- Stablecoins are cryptocurrencies whose value is linked to an underlying asset such as the US dollar, gold or another.
- There are decentralized finance (DeFi) platforms that allow users to earn rewards through their holdings in some stablecoin.
It is possible to earn interest from stablecoin holdings on some platforms. Admittedly, the return to be gained from a stablecoin may not be as significant as trading or staking a volatile crypto, but it still represents a slightly more reliable source of income.
A stablecoin is a cryptocurrency that, unlike the rest, its value is determined by another asset such as the US dollar or even gold. In this sense, this type of cryptocurrency lacks volatility and therefore allows users to reduce risks.
It is essential to keep in mind that there are different types of stablecoins depending on what type of asset their value is linked to: stablecoin with fiduciary guarantee, stablecoin with guarantee in other cryptocurrencies, stablecoin with guarantee in commodities and stablecoin with algorithmic guarantee.
Thus, stablecoins are not high-yield investments and are generally used to preserve portfolio value, but still they are a good option for investors who want to enter the crypto market without dealing with volatility.
How to get interest from stablecoins?
Since the value of a stablecoin is linked to the value of another relatively stable asset, the only way for the value of its asset to appreciate is for the value of the underlying asset to appreciate. However, this does not mean that you cannot earn additional income from your stablecoin holdings.
In particular, centralized stablecoins, such as USDT (Tether) and USDC, allow you to generate passive income through lending which work in a similar way to the interests of a savings account in a traditional bank. While other stablecoins allow users to deposit their assets in a Decentralized Finance (DeFi) protocol and get rewards for keeping the network secure, that is, they allow stake, for adding liquidity to pools or granting the cryptocurrencies in the form of a loan.
It is essential not to lose sight of the fact that they are stablecoins does not mean that they are completely risk-free. Taking this into account, let’s talk about the best DeFi platforms to obtain returns from Stablecoins.
Anchor Protocol
Anchor Protocol is a decentralized savings protocol that seeks to offer low volatility returns on deposits in the Terra stablecoin. It uses the collateral liquidation process in order to ensure that capital is safe and secure.
Anchor Protocol works by relying on three key components: bAssets, the money market, and loan settlement. A bAsset, or linked asset, consists of a token that represents ownership of a staked asset within the Proof of Stake (PoS) consensus mechanism.
It is necessary to remember that the PoS consensus mechanism requires the existence of several validators in the network that manage to reach a consensus and are awarded rewards for it. But, to be a validator, a certain amount of the token must be committed to the blockchain. This means that the tokens will be blocked in the network and cannot be used in a certain time.
bAssets are transportable and fungible, unlike a staking asset. This allows investors to transact in the same way as they do with the underlying PoS asset. In other words, it allows collecting rewards without losing the liquidity and fungibility of the asset that is staking.
rewards
Previously Anchor Protocol offered a stable rate of return of around 20% per annum on the Terra US (UST) stablecoin. However, the community that owns the Anchor governance token (ANC) voted to change it to a variable interest rate. Even so, Anchor Protocol is one of the platforms that offers some of the best interest rates on stablecoins.
At the time of writing, the APY is 19.32%. To earn this interest rate, you’ll need to deposit your UST funds for at least one year; Otherwise, the interest rates decrease if the deposit is made for a shorter period of time.
SpookySwap Finance
SpookySwap is an automated market making (AMM) decentralized crypto exchange (DEX) for the Fantom Opera network. Being a DEX, SpookySwap offers services from cryptocurrency trading to farming.
A fundamental aspect is that SpookySwap has a native token called BOO, being the government token. It also has a wide variety of farming options, built-in blockchain bridges, and a user-centric service.
rewards
Users can earn rewards when adding liquidity and when staking on farms.
To those who add liquidity to the pools, they will receive 0.2% of the commissions for the transactions that take place in the pool. One aspect to keep in mind is that, to add liquidity in a pool, the user is required to provide an equal amount of both tokens that make up the pool.
On the other hand, users can access yield farms where they deposit their tokens in a Liquidity Pool and earn additional income.
At the moment the Pool with the highest yield is the USDC/BOO pair with an APR of 50.77%. By adding liquidity to the farms, the user will receive 0.2% of the commissions and earn BOO token depending on the APR of the farm.
There is currently US$773 million on deposit in the protocol.
Finance Cream
Finance Cream is a liquidity protocol on the Solana blockchain. Their main product is their Concentrated Liquidity Market Maker (CLMM), which is an algorithm to power decentralized trading.
Unlike the AMM, liquidity providers can set specific price ranges at which they want their liquidity to trade. In the AMM model, only liquidity close to the real-time trading price will be used, meaning that a large proportion of contributed capital will remain unused in the long term.
rewards
By being able to control the price range of your liquidity positions, you will theoretically not suffer temporary losses. Temporary losses occur when you provide liquidity to a pool and the price of your deposited assets changes compared to when the deposit was made.
Crema Finance currently offers different pairs of stablecoins to farm with them. For example, the UST/USDC pair offers an APR of 36.77% and the USDT/USDC pair offers an APR of 25.68%.
Curve
Curve is an automated market making (AMM) protocol that allows its users to trade between stablecoins with low fees. It is a decentralized liquidity aggregator. That is, like the other platforms, users can add their assets to different liquidity pools and get rewards.
By focusing on stablecoins, Curve allows investors to not have to expose themselves to cryptocurrencies with higher volatility while earning high interest rates from lending protocols.
rewards
As with other protocols, whenever someone trades in any way on Curve, the Liquidity Providers (LPs) will receive a transaction fee, so if Curve’s trading volume increases, so does the LP’s annualized revenue. they will do it.
If you provide loan tokens, you will be able to generate more income as additional interest will be given to you. Reward rates on the CRV token range from 3% to 10% depending on the pool that is selected. Supported stablecoins are USDT, USDC, DAI, GUSD, BUSD, UST, EURS, and sUSD.
There is currently a total of $19.7 billion USD deposited and a daily volume of $2.5 billion USD.
Aave
Aave is a protocol that allows investors to lend and borrow cryptocurrencies from any other investor without the need for a middleman. In case of lending, the investor will earn interest.
Being built on the Ethereum blockchain, Aaave supports all ERC-20 tokens. However, they also allow other blockchains like Avalanche and Polygon.
The protocol is open source, this means that anyone can create any third party service or application to interact with the protocol and enrich their product. Additionally, the protocol has been audited.
rewards
Thanks to the use of Smart Contracts, there is no intermediary that connects a person who wants to give their money as a loan and one who wants to request a loan.
An important aspect to keep in mind is that to borrow in Aave it is required to place a guarantee in cryptocurrency and given the volatility, DeFi platforms usually require a guarantee superior to the loan that is requested.
So if you borrow US$500 on Aaave, you will need to deposit a larger amount in a different cryptocurrency. This way, if the price of the cryptocurrency crashes and the collateral amount no longer covers the amount you borrowed, your collateral is liquidated to cover the cost of the loan.
However, the investor can find himself on the other side: be the one who lends and earn interest for it. In this case, rewards depend on loan interest rates and Flash Loan fees.
Supported stablecoins are BUSD, DAI, sUSD, TUSD, USDC, USDP, USDT, UST.
For example, lending BUSD offers an APY of 3.49% while with USDT the APY would be 2.70%.
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