How to Make Money with DeFi?

Can DeFi Make You Rich?

The cryptocurrency market today is in a very interesting situation: on the one hand, crypto tokens have been attracting the attention of tens of millions of people, including institutional investors, for several years now. On the other hand, the industry is just beginning to take shape: countries are introducing legal regulation, large investors, one by one, are transferring part of their assets from the world of traditional finance to cryptocurrencies. But there is no general acceptance yet. And such conditions, when the cryptocurrency strengthens its position, are ideal for those who want to overtake the old-timers of the financial markets and get the maximum benefit from new technologies in the world of digital assets.

The most important change in the field of cryptocurrencies over the past two years has been the shift in focus towards automated financial services, or decentralized finance – DeFi. Today, in order to effectively invest in cryptocurrencies, you need to have an understanding of what DeFi is and how to make money with DeFi.

What Is DeFi Crypto?

DeFi is an ecosystem of decentralized applications (DApps) that are located on top of blockchain networks (mainly the Ethereum network) and operate autonomously, that is, without the participation of any governing body. DeFi projects use open source software and offer users a full range of financial services and products similar to traditional finance services.

How to Invest in DeFi Lending

In order to get a loan from a bank, you need, at a minimum, to have a bank account, and in addition to it, a positive credit history and a stable income, with the ability to confirm it with an appropriate certificate. But more than 500 million adults live without a bank account, and this immediately puts an end to the possibility of lending. But even if you have an account, in order to get a loan, you will most likely have to bypass more than one bank, spend several hours in lines and reveal your personal data at every stage of loan approval. As a result, you still do not have a guarantee of a loan, and if you get one, the bank can revise the conditions at any time and you will pay more than you originally planned.

Decentralized lending removes the barrier between you and the money that is usually needed right here and now: no third party is needed, no approval process. You can get a loan of any size by simply depositing your digital assets as collateral. Moreover, you can act as a bank yourself – deposit your digital assets into credit pools and these funds will bring a stable guaranteed DeFi passive income. 

How to make money in DeFi lending? You receive interest from the liquidity provided to the credit pools, and also buy at a discount the collateral positions of other platform participants when their collateral assets are liquidated. Liquidation occurs when the amount of collateral for a loan falls below the acceptable threshold – the fact is that collateral for a loan is always excessive, and due to this, the risk of losing funds for the lender is eliminated.

Thanks to the redundancy of collateral and the automatic liquidation system, the volatility of the crypto market does not affect creditors in any way. Each creditor can expect that he will receive his funds in full and on time. If the funds are not returned, the platform will automatically sell part of the borrower's collateral in order to pay the installments on time. If the value of the cryptocurrency collateral drops significantly, the system will liquidate the collateral to fully repay the principal and interest.

Where to Buy DeFi Crypto

Decentralized exchanges are the absolute trend of the last two years in the crypto market. Trading on the DEX eliminates the risk of hacking and loss of participants' funds, since all funds are stored exclusively in their wallets, with full security, while the platform only provides the infrastructure for the exchange. All processes on the DEX are absolutely transparent and are regulated by open source smart contracts. Such a scheme proved to be extremely popular in making money with the DeFi field. 

How to make money with DeFi exchanges?  In addition to direct exchange trading, DEXs provide their users with the opportunity to become a market maker and receive a percentage of the platform commission for exchange operations. The exchange conducts transactions with your money, you become a liquidity provider and receive a real passive income. Its size is different for each exchange. DEXs use their own tokens to reduce exchange fees. It is worth paying attention to the DEX tokens of the exchanges, as they can rise in price well after a generous giveaway.

What Is DeFi Passive Income

Staking is a DeFi passive income technology. It can be compared to dividends on shares or interest from a bank deposit. This is the new way that cryptocurrencies multiply. Previously, cryptocurrency was mined – probably, many have heard about farms, ASICs, crazy kilowatts of electricity that are needed for this activity. Mining consumes a lot of energy and money, it is not environmentally friendly. Therefore, staking came to replace it. 

The essence of the process is as follows: the tokens need to be transferred for storage, and for their freezing you receive a reward – it is charged in the same tokens that are frozen on the deposit. In staking, you earn by receiving interest from the number of tokens on deposit. The reward is paid automatically in accordance with the terms of the smart contract. Like everything in DeFi, staking is a completely transparent technology, and you will receive your defi passive income dividends without risk.

How to make money in DeFi staking? Staking rewards are not paid out of thin air, as it might initially seem. It's all about the difference in approaches to validation, i.e. confirmation of transactions in mining and staking. Mining works on the principle of Proof-of-Work, where the condition for proving the work done will be the solution of complex mathematical problems, which can only be done by equipment with powerful characteristics. 

