How to Earn Interest on Stablecoins by Sarah Kutu

The cryptocurrency market is peculiar in its volatility. Coin prices swing every second, making it unpredictable and risky. To solve this challenge and create a market for risk-averse people, stablecoins were created. These kinds of cryptocurrencies have their values pegged to real-world assets like the US Dollar, gold, or commodities.

So, they are almost always the same value. However, you cannot make massive profits from trading stablecoins because their values don’t rise and fall. That’s why some investors look for alternatives to earn interest on stablecoins. Let’s find out how in this article. 

What Are Stablecoins?

Stablecoins are a type of cryptocurrency built to retain their value instead of being volatile like popular cryptocurrencies, such as Bitcoin and Ethereum. The value of stablecoins is tied to actual assets, especially the USD. That means the value of a dollar-backed stablecoin is built to be equal to a dollar. 

For instance, Tether (USDT) is a stablecoin that aims to have the same value as the USD, making it more stable like cryptocurrencies like Bitcoin and Ethereum. This makes it a great store of value for those looking to save in dollars using crypto. Also, it allows users to access financial services without a bank or traditional financial institution. 

How to Earn Interest on Stablecoins 

While trading stablecoins can’t yield profits because their values are fixed to a particular amount, there are many ways to earn interest on stablecoins. We highlight some options below:

Crypto Lending Pools

Crypto lending platforms or pools connect borrowers and lenders. Borrowers enter these platforms to get loans from lenders who have deposited stablecoins like DAI and USDT. Once the loan has been used, the borrower repays with interest, helping the stablecoin lenders earn passive income. However, the interest rates vary from one platform to another. So, you want to opt for highly rewarding platforms when looking to earn interest on stablecoins. 

Besides, crypto lenders can also offer peer-to-peer (P2P) services and set their own terms, such as interest rates and loan periods. This makes it easy for them to have control over their stablecoins and avoid additional fees that would have gone to middlemen. 

Crypto Savings 

Cryptocurrency banks and other financial institutions have savings accounts where people can store their stablecoins to earn interest. These accounts have flexible or fixed terms with relatively higher interest rates than conventional savings accounts. 

Interest-Earning Programs 

Like banks, many cryptocurrency exchanges have interest-earning accounts and programs for people looking to earn interest on stablecoins. All you have to do is enter such programs and lock your stablecoins in the exchange’s liquidity pool. However, the potential interest is determined by factors like the platform, its rates, the vesting period, and how much you invest. 

Staking 

As with other proof-of-stake coins, you can lock up your stablecoins on supported platforms for staking rewards. The staking rewards are for their contribution to the platforms’ security and efficiency. 

Popular examples of such platforms include Binance Staking, Compound, and Kraken Staking. Each platform has its reward system, depending on your staked amount and lock-up period. 

Yield Farming

Decentralized finance (DeFi) platforms also have yield farming opportunities. The process involves locking up your stablecoins in a liquidity pool or DeFi protocol for periodic rewards, which are usually the platform’s utility cryptocurrencies. 

For instance, you can join decentralized exchanges (DEXs) like Uniswap, PancakeSwap, or SushiSwap and provide them with liquidity using your assets. That means you are directly supporting the easy flow of transactions across buyers and sellers on the platform, and getting rewarded for it. 

The idea is to do this on many platforms to combine the rewards across them and earn significant interest on your stablecoin. 

How to Earn Stablecoin Interest – Step-by-Step Guide 

Here are the steps required for earning interest on stablecoins:

Choose an Earning Platform 

The first thing is to find a liquidity platform or pool that supports stablecoin staking. Register on the platform and verify your email address or identity, if required. 

Deposit Stablecoin and Choose a Plan 

Once your account is set, add funds to it and opt for a contract from the available earning options. 

Start Earning Interest

Some platforms pay their interests instantly. Others break the returns into periodic dividends. Either way, you can earn interest on your assets. 

Conclusion 

While stablecoins are popular for their immunity to market volatility, they double as investment opportunities for those looking to earn passive income. However, it’s crucial to do proper research before joining any stablecoin earning platform to avoid scams and other potential issues.

Safeguard Your Stablecoins With the Zypto DeFi Wallet 

Whether you fancy dollar-backed stablecoins like USDT/USDC or prefer crypto-back stablecoins like DAI, you can securely manage, store, and trade your assets using the Zypto DeFi Wallet. 

The wallet supports DeFi and regular cryptocurrencies, making it easy to do all you need in one place. Visit the Zypto website to find out more. 

Which stablecoin are you currently holding or are you looking to invest in for interest? Share your options in the comment section below.

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