many CeFi platforms that don’t provide insured custody and may even mislead investors, but bigger players are interested in offering the best products with a focus on the security of funds. Companies like Binance or well-established brands like Nexo are interested in maintaining their good reputation, which positively impacts the safety of their crypto lending products. It’s worth mentioning that Celsius made some mistakes by investing their funds without properly diversifying their exposure, which is not the case for other players.

Elsewhere, DeFi crypto lending remains a safe alternative given that users have full control over their funds.

One of the main risks both with CeFi and Defi lending platforms is the extreme volatility of deposited cryptocurrencies, which can greatly affect the value of holdings in dollar terms. However, this is something that crypto lending platforms cannot control and are not responsible for.

Investor Takeaway

Crypto lending platforms might be a good avenue for making your digital assets work for you. That said, CeFi and DeFi lending platforms each have their advantages and drawbacks. Be sure to look for platforms that have been around for several years, with an excellent reputation. And use our calculator to determine how much you’ll really earn.

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Leading DeFi Lending and Savings Apps

We track the best interest rates paid to depositors at five leading DeFi protocols. Here’s an introduction to each platform, and how much you can earn.

Aave

Aave is an established decentralized lending protocol where anyone can borrow and lend cryptocurrency. Powered by smart contracts on the Ethereum blockchain, Aave provides liquidity across 25 markets to enable digital asset investors to borrow funds or earn interest on idle digital asset holdings. Learn how to use Aave here. 

Compound

Compound is the leading decentralized money market protocol and one of the longest-standing DeFi applications in the market. Offering lending markets for 12 digital assets, Compound allows investors to deposit funds and earn a variable yield or borrow against digital asset holdings. Learn how to use Compound here. 

Coinbase

Coinbase has the most limited DeFi offerings, but perhaps the highest degree of trust. What you trade off in yield, you make up in reputation: some consider it the gold standard of crypto exchanges. A fully-licensed and publicly-traded U.S. company, Coinbase has over 73 million customers worldwide. Learn how to use Coinbase here.

dYdX

dYdX is a decentralized derivatives trading platform that also allows users to earn yield on funds they deposit in the Ethereum-powered application's smart contract. The interest rate paid will depend on supply and demand from depositors and borrowers on the DeFi application. Learn how to use dYdX here. 

Vesper

Vespers is a promising new DeFi application, backed by industry heavyweights, that currently allows you to earn yield using Vesper Grow. Via smart contracts, Vesper uses the pooled deposited digital assets and deploys them across multiple DeFi protocols and returns the yield to you. Learn how to use Vesper here. 

What Is DeFi?

Decentralized finance (DeFi) refers to open-source, blockchain-powered financial software that aims to provide financial products and services to anyone with an internet connection.

In today’s DeFi market, you can:

• Deposit digital assets into lending protocols to earn a yield;
• Borrow digital assets to access capital;
• Trade one digital asset for another via decentralized trading pools;
• Earn fees for providing liquidity to autonomous trading platforms;
• Invest in tokenized traditional assets (equities, commodities, and FX);
• Hedge your portfolio using decentralized derivatives;
• and more.

Arguably the biggest DeFi use case to date has been DeFi lending, which helps digital asset investors to earn a yield on their long-term holdings. Billions of dollars in cryptocurrency are locked into decentralized lending pools.

Why Are DeFi Interest Rates Higher Than on Traditional Interest Products?

Defi rates are typically higher than what your bank offers due to the high borrowing demand from professional and institutional market participants for digital assets. Professional trading counterparties borrow to place leveraged trades in the crypto capital markets where market inefficiencies provide excellent trading opportunities for experienced traders and investors.

Additionally, borrowing and lending are typically riskier in the DeFi markets than in the traditional money and capital markets.

DeFi Lending Risks

Lending in the DeFi markets is not without its risks. Below, you will find the main risks in DeFi lending you should be aware of before deploying any capital in this new market.

• Code Risk - Vulnerabilities in a protocol's smart contract could lead to a complete loss of funds should bugs in the code be exploited by malicious third parties.
• Market Risk - Price volatility of the token's deposited could lead to a negative ROI for lenders if the market price drops more than the yield generated.
• Oracle Failure - Price oracles used in DeFi applications could fail, leading to mispricing and a loss of funds.
• Liquidity Risk - A lack of liquidity could lead to price slippage when converting your funds back into stablecoins, especially for smaller digital assets.
• De-pegging - If you've deposited a stablecoin or a pegged asset it is possible that they could de-peg, which could lead to losses.

Lending in the DeFi markets is a relatively new financial product and, as such, carries a higher risk than its established counterparts in the traditional lending markets. So as with any investment, it's advisable to not put all your eggs in one basket and only invest as much as you can afford to lose.

Related Articles:

• DeFi Investing 101
• Top 10 DeFi Platforms in 2021
• What is DeFi Insurance And Do You Need It?
  

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The post This Week’s DeFi Interest Rates: Best Yields for Lending and Saving appeared first on Bitcoin Market Journal.

The largest stablecoin by market cap is Tether (USDT); here’s how you can make the most out of it.

USDT Lending Platforms

If you want to generate high yields while reducing volatility risk, centralized lending platforms are the ideal choice. They operate similarly to traditional online lending services or banks. They will require you to pass through a KYC (know your customer) verification procedure before your account is approved.

We selected three of the most trusted lending platforms that support USDT and provide high yields:

Nexo

Another popular crypto lending platform is Nexo, founded in 2017. The platform provides an APY of up to 10% on USDT deposits. If you choose NEXO token rewards, the platform’s native token, you’ll earn an even higher APY. These are by far some of the highest interest rates in the market today. We also like Nexo’s intuitive interface, which can make a difference for beginners.

Retail and institutional investors choose Nexo because of its compound daily payouts and flexible earnings. Also, deposits are backed by $375 million insurance coverage through BitGo and Ledger.

Using the NEXO token not only provides better interest rates but more free crypto withdrawals and other perks.

U.S. customers are no longer accepted.

Click here to see current Nexo interest rates.

Pros and Cons of Lending Platforms

USDT Lending on Exchanges

You can also earn interest on USDT lending with centralized crypto exchanges and platforms. They usually use funds to lend to traders who engage in margin trading. As a rule, you will have to lock your USDT for a predetermined period. Here are a few well-established crypto exchanges that support USDT lending:

Binance

Binance is by far the largest crypto exchange by trading volume. Since starting in 2017 as a spot exchange, it has turned into a diverse ecosystem that also offers futures and options trading, launchpad, liquidity farming, staking, and payment options, and more.

One of the main products is Binance Earn, which is a one-stop solution to earn interest, including interest on USDT. The APY on USDT flexible deposits is a generous 10.00%, though the rate drastically declines with higher deposits. Thus, if you deposit more than 2,000 USDT, you should expect an APY of only 3.00%.

Click to see current Binance interest rates.

Crypto.com

Founded in 2016, Crypto.com has become one of the biggest crypto brands thanks to multiple high-profile partnerships, especially in sports. The platform provides exchange, non-fungible token (NFT), payment, and lending services to over 50 million users worldwide. It offers insurance coverage of $750 million on all assets. In 2021, the company partnered with Visa to settle transactions on its payment network.

The Crypto Earn product supports USDT and provides APYs from 0.4% to over 5%, depending on your balance, as well as whether you are willing to hold CRO tokens and/or lock up your crypto for three months. You can pick from flexible and fixed-term deposits, but the former gives lower yields. The interest rewards are paid weekly.

Click to see current Crypto.com interest rates.

Pros and Cons of Lending on Exchanges

USDT DeFi Lending

If you want to have full control over your funds and not share your personal information with anyone, you might opt for Decentralized Finance (DeFi) lending protocols. DeFi is one of the most important trends within the crypto industry, as it enables users to access financial services run by algorithms and powered by blockchain rather than being managed by centralized entities.

Aave

Aave is the second-largest DeFi protocol, with a total value locked (TVL) figure near $8 billion. Stablecoins play a leading role on Aave, accounting for over 30% of all deposited assets.

