Generating income with cryptocurrency used to involve a lot of patience and luck. You’d find a cryptocurrency you think would appreciate in value, buy it, then wait for it to rise in value before selling it for a profit. The whole process is risky and demanding. Therefore, many crypto holders opt for HODLing, where they buy tokens and let them remain secure in a crypto wallet (preferably cold wallets) as they wait to sell them later. Such assets would remain idle, generating no regular income for the owner.
However, things have currently changed. You can now leverage your idle crypto to earn more income without waiting to sell them. Some of the ways you can generate more money and rake in crypto interest with your crypto holdings are staking, crypto interest accounts, DeFi, and yield farming.
While most DeFi offers simple interest (APR), some projects offer compounded interest (APY) hence the higher interest. Hi.com allows users to earn high APY.
Crypto Interest Terms
Before you start investing and earning crypto interest, it’s important to understand a few key terms related to earning crypto interest.
Simple Interest vs. Compound Interest
Interest is the reward you get for lending your crypto asset to a crypto institution program or saving it in an interesting account. Interest is usually stated as a percentage and can be compounded or simple. Simple interest is based on the principle of the lent amount. On the other hand, compound interest is based on the principle amount and cumulative interest on every period. Calculating Simple interest is quite easy as it involves only the principal amount of a deposit. Therefore, many DeFi projects offer simple interest. However, compound interest can earn you more income in the end as the principle keep growing.
Simple interest and compound interest are described by the words annual percentage rate (APR) and annual percentage yield (APY). Sometimes, people may incorrectly use these terms interchangeably.
Annual Percentage Rate (APR)
APR is the annual rate interest that you earn when you lend your crypto assets to a crypto interest-earning project. You earn this reward by making your crypto tokens accessible for loans. Different platforms offer different APR terms. Therefore, it is important to find a platform that offers higher interest rates. Exchange platforms offer two types of loans: Fixed lending and Flexible lending.
Fixed lending operates like a bank-certified deposit (CD). It keeps your money for a specific length of time, typically seven to ninety days, at a fixed rate. This type of lending has a greater compound crypto interest rate.
Flexible lending operates like a savings account. However, this model allows you to withdraw your crypto anytime. The rate of interest for flexible lending is lower than that of fixed lending.
An example, if you lend a project token worth $10,000 at an APR of 10%, you will get a $1000 reward at the end of the year.
As an investor, you must keep in mind that cryptocurrency is very volatile. Therefore, the amount of APR you earn may vary. Many crypto programs appeal to investors who want to keep their coins over the long term. For such, passive income through APR will add value to their portfolio.
Annual Percentage Yield (APY)
APY sometimes referred to as “interest on interest,” reinvests your interest and adds it to the initial sum of the deposit. APY leads to the growth of interest over time. In the DeFi community, a few protocols, such as Hi.com, offer automatic APY investment products for investors. Therefore, many traders will claim the rewards for their staking and reinvest the money into staking to earn higher profit next time. Thus, they create compounding interest in crypto on their own. Simple interest, which does not add your earned interest to your initial deposit (principal) to boost growth, is far less profitable than compound interest.
Suppose you staked 10,000 HI tokens with hi.com at an interest of 40%. Over the first year, you get 40% interest, which is 4,000 tokens. This reward adds to your staked amount automatically so that you have 14,000 HI dollar tokens as the new principal for the second period. As the second period ends, you get 10% interest in 14,000 tokens, which is 5,600 tokens. Again you reinvest these rewards, adding them to your principal at the end of the second year. You will have 19,600 tokens as your investment at the beginning of the third period. With 40% interest, your total amount at the end of the third period will be 27,440 tokens.
If you were dealing with simple interest, you would have 22,000 tokens at the end of the third period. The scenario will be the same if you collect your interest after every period leaving only the initial principal. This difference may not seem very big at the beginning, but over time, it grows bigger.
