Decentralized Finance(DeFi) is the wave of the moment in the Blockchain Space. Instead of saving in the traditional banking system that pays a negative interest rate in most highly-developed countries like Sweden, Denmark, Australia, Japan, USA etc, a lot of people now prefer to grow their capital on DeFi apps like Celcius Network, BlockFi, Nexus, and Crypto.com.
We currently have over 100 DeFi platforms offering various financial services like Lending, Borrowing, Predictions etc. And it’s so fascinating that a lot of them are been built on the Ethereum blockchain. An incredible list of over 100 DeFi platforms can be accessed on either Consensys or Defipulse.
So how do you make money from DeFi Application?
Although there are numerous ways to make money on DeFi apps, the 3 best ways for Nigerians to make money are:
1. Saving money on DeFi platforms
This simply involves saving your Cryptocurrency on DeFi Platform so that it can accrue an Average Percentage Return (APR) of 10%. Your APR is the average return you get from each loan that is lent out, and it depends on factors like the duration of the loan, the cryptocurrency been lent, and the market volatility.
I’m sure you’re thinking that Cryptocurrencies are very volatile, and there is no point earning 10% interest in a year when the price of your Cryptocurrency keeps crashing down. That’s very true but there’s a way out.
The simple way out is to convert your Bitcoin or any cryptocurrency to a Stable Coin, then save it on the DeFi App. For those that don’t know what a stable coin is, it’s simply a digital currency that’s pegged equal(1:1) to a fiat currency. A good example is Tether(USDT), a dollar-pegged stable coin i.e. 1 unit of USDT should always be equal to 1 unit of Dollar, and should be easily converted vice versa.
Saving USDT and other stable coins on any DeFi App will accrue about 4% APR, and won’t be affected by fluctuations in the Cryptocurrency market.
2. Borrowing people money and saving the collateral on DeFi platforms
This one of the most interesting ways to make money in the crypto space. To understand it better, let’s assume the current price of bitcoin is $10,000. Now I want you to imagine that someone came to you to borrow $10,000, and use 1 Bitcoin as collateral.
What you do is to put the Bitcoin into a DeFi app that generates 9% APR. When the person returns the $10,000 you lend him, you can then return the 1 Bitcoin to him, and keep the 9% APR generated on the DeFi app.
Note that this deal can go soar if the person you gave the loan never returns your money, and the value of the Bitcoin you collected goes down due to low Bitcoin price. Aside from this, using bitcoin to hedge the loan you give out to people is a good way of making passive income.
3. Hedging on DeFi platforms
This another simple way to make money from DeFi apps. If you’re certain the price of Bitcoin has reached its peak, and it’s about to start falling with a considerable margin, you can borrow Bitcoin and sell it at the top, then pay back the loan when the price is low.
To give an illustration, let’s say you borrowed 1 Bitcoin @ 12% yearly APR when the price was $20,000, and you immediately sold it. You now have $20,000, and you’re expected to pay back 1.12 Bitcoin(1BTC + 0.12 BTC(12% interest)).
If you wait till the Bitcoin price falls to $10,000 and you use the $20,000 you have to buy 2 BITCOIN. You can then decide to pay back your loan and interest of 1.12 BTC while holding onto the 0.88 BTC profit(2 – 1.12 BTC). Quite easy to do right! Sure.
In conclusion, making money from DeFi is not rocket science. All you need to do is to find the best method that works for you. Whether it’s saving, borrowing and saving, or just hedging on DeFi platforms.
If you need a trusted DeFi platform to start this business, I will recommend you use Celcius Network. I have been using it for over 6 months and there is no cause of complaint.
I hope you enjoyed this article, and if you have any questions don’t hesitate to ask them in the comments below.