How To Generate Yield On Crypto Assets: Class 1
This is the first series of guides that will show you how to earn from DeFi. There are many ways to earn from trading digital assets, such as day trading on the future contract, arbitrage on different platforms, holding digital assets and many more. Neukind Hong Kong focuses on DeFi and sees much greater potential of DeFi in the future. DeFi is one of the most exciting places in digital assets. Since the low of Uniswap on Sep 17 the price went 9600% up to $41 a token. There are many more different tokens and projects that are just as exciting as the Uniswap platform. We hope through these articles people would be more active on the DeFi protocol and more people would be interested in DeFi like how we are excited with the DeFi space. This article will focus on lending, one of the first functions on DeFi and yet still profitable with lending on DeFi.
What is the DeFi platform?
DeFi are platforms that offer decentralized financial services or decentralized banking systems.
What are the platforms?
There are many DeFi protocols that offer lending such as Maker, Compound, dYdX, and many more.
What is lending on DeFi?
In DeFi lending investors or lenders deposit their digital assets including Bitcoin, Ethereum, or stable coins through a distributed system on a decentralized application. On the other hand another party borrows money from the pool investors or lenders deposited and pays an interest. Although lending also exists in centralized finance such as Binance, Nexo and BlockFi, DeFi also offers a compelling yield.
One of the drawbacks of borrowing from DeFi is because borrowers will put up their digital assets as collateral and normally would need over collateral meaning the borrowed amount is around 50% of the collateral. The reason behind this is because there is still no trust or credit system in the DeFi world. When the underlying digital assets go below the rate their collateral would be liquidated so that the investors or lenders are able to secure their asset. It is a positive thing for the investors or lenders because the asset is secure and there should be no risk with that.
Earning on DeFi
After learning about the basic idea of lending on DeFi what is the yield for lending on DeFi? Normally the lending fee is around 1% ~ 30% APY. As borrowers the benefit is that they lend from DeFi with their bought digital assets from exchange. That is increasing their position by 50% without incurring capital gains tax.
Next we will be talking about Liquidity Providers so make sure to follow Neukind Hong Kong for more updates.
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