The interest rate for contributing with USDT liquidity is well over 1%. Although this is far less than interest rates offered above, there are no lockup periods and no minimum balance. (You will usually pay transaction fees to move money in and out.)

Click to see current Aave interest rates.

Compound Finance

Aave’s direct competitor is Compound, which has a TVL of $4 billion as of this writing. The lending protocol triggered the DeFi craze in the summer of 2020, when it launched its governance token.

USDT is playing a leading role here as well, with the APY on USDT deposits coming in at well over 1%.

Click to see current Compound interest rates.

Pros and Cons of DeFi Lending

What is USDT?

USDT is a stablecoin cryptocurrency issued by Tether Limited, a company launched in 2014. USDT has its price pegged to the US dollar-based on a 1:1 ratio. It is hosted on the Ethereum blockchain as an ERC-20 token.

Tether claims that USDT is fully backed by reserves consisting of US dollars, cash equivalents, other short-term deposits, and commercial paper. The latest attestation report was released by MHA Cayman, confirming that USDT tokens are fully backed.

At the time of writing, USDT’s market cap exceeds $72 billion, putting it in the top 3 largest cryptocurrencies after Bitcoin and Ethereum. The stablecoin has played a key role in the crypto industry, bridging the gap between blockchain and traditional finance.

Why are USDT Yields so High?

The yield provided by traditional savings accounts is less than 1%, so how come USDT rates are higher? This is a good question considering that USDT has its price pegged to the US dollar, reducing the volatility risk to almost zero.

Nexo, and others offer better rates thanks to a business model in which users lend cryptocurrency to borrowers willing to pay higher rates. The latter are ready to use their crypto as collateral, which isn’t possible with traditional banks. Thus, the growing demand for loans against crypto collateral is driving the interest rates.

USDT Staking vs. Lending

Staking and lending are two ways for investors to profit from their crypto holdings without selling them. Traditional savings accounts cannot generate significant yield in today's low-interest-rate environment. Thankfully, investors can use stablecoins like USDT for staking and lending instead.

The main difference between staking and lending is that the former requires users to lease their USDT to a blockchain or crypto platform in exchange for rewards, while USDT lending requires them to lease the funds to borrowers to earn interest.

Keep up to date with developments in lending and staking when you subscribe to Bitcoin Market Journal.

The post This Week’s USDT Interest Rates: Best Yields for Tether Lending and Staking appeared first on Bitcoin Market Journal.

Evolving cryptocurrency markets make it easier for investors to perform quick transactions with minimal fees. However, crypto’s volatility can make it difficult as a payment gateway, leading to hesitancy among investors.

Stablecoins help solve this problem, protecting against crypto’s volatility. Stablecoins are tied to an underlying asset and are designed to maintain a fixed value, called a peg. So, unlike other crypto assets that fluctuate in price, stablecoins are always pegged to the value of a less volatile asset.

The stablecoin you choose to invest in will largely influence which lending platform is right for you. For example, Nexo will provide the best rates for BUSD, so this may be the right lending platform for you if you choose to invest in BUSD. Of course, you’ll also want to look at the platform’s yield (as shown in the chart below) to understand what kind of profit you can make.

Here, we go over the best stablecoin lending platforms and how much you can earn in yield, from stablecoin lending. Yield is similar to the dividends you can earn from investing in stock. More specifically, yield refers to the earnings generated and realized on a particular investment (in this case, stablecoins) over a certain period of time. Typically, higher yields are an indication of higher income and lower risk. We also discuss some stablecoin basics at the bottom of the article for those new to this form of investing.

Leading Stablecoins

The emergence of stablecoins has been great for trade, as they are less volatile than traditional crypto thanks to their backing by traditional fiat currencies and other assets. This stability allows more conservative investors to enter the market and take part in the world of crypto.

Here are the leading stablecoins to consider.

USDT (Tether)

Launched in 2014 as RealCoin, Tether was the world’s first stablecoin and is the most liquid and transacted stablecoin on the market. Tether is also the largest stablecoin by market cap in May 2022, making it the third cryptocurrency overall, just behind Bitcoin and Ethereum.

The goal of the Tether stablecoin is to keep its value pegged at 1:1 to the US Dollar. This means that investors can purchase and redeem one USDT for $1. Many stablecoin exchanges offer USDT as an alternative to fiat currencies so investors can perform quick trades without excessive fees. According to Tether, USDT is 100% backed by reserves, including traditional currency and cash equivalents.

Tether also offers a three-pronged strategy. It has brought three stablecoins to the market, with the first one being the USDT. It also has a second stablecoin pegged against the euro (EURT) and a third stablecoin pegged against China’s yuan (CNYT).

Tether is a useful stablecoin for investors. It offers a solution for avoiding extreme volatility, and holding USDT removes delays and transaction costs that can impair trades within the crypto market.

USDC (USD Coin)

USDC was created by the Centre Consortium, which Coinbase and Circle founded. Its goal is to make it easier for investors to invest in crypto without worrying about fluctuations in the market.

Like Tether, USDC is tied to USD. Its supply is backed by US dollar reserves, and the Coinbase crypto exchange claims that it has achieved regulatory compliance. USDC is accepted on most large exchanges. While it was initially an Ethereum-based token, it has since bridged to a number of other blockchains, making it suitable for many DeFi applications.

BUSD (Binance USD)

Binance is one of the top crypto exchange platforms. It has developed its stablecoin to rival its main competition, Coinbase.

BUSD is an ERC20 token issued on the Ethereum blockchain. Launched in 2019 by Binance in a partnership with Paxos, it has a supply limited by dollar reserves audited monthly. Because Binance is a founding member, users have the opportunity to exchange fiat/crypto for BUSD with zero fees on exchange services. This makes it the preferred stablecoin for users interested in using the Binance exchange for crypto-asset transactions.

BUSD is pegged 1:1 against the US dollar, and it’s eligible for use in nearly any case that’s compatible with the ERC20 Ethereum standard.

USDP (Paxos)

USDP is a fiat-collateralized stablecoin based on the Ethereum network created by Paxos, a New York-regulated financial institution.

Like BUSD, UDSP has been approved by the New York State Department of Financial Services. USDP’s value is pegged at 1:1 against the US Dollar. Like other stablecoins, it aims to combine the reliability and stability of the US dollar with the benefits of digital assets.

USDP can only be created when new US dollars enter the Paxos system. One new USDP token is created when someone sends one US dollar to Paxos, which goes to the Paxos’s regulated bank account. USDP is not created without a purchase, so the supply is entirely dependent on the demand.

Paxos also has a partnership with PayPal, giving it a potential competitive advantage in the future.

DAI

Offered by MakerDAO, Dai is an entirely decentralized stablecoin, meaning it doesn’t have the backing of any centralized authority. Instead of being backed by US dollars or other fiat currencies, DAI is backed by MakerDAO’s crypto collateral, such as Ether and USDC. However, it still correlates to the US dollar at a 1:1 ratio.

This multi-collateral option helps to increase DAI’s stability, and users can even vote for more collateral options through the MakerDAO community. DAI is also an Ethereum-based ERC20 token. DAI is also a partially-algorithmic stablecoin. While these stablecoins tend to be more prone to risk, DAI offsets the risk by being partially collateralized with crypto. While this system could collapse during extreme market turbulence, DAI has already survived several market crashes.

Leading Stablecoin Lending Platforms

Once you’ve selected your stablecoins, it’s time to start thinking about which lending platform you’ll use.

That being said, here are some of the leading stablecoin lending platforms:

Nexo

Nexo offers a large number of supported tokens and highly-attractive APYs. APYs can go as high as 17% for stablecoins like USDT, with earnings coming in Nexo tokens.

Nexo offers both locked and flexible term holdings for lending crypto. While flexible holdings offer lower interest rates compared to locked holdings, investors can benefit from free withdrawals with flexible holdings.

Nexo also offers $375 million in insurance on all custodial assets, making it an excellent choice for more conservative investors.

U.S. customers are no longer accepted.

Aave

Aave is a DeFi liquidity protocol that offers a wide range of crypto loan options, including stablecoin loans. The protocol offers short-term fixed interest rate loans, uncollateralized flash loans, and regular crypto loans.

With Aave, users can earn interest on their crypto deposits and borrow funds by staking their assets. In addition, interest rates are clearly listed through the platform, so you can easily compare borrowing and deposit rates.

Compound

Compound is another DeFi liquidity protocol that offers a range of lending and borrowing options. There are many cryptocurrencies and stablecoins listed on the protocol, and you can borrow or deposit any of them.

The protocol offers top-notch security and a live price feed that allows you to track prices on the platform based on liquidity availability easily.

Vesper

Vesper allows users to earn interest on various stablecoins or cryptocurrencies. Previously, users could only earn interest on the same crypto as the deposit. For example, this meant that Ethereum deposit interest was only paid out in Ethereum.

Now, users can earn interest through a mix of Ethereum, Wrapped Bitcoin (WBTC), DAI, and other stablecoins.

What are Stablecoins?

A stablecoin is a type of cryptocurrency that depends on a more stable asset (such as fiat currency or precious metal) for the basis of its value. Stablecoins are pegged to another asset and act almost as a reserve currency but in the crypto sphere. Whenever someone cashes out on their stablecoin tokens, an equal amount of assets gets taken from the reserve.

Because they’re tied to an underlying asset, stablecoins are seen as a less volatile cryptocurrency, and they have the potential to mimic the types of currencies people already use in their everyday lives.

Why Are Stablecoin Interest Rates Higher Than Traditional Interest Product Rates?

While you’d think that stablecoins pegged at a 1:1 ratio to the US dollar would command the same interest rates, this is not the case. Often, stablecoin interest rates can climb to 9-13%, or even more.

Interest rates on actual dollars are so low because the Federal Reserve has cut interest rates to historically low levels, so banks don’t have a reason to pay interest on deposits.

When looking at stablecoin interest rates, it is more of a supply/demand equation, where demand constantly exceeds the supply. As a result, people who hold stablecoins can charge premium interest rates, and crypto exchange platforms seeking to attract stablecoin lenders offer high interest rates.

Stablecoin Lending Risks

Lending always involves risk, and this is the case for stablecoin lending as well. When you lend money through a centralized institution, there are typically safeguards and regulations to ensure you’ll get your money back should the borrower default on their loan.

For example, if you take out a loan from a bank, the bank may have you put down collateral (such as a car or home) if you default. Additionally, loans through banks are protected by government insurance.

Many stablecoins aren’t regulated or only lightly regulated, so there may not be a guarantee that you’ll get your money back should the borrower default. Regulators are still figuring out how to supervise stablecoin lending. Additionally, there is the (slight) chance that the custodian gets hacked.

Conclusion

If you’re looking to invest in crypto but don’t want to be subject to crypto’s historical volatility, stablecoins are a great option. Taking time to research the leading stablecoins and stablecoin lending platforms is essential before you begin investing.

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The post Stablecoin Lending: Best Stablecoin Interest Rates appeared first on Bitcoin Market Journal.

Crypto staking has continued to explode in popularity, as investors can earn more interest (also called “yield” or “rewards”) on their crypto, by staking the most popular Proof of Stake tokens. As you can see below, the interest rates far exceed those of traditional banks.

(If you’re just getting started, see our Guide to Staking Crypto here.)

Most investors want to know which crypto is best for staking, and where can you find the best rates. Our editors rate and review the top tokens and staking platforms weekly, keeping this chart your best source of information on best staking tokens and best staking rates.

Ethereum (ETH)

ETH has the potential to become the best crypto for staking. Investors have already locked in $21 billion to the Ethereum 2.0 staking pool. That’s mainly due to the confidence Ethereum inspires: it has a massive ecosystem and widespread adoption.

However, there is still risk involved in staking ETH. Staking ETH today will mean that it is locked until the “Shanghai” upgrade, which is currently scheduled for 2023, but could take longer.

If you have a few ETH in cold storage and don’t have any plans to cash in for a few years, getting into a staking pool might be a good option. After all, this is one crypto we believe in for the long haul.

Binance Coin (BNB)

Binance is the largest crypto exchange in the world. Its native token, BNB, is an excellent long-term staking option due to its growth potential. It is also incredibly easy to stake using the Binance platform, with a user-friendly interface.

The minimum threshold for delegator staking is extremely low at BNB 0.0001 ($0.048). The BNB Vault on the Binance platform is a good choice for beginners wanting to stake BNB.

Cardano (ADA)

Cardano launched in 2015 as a Layer 1 blockchain platform that competes with Ethereum. It shares many features with ETH, including smart contracts, with the added advantage of a PoS algorithm baked in from the beginning.

Over the years, Cardano has grown into one of the top Layer 1 blockchain platforms, with a market cap of $37 billion as of this writing. Granted, it is small compared to BTC and ETH. But Cardano, and its companion token ADA, have a strong community and a forward-thinking development roadmap.

The APR is also quite competitive, and there are frequently no lock-up periods.

Solana (SOL)

Solana positions itself as a younger, more polished version of Cardano and Ethereum. As a result, the Layer 1 has impressed with a meteoric rise since its launch in April 2020: at this writing, it sits in the top 10 most valuable cryptos with a market cap of nearly $12 billion.

With a unique “Proof of History” consensus mechanism and excellent support for smart contracts, DeFi, and NFTs, Solana has attracted serious interest from developers and institutional investors. Like its competitor Cardano, SOL is a Layer 1 to watch.

This makes it a solid choice for crypto staking, with competitive APRs. In addition, there is no minimum amount of SOL tokens required for delegator staking.

Algorand (ALGO)

Algorand is yet another Layer 1 aiming to become an “Ethereum killer.” It has a solid dev team led by a respected MIT professor, smart contracts, and an improved consensus protocol called Pure Proof of Stake.

Algorand’s native token, ALGO, offers competitive interest rates. And Algorand’s speed and low cost may make it an investment worthy of holding long term.

Tezos (XTZ)

Don’t let its market cap of “only” $1 billion fool you: Tezos has been around for longer than most tokens. But internal struggles and instability hampered its growth after a successful ICO in 2017.

The APR on Tezos’s XTZ token is quite reasonable. In addition, it has an asking price of about $2 as of this writing, and no minimum stake or lock-up period for delegators, making it a possible choice for newcomers to crypto staking.

Celo (CELO)

Celo has a strong focus on DeFi, smartphones, and sustainability. Its Valora payments app has gained widespread acceptance in mobile remittance. With strong backing from several high-profile investors, Celo is a crypto startup with a potentially exciting future.

With a low percentage of tokens staked, Celo may be an excellent option for crypto staking. It has a relatively high APR at this writing, with no minimum stake and a short lock-up period of 3 days.

Mina (MINA)

With a total blockchain size of just 22kb, Mina is has of the lightest crypto codebases on the market. (In comparison, the bitcoin blockchain is currently at 350GB and growing.) The focus on minimalism holds promise for faster crypto transactions, an area where the bigger digital assets struggle.

Originally called Coda Protocol after its launch in 2017, Mina was rebranded in 2020 and has a high staking APR.

Avalanche

Being one of the youngest cryptocurrencies on the list, Avalanche prides itself on being one of the fastest smart contract cryptos in the blockchain industry, as measured by time-to-finality. Avalanche stands at a market cap of approximately $5 billion today, and ranks as one of the top 20 cryptocurrencies.

Avalanche has the potential to be one of the leading smart contract platforms. Given its proof-of-stake model, suite of Defi applications, and big-name backers, the currency might be at the top of the game in due time. The trend of recent private equity tokenization on the Avalanche blockchain can even allow investors to begin private market investments without specialized connections or loads of cash.

Polkadot

Born with the intention of rivaling contemporaries like Ethereum, Polkadot stands as the 11th cryptocurrency by market cap, with figures as high as $7.6 billion. Its ability to support Parachains (short for ‘Parallel Chains’) is attractive to developers because it allows them to run blockchains alongside one another to speed up transactions.

Owing to these technical innovations, Polkadot can often return high interest rates. Along with a greater risk, there is potentially a lot for investors to gain.

Polkadot’s new on-chain governance model called “Gov2” means more good news for investors. Replacing its council-led governance model, Gov2 is set to build a more open and decentralized structure.

Polygon

Polygon is considered one of the most promising projects in crypto. Launched in 2017 as MATIC, Polkadot is a Layer 2 scaling solution backed by Binance and Coinbase. Its appeal lies in stimulating mass adoption of cryptocurrencies by improving scalability on many blockchains.

Polygon, similar to Polkadot and Avalanche, comes with the capability of creating a multi-chain network. The only difference is that this network of blockchains works on Ethereum, thus including Polygon in Ethereum’s robust security and open ecosystem.

Cosmos

Cosmos, since its launch in 2017, set out to solve a pressing problem in the industry: the inability of blockchains to interact with one another. Described as “Blockchain 3.0,” Cosmos’s native ATOM token has held up well during the crypto winter of 2022.

Cosmos, besides being a bridge of blockchains, also lets developers quickly create complex blockchains within the Cosmos ecosystem. Owing to this, Cosmos continues to see a steady growth of dapp developers and users.

Tron

Tron incentivizes content creators to upload their data to the blockchain by rewarding them in TRX coins. As a result, Tron remains largely decentralized.

Staking TRX comes with a decent APR. And given a token price of less than a dollar, TRX may be worth buying and holding for the long term.

Near Protocol

Near’s uniqueness lies in its version of sharding. Dubbed “Nightshade,” the technology improves the overall capacity of blockchain by allowing individual validators to process transactions simultaneously, across multiple sharded chains.

Near boasts a market cap of about $3 billion at this writing. With the possibility of the platform hitting an ATH in the next five years, now could be a good time to buy and stake long-term.

Flow

Perhaps Flow’s biggest selling point is its target audience: the mainstream user. It’s the blockchain that runs many top NFT projects, from NBA Top Shot to Bud Light, targeted to the everyday user.

Flow may seem like a smaller Layer 1, but given its respectable APR, its stable of well-known investors, and its traction with everyday users, it could be a worthy long-term investment.

Investor Takeaway

The primary focus of crypto staking is to generate income from assets that would otherwise lie dormant. Instead of looking for crypto assets with the best staking yield, it’s important to balance them with the potential for long-term gains.

Starting from such a “HODL perspective,” you may want to prioritize large-cap, well-established staking coins over obscure cryptocurrencies with double-digit APRs.

For the latest staking strategies, subscribe to our crypto investor newsletter.

The post Best Crypto Staking Rates appeared first on Bitcoin Market Journal.

Cryptocurrencies are often associated with high-risk investments because of price volatility. However, there are low-risk investment products that revolve around stablecoins, which are blockchain-based digital currencies whose price is pegged to fiat or commodities, enabling them to reduce the volatility risk. Here we discuss how to generate interest or “yield” with USDC, the stablecoin that’s fully backed by US dollars.

What is USDC?

USDC is a digital currency issued by US-based fintech firm Circle. It is backed by the US dollar, based on a 1:1 ratio and relies on a multi-chain infrastructure. After starting as an ERC-20 token, USDC has expanded to other major blockchain platforms, including Algorand, Solana, Avalanche, Stellar, and Tron.

To maintain the peg, Circle keeps reserves consisting of USD cash, equivalents, and US Treasuries. The reserves are monitored every month by third-party auditor Grant Thornton.

USDC’s stable peg and Circle’s reputation have driven demand for this digital dollar token, helping it become the fastest-growing stablecoin. It is currently the fourth-largest cryptocurrency, with a market cap of over $50 billion.

USDC: Staking vs Lending

Crypto staking and lending are two ways to profit off your crypto holdings without selling them. Moreover, these passive income mechanisms enable USDC holders to put their money to work, as most dollar stablecoins fetch greater interest rates than traditional savings accounts, especially amid today’s low interest rate environment.

The main difference between the two is that USDC staking requires you to lend your digital dollars to a blockchain or crypto network for rewards, while USDC lending means lending it to borrowers in return for interest.

USDC Lending Platforms

The most straightforward way to earn passive income on USDC is to deposit it with centralized lending platforms, which provide some of the highest annual percentage yields (APY). Here are some of our top picks for lending platforms:

Nexo

Nexo provides an APY of up to 12% on USDC deposits, which is much higher than the average. In addition, Nexo is great for beginners as it has an intuitive interface.

Investors prefer Nexo because it offers compound daily payouts and flexible earnings. The platform has $375 million insurance on all custodial assets covered by BitGo and Ledger.

By using Nexo – the platform’s native token – you’ll benefit from more perks, such as better interest rates and more free crypto withdrawals.

U.S. customers are no longer accepted.

Hodlnaut

Hodlnaut is a crypto platform that enables users to diversify their crypto investments with six top digital assets, including Bitcoin, Ethereum, and USDC. The APY on USDC deposits can reach up to 9.40%.

Users can deposit their stablecoins anytime, with no lockup or deposit limits. Furthermore, they can receive weekly payouts and withdraw the funds at any time. The withdrawal fee is $10 USDC.

Pros and Cons of Lending Platforms

USDC Lending on Exchanges

Another way to earn interest on USDC lending is through centralized crypto exchanges, which use your funds to lend to traders. In most cases, you will have to lock your USDC funds for a certain period. Here are the most popular exchanges where you can put your USDC funds to work:

Binance

Binance is the largest crypto exchange by trading volume. It offers many crypto products besides its flagship exchange terminal. Binance Earn is a one-stop hub for its yield-generating possibilities, including earning interest on USDC. While it offers generous rates for most digital assets, the APY on USDC flexible deposits is only 1.20% currently, as Binance counts on other stablecoins for its ecosystem. Nevertheless, investors can rest sure their funds are safe.

Kucoin

Kucoin is a fast-growing crypto exchange founded in 2017. It has managed to expand its global presence and reach a valuation of $10 billion, according to its latest financing round conducted in May 2022. The company raised $150 million from a pool of investors, including Circle Ventures.

Kucoin supports USDC lending to let users earn interest. Unlike other exchanges, Kucoin enables users to lend directly to counterparts, which decide the interest rate on their own. Thus, the APY figure can range from 1% to over 50%. Users can choose to lend USDC holdings for 7, 14, or 28 days.

Crypto.com

Founded in 2016, Crypto.com has become one of the most trusted cryptocurrency services. It offers exchange, non-fungible token (NFT), payment, and lending services to more than 50 million users worldwide. In addition, it boasts insurance coverage of $750 million on all assets. Last year, it was selected by Visa to settle transactions on its payment network.

The platform’s Crypto Earn supports USDC and offers an APY of 8% on average. You can choose from flexible and fixed-term deposits, but the former would generate a lower yield. The interest rewards are paid weekly.

Pros and Cons of Lending on Exchanges

USDC DeFi Lending

Decentralized finance (DeFi) is one of the most important trends within the crypto industry. DeFi apps enable users to access financial services run by algorithms and powered by blockchain instead of being managed by centralized entities. Here are the best lending protocols as of today:

Aave

Aave is one of the largest DeFi markets, with the total value locked (TVL) figure near $10 billion. The protocol specializes in lending services, and USDC plays a leading role, accounting for over 20% of all assets on Aave.

The interest rate for contributing to USDC liquidity is 1.50%.

Compound Finance

Compound is a direct competitor to Aave. The lending protocol is the primary catalyst that triggered the DeFi craze back in 2020. With a TVL figure of over $5 billion, Compound is the third-largest lending protocol after Maker and Aave.

USDC plays a leading role here, although the APY on USDC deposits doesn’t exceed 0.65% currently, down from 2% in March 2022.

