Crypto Academy Season 2, Week 7 - Homework Post for @imagen | Different Methods to Generate Income with Cryptocurrencies

Hello Everyone,

Generating income is always a useful topic 😉, because everyone search way to grow their digital currency. In this lesson crypto professor @imagen has covered many areas that crypto enthusiastic can look for.

In today's world we do not have to wait for bank interest or stock market to go up for an extra income for our assets. There are many possibilities with cryptocurrency to earn passive income for you.

So, for today's homework I have chosen Cryptocurrency Lending

Introduction

As the word suggest, Lending enables you to earn interest income from your funds value, here in crypto lending you can lend crypto currency and stable coins to borrowers in return for interest on their deposit. This interest could earn on daily, weekly, monthly or annual basis.

The platforms are divided into two protocols as DeFi (Decentralized Finance) & CeFi (Centralized Finance). DeFi lending allows complete decentralized and permissionless financial service for users to become lenders or borrowers while CeFi users has to go through a central exchange.

👉 What platform did I choose?

I chose AAVE as my lending platform. It is a DeFi lending platform found in 2017. Formally the platform was named as ETHLend and renamed to Aave in 2018. It offers 17 different cryptocurrencies to choose with stable and variable interest rates to its users.

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👉Why did I choose it?

The main reason I have chose Aave is that they provide comparatively the best interest rate in the market for many currencies. Also, the control over our wallet is 100% secured with retaining our private keys.

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Aave is currently the number 01 DeFi platform for the total value locked in TVL ranking. It has about 08 billion USD assets locked up in DeFi. The security over our funds can be trusted since they are the Difi market leader for lending.

Also, unlike any other DeFi protocols Aave does not require lengthy registrations nor any KYC (Know Your Customer) or AML (Anti Money Laundering) documents to get in to the platform. That is a massive advantage for user as nobody can stolen your personal data.

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Aave uses Ethereum blockchain to run the system and enables non-custodial smart contracts to manage its network on a software. Which makes there is no particular institution or person to manage this network but the code in the software. Aave offers Reduce fees and better loan to value ratio compared to other platforms.

👉 What other types of services Aave offers?

Aave offers services such as,

• Depositing
• Borrowing
• Staking
• Swapping on the DeFi platforms

However, the highlighted feature would be the Flash Loans. This is a unique service for Aave which allow users to borrow crypto with no collateral. They just charge 0.09 fee for each flash loan.

Explain the process to transfer the funds to Aave platform

First let's get access to the platform,

Go to https://aave.com/ & click onto the "Enter App"

Then click "connect"

Here you will see a few options to connect to your wallet,

Choose "Browser wallet" for metamask or "Wallet Connect" for Trust wallet.

I have metamask wallet as a chrome extension so I chose that. If you don't have this wallet you can simply click here to get the wallet: [Metamask wallet Extension] (https://chrome.google.com/webstore/detail/metamask/nkbihfbeogaeaoehlefnkodbefgpgknn).

Once you logged in the icon will change like this, in the chart below you have all the returns and the interest rates. For lending we have to check the deposit returns. I like to lend some USDT so my return interest would be 1.83% APY

This wallet should have the funds we plan to deposit. If you do not have you can deposit the funds from an exchanger. I'll give you an example how to do it on Binance.

Log on to Binance and select "Wallet" and the "Fiat and Spot". Select the currency you wish to transfer to metamask. Click "Withdraw". Make sure your metamask wallet support BSC network before withdrawing money.

You will have a few confirmation pop- ups & authentication checks to complete.

Now go to the Aave app and select "Deposit"

Go to the currency you want to deposit and enter the amount you want to lend.

That's it now I can enjoy some interest for my deposit.

Explain the profitability of the chosen method

While I was searching for lending money for this home work, I found out that Aave gives the highest interest rates for the stable coins. Though it is reduced around 2% now, 03 months back it was around 12% APY. That's an incredible rate to have since even bank does not provide such high rate. However, it is important to understand that there is gas fee involvement for the transaction. Hence you have to be careful how many times you are going to withdraw.

Anyhow, it is still better to have some interest from the money you are holding in exchangers or wallets.

The other benefit I can get in Aave is that when I deposited as asset I can use it as collateral and borrow from Aave borrowing. However, there is a high risk involvement to liquidate money if it wasn't use by a strategy.

Conclusion

Aave offers quick and simple financial services comparative to the other DeFi platforms. They are the market leader for the lending & borrowing for DeFi platforms. That makes them secure and trustworthy platform for its users and the recent growth of the TVL value confirms that. The variable interest rates & gas fee for the withdrawal can be something consider time to time. The interest rates for the stable coins have higher gains with price stability. Features like Flash loans give many opportunities for the users without any cost.

Since the users hold the authority over their accounts they can withdraw the deposit any time with the interest. That is anyway the beauty of Defi system.

Thank you!