The cryptocurrency market is highly volatile and unpredictable. But… what if I tell you that you can stick to the USD and at the same time earn from 8% to 10%? It may sound crazy considering that the average bank pays 0.5% on savings accounts… But YOU can get up to 10% with the platforms below. They are legit and solid.
The volatility of crypto assets is what makes them difficult to trade. Not everyone has the stomach to deal with this volatility. Some investors want some form of ‘stability’. They want something that can hold value over time. This is where stablecoins and stablecoin yields come in!
If you have absolutely no idea what stablecoins are, what you can do with them, or even how to make money with them, then this article is for you. In this article, we will be talking about the best Centralized Finance (CeFi) platforms that you can use to earn interest on your stable coins.
Here, we’ll take it from scratch, so again, if you are new to this space, you have nothing to worry about. And by scratch, it means, you should go grab a coffee!
Let’s get right into it…..
Stablecoins are “stable” coins. Literally! They are designed to have a value that is stable and fixed, and this is because they derive their value from underlying external assets such as the US dollar or the price of gold. This is what makes it different from Bitcoin and other cryptocurrencies. Most cryptocurrencies, including Bitcoin are purely digital assets with no backing whatsoever of any external asset or currency and they are usually ‘mined’ by computers. Stablecoins are totally different from all of these. Stablecoins provides a way of trading crypto assets, in such a way that it reduces the risk of holding such assets.
There are different types of stablecoins, based on what they are linked or pegged to and we’ll just pick the major examples.
- Fiat- collateralized stablecoins — Fiat-collateralized stablecoins are the most popular types of stablecoins. They are pegged to certain fiat currencies, for example, the US dollar, Euro, and the Pound. Stable coins in this category are usually pegged at a 1:1 ratio. This means that 1 stablecoin is equal to 1 unit of currency. A good example of a fiat-based stablecoin is the Tether (USDT) and also the USD Coin (USDC), which is issued by Coinbase and compliant with US regulations.
- Crypto-collateralized stablecoins. These are Stable coins backed by other cryptocurrencies. An example is DAI which is issued by MakerDAO, a Decentralized Autonomous Organization and it’s overcollateralized by Ethereum.
- Commodity-collateralized stablecoins. These are coins pegged to other assets such as gold. Examples are DigixGold (DXG) and PaxosGold (PAXG).
There are so many stablecoins currently in circulation, but the ones below are the most popular.
So in a nutshell, the top 6 stablecoins are Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI), Terra USD (UST), and True USD (TUSD). We can say that all these are pretty solid and proven to be solid. Side note: I think MIM, the Abracadabra stablecoin is missing here considering that it’s also a stablecoin and the market cap is $2 Billion as of Feb. 2022.
USDT, USDC, and BUSD are directly backed by the US Dollars, and have a higher chance of maintaining their peg ratio of 1:1. They are accepted by most crypto exchanges.
DAI is a stablecoin that is collateralized by crypto assets (mostly Ethereum)
By now, you should be aware that the price of a stable coin is ‘stable’. So let’s say you have 100 USDT. How then can you make more money?
One way that crypto investors make money is by borrowing and lending coins. If you have extra stable coins, you can lend them out and then receive ‘Annual Yields’. In fact, one of the biggest applications of Decentralized Finance till date is crypto lending, otherwise known as ‘Yield farming’.
In this article, we will be focusing on Centralized platforms that pay yields on stablecoins. These platforms enable users to earn interest on their digital assets and also borrow funds by using their crypto assets as collateral.
In this post, I’m only considering the Best Centralized platforms that you can earn on your crypto. There are Decentralized platforms (DeFi) as well, but the demand on here usually fluctuates thereby resulting in yields that are volatile. The interest rates of the CeFi platforms are usually more stable and higher, which makes them more appealing to lenders.
By the way, very important: depositing your crypto on this platform is like depositing in a bank. You need to provide your ID for their KYC checks and just like any other bank, they will lend you money to borrowers.
Examples of these Platforms are BlockFi, Nexo, Youholder, Celsius, Crypto.com, Coin Loan, Swissborg, and so on.
There are many but our main focus would be on these four, considering that they are probably the most solid offers in the market and they are regulated in the US.
- Celsius — 8.5% to 11% on USD stablecoins.
- BlockFi — 8.85% on USD stablecoins.
- Nexo — 8% to 10% on USD stablecoins.
- Crypto.com — approx. 10% on USD stablecoins.
By the way, the links to these platforms are referral links. You will win a welcome reward from the platforms and I will also get a little reward. Nexo for example will give you a $25 sign-up bonus in BTC, Celsius will give $50 worth of BTC and Blockfi will offer $10 but please read their terms. Let’s dive in!
Celsius was founded in 2017 by Alex Mashinsky. Celsius is a US-based crypto lending platform. It also pays interest weekly. Celsius currently has over $21 billion in community assets and 734,000 customers.
Celsius has an APY of about 8.5%. Celsius supports any USD token but also has its own native token, the CEL and it is used to determine customer loyalty level. The amount of interest paid depends on the tokens held and what proportion of your portfolio is held in CEL. For example, if you have 5–10% CEL token holdings, you are Bronze level and you have 5% bonus rewards. Compare this to if you’re in the Silver level, you have 10–15% CEL token holdings and get10% bonus rewards. The same goes for the gold and platinum levels with 15% and 25% bonuses respectively.
Celsius doesn’t charge any withdrawal fees or transaction fees so it is absolutely free to use.
BlockFi is a centralized finance platform that was founded in 2017. The interest rates on BlockFi vary depending on the amount you deposit. You can earn between 8% to about 9.25% interest on your crypto stablecoin holdings. Interest accumulates daily and is added to your account monthly so BlockFi pays your interest monthly. The account has no minimum balance requirement, this means that whatever you deposit, starts earning interest as soon as possible. One of the cons of using BlockFi is that it only allows one free withdrawal a month after which they charge a small fee. They also let you choose the crypto asset your interest payments will be made in, whether it’s in Bitcoin, Ether or stablecoin. BlockFi doesn’t have its own native currency but it supports DAI token, USDC, PAX, GUSD, BUSD, and USDT. You can earn interest in your choice of cryptocurrency. BlockFi is the first company to launch a Bitcoin rewards credit card that earns 1.5% back in Bitcoin if you purchase anything. Your rewards will be added to your interest account.
Nexo was deployed as a platform in 2018 and it supports any USD token. Unlike BlockFi, Nexo has its own native token, called NEXO. If you choose to receive your interest in NEXO (that is the Nexo token), you get paid a higher percentage. In other words, If you want maximum interest on your coins, you should hold the Nexo token.
Nexo offers daily interest payments and also has high APY. It has an APY of up to 12% on stable coins. In terms of Insurance, Nexo’s total insurance is currently at about $375 million.
Crypto.com is another CeFi platform that offers up to 14% in interest on stablecoins. It was founded in June 2016. It also supports any USD token.
Crypto.com offers weekly interest payments. Just like Nexo, crypto.com also has its own native token, called the CRO.
To conclude, stablecoins promises price stability that is necessary for mass adoption and everyday use. So if you’re an investor in the cryptocurrency world or looking to be an investor with a low/moderate risk appetite, or just want a place to park your money, dealing in stablecoins is a safe space for you.
Please note that when it comes to which one to actually use I have no answer for that. Everything has its own pros and cons, so make sure to do your research diligently and figure out the one that works for you best.
Finally, if this article has helped you in one way or the other, please share it with your friends.
Do you want to learn more about crypto, NFTs, and the Metaverse?
🚀 Follow me if you like this content and also check my blockchain and NFT courses: