Cryptocurrency owners are not just bragging about outlandish returns — there’s also the yield. Today, many platforms help you earn high returns just by depositing your crypto assets. The idea seems to be gaining quick ground: Deposits in decentralized finance (DeFi) applications grew from about $1 billion in June 2020 to just under $40 billion by late January 2021. But questions loom: How does it work? How high is the interest rate? Are there any risks? Who is it ideal for? This article covers all your questions and hopefully more so that you can get a solid understanding of interest-earning crypto accounts. How a Cryptocurrency Interest-Earning Account Works The premise of an interest-earning crypto account is the same as a regular savings account. You deposit your Bitcoin or altcoin and earn compound interest on your assets. The only difference is that the rate of return is significantly higher compared to traditional savings account rates. You can also receive weekly payouts to your wallets and withdraw funds anytime. Currently, the most you can earn from a savings account in the U.S. is 0.7% annual percentage yield (APY), offered by Sallie Mae’s SmartyPig account — 11 times the FDIC’s national average of 0.06%. Crypto interest-earning accounts offer interests up to 7.5% APY, on average. But some platforms can even allow you to earn interest up to 12.73% APY on your cryptocurrencies — no lock-up or deposit limits. The interest is driven by market effects and is paid out in cryptocurrency. You may need to pay a withdrawal fee, which is regularly adjusted according to blockchain conditions. Your platform can offer you high interest because it lends your crypto assets to individuals, corporations or institutions that use it depending on their business functions. The borrowers return the assets with high interest, and your platform takes a small portion of the interest and passes the rest to you.
Protected by Patchstack