To invest in DeFi:
Investors like Mike Tha heavily promote DeFi as the future of investing. He claims to make $250 per day. Another one is Jake Call, who pays his rent through DeFi passive income. He says he makes $1,600 monthly passive income from his DeFi investments. With these success stories, many are curious about how to get started with DeFi investing. However, not everyone seems to buy the get-rich-quick promise.
This Reddit commenter explained that DeFi isn't the place to invest if you want to make 10 times your income in a few months.
DeFi is a very complex space. Beginners might have a hard time determining legit opportunities from Ponzi-scheme ones.
This article aims to explain the step-by-step process of DeFi investing. The top investment strategies, DeFi staking, yield farming, and lending are thoroughly discussed in this article. The pros and cons are enumerated plus real-life examples to help beginners decide if it's the right investment for them.
Step-by-Step Guide on DeFi Investing for Complete Beginners
Set Up a DeFi Wallet
Download a DeFi wallet app or browser extension. Popular choices include MetaMask (over 10 million users), Trust Wallet (trusted by millions), or Coinbase Wallet (part of Coinbase with over 43 million users).
Buy Cryptocurrency
Purchase from popular exchanges like Coinbase, Binance, and Kraken. Coinbase has over 56 million users, Binance is the largest exchange by trading volume, and Kraken is known for its security and regulatory compliance. If you already have crypto, transfer them to your DeFi Wallet so you can use them for investing.
Link Wallet to a DeFi Platform
Most users recommend Uni swap. The leading decentralized exchange platform handles over $10 billion worth of trades every day.
How to Connect crypto.com to Uniswap on iPhone
Choose an Investment Strategy
The top investment strategies are DeFi staking, lending, and yield farming. DeFi staking locks up your cryptocurrency assets in a blockchain network to support its operations. This earns rewards in return. For example, staking Ethereum 2.0 can yield annual returns of 5-7%. Yield farming lends crypto assets to earn interest or other rewards. This provides liquidity to decentralized exchanges (DEXs).
Regularly Track Your Earnings
Most platforms provide real-time updates on your investment performance. Aave and Compound offer detailed dashboards showing interest rates, collateral levels, and borrowing limits. You can also withdraw or reinvest anytime you like.
What are the Top DeFi Investment Strategies?
How to Make Money Through DeFi Staking?
Make money through DeFi staking by moving assets to a DeFi account and earn interest. Get rewards by locking up your crypto assets to support blockchain operations. Look for platforms with good security, reputation, and user reviews. The popular choices are Uniswap, Aave, Compound, and PancakeSwap. Uniswap, for instance, has over $10 billion in daily trading volume.
Connect your wallet to the DeFi platform and follow the steps for staking. Claim rewards daily, weekly, or monthly depending on the agreed conditions. Some platforms, like PancakeSwap, offer flexible staking options where users can choose between fixed and flexible staking periods. You can unstake your crypto assets after a certain period. However, some platforms will set the minimum staking duration. Aave requires 30 days minimum lock-up to earn rewards.
How to Make Money by Staking with Binance According to Fisayo Fosudo
Use cryptocurrency to stake in Binance. This lets you earn passive income by supporting blockchain operations. This includes various staking options like Guaranteed, High Yield, and Auto Invest. Guaranteed is the best option for beginners. It offers flexible returns with fixed and flexible savings. High-yield is another Binance-staking option, but it’s also riskier. Investments that offer higher returns are DeFi Staking, Dual Investment, and Binance Liquid Swap.
Pros and Cons of DeFi Staking
Potential for passive income
Higher returns than traditional savings
First dibs on new tokens
High risk of DeFi market fluctuations
Prone to bugs and hacks
Steep learning curve for beginners
Lock-up periods can limit your investment activities
How Do You Make Money as a Liquidity Provider?
Earn From Trading Fees: Make money by investing in liquidity pools. You'll get paid a portion of the liquidity fees after every trade. Each investor in the liquidity pool is paid in proportion to their share. Glassnode found that liquidity providers on Uniswap earned a 30% APY in 2020.
Incentives From Yield Farming: Earn incentives by staking your LP tokens in special contracts. Sushi swap and PancakeSwap offer yield farming programs where users earn native tokens (SUSHI and CAKE) on top of trading fees.
Staked Tokens Appreciation: As the value of the tokens in the liquidity pool increases, the value of your tokens also increases. For example, Ethereum's (ETH) price increased from $130 in January 2020 to over $4,000 in May 2021. ETH holders experienced substantial gain from token appreciation.
Jake Call Made Full Time Passive Income by Investing in DeFi Liquidity Pools
Jake invested crypto assets, wrapped Bitcoin (WBTC) and MATIC, into liquidity pools on the Polygon network. He earned fees whenever traders swapped tokens in the pool. He had about $14,000 deployed in the WBTC-MATIC pool. This could fluctuate because of the changes in the value of MATIC and Bitcoin. Despite this, Jake remained profitable.
He acknowledged that there are high risks involved in this business. However, he also believes that this can be justified with the 50%-60% APR high-returns for his portfolio.
Pros and Cons of DeFi Lending
Transparent and open for all
Less prone to fraud
Higher gains than traditional bank investments
Cheaper and faster
Prone to hacks and smart contract bugs
Crypto is a highly volatile collateral
DeFi lending is unregulated
Not for beginners
How to Make Money with Yield Farming?
Make money with yield farming by lending or staking cryptocurrency in a DeFi protocol to earn rewards. Yield farming can offer annual percentage yields (APYs) ranging from 5% to over 1,000%, depending on the platform and market conditions. Investors earn interest and new cryptocurrency tokens. For example, platforms like Yearn Finance and Curve Finance have been known to provide high returns during peak periods. Deposit the fund you want to invest in the "lending" section of your chosen platform. After the funds are deposited, you’ll start earning rewards based on the existing yield rates.
Funds can be withdrawn anytime. However, some platforms may have specific conditions or fees for early withdrawal. To do this, simply go to the "withdraw" section of the platform. Aave and Compound offer user-friendly interfaces that allow for easy tracking and withdrawal of funds.
Lucas Rubix's DeFi Yield Farming Strategy in 2024
Lucas' strategy is to build a sustainable and profitable crypto portfolio. He has two main portfolios: crypto cash flow and buy and hold. He uses his cash flow portfolio to join multiple liquidity pools and generate consistent daily income. His buy and hold assets are focused in generating long-term profit. Lucas also takes profits from yield farming ventures and reinvest them. He places them into lending platforms that earn an additional yield of 7%-10%.
Lucas explains that there are long-term and short-term market cycles. He adapts his investing strategies according to these cycles. This way he can be more hands-off with long-term investments and active with high-yield ones.
Pros and Cons of Yield Farming
High returns that could exceed 100% APY
Provides liquidity or staking assets
Diversified crypto portfolio
Less restrictive than traditional finance
High risk of financial loss
Highly volatile
Prone to scams and "rug pulls"
Is Yield Farming Different From Staking?
Yield farming involves lending or staking crypto into a DeFi protocol to earn rewards. On the other hand, DeFi staking involves locking up crypto assets to support blockchain operations. In yield farming, investors make money by depositing their assets into DeFi protocols and exchanges (DEX). They get a portion of the platform’s fees or interest in return. Staking supports the security and decentralization of PoS blockchains.
Yield farming allows instant withdrawal of tokens while staking imposes an "unstaking" period. This takes a few days to weeks. Yield farming offers higher returns but is riskier and more complex. Staking usually offers lower, more conservative returns (single-digit APYs).
Is There a Course That Teaches Decentralized Finance?
Yes, there's a course that teaches decentralized finance to beginners. One of the most popular ones is Tan Gera's Decentralized Masters course. He teaches valuable investment strategies conducted by his private research team. Tan also shares proprietary tools that help beginners in their DeFi investments. The platforms offer comprehensive DeFi educations. It covers a DeFi investment system and training. Members are also added to a network that connects them with other DeFi investors.
My Low-Risk, High-Reward Alternative to DeFi Investing
My low-risk, high-reward alternative to DeFi investing is local lead generation. This business builds simple websites for local service providers, such as plumbers, electricians, and landscapers, and ranks them on Google. BrightLocal found that 93% of customers find local business through the internet. This shows there's a demand for visibility among small businesses.
Local lead generation has higher profit margins, usually 85% to 90% on ranked sites. A well-ranked site generates thousands of dollars-worth of leads every month with minimal ongoing costs. It's an evergreen industry because small businesses will always need leads to keep their competitive advantage.
DeFi investments are very volatile. Profitability can change anytime and there's no way to ensure consistent and passive income