How to Earn Interest on Your Cryptocurrency

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Earn Interest on Cryptocurrency
Photo Credit: yale.edu

How to Earn Interest on Your Cryptocurrency. Cryptocurrency has taken the world by storm and has become an exceptionally popular investment medium. However, it is also about so much more. In truth, if you know what you are doing, you can find ways to make your crypto positions make even more money for you. One such way of doing this is by earning interest on your crypto investment.

What is interest?

Interest is one of the more common methods by which people make more money. Its exact definition varies depending on the context, but in this case, interest is essentially the payment that someone makes on a loan. It means that they will ultimately pay you a certain percentage that is more than the original value of the loan that they are repaying. This way, the originator of a loan ultimately can turn a profit. 

Interest rates tend to vary in their calculations, but generally speaking, an investor will look to make more on an interest rate than they would on a traditional investment. They will also want to raise or lower the rate in order to compensate for the risk of a lender. As such, a riskier loan will likely have a higher interest rate. 

What is staking?

Staking is a common process with a crypto transaction. In staking, someone participates in a crypto transaction by contributing the processing power of their computer or hardware to the network. In doing so, an individual can earn rewards that are relative to the amount of processing power contributed. The rewards can vary, but can typically earn another person additional currency. As such, staking is a great way to earn additional dollars to be invested.  

How can you earn interest from your crypto?

The most common way to earn interest on your crypto investment is via crypto loans. According to the crypto experts at SoFi Financial, “…crypto lending is quite similar to traditional lending. With a cryptocurrency loan, a borrower typically offers up their cryptocurrency as collateral to the lender, who gives them cash or a stablecoin cryptocurrency that’s tied to a traditional currency, and charges the borrower interest on the loan.” As such, in crypto lending, you become the bank. Since crypto is essentially a peer-to-peer service, there are many ways that you can become the person who actually lends out the crypto to an investor. They can then use that investment how they see fit – provided that they return the value of the loan and interest to you.

To be clear, crypto lending can be complicated, and there are many risks involved – not the least of which is the rapidly fluctuating and volatile value of many cryptos, like Bitcoin. You will likely want to work with a professional or an app to standardize the process and make sure that your interests are protected. As such, crypto lending is not for everyone. However, for people looking to turn their crypto investment into something more, crypto lending may be an excellent way to go. 

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