How To Earn Interest On Ethereum: Beginner's Guide
Ethereum is the second-largest cryptocurrency by market capitalization and its value has grown at a faster rate over the last 12 months when compared to its contemporary Bitcoin. And with Ethereum's transition from Proof of Work to Proof of Stake consensus mechanism things are looking great for it.
The two most common ways to earn interest on Ethereum are loans and staking. With lending platforms like Celsius and BlockFi, you can open a savings account and earn annual 5% to 6.5% interest rates. These platforms basically use your funds to provide loans to institutional and retail investors and offer you competitive interest rates for that. Another way to earn 4% to 10% annual interest in Ethereum is by staking your Ethereum on the Eth 2.0 beacon. But it's important to note that if you choose to stake your Eth token, you won't be able to withdraw your funds until the Eth 2.0 upgrade completes later this year.
How To Earn Interest On Ethereum?
Step 1: Open Your Crypto Account
There are many platforms that let users like you earn interest on their Ethereum tokens. This interest is paid in Ethereum, so if Ethereum token value goes up then your investment and interest on it will increase with it but if Ethereum token value goes down then your interest earned and investment will go down in value.
There are many great lending platforms like BlockFi, Celsius, etc that offer pretty good interest rates on saving accounts for Ethereum. Apart from the lending platforms, you can also use cryptocurrency exchanges like Binance, Coinbase, etc for staking Ethereum. Staking Ethereum is a great way to earn interest, as it is very simple to earn more Ethereum. If you don't trust lending platforms and crypto exchanges, you can also use Ethereum wallets like Atomic Wallet, Argent, etc.
Step 2: Evaluate Interest Rates Available In Different Platform
The cryptocurrency lending platforms calculate interest rates based on the demand and supply of the loans on their platform. Usually, the interest rates on these platforms remain stable but there is no surety that you will earn 5% to 7% of annual interest over a long period of time, therefore it's always advised to monitor the interest rate you are earning on your Ethereum regularly.
In case, you decide to stake Ethereum tokens, the interest rate to be earned on staking depends on the supply of Ethereum tokens staked on its blockchain. The Ethereum tokens you earn from staking are split proportionally between all staked on its blockchain, therefore more investors staking Ether tokens means less interest for you.
Step 3: Add Ethereum To Your Portfolio
To start earning on these platforms, you need Ethereum tokens. So, if you don't have Ethereum tokens already, you can buy them from crypto exchanges like Coinbase, Binance, WazirX, CoinDCX, etc send your tokens to the platform where you want to earn interest on or use your bank account to wire funds to your BlockFi account.
Many crypto exchanges like Binance, Coinbase, Kraken, etc let you earn interest on your Ether tokens directly on their exchange by staking mechanism.
Step 4: Time To Earn Interest
It's important to note that the interest rate you earn will vary depending on whether you are staking your Ethereum tokens or using a lending platform. If you are staking your tokens on Eth 2.0, your token will be locked until the Eth 2.0 upgrade is complete even if interest rates keep on decreasing.
On the other hand, if you are using a lending platform to earn interest on Ethereum, it is important to keep monitoring your interest rates so that you can optimize your interest earnings.
Should You Stake Ethereum?
Staking your Ethereum tokens is a great way to grow your cryptocurrency holding. As specified earlier, the fund you stake on Eth 2.0 beacon will be locked up until Eth 2.0 upgrades completely and there is no clear set date for the launch yet. So if you are planning to stake your Ethereum token, you will need to be ok with the fact that you will not be able to access your token for up to a year.
We hope that this post has provided you with some interesting and useful information. Thank you so much for reading this post, please feel free to leave your feedback.
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