What is Ethereum? How to earn the interest of Ethereum?
What is Ethereum? How to earn the interest of Ethereum? In terms of market value, Ethereum is the second largest cryptocurrency. In the past 12 months, its appreciation rate has exceeded that of Bitcoin. Ethereum is different from Bitcoin because you can use smart contracts on its blockchain. The smart contract is the code on the Ethereum blockchain. It can independently handle encrypted assets and enable you to earn interest on Ethereum tokens in a unique way.
What is Ethereum?
Ethereum is the pioneer of universal blockchain. It serves as the foundation for thousands of other applications and tokens. The most innovative part of Ethereum is its support for smart contracts, which has been replicated by many new cryptocurrencies, such as Coin Security Smart Chain and Solana. Smart contracts are programmable and automatically executed contracts written in code in the blockchain. They are tools used by a new generation of excellent software developers to build complex applications on Ethereum and similar networks. Developers can also create their own tokens on the network, called ERC-20 tokens, and build them into their platforms.
Smart contracts allow decentralized applications (DApps) such as Uniswap, SushiSwap, Aave, and Yearn Finance. These platforms provide loans, loans, interest and other financial services. If you are used to the savings account interest paid by the bank, the figures touted by these platforms may surprise you. Platforms like Sushiswap can give your password 5% to 200% APY. This activity is often called high-yield agriculture, which is reasonable. Over time, gamblers can get huge profits from their passwords, but this can also be extremely dangerous. A relatively small possibility exists that they may lose all their cryptogamous crops.
Two ways to earn Ethereum interest
The two most common ways to earn Ethereum interest are through Ethereum bets and loans. BlockFi and other loan platforms provide savings accounts with annual interest rates between 5.25% and 6.35%. These platforms use your funds to provide loans to institutional and retail investors and provide you with competitive interest rates for this purpose.
Or, you can bet that your Ethereum will earn 4% to 10% of the profits every year on the Eth 2.0 beacon chain. Ethereum betting is being used to upgrade the share consensus of Ethereum blockchain using the so-called evidence.
This upgrade will reduce the transaction cost of the Ethereum blockchain and significantly improve the transaction throughput of the blockchain. If you choose to bet your Ethernet token, you will not be able to withdraw your funds until the Eth 2.0 upgrade is completed later this year.
Step 1: Open an encrypted account
There are many platforms that allow you to earn interest in Ether. This interest is paid to you by Ethereum, so if the Ethereum token appreciates, your initial investment and interest will both appreciate. On the contrary, if Ethereum depreciates, your interest and initial investment will also depreciate.
Some of the top lending platforms that provide Ethereum with competitive interest bearing savings accounts are BlockFi and Nexio Io, these platforms also allow you to use cryptocurrency for loans, but you need to use cryptocurrency as collateral. This is a good choice for investors who may need loans but do not want to sell their cryptocurrency assets.
You can also use Cryptocurrency Exchange to create an account to invest in Ethereum. Betting Ethereum is a great way to earn interest, because it is a safe and simple way to earn more Ethereum. You can join the waiting list to bet on Ethereum in the Bitcoin base, or start betting on Ethereum in the Beihai giant demon today.
If you want to bet on Ethereum independently, you can use an Ethereum wallet similar to Argent. However, you need to have 32 Ethereum tokens to bet independently. The exchange collects investors' passwords and stores them in the blockchain, so you can store any number of Ethereum in Bitcoin Base or Beihai Giant Demon. These exchanges charge a management fee for betting on your Ether, taking about 15% to 25% of the interest you earn.
Step 2: Look at the interest rate
For the cryptocurrency lending platform, the interest rate is calculated according to the supply and demand of loans on the platform. Although these interest rates are relatively stable, they cannot guarantee that you can earn 5% to 7% annually in the long run. It is a good idea to monitor the interest rate you earn on Ethereum at regular intervals so that you can know exactly how much interest you earn.
If you decide to bet your Ether, the interest rate you get from your bet will fluctuate with the supply of Ether on the blockchain. It is estimated that Ethereum Bet will get 5% to 10% return every year. The Ether you win from your bet will be distributed proportionally among all bets in the blockchain, so the more investors bet on Ether, the less interest you will get.
Step 3: Add Ethereum to your portfolio
To fund your account on these platforms, you need an Ethereum token. If you do not have an Ethereum token, you can use your bank account to wire transfer funds to your BlockFi account. Otherwise, you need to buy Ethereum in the crypto exchange and send your token to the platform where you want to earn interest.
Some exchanges, such as Bitcoin Base and Beihai Giant Demon, let you directly earn the interest of Ether in their exchanges in the form of Ether bets.
Step 4: earn interest
The interest rate you earn will vary depending on whether you bet on Ether or use the lending platform. If you bet your Ethernet token on Eth 2.0, your token will be locked for at least one year, so even if the interest rate drops, you cannot deposit or withdraw your funds.
If you earn interest on a loan platform, you should monitor the fluctuation of interest rate, because you can use several platforms to earn the highest interest. Different platforms have different interest rates, and each cryptocurrency has different interest rates. Some investors choose to switch between different cryptocurrencies to earn the highest possible interest rate.
How does Ethereum compound interest work?
Most platforms that offer cryptocurrency interest offer compound interest. Compound interest will add the interest you earn to your account, so you can get the interest from your initial investment, plus the interest you have already earned.
BlockFi compound interest every month, while Ethereum bet does not compound interest at all. In the long run, looking for compound interest of Ethereum may allow you to gain more than simple interest.
Advantages and disadvantages of Ethereum earning interest
Although it has obvious advantages to earn interest from Ethereum, it is a more risky investment than ordinary savings accounts. Although the risk of crypto savings account is low, you will still face the risk of cryptocurrency, a highly volatile asset.
Let's take a look at the risks associated with Ethereum's volatility. Suppose you use Ethereum to earn interest on BlockFi, and you invest 10 Ethereum tokens worth 15000 dollars (1500 dollars per token). If Ethereum is worth $2500 at the end of the year, your initial investment will be worth $25,000, and you will receive interest from that $25,000 plus any accrued interest.
Or, if Ethereum is worth $1000 at the end of the year, your account value will be reduced to $10000 plus any accrued interest. The accrued interest on your investment will increase the amount of Ether you own, but the dollar value of your savings account will decrease.
Should you bet on Ethereum?
Betting your Ether is a good way to increase your cryptocurrency holdings. The funds you bet on Ethereum blockchain will be locked until Eth 2.0 is fully launched, and the launch date has not been determined. If you bet with your Ethereum token, you need to accept that you cannot use your token for one year.