There may be many hooks for a newcomer to start using decentralized finance or DeFi, but it can be difficult to overlook the most attractive one —the fact that it is an open opportunity for anyone in the world with digital assets, a computer, and internet to generate passive income. By committing their crypto assets into fairly safe decentralized protocols, crypto owners all over the world earn annual percentage yields (APY) that are higher than bank savings returns.
In this article, we go over four of the most well-known DeFi activities that people are using to earn passive income.
Lending is perhaps the most recognized DeFi activity in the space. It’s a straightforward concept: you lend your digital assets to a platform by locking your assets into a smart contract. Borrowers can then access these assets as loans and pay back interest to the platform. Smart contracts distribute the interest accrued to lenders in proportion to what they lock in.
Decentralized Finance platforms are attractive because it’s easy to use— you stake tokens to lock them for lending and unstake them to take them back—and you earn high APYs relative to traditional interest-bearing accounts with banks
As the term implies, staking involves the process of locking in digital assets into a smart contract. Many DeFi platforms also use staking as a means to open what is essentially a savings account on the blockchain. Like a savings account, your balance will accrue additional income, typically in the form of the same type of tokens or another token on the same blockchain.
The Proof-of-stake concept states that a person can validate transactions according to how many tokens they hold. The more you own and stake, the more important your vote is.
But for many DeFi tokens (mainly on Ethereum, which is not yet a proof-of-stake blockchain) , staking is simply a way to encourage users to lock their assets for the long term, with the network revenues shared with stakers as incentive.
Another favorite method for DeFi users is called yield farming. Yield farming lets people earn additional income by providing liquidity. Liquidity providers usually get a specific liquidity pool (LP) token when providing liquidity to pools, which is a token that represents their share in a pool. When redeeming these LP tokens, they receive back their stake plus any share of fees earned.
RoboFi (www.robofi.io) is a Defi platform that envisions a marketplace for revolutionary Dao crypto trading bots. Through its IBO (Initial Bot Offering) system, community members can maximize their earnings in an easy, simple, and secure way. We create a safe and transparent environment based on blockchain technologies that help developers bring crypto trading bot platforms to the market. In addition, individuals will have easy access to these bot applications, thereby generating more earning opportunities. RoboFi ecosystem is fueled by the $VICS token.