Curve Finance

Unlike Aave and Compound, Curve is a decentralized exchange (DEX) focused on stablecoins. It acts as an automated market maker (AMM), meaning it has no centralized order book to match buyers and sellers. Instead, it relies on liquidity pools consisting of stablecoins. Liquidity providers are incentivized for their effort. For example, one of the largest pools on Curve requires users to lock DAI, USDC, and USDT to earn an APY of about 2%.

Pros and Cons of DeFi Lending

Why are USDC Yields so High?

USDC yields are much higher than the interest rates provided by traditional savings accounts despite the parity between the digital dollar and the fiat dollar. How is that possible? Traditional high-yield savings accounts barely reach an APY of 1%, but crypto lending platforms can exceed the 10% mark while eliminating the volatility risk.

It all boils down to the business model implemented by crypto companies. Specifically, they let users lend digital currencies to borrowers willing to pay higher rates, as they can use their crypto as collateral, which one can’t do with traditional banks. As a result, the demand for loans against crypto collateral drives the interest rates, offering crypto investors the opportunity to generate better returns than with money market products.

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The post Earning Yield on USDC: Best Interest Rates appeared first on Bitcoin Market Journal.

Related Pages

• Bonds vs. Crypto Staking: Which Has Higher Yields?
• Ethereum Staking Yields: Maximize your ETH Returns
• What is Staking? The Quick Guide for Crypto Investors
• Best Staking Rates with Liquid Staking Derivatives
• Earning Yield on USDC: Best Interest Rates
• What is Proof of Stake? The Quick Guide for Crypto Investors
• Sector Report: Liquid Staking

Staking crypto assets can seem like a daunting process, but it’s much easier than mining or trading. By using centralized exchanges or staking platforms, most investors find it much easier to jump into staking to generate wealth.

This beginner’s guide covers the basics of staking: methods, platforms, and the best crypto to stake for solid yields.

What’s Inside?

• Learn how to stake popular tokens like Ethereum, Cardano, and Solana right from your couch.
• Discover the best platforms and rates for some of our favorite staking tokens.
• A step-by-step guide to starting staking on Coinbase, Binance, and even your hardware wallet.
• Risks & Rewards: Yes, there’s fine print. We cover that, too.

How Do You Stake Crypto?

The simplest way to start staking as a beginner is via an online crypto exchange or platform. These resources provide users with tools and interfaces that make staking crypto straightforward.

Here’s an easy-to-follow guide to getting started with staking using Coinbase:

What is Staking Crypto?

Staking crypto is a process where investors can earn more cryptocurrency by supporting validation, specifically on “Proof of Stake” blockchains.

In a PoS blockchain, active users put up a small amount of crypto (the “stake”) to be considered for block verification. The chain will then select a random staker to authenticate a block and earn more crypto in return.

With the rising popularity of staking, however, it takes more and more crypto to participate effectively:

Staking is using your crypto to earn passive returns by locking some of that crypto into a staking wallet that the exchange uses to validate on-chain transactions. This process is much like earning “interest,” but rather than earning interest through a bond or a bank account, you earn it on the exchange.

Commonly, the staking process involves leaving the crypto in the wallet for a predetermined time. During this time, the network uses the locked cryptocurrency to verify transactions and maintain the security of the blockchain. In exchange for providing this service, crypto holders earn more cryptocurrency as a reward (i.e., “staking rewards”).

Staking is an alternative to the energy-consuming and tedious validation processes found on Proof of Work chains like bitcoin. You can earn interest income on cryptocurrency holdings without trading or mining it actively.

Proof of Stake vs. Proof of Work

Staking is possible exclusively on blockchains that employ the Proof of Stake (PoS) consensus algorithm. This mechanism lets network participants agree on which transactions should be validated and added to newly created blocks.

Unlike bitcoin’s Proof of Work (PoW) algorithm, which raises the question “Can you stake bitcoin?” (the answer is no), the PoS consensus method is a more energy-efficient, eco-friendly alternative to PoW mining.

If you have PoS crypto investments sitting idle, staking is an option to earn additional income. It is similar to earning interest on a fixed deposit but with the potential for higher interest and risk.

How Crypto Staking Works

Staking involves holding a certain amount of cryptocurrency in a specific digital wallet and locking it in place for a predetermined amount of time. This process requires user resources to support stability and security across the chain, as staking wallets support the longevity of transaction verification.

To stake, users commit a certain amount of cryptocurrency to the network to participate in cryptocurrency staking. For example, a minimum of 32 ETH is required to stake on the Ethereum chain. The network then selects validators from among staking participants to confirm blocks of transactions. The more cryptocurrency users commit, the higher their chances of being chosen as a validator.

As each block is added to the blockchain, new coins are created and distributed as rewards to the validator of the block. Typically, these rewards are paid in the same cryptocurrency that the participants have staked.

Staking rewards vary depending on factors like the amount, the length of time the cryptocurrency is staked, and the demand for the cryptocurrency.

Different Ways of Staking

There are four primary ways in which you can participate in coin staking:

Delegation

The first and easiest way is delegating, a popular option for smaller crypto investors who don’t want to spend the money and effort to operate a validator. Rather than investing a large sum, smaller users delegate their coins to a validator (such as an exchange or staking platform), which pools the staking funds from multiple investors.

Investors then receive a portion of the staking rewards earned by the validator in exchange for their delegation. The rewards depend on the amount of the delegated cryptocurrency and the share it represents from the validator’s total stake.

Delegating implies entrusting your cryptocurrency to a third party. Therefore, it’s essential to perform due diligence and pick a trustworthy validator or node with a good track record and reputation in the network.

Pooled Staking

The second method is to stake your tokens through a pooled staking service. Many include Stake.fish (covered in more detail below) and RocketPool. Pooled staking functions similarly to a delegated approach in that a pool of crypto exists for staking purposes. However, this approach combines multiple validators into a pool to achieve greater staking rewards. The greater the number of tokens held in a single pool, the greater the chance that the pool will receive a staking reward. Pools are more advanced when compared to delegation but are worth investigating.

Liquid Staking

A third method for staking, becoming increasingly popular, is liquid staking services (also called liquid staking derivatives, or LSDs). Liquid staking through a platform like Lido (covered in more detail below) allows token holders to receive staking rewards while retaining access to their tokens. This provides greater flexibility and efficiency when staking. That said, liquid staking may be beyond those completely new to staking.

Validator Nodes

The fourth and most advanced method for staking is as a validator. You run your staking node using advanced technical skills and your hardware (which must always be kept online). The advantage is higher rewards and voting/controlling rights on some blockchains.

But becoming a validator takes work; you must invest higher sums just to qualify. And, of course, there’s the technical knowledge required. Running a validator node is certainly not for most beginners.

Popular Staking Tokens

Below are six of the more popular tokens we see staked by investors. Their popularity stems from several factors, including the project's strength, the APY offered, and the token's large market cap and liquidity.

The tokens discussed here are listed in order of the total percentage of tokens staked.

Ethereum 2.0 (ETH2)

After years of anticipation, Ethereum finally upgraded to PoS, with the Merge upgrade in September 2022. Many expect the shift to help the blockchain overtake bitcoin as the most valuable crypto by 2023-24. Still, whether Ethereum manages to dominate the crypto market remains to be seen. At this writing, ETH has a market cap of over $196 billion, about 39% of bitcoins.

Validator nodes on the new PoS blockchain require 32 ETH tokens and a lock-up of 365 days. Delegate staking pools don’t have any minimum requirements or lock-up periods, making them ideal for beginners. APYs for ETH staking will vary from one platform to another. We have many of the top staking platforms and ETH APYs here.

Binance (BNB)

Binance is the world’s largest cryptocurrency exchange. The platform launched a native token in 2017. With a $214 per coin value and a market cap of $32.9 billion, the Binance token is only behind bitcoin, Ethereum, and USDT on the list of largest cryptos.

To get started with BNB delegation pools, a minimum of 1 BNB is needed. However, you will need a whopping 10,000 BNB tokens to run a validator node. Both options have a minimum lock-up of 7 days, although longer periods result in higher reward rates.

Polkadot (DOT)

Polkadot uses a complex architecture of multiple chains to avoid the high fees and congestion plaguing other blockchains like Ethereum. Launched in 2020, the blockchain has zoomed to the top 15 cryptos list with a market cap of $5.1 billion.

Staking on this blockchain uses the native token DOT. The amount of DOT needed to stake is dynamic. based on factors like how much stake is being put behind each validator, the size of the active set, and how many validators are waiting in the pool. The current requirement is 450 DOT.

To join a delegated pool, you need a minimum of 1 token and a lock-up period of 28 days for what have historically been high APYs.

Solana (SOL)

This particular blockchain launched heavily on decentralized finance (DeFi). The SOL tokens were first publicly launched in 2020 for $0.22. In 2021, SOL was worth close to $250, placing it in the list of the top crypto with a market cap of $74 billion. SOL was hit by the “crypto winter,” but it remains one of the largest cryptocurrencies, with a $7.9 billion market cap.

No minimum limit is required to run a validator node on the Solana blockchain. Both delegator pools and validators have a lock-up of 2 days. The shared rewards from a pool can bring in around 7% APY.

Cardano (ADA)

Cardano is another “Ethereum-killer” that has been around for nearly a decade. This PoS blockchain with smart contracts and improved scalability was launched in 2015. As of this writing, it is one of the top ten largest cryptos in market cap, with $8.9 billion.

Staking on ADA has several advantages – minimum limits or lock-in periods are not required. Users who join any large and reputable delegated pool can start earning rewards with minimum fuss. The APY for Cardano staking is around 5%.

Tezos (XTZ)

Launched in 2014, Tezos is a programmable cryptocurrency supporting smart contracts. It has a self-amending mechanism to avoid “hard forks” or compatibility divergence in two versions of the same blockchain. While the total market cap is a bit low at $684 million, many investors feel it has future potential.

To become a full validator or “baker” on the Tezos blockchain, you need a minimum of 6,000 XTZ and an initial lock-up period of 14 days. But if you don’t have enough tokens to spare, you can participate in the delegator pools for annual percentage yields (APY) of around 4%.

Where to Get Started with Coin Staking

There are three main places where you can stake PoS cryptos:

• Centralized Exchanges (CEX) – Most leading cryptocurrency exchanges, such as Binance and Coinbase, provide easy staking as an option to their users. This option is quite simple and allows you to take advantage of any useful features or regards the platform offers.
• Staking Platforms – These online “staking-as-a-service” platforms focus entirely on crypto staking pools in exchange for a commission. While less comprehensive than an exchange, these allow you to focus on staking.
• Hardware Wallets – This method using offline crypto wallets/hardware wallets is called cold staking.

Let’s take a closer look at some popular coin-staking options from these three categories:

Centralized Exchanges

Binance (CEX)

Binance is the largest and most popular crypto exchange worldwide. Apart from staking its native Binance Coin, you can pick from over 12 POS staking options, with APYs up to 13.5% or more. Staking information for Binance can be found here, along with a good explainer video.

Coinbase (CEX)

Established in 2012, Coinbase is a fully-regulated crypto exchange in the United States. The platform offers staking on all major PoS cryptos like ETH2 and Tezos. The NASDAQ-listed company is a top alternative to Binance, especially for US customers. Get started by opening a Coinbase account and visiting their Earn page for available assets to stake.

Hardware Wallets

Ledger

Ledger is the most popular brand for hardware crypto wallets. Using the Ledger Live app, you can connect to over 15 different Web3 services, many of which allow staking. The rewards are delivered on the Ledger Live app or to an external wallet. This makes most of the popular tokens available for staking through your Ledger wallet, including Ethereum, Polkadot, and Solana.

Trezor

Created in the Czech Republic in 2011, Trezor is the world’s first digital cryptocurrency hardware wallet. Trezor also supports crypto staking, but not directly. Instead, you can connect the Trezor to a wallet like Exodus as a staking interface. More advanced users can connect the Trezor to a staking service like Allnodes.

Staking Services

Lido

Lido is a secure protocol for liquid staking that is designed to support multiple PoS cryptocurrencies, including Ethereum (ETH), Solana (SOL), Polygon (MATIC), Polkadot (DOT), and Kusama (KSM). Lido, launched in 2020, aims to solve the problem of the PoS staking ecosystem: illiquidity.

As a rule, once a crypto user starts staking, the assets are typically locked up and cannot be used or traded until the period ends. Lido aims to address this by allowing users to stake their cryptocurrency and receive a so-called “liquid staking token” (LDO) in return. Liquid staking tokens can eventually be traded or put to work in decentralized finance (DeFi) applications.

This makes it easier for users to participate in staking and access the benefits of staking rewards without sacrificing liquidity.

While Lido supports multiple PoS blockchains, the staking service focuses on Ethereum, the second-largest cryptocurrency by market cap, dominating the DeFi space.

Stake.fish

Stake.fish is a staking platform for cryptocurrencies where crypto holders can pool their assets and earn rewards. Stake.fish supports staking on 18 PoS blockchains, including Cardano, Cosmos, Ethereum, Polkadot, Polygon, Solana, and Tezos. At the time of writing, over 735,328 ETH is staked with the platform.

Launched in 2018, stake.fish has attracted over $1 billion worth of cryptocurrency for staking from both retail and institutional investors.

How to Stake Cryptocurrency: Step-by-Step Guide

The steps for staking will vary depending on the platform/method you prefer. However, the initial steps remain the same across all methods. Here are the simple general steps on how to stake cryptocurrency:

Basic Steps

1. Choose a Crypto Asset to Stake: Look at factors like APY rewards, minimum stake, lock-up periods, and other aspects of the crypto asset. Do adequate research before picking up unknown/obscure cryptos.
2. Decide on a Validator or Delegator: The validator requirements are quite steep for some crypto assets. They also require desktop PC hardware with 24/7 internet connectivity. Setting up the node also requires advanced skills. Most beginners will choose the delegation route. In this case, choosing a delegator with a good history and reputation is best.

For Crypto Exchanges

1. Create an account: Visit the crypto exchange and sign up for an account. Link your crypto wallet to your account.
2. Buy Stakeable Assets: If you don’t already have particular coins or tokens in your wallet, buy them from the exchange.
3. Go to Staking Page: Find the dedicated staking page for the crypto on the online exchange. Coinbase is here, and Binance here.
4. Enter Staking Information: Using the platform’s interface, set your staking amount and settings. Some exchanges offer different pools with varying lock-ups, APYs, and other special features.

For Private Staking (Crypto Wallets)

1. Download App: Software wallets support staking directly on the app. Some examples are Exodus and Trust Wallet.
2. Pick an Asset that Supports Staking: Most PoS blockchains, such as Ethereum, Cardano, or Solana, will support staking. Make sure to hold your crypto assets on the app.
3. Set Stake: Launch staking by tapping “earn now” or “start earning.” You can calculate potential rewards directly on the app.

Delegating (Platforms)

1. Select a staking platform, such as Lido or Stake.fish. Some platforms, such as Stake.fish, require registration, so register.
2. Go to the staking page that lists all supported coins for staking. Choose a crypto asset that you want to stake.
3. Connect a wallet where you have your cryptocurrency stored. Some staking platforms, such as Lido, support multiple wallets, including MetaMask, Ledger, Trust Wallet, and Exodus.
4. Start the staking process after confirming the amount and checking the reward rate.

Mining vs. Staking

For individual investors, staking is a much better alternative to crypto mining. The energy issues associated with mining are one of the major reasons why Ethereum shifted to PoS. After the shift, the Ethereum blockchain saw its energy costs reduced by 99%.

The following table illustrates the main differences between mining and staking on cryptos:

Both methods also have some striking similarities, as listed below:

• Both allow the pooling of resources for low but steady rewards
• Rewards are provided in the native cryptocurrency

The STAKEaway: How to Stake Crypto and Make Money

Staking doesn’t involve steep upfront/running costs of mining: no GPUs or mining rigs are required. It does not spike your energy bills and is extremely eco-friendly. For beginners, the best way to try staking is via an online platform.