Staking works on the Proof-of-Stake algorithm, where each participant becomes a validator and confirms network transactions.You do not need to have super-equipment for this – in fact, anyone can become a DeFi passive income recipient. 

In general, the above types of earnings are called yield farming. If you’ve heard the phrase before but haven’t fully understood its meaning, then you should know that a successful DeFi farmer is one who has mastered the art of combining staking, lending, and liquidity provision, switching between these types of income, depending on market conditions. You can start with one thing and, having figured it out, take on the development of the following tools. There are also more subtle methods to make money with DeFi, including DeFi passive income models and they should be approached after you have mastered the previous three.

What Is Arbitrage Trading in DeFi  

Arbitrage in DeFi, like in any other market, is operations that are both characterized by low risk and low return corresponding to the level of risk. Such operations are a lot of experienced stock players, and such a method of making money with DeFi is not suitable for a beginner – in arbitrage, you need to logically link several transactions into one in order to earn on the difference in asset prices on different sites. 

How to make money in DeFi arbitrage? The arbitrage specialist earns on the difference in price, and we can safely say that, having mastered the intricacies of this business, you will get a real profession with a guaranteed salary – however, like most jobs with a guaranteed salary, it is not rewarded as generously as the more risky strategies on the market.

How to Make Money with DeFi Flash Loans

A flash loan is, by analogy with the traditional market, trading with leverage. In DeFi, you can also take risks and play ahead of the curve: take a loan, use it in a trading operation, without having any assets as collateral. There is only one condition here, but it is very strict: liquidity must be returned to the pool within a single transaction. That is, if your calculations turned out to be correct and you received a profit, the borrowed funds are immediately credited back. But if you are unlucky, then alas, you will find yourself in the red. 

In DeFi, as always, the borrower bears all the risks, while the lender is protected from loss of funds and earns anyway. The method of earning on flash loans is more suitable for advanced level players. When trading with leverage, you need to understand exactly what and why to do. 

What Is Making Money with DeFi Through NFT

NFT is the latest hot trend in the DeFi market development. The driver of its development was the desire of people to have exclusive rights to various kinds of digital objects, including digitized equivalents of real things. This includes: all kinds of digital art, sports trophies, celebrity cards, exclusive interviews, alternative songs, collectible character packs, and thousands of other copyright items. 

The future of this industry is predicted to be the brightest, since NFT technology opens up vast prospects for organizing the transfer of ownership of any objects – even real estate and land ownership.

How to make money in DeFi NFT sector? Theoretically, everyone can make money on NFT, but everything is not so simple here. The main risk is that a unique product becomes the object of trading – one of a kind – which is a priori illiquid, and the ability to sell it directly depends on the presence of the token creator's audience. Therefore, anyone can issue a token, but only a well-known person can sell his NFT for millions. There is another way of  making money with DeFi: buy NFT with the expectation of selling it later. In general, as with any other assets, analytics, intuition and patience come to the rescue here, since really interesting assets can potentially bring their owner a profit hundreds of times higher than the starting cost of the item.

What Are the Problems You Should Be Aware of When Entering the DeFi Market

Like any other industry in a phase of rapid development, DeFi has its own problems. The most important of them is the high technical complexity of operations in the DeFi market, because, no matter how much we describe ways of earning here, each user has to master them on their own, “in the field”.

Making money with DeFi is not for crypto newbies. It takes a lot of technical knowledge and experience with cryptocurrencies, wallets, and crypto apps just to get started in this area and then gradually learn how to make money with DeFi. And in order to comprehend the subtleties and evaluate all the potential opportunities of decentralized finance, you need to spend a lot of additional effort and time in order to get DeFi passive income. 

DeFi, as the most progressive area of the cryptocurrency market, is definitely worth exploring. Start small: open a wallet and research security issues thoroughly: how to store passwords, verify transactions before sending, so as not to be caught off guard by the fact that all transactions on the blockchain are irreversible.

Your most important advantage is that no matter how slowly you progress, you will still be ten steps ahead of the vast majority who have not even heard of DeFi yet. At the same time, in the future, with the help of DeFi tools, you will be able to organize a real yield farm for yourself, which over the years will bring you more and more tangible income.


Projects using DeFi

Pandora Protocol
PulseChain Chain
PulseChain Chain
Pandora Protocol
Pandora Protocol
Pandora Protocol
Pandora Protocol
Pandora Protocol
Pandora Protocol
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