Making Money With DeFi – Some Of Our Favorite Ways

Anyone who has been watching the crypto markets and decentralized platforms will agree that 2020 was a good run for DeFi. The sector grew by leaps, recording a 2000% growth to close at $13 billion in TVL. 

Although DeFi was initially established to bank the unbanked, these projects have come up with different ways for users to make money. Whether you know every nook and cranny of the sector or you’re just getting started, there’s something for you in DeFi. 

Uniswap

Uniswap is, undoubtedly, one of the most popular DeFi projects, thanks to its automated market maker (AMM) protocols. Thanks to these, there’s no need for order books as is the case with traditional exchanges. 

LPs then make money by earning a share of the trading fees. Uniswap currently sets this at 0.3% of the trading fee, distributed according to the amount held in the pool. 

Suppose ETH gains 5x following your deposit in the ETH/USDT pool; you could have a 25.5% impermanent loss. However, if you gained 40% on the fees, you’ll end up making a net profit of 14.5% since the net gain is calculated by subtracting the impermanent loss from the trading fees. 

They are called so because the loss isn’t realized if the price ratios are correct before you withdraw.

Therefore, you make the highest returns when there are low price changes and a high trading volume. 

MakerDao 

MakerDao is another well-known name within the DeFi space. The open-source project was established in 2014 and has held its position as one of the top DeFi projects even as new contenders join the scene. 

MakerDao employs a global system parameter to determine how much Dai holders earn on their savings. The platform has another token, MKR, which serves as the governance token.

MKR holders mitigate Dai’s price instability whenever the market price deviates from the target price.

The network, however, has plans to implement the DSR Adjustment Module or easy adjustment of the DSR. The module will control both the DSR and the base rate, making it easier for an MKR holder to adjust the rates in lieu of a bigger group of holders. 

Compound

Our final pick for this list is Compound, a decentralized protocol for developers that makes it easier to access open financial apps. Compound takes advantage of one of the most important aspects of any financial system; borrowing and lending. 

The interest starts accumulating once you’ve made your first deposit and is denominated in the same tokens that you deposited.

Therefore, if you had lent Dai tokens to the protocol, you will receive interest in Dai. 

However, once you make a deposit, you earn cTokens, which you can redeem at any time to get the underlying assets. As the underlying asset gains interest, the exchange rate for the cTokens increases over time relative to the underlying asset. 

Compound protocol automatically determines and implements the interest rates, which fluctuate, depending on the market dynamics. The floating interest rates make it more lucrative to lend cryptos to smaller pools since they generate higher returns. 

DeFi Yield Protocol (DYP) 

One of our favorite new platforms to explore is DeFi Yield Protocol (DYP), a unique platform that offers various DeFi solutions to its users. DYP provides a bunch of advanced trading tools that its users can leverage to get the most out of it. 

The platform will then convert the assets into DYP before depositing them into a staking contract. DYP then distributes the rewards automatically, and users can claim them every day. 

Besides the Buyback contracts, DYP users can make money through several other ways;

Vault– DYP integrates with Compound in this automated yield farming contract. Users can earn from the ETH, DAI, USDC, USDT, and WBTC markets. DYP distributes 75% of the earnings to the liquidity providers and uses the remaining to buy back their token and burn it. 

Farm– The platform is quite innovative, making history as the first and only in the DeFi scene to reward its users in ETH. The farms allow users to deposit tokens and become liquidity providers to receive their earnings in Ethereum.

Stake– DYP token holders can earn DYP rewards by depositing into any of the staking pools. The pools offer different staking options, with the rewards ranging from 20% APR- 35% APR. Users can also choose to reinvest their daily returns into the staking pool or even more earnings. 

Referral– You can earn DYP by bringing more users on board. The platform provides each user with a referral link at request. Whenever any of your referrals stakes DYP, 5% of their rewards are automatically sent to you, free of gas fee. 

Bottomline

DeFi is constantly challenging the traditional financial systems the world is used to. Thanks to the 2020 craze, crypto critics and fans from across the globe are paying more attention to the industry. Therefore, we can only expect developers to come up with even more ways to earn from these projects.