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March 04, 2022 at 03:10 PM
Zero point nothing. That’s about the rate of interest you’re earning from bank accounts these days. This is causing lots of people to seek alternatives, in an effort to obtain higher yields.
Enter stablecoin lending — a new way to earn passive income. You accomplish this by lending your digital assets to others.
A stablecoin is a digital asset whose price is pegged to a fiat (government-issued) currency, such as the dollar, euro, rupee or yen. More than 200 stablecoins exist worldwide, worth an aggregate $130 billion. That’s a 6x increase from a year ago, demonstrating the increased engagement by investors around the world.
Unlike Bitcoin and other digital assets, whose prices fluctuate wildly, stablecoins are designed to reliably maintain, uh, a stable value over time. No volatility.
But no volatility means no potential for upside, because the price won’t rise. And like the dollars in your pocket or purse, stablecoins pay no interest. But you can earn interest by lending your stablecoins to others.
Crypto Staking vs. Lending
There are two ways you can generate income with digital assets: Staking and lending. Interest rates range from 1% to 15%, depending on which digital asset you use and how long you provide the loan.
When you engage in staking, you pledge your digital assets to support a blockchain network. In return, you receive payments in the form of interest or tokens paid to your account. You sometimes have to agree to leave your coins there for a certain period, and in those cases, staking is best for long-term investors.
When you lend your coins, borrowers pay interest to you. To reduce your risk, borrowers post collateral — typically, their own digital assets.
At present, there is a lot of demand for loans of stablecoins and digital assets — which is why borrowers are willing to pay very high rates of interest.
