How to Earn Interest on Crypto

Put your crypto to work and start earning yield on your assets.

How can I start lending crypto and earning interest?

Generally speaking, there are two main options to start lending your crypto. The first is through centralized exchanges and platforms and the other is via decentralized finance.

Centralized Exchanges and Platforms

Most of the popular cryptocurrency exchanges (such as Binance, Coinbase and Bitfinex) and custodial platforms offer native lending services. These are centralized offerings, which mean they are essentially acting as the middleman in the transaction which makes it relatively safe - however they do take a small fee for providing that security.

To get started, you would firstly need to send your cryptocurrency to begin lending out to the respective platform. You can then select how long you would like to loan out the crypto and the platform will show you what interest rate you will get for that loan period. Once you select the period (let's say 7 days) - your cryptocurrency will be locked up for that entire duration until the period elapses, then you will get your cryptocurrency back, plus the interest you earned from the transaction.

You can compare the best lending platforms here.

Decentalized Finance

Decentralized Finance as a lending option has grown incredibly popular in the last 1-2 years. These protocols essentially enable users to lend and borrow, without requiring a middleman - making it much more efficient for both parties on either side of the transaction. These decentralized protocols enable this by executing a 'smart contract' that will deterministically ensure that the transaction is handled correctly and is executed by verifiable code. The two most popular decentralized lending protocols are AAVE and Compound Finance.

Although this sounds great at first glance, there are significant risks for users who are not used to operating on Ethereum or within Decentralized Finance generally. Because these transactions are autonomously handled by smart contracts and protocols, there is always a risk of a smart contract bug or failure - and there is certaintly precedent for this (although it is not common).

A guide to start lending crypto and a comparison between Centralized exchanges and decentralized finance.

James Glennon

I spent 5 years as a Commercial Lawyer in Australia before stumbling across the innovations behind Bitcoin and the cryptocurrency space. Ever since, I have been committed to learning more and educating the broader Australian community about Bitcoin, hard money, investing and decentralized finance.