Crypto lending can help you earn interest by finding a digital currency exchange or DApp, offering cryptocurrency accounts.
Digital Currency has offered developers and investors the opportunity to introduce new financial tools, giving many options to earn.
Holding these digital currencies gives investors the chance to make a profit over months and years, but there are several other ways to increase your assets, even in a bear market.
Other than holding up your Currency, these account gives the option to stem up the funds by earning interest. Digital Currency (Cryptocurrency) interest accounts are high in demand because they give much higher returns than simple accounts.
Crypto Saving Account
An interesting account is referred to as the DeFi platform service that allows you to earn interest on Cryptocurrency Assets that you have deposited in your account and granted out in exchange for a return.
It is much more similar to a service provided by banks for Saving Accounts that will invest your money for some time and give you interest.
By definition, this technology encourages customers to become liberated from other parties other than providing ease. These companies will also hold the risk of insolvency. Some reputed companies also offer insurance to protect their users.
Working on a Crypto Account
Once you have deposited your Currency in your digital account, you start making interest on it from the very first day. There are more than 10000 cryptocurrencies among the following are famous, BITCOIN(BTC), ETHER(ETH), LITECOIN(LTC), and USDT.
By deposing your Currency in any digital platform, you give them full access to use or utilize your money in any case, like holding it or investing in any other currency.
While locking up your account, which means holding your Currency for a longer period, gives you more favourable rates of 4 to 5 %.
Investing In A Crypto Savings Plan
If you want to invest in a crypto savings plan, then here are the steps:
- Choose a cryptocurrency platform you trust that offers a realistic interest rate.
- Transfer cryptocurrency to this selected platform.
- Follow these few simple steps for depositing your crypto assets into a crypto saving account. Usually, these steps are quite simple, and you’ll get full guidelines from the platform.
- If you want to deposit your digital asset for a limited time or choose a flexible time that enables you to withdraw your cryptocurrency anytime.
- You can then start earning interest each day.
As mentioned earlier, there are many platforms you can choose from, including well-formed cryptocurrency exchanges such as Coinbase.
Binance is another worldwide popular crypto platform offering interest rates on many cryptocurrencies with flexible savings and locked saving options.
Crypto.com and Nexo are among firms that offer greater interest rates to crypto holders who lock their assets for weeks or months. But the main drawback with this type of savings account is that you cannot withdraw or sell your cryptocurrency during that period.
The interest you can earn with crypto savings accounts mainly depends on the platform and the cryptocurrency you choose to deposit. The interest rate that is given by the service will also be driven by market conditions. It is usually paid out in the cryptocurrency you have deposited.
Their high-interest rates can excite you; however, you should consider how secure your investment is with them. Therefore, selecting the best cryptocurrency interest account is not simply comparing interest rates paid. It also makes sure your investment is as safe as possible.
You need to remember that they are custodians of your cryptocurrency assets, which shows that by holding your funds, they can even hinder you from withdrawing them or delaying the process of withdrawal, which may result in a loss for you if the value of the cryptocurrency asset changes in the meantime.
When you choose the best interest rates, make sure you understand the difference between the APY (Annual percentage yield) and APR (Annual percentage rate), as they might mislead you in calculating your yearly returns.
In short, an Annual percentage yield includes a compound interest that is the addition of interest to the principal total of a loan or deposit. Whereas APR does not include compound interest.
Due to the compound interest factor, APY provides a higher return than APR. Yet it’s always worth reading the safety account’s small print as certain services will pay simple interest only and won’t produce compound interest with time.
Crypto Saving Account Risks
One of the major risks regarding crypto saving account is that it is mostly unregulated.
Therefore, the investors might not have any cover in case something goes wrong with their assets.
In this framework, crypto savings accounts that don’t offer government-backed deposit insurance are like the Federal Deposit Insurance Corporation or National Credit Union Administration.
Such savings accounts provide higher yields as they are riskier. For instance, they could limit how fast you can withdraw your assets, and, in times of difficulties, they might not let customers withdraw them.
These savings accounts are much more exciting for an investor than a typical bank account. But, for these accounts to give such a high interest that can be over 20%, you should wonder how your money is employed.
Furthermore, they are lending more than they have to financial institutions. There is no deposit insurance to back them, such as in the case of conventional banks.
Crypto Savings Accounts vs. Crypto Wallets
| Crypto savings account | Crypto wallets |
| conceived to increase the number of coins you possess overtime | Won’t accrue your crypto holdings |
| At the expense of key ownership, private keys that enable you to access coins are maintained by the crypto platform. | Make sure you keep full ownership of your private keys. |
| Holds private keys as it is potentially at risk of becoming insolvent, hacked bankrupt, and you can lose your money. | You need to choose your wallet carefully so that you avoid services with less security and vulnerability to hacking. You need to ensure you can access your wallet’s private keys conveniently. |
Also Read: BEST CRYPTO EXCHANGE WALLETS OF 2022
Wrapping up
Cryptocurrency is an emerging field and will likely undergo a continuous progressive change over time, typically in regulations, which can affect how crypto savings accounts are managed.
The issues of leading crypto lending platforms such as Celsius and Block. Fi has raised many concerns over the future of crypto savings accounts and the same related cryptocurrency services.