Like all crypto-related investments, staking has a fair degree of volatility and risk. Pick established crypto assets, and avoid less-known altcoins to minimize risk exposure.

To learn the basics, consider starting small with popular assets like Ethereum (ETH) or Cardano (ADA). Then, do thorough research and always exercise caution when investing/staking crypto assets.

To learn more about earning money on crypto investments, including the best staking rates, subscribe to our Bitcoin Market Journal newsletter.

Crypto Staking Frequently Asked Questions

What is staking in cryptocurrency?

Staking refers to participating in a proof-of-stake consensus mechanism by holding a specific amount of cryptocurrency in a wallet to support the network's operations.

How does staking work?

Once you stake your coins, they are 'locked' for a certain period and used to validate transactions and create new blocks. In return, you earn staking rewards.

What are the benefits of staking?

• Passive Income: You can earn additional coins as staking rewards.
• Low Entry Barrier: Generally, you don’t need specialized hardware as you would for mining.
• Energy Efficiency: It is more eco-friendly compared to PoW systems.
• Network Security: By staking coins, you contribute to the network’s robustness.

What are the risks involved?

1. Locked Funds: Your staked coins are not liquid, meaning you can't sell or transfer them until the staking period is over(though LSDs attempt to address this downside).
2. Slashing: In some PoS networks, misbehaving nodes may lose some of their staked coins.
3. Market Volatility: The value of your staked coins can fluctuate, affecting your returns.

How to stake cryptocurrency?

1. Do Research: Learn about the specific cryptocurrency you are interested in staking.
2. Choose a Wallet: Opt for a staking-compatible wallet.
3. Transfer Funds: Move your coins to your staking wallet.
4. Follow Staking Instructions: Each cryptocurrency and platform will have its unique staking process, often outlined in their official website.

Can I unstake my coins?

Yes, but it may require waiting before you can access your staked coins. The time and conditions may vary based on the cryptocurrency.

Is staking better than trading?

Staking and trading are different strategies with their own risk-to-reward profiles. Staking is generally more passive and less risky than active trading but may offer lower potential returns.

What's the minimum amount required for staking?

This varies from one cryptocurrency to another. Some might allow you to stake with as little as one coin, while others may require a more substantial minimum investment.

How does staking compare to bonds?

Staking and bonds offer passive income but differ in risk and regulatory oversight. Bonds are generally lower-risk and well-regulated, while staking offers potentially higher returns but with more volatility and less regulation.

Can you stake Bitcoin?

No, you cannot stake bitcoin as it uses a Proof-of-Work consensus mechanism, not Proof-of-Stake. However, some financial services offer to "stake" your bitcoin for you, but this is more akin to lending rather than true blockchain staking.

The post Staking Crypto: A Beginner’s Guide on How to Stake Crypto in 2023 appeared first on Bitcoin Market Journal.

Executive Summary: After the successful conclusion of the Merge and the removal of lock-up periods, interest in Ethereum staking is increasing rapidly. But staking comes at the cost of liquidity. Platforms that offer liquid staking derivative (LSD) tokens combine the best of both worlds – passive income from staking rewards combined with the freedom to trade and invest staked ETH on DEXs and DeFi platforms through derivative tokens.

LSD tokens come in different designs and architectures – rebasing contracts, non-rebasing tokens, single tokens, and dual-token models are the primary examples. Investors must learn about the pros and cons of each token and pick one that aligns with their long-term goals, risk tolerance, and liquidity needs.

Staking rewards from LSD tokens range from a low of 2.00% all the way up to 9.00% APY. For DeFi projects, non-rebasing, dual-token systems offer the best performance. Decentralized services are preferable to centralized platforms due to the reduced risk of network attack vulnerabilities.

What are Liquid Staking Derivatives (LSDs)?

Explain Like I’m 5: Liquid staking derivatives are like borrowing a toy that looks and feels just like your favorite toy, so you can play with it while keeping your original toy safe. You can give the borrowed toy back when you’re done and get your original toy back. It’s a way to use your locked-up cryptocurrency without actually unlocking it.

Liquid staking derivatives are an interesting new breed of crypto tokens that arose in late 2020. Like the derivative instruments in traditional finance, LSDs are financial instruments that derive their value from an underlying asset – in this instance, staked tokens in Proof-of-Stake (PoS) blockchains like Ethereum.

LSDs are the native token found on liquid staking platforms. Rocket Pool, LIDO, and StakeWise are popular examples of liquid staking service providers. When you stake your PoS tokens on these platforms, you receive an equal amount of a native LSD token in exchange. (Stake your ETH in Coinbase, get cbETH in return.)

The derivative tokens are minted on-demand in a 1:1 ratio when you deposit your tokens into the platform. And they are destroyed as soon as you withdraw your staked tokens. The LSD tokens can then generate additional yield through methods like yield farming.

Any income you generate through these methods is in addition to your staking income. If you need immediate liquidity, you can trade these tokens on derivative exchanges or use them as collateral for DeFi loans.

LSD tokens are similar to other crypto tokens since they are fully transferable and fractional. They hold a value that is similar to the underlying token. Their main purpose is to overcome the limitations associated with regular staking.

Why Invest in Liquid Staking Derivatives?

By January 2023, over 16 million ETH was locked away in staking. Liquid staking pools like Lido and Rocket Pool accounted for 42.7% of the total, worth around $10.7 billion. The success of these platforms indicates the massive demand for ETH staking despite the long lock-up period.

Although the Shanghai-Cappella upgrade in April 2023 removed the withdrawal restrictions, it has not resulted in a sustained exodus of staked ETH from validator pools. Instead, deposits exceeded withdrawals barely a month after the upgrade, indicating renewed interest in Ethereum staking.

And it is not hard to see why. To date, Ethereum staking has yielded rewards worth 1 million ETH. In the absence of mandatory lock-ups and the freedom to withdraw, the validators are likely to increase. When that happens, the average yield (APR) from staking will decrease further, especially for staking pools.

Besides, even after the Shapella upgrade, investors seeking appreciable staking returns will still have to lock their tokens away for sustained periods of up to a year or more. This, combined with the specter of lower staking rewards, makes liquid staking derivatives even more attractive for anyone who cannot afford to run their own validator nodes.

Best Staking Derivative Rates

Rocket Pool rETH

Minimum Stake: 0.01 ETH

Total Value Locked (TVL): $1.17 billion

Market Share: 7.16%

Rocket Pool is one of the oldest Ethereum staking projects. The project was launched in 2016 when the Ethereum community was still debating the blockchain’s transition to the Proof-of-Stake model.

Although it has been overtaken by others like Lido and the newer Coinbase liquid staking protocol, Rocket Pool is still the third-largest liquid staking project for ETH. It retains a loyal following among crypto enthusiasts due to its heavy focus on decentralization.

The governance token of the project is RPL. The LSD token you get in exchange for staking ETH is called rETH. Anyone with 16 ETH and 1.6 ETH worth of RPL can create a  Rocket Pool ETH staking node.

The remaining 16 ETH is collected from other ETH holders seeking to participate in liquid staking through permissionless staking. The minimum stake required is quite low at just 0.01 ETH or around $20 at current exchange rates.

The node operators receive a fee ranging from 5 to 20% of the staking rewards for their effort. Rocket Pool offers relatively modest yields of around 5.17%. The protocol earns income solely through RPL token emissions.

As it is significantly less centralized than Lido, with over 2000 validators compared to the latter’s 21, Rocket Pool poses minimal risk to the Ethereum blockchain. Unlike Lido’s stETH, Rocket Pool’s rETH is not a rebasing token.

The value of rETH constantly appreciates over time to reflect your staking rewards. In addition, non-rebasing tokens are easier to deploy in DeFi projects. These are some of the main reasons Rocket Pool maintains its popularity among safety-conscious stakers.

StakeWise sETH2

Minimum Stake: 1 wei

Total Value Locked (TVL): $163.94 million

Market Share: 1.00%

StakeWise is one of the many liquid staking protocols that appeared on the market after the launching of the Beacon Chain for the Ethereum Merge in December 2020. The LSD token awarded to ETH depositors on the staking service is called sETH2.

Apart from sETH2, the protocol also has a dedicated token for staking rewards called rETH2, which should not be confused with the rETH of Rocket Pool. Stakewise LSD token holders will start receiving rETH2 rewards within 24 hours of depositing their ETH.

StakeWise uses a decentralized system that anyone can apply to become node operators. But qualification is not guaranteed since there is a rigorous vetting process, and applicants have to garner the approval of the protocol DAO members.

For the ordinary ETH stakers, the main appeal of StakeWise sETH2 lies in its simplicity and promise of fast rewards. The service accepts minimum stakes starting at the lowest possible fraction of ETH, or 1 wei.

The dual-token system also helps the protocol avoid the common pitfalls associated with rebasing tokens. The APY reward potential is also among the highest, making StakeWise an attractive choice for stakers who want a smaller, more decentralized, and DeFi-friendly alternative to Lido.

Frax Ether sfrxETH

Minimum Stake: 1 wei

Total Value Locked (TVL): $356.03 million

Market Share: 2.17%

Frax Finance is the issuing authority of the staked Frax Ether token. Additionally, they are the issuers of the FRAX stablecoin, the first fractional reserve stablecoin pegged to the US Dollar. It is also one of the newer entries to the market, with a soft community launch in October 2022 and an official launch in January 2023.

The liquid staking service at Frax Ether follows the same basic principle as StakeWise, with separate tokens for liquidity (frxETH) and staking rewards (sfrxETH). To participate, ETH holders can deposit their tokens into the Frax ETH Minter smart contract.

Depositors receive frxETH in a 1:1 ratio. You can trade or participate in other DeFi activities using the frxETH token on the Curve platform. To access the staking rewards, you must convert the frxETH into sfrxETH tokens.

Despite its late launch, Frax Ether has attracted over $350 million in TVL with a 40% increase in staking within a few months of launch. It currently sits above older, more mature liquid staking services like StakeWise. It also boasts the highest returns of all LSD tokens, with APY approaching 9.10%.

The main risks associated with Frax are related to its algorithmic stablecoin in light of the recent collapse of Luna/Terra. But to counter that, Frax Finance has collateralized the stablecoin up to 90% using USDC and maintains deep liquidity on the Curve platform.

Lido stETH

Minimum Stake: 1 wei

Total Value Locked (TVL): $12.22 billion

Market Share: 74.52%

With a market share that has touched 90% in the past, Lido is the dominant player in liquid staking by a large margin. It was the first mover in the liquid staking business after the beginning of the Ethereum Merge in December 2020, an advantage it has retained in the last two years. The protocol accounts for nearly 30% of all ETH staked.

Users can stake any amount of ETH on the platform and receive the stETH token in exchange at a rate of 1:1. Unlike other LSD tokens on this page, stETH is a standalone token used for liquidity and staking rewards.

The tokens are minted when a user deposits ETH on Lido. And they are burned away when the user withdraws the ETH at a later date. stETH is a rebasing token – its supply is automated through a smart contract to maintain price stability.

The quantity of stETH in supply may change daily at 12PM UTC if there are any changes in ETH2 deposits or ETH rewards. While price stability and decentralization are obvious advantages of rebasing, they also have some notable flaws.

Many DeFi apps are simply incompatible with rebasing tokens, potentially minimizing the number of available projects for stETH holders. In extreme market volatility, the rebasing function can also backfire, contributing to price instability instead of preventing it.

Lido is also a victim of its own success. The entity’s gigantic market share is a concern as it can lead to centralization and increase the risk of network attacks. Efforts are underway to minimize this risk and reduce the centralization of the protocol.

Coinbase Wrapped cbETH

Minimum Stake: 1 wei

Total Value Locked (TVL): $2.14 billion

Market Share: 12.58%

Coinbase is a major centralized cryptocurrency exchange based in the United States. The platform launched its liquid staking services in August 2022. With the inherent advantage of its large user base, Coinbase has quickly become the second-largest liquid staking protocol with over $2 billion TVL within 12 months.

The LSD utility token on the platform is called the Coinbase Wrapped Staked ETH, or just cbETH for short. It is an ERC-20 token generated in exchange for your staked ETH in a 1:1 ratio. But since it is a wrapped token, the prices of cbETH will tend to be lower than the market price of ETH, and the 1:1 value is not pegged.

You can buy and stake ETH using the Coinbase app. The wrapped cbETH can be traded on the exchange or moved on-chain and be used in various other DeFi projects on platforms like Curve Finance and Aave. Instead of staking ETH, you can also buy the wrapped token directly.

Due to the platform expenses and other fees involved, cbETH staking rewards tend to be lower than other decentralized protocols in the liquid staking scene. If you already use Coinbase actively for trading and staking ETH, cbETH could be a good option for the sheer sake of familiarity and ease of access.

Gitcoin Staked Ethereum Index

Minimum Stake: 1.01 ETH

Total Value Locked (TVL): N/A

Market Share: N/A

Investing in a single LSD token can expose you to some degree of risk from volatility. Spreading your ETH across multiple liquid staking services can mitigate this to some extent, but it is not very convenient.

Investing in an index token that gives you exposure to the top LSD tokens in the market is a more convenient and safe alternative. One such option in this space comes from a DAO called Index. It was launched by Set Labs in October 2020 with the aim of decentralizing the blockchain finance ecosystem.

Index has launched several index tokens that focus on major LSD tokens from Lido, Rocket  Pool, and StakeWise. One such token with a public service motive is the Gitcoin Staked Ethereum Index. The LSD token here is called gtcETH.

Buying gtcETH gives you exposure to the major LSD tokens while accruing staking rewards. Index collects a 2.00% streaming fee on the platform. Out of this, 1.75% is paid out to Gitcoin, an open-source, decentralized platform that focuses on funding public goods projects in the Ethereum ecosystem.

Investing in gtcETH is like indirectly subscribing to Gitcoin – you are basically contributing funds to their projects while simultaneously earning a portion of staking rewards. Due to that streaming fee, rewards on gtcETH are among the lowest of all liquid staking services. It is a worthy option for ETH stakers who want to diversify while contributing to Gitcoin initiatives.

Diversified Staked Ethereum Index

Minimum Stake: 1.01 ETH

Total Value Locked (TVL): N/A

Market Share: N/A

This is the second index token from Index DAO. Like the Gitcoin Index, the Diversified Index tracks the major liquid staking tokens like Lido’s stETH and Rocket Pool’s rETH. But unlike the other project, this one promises higher rewards.

Streaming fees exist, but here, you are just paying the basic 0.25% fee to the Index Coop. The LSD token is called dsETH, and you can buy it on most decentralized exchanges. Another option is to get it by redeeming ETH on the Indeed Coop App through a process dubbed Flash Minting.

Both gtcETH and dsETH are virtually identical, save for the additional funding to Gitcoin in the former. They both allow holders to earn passive income while spreading the risk across multiple LSD tokens in the marketplace.

In the process, you can also contribute to the overall decentralization of the Ethereum staking ecosystem. dsETH rewards are comparable to other major LSD tokens like Rocket Pool or Coinbase, at an average of 5% APY.

Investor Takeaway

The liquid staking derivative space is a rapidly evolving market. Investors already have access to a plethora of LSD tokens, each with unique advantages and weaknesses.

For investors who want the token with the most market share, Lido is the undisputed champion. But concerns exist regarding its potential threat to the long-term decentralization of the Ethereum network.

If high returns are a priority, Frax and StakeWise are the optimal choices with the highest APY among leading tokens.

For investors concerned about over-centralization in the Ethereum ecosystem, there is probably no better option than Rocket Pool.

If you prioritize diversification above all else and want to minimize risk as much as possible, consider investing in an index token like dsETH on the Index Coop app.

And if you are a Coinbase regular, the on-chain cbETH is probably the safest, easiest option for investors who don’t mind the centralized architecture.

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