Leading Crypto Compounding Platforms
Depending on the coin that you choose, your annual income for compounding will vary. Investing with a reliable platform is the best way to protect your investment. Here is a list of the popular platforms you should consider when looking for somewhere to compound your digital token.
PancakeSwap is one of the popular decentralized exchanges (DEXs). It uses an automatic market maker (AMM) that runs on the Binance Smart Chain (BSC). PancakeSwap offers various interest-earning products such as yield farming and staking services. Investors can stake CAKE for zero fees through Auto CAKE Syrup Pool. Users can claim their interest and get the reward through the Auto CAKE bounty.
Users can withdraw their staked funds for no fees as early as 72 hours after staking. Any earlier withdrawal attracts a 0.1% fee. Any time you reset your stake by withdrawing part of it or adding more funds, the withdrawal time is reset. Additionally, you incur a 2% performance fee for any interest you withdraw from your staked funds.
CakeDeFi is one of the consistent and legit crypto compound interest-earning platforms. The platform provides a transparent ecosystem for investors to earn interest while maintaining custody of their investment.
CAKE DeFi offers 5.7% APY for DASH investments and 34.1% on DFI. The platform gives you the option of turning on the automatic service leave it as manual. For the automatic option, the platform converts your rewards to additional funds that earn interest every time the system confirms your rewards.
However, CAKE DeFi supports limited tokens for automatic compounding – Dash Coin (DASH) and DeFi Chain (DFI) token.
BlockFi is one of the oldest DeFi protocols offering compounding services. Founded in 2017, the platform gained people’s trust as a provider of digital asset management services. It boasts many licenses, which builds to its trustworthy profile.
BlockFi offers 4.5% to 8.6% APY, depending on the cryptocurrency. The platform has no limitation on how long investors can hold their token investment. BlockFi also has compound interest opportunities on its interest accounts. The protocol does not charge any fee for the interest account.
BlockFi supports various options for collecting the earnings, including the currency you deposited in or another. However, it has a limited amount of tokens for staking. Examples of supported tokens include BTC, ETH, and LTC.
Drip Network is a relatively new DeFi protocol that was launched in 2021. It uses the Binance Smart Chain (BSC). The Faucet contract enables users to get a 1% return daily for the deposit they make all year round. Therefore, an investor can achieve a maximum of 365% interest from their investment. Their compound interest has a lower tax of 5%. It redirects all the dividends you get from your activity on the platform to the Faucet contract, thus creating a more long-term outlook for users’ investments.
Hi.com is a cryptocurrency DeFi suit that offers a range of products from exchange to interest-generating deposit accounts. The platform offers one of the highest APYs. You can deposit USDT or ETH into the flexible account and earn up to 11% APY. The platform offers up to 40% APY for investors who deposit hi dollar, the native token. Additionally, you can earn up to 25% more in APY if you are entitled to interest boosters. The reward is paid out weekly.
Unlike most platforms, Hi.com does not lock up your investment. Therefore, you can withdraw them anytime.
Hi.com is More Than a Compound Crypto Interest
While compound interest might be the carrot at the end of Hi.com’s stick, it is not the only one. Hi.com is a comprehensive cryptocurrency platform that allows users to manage their digital assets and optimize their portfolio allocation. With your fiat asset, you can increase the amount of money in your account. The deposit and withdrawal procedures are both simple.
The platform also offers an exchange service, where you can buy, sell, or swap cryptocurrency assets.
Hi.com is also offering Crypto Gift Cards that you can purchase and use in gifting your loved ones Bitcoin, Ethereum, HI, and other assets. Users can easily redeem crypto as a gift.
It has an intuitive user interface that is suitable for both experienced and beginner traders.
Cryptocurrency compound interest is fast becoming popular in the crypto market. Knowing how to earn interest with compound crypto interest can enable you to generate more money with your crypto holdings. Unlike APR projects, APY ensures that your principle keeps growing as long as you do not withdraw your interest.