Did you buy some cryptocurrencies and are not quite sure what you can do with them? Ever thought about earning interest on your cryptocurrencies the same as you do with your cash? Well, now it’s possible to invest in crypto interest accounts and earn interest.
Companies like BlockFi allow people to earn interest on their crypto. According to their website, you can earn an interest of up to 8.6% annually on your cryptocurrencies. Interest is then paid back in cryptocurrencies, making your original investment compound over time.
BlockFi basically lends your cryptocurrencies to trusted institutional and corporate borrowers, on overcollateralized terms to avoid defaults. These institutions pay interest back to BlockFi. BlockFi does take a fee and pays the remaining back to the clients as interest. They also keep enough reserves to facilitate client withdrawals, so it all works smoothly.
Celsius’s interest accounts pay up to 10% interest, depending on the cryptocurrency, and claim to be the best provider in this space. They also pay interest weekly, in either cash or CEL tokens, which are Celsius’s own tokens. In order to incentivize users to use CEL tokens, they end up paying a lot more than they do in cash.
Nexo, for example, also provides crypto interest accounts on stablecoins, besides USD, EUR, and GBP currencies. They provide interest rates of up to 8%, and they pay interest daily, allowing your funds to compound fast over time. Besides interest accounts, they also provide crypto loans and a card. Nexo’s card allows payments in local currencies, instant cashback on purchases, amongst other features.
Compound Finance, on the other hand, has a slightly different offering. It is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.
What it allows users to do is to provide liquidity to the market by placing the digital coins in it, and others will borrow from the market. Interest rates are then determined algorithmically, based on supply and demand, and interest accrues every Ethereum block. If there’s a lot of liquidity, interest rates will stay low. However, when there’s less liquidity, they will rise.
Note that Compound Finance is truly decentralized and it is quite trusted, so it’s a good alternative to those mentioned above.
Invest in Commodities is a part of our guide Alternative Investments For Beginners. Read up on other popular types of alternative investments: