Decentralized Finance, otherwise known as DeFi, represents one of the easiest ways to earn cryptocurrencies in 2020. The sector exploded as a result of the high demand for blockchain technology in finance applications. Moreover, new techniques that practically replaced mining meant that investors could receive more money than they could previously earn.
With token swapping and liquidity farming, a new era of the cryptocurrency industry began. And the pure interest in DeFi and its value can be seen through users locking their old crypto assets into new DeFi platforms. In September, investors locked almost $10 billion in collateralized assets, marking it a new record for the sector.
In this article, we will show you the best ways to earn in DeFi and what techniques give the best returns. While not every technique may be suitable for you, we guarantee at least one that will help you earn passive income. Earning in DeFi is a process of trial and error so do not let past failures hinder your motivation to succeed. If a riskier option does not work you, a more stable one will definitely do the trick.
What crypto enthusiasts refer to when talking about token swapping today is completely different from the past years. Previously, token swapping was a process where projects would migrate their native token from one blockchain network to another. While the mention of token swapping did have a price impact at that time, as the result of developers finally launching native networks, token swapping in 2020 brings even more money.
In most cases, token swapping today represents the process of swapping one token to another. How does this earn you money and why do investors even swap tokens? Well, it all started out with the boom of DeFi projects and their listing issues. In the past, centralized exchanges required crypto projects to reach certain requirements before listing them. For example, they would need to have a sizeable community, significant trading volume, high developer reputation, and other factors.
In reality, most startup teams that create a cryptocurrency barely have any of that. Even if they did meet these requirements, they still required the money to pay for huge listing fees. With that in mind, DeFi developers made the choice to migrate to decentralized exchanges.
Decentralized exchanges (DEX) most of the time demand no requirements for token listing. Furthermore, some DEXs employ an automatic market maker (AMM) instead of a traditional order book. With an AMM, investors trade with each other instead of trading with the exchange.
Where is the money in this?
Before liquidity farming propelled DeFi to new highs, investors initially made money by token swapping. After exchanging Ether and paying a small gas fee, DEX users can purchase new tokens that are not listed anywhere else. By doing so, investors can effectively ‘buy low and sell high’ before major exchanges list the token and catapult their price. With proper fundamental analysis, investors can revise the true value of a new project and speculate on its future price. Compared to traditional markets, token swapping is comparable to penny stocks with the difference that DeFi tokens have a higher chance to pump.
If you are a veteran of the cryptocurrency community, you already know which aspects to keep track of when deciding if a project is good or not. If not, we recommend that you start out by checking the following basic things:
Is the team anonymous?
Do they offer unrealistic returns and sound too good to be true?
If not anonymous, have the devs previously participated in controversial projects?
Does the platform look like it just copied another project?
If you checked all of these factors, then you will most likely have more luck with a different project. Luckily, there is a sea of DeFi projects waiting to be discovered.
Providing liquidity on Anyswap
Liquidity providing, also known as liquidity farming, is the process of temporarily lending your assets to a platform to increase their liquidity. As liquidity is a major issue when interest in markets is low, exchanges figured a way to attract cash flow and keep markets stable by rewarding investors.
You may ask yourself, is it really that safe to lend hard-earned assets to a decentralized exchange? New investors tend to ask this before becoming a ‘farmer,’ but they always rest assured in the end. Decentralized exchanges work based on how they are coded, everything is practically automatized. This means that no central entity controls your assets, making it even safer to use than centralized exchanges.
The best way to earn the highest returns as a farmer is to search for platforms that offer the highest rewards. Searching is almost a constant activity in the life of a farmer. However, it doesn’t have to be. DeFi platforms that are still not popular but provide innovative and rewarding features are real hidden gems in DeFi. With that in mind, we recommend Anyswap.
Anyswap is an open-source cross-chain DEX launched in July 2020 that offers token swaps and liquidity farming pools while utilizing low fees and high rewards. The DEX’s safety is established through the adoption of the Distributed Control Rights Management (DCRM) technology from finance ecosystem protocol Fusion. Through DCRM, investors can safely and in a decentralized way swap tokens as well as provide liquidity.
Launched in July, the platform succeeded in attracting a significant number of users and collateralized assets in only one month. Anyswap reports having $169 million in trading volume and 598,000 token swaps in the first 30 days. Moreover, the platform recently joined the Binance Smart Chain and enjoys partnerships with leading exchanges such as Hotbit.
Why do farmers earn so much on Anyswap?
Their native ANY governance token is the main reason why Anyswap is so effective for investors. With the token, holders have the possibility to vote for future changes. Moreover, Anyswap rewards liquidity providers with ANY tokens. Providers receive 9900 ANY every single day. Combined with the usual rewards from lending assets, users earn significantly more money compared to other popular platforms. Anyswap offers FSN/aUSDT, FSN/aETH, and FSN-ANY liquidity pools. In September, these LPs rewarded farmers with a 296%, 119%, and 183% APY respectively. Farmers who joined FSN/aUSDT and FSN/aETH LPs earned around 950 ANY per pool. Meanwhile, the FSN-ANY pool rewarded farmers significantly higher, with 14605 ANY per day.
Low gas fees are another reason why Anyswap is better than other solutions. Through the help of the Fusion blockchain, farmers pay less than $0.0001 in gas fees, lower than any other platform in DeFi. In this case, farmers earn higher profits as they do not have to pay exorbitant fees for lending tokens. With significant network congestion on Ethereum, platforms such as Uniswap charge up to $40 for token swapping or liquidity farming.
Some liquidity providers reported more than $3000 in rewards every day. In one specific case, a happy farmer shared with the community that he earned $150 every hour by using a stablecoin liquidity pool. He stated that it was more than just a passive income for him. The user noted that platforms such as Anyswap completely replace earnings from traditional job prospects.
While speculation may be the riskiest way to earn money in DeFi, it is certainly the highest rewarding path. One way to earn DeFi tokens in 2020 is through pure speculation. Not only will investors earn money by doing so, but they will also learn the technical knowledge they need to succeed as a trader. Remember, not everyone needs to know technical analysis to be an investor in this era. Today, investors and traders must be technologically adept to succeed.
Fundamental analysis (FA) is the only tool you will need to successfully speculate. Compared to technical analysis, FA requires no chart reading. All you need to do is constantly track the development of the DeFi ecosystem and study its most important aspects. Moreover, you will have to start thinking outside the box and take a look at the bigger picture once in a while.
Traders who only focus on charts and not on what projects really offer often have tunnel vision. This sort of perspective is best described by the English expression of not being able to see the forest for the trees. Trading based on TA may be the best for short-term rewards. However, real investors are known for their skills by thinking long-term. They purchase an asset once at the bottom and sell it at the top like they have mastered their trade.
Where do you start? We recommend that you begin by investing yourself entirely in the sector. Start reading some of the best and earliest cryptocurrency whitepapers to understand what the industry is really about. Join various communities and discussions to share opinions and get a better insight as to how other investors think. It might even help you to start reading articles and other people’s opinions on websites such as Twitter and Hackernoon. Furthermore, it would be beneficial to start understanding the clockwork of certain technologies in the space for a better picture of how developers could utilize them.
All in all, an investor’s best friend is knowledge. If inexperienced, most will not succeed with their first few investment choices. However, enough trial and error will result in you becoming an expert at investing in DeFi projects.
After listing the various ways of how investors can earn money in DeFi, we have concluded that earning money in the current crypto bull cycle is really not that hard. With enough hard work and the right platforms, anyone can join the DeFi bandwagon and make passive income with their digital assets. It may be hard to figure out how everything works and what is best for you in the beginning. Nevertheless, with enough experience, you will become a master of your own trade in no time.
To shortly summarize what we have learned today, token swapping, liquidity farming, and speculation are one of the best ways to earn in DeFi. Tools such as token swapping allow users to become one of the first investors of a newly created asset. Since centralized exchanges rarely list tokens that are not established, investors should look over to decentralized exchanges for easy and safe investments. Moreover, investors that migrate to DEXs will have more control over their assets as no central entity controls them.
By providing liquidity, holders can profit by lending their assets to a platform. Maximizing your rewards can be done by searching for less-known platforms that are secure and provide higher returns are the same time. Some of them such as Anyswap not only provide the usual rewards for providing liquidity. With the native ANY governance token, Anyswap users earn an additional source of income which increases their profits. Moreover, these users ensure the safety of their assets as the platform uses Fusion’s DCRM technology for decentralized custodial purposes.
Lastly, speculation is the riskiest but most rewarding way to earn in DeFi. Crypto enthusiasts who decide to become investors can speculate on various new projects in the sector to earn returns higher than normal. Furthermore, speculation not only builds an excellent portfolio, but it also builds your knowledge of the industry allowing you to become an expert in the DeFi space.
In the end, everyone is different and sometimes suited for one specific thing. While one user may be better at speculating, others might find their luck in the stable and passive income of providing liquidity. If you have not any of the listed ideas before, it may be worth to try everything at a slow pace to find out what option is the best for you.