One of the most popular applications of blockchain technology is decentralized finance. For those who are ready to enter cryptocurrency but are not ready to make large investments, DeFi may be a good way to earn passive income. There are many ways to start. From investing in digital assets to becoming a liquidity provider or engaging in high-yield agriculture, this article will explore all the ways to create passive income with DeFi one by one.

1. Encrypt APY storage

This is similar to having a fixed savings account and earning interest. However, interest rates these days are quite low, if not negative. Compared with commercial street banks, DeFi has much higher return opportunities. Many DeFi platforms call this process "pledge", and the interest earned can be the same type of pledge or any other token supported by the blockchain. When you pledge your encrypted assets, you become a transaction verifier or node of the network. This is very important for the functionality and security of the network.

There are many currencies and tokens that can be used for pledge, but please remember that most DeFi platforms run on the Ethereum blockchain, which means that Bitcoin (BTC) is generally not accepted. This DeFi method is most suitable for the so-called "cryptocurrency holders", that is, investors who want to deposit tokens in exchange for regular interest payments. There are many platforms to choose from. Each platform supports different currencies, pledge periods and interest rates.

2. DeFi loan

Loan is another recognized way to earn passive income through DeFi. There are various platforms dedicated to this type of cryptographic loan protocol. Similar to the pledge, passive income is derived from DeFi loans by depositing tokens in an account for a period of time.

When you lend cryptocurrency to a platform, you are letting it to other cryptocurrency borrowers. In return, you will receive interest. Generally, the smart contract will distribute the accrued interest in proportion to the number of assets you lock.

Another advantage of DeFi loan comes from the fact that the risk of borrower's default is almost zero because the whole lending process is through smart contracts. Therefore, your assets are relatively safe. Most DeFi loan platforms will also allow you to withdraw your cryptocurrency at any time without any fees.

3. High-yield agriculture

The rate of return is in exchange for interest or other types of returns. Users of the DeFi platform can put their funds in the liquidity pool. Once these tokens are locked through smart contracts in the distributed application (Dapp), users can obtain fees or interest to allow their assets to be used on the platform or borrowed and sold.

It's much like putting money into a bank account, and then using it for loans and other operations, for which you will get a fixed percentage of interest. Similarly, production farms help ensure high mobility throughout the DeFi ecosystem. The people who lend tokens to DeFi platform are usually called "income farmers". They usually switch between liquidity pools as a strategy to maximize returns.

4. Become a liquidity provider

Unlike pledge or income agriculture, which uses cryptocurrency to confirm transactions or fund crypto loans, liquidity providers have different roles. They are used to ensure that token swaps occur more efficiently and more quickly in the Decentralized Exchange (DEX). Liquidity providers are also called transaction promoters, and they get paid through the transaction fees of the transactions they promote. However, you do not need to actively participate in these processes. As with other ways of obtaining passive income mentioned above, there are certain risks, especially in the current bear market. But you can not only do a good job of research before investing capital, but also choose to invest in asset pools with high liquidity and more secure encrypted assets.

5. Mobile mining

Cryptocurrency holders lend their assets to a decentralized exchange and receive returns. However, the difference is that mobile miners often get the local token of the blockchain they are using, and they also have the opportunity to get the governance token, thus maximizing their participation in specific projects. As with any liquidity pool, providers' compensation is based on the number of liquidity pools they provide.

summary

The above is a brief description of five ways to increase passive income through decentralized financial DeFi. There are many ways to obtain passive income through DeFi, and each method has advantages and disadvantages. Considering the current situation of the encryption market, it is reasonable to choose the DeFi passive income strategy. But as mentioned above, we must do a good job of investigation, make the most favorable choice for ourselves, and do not invest more money than we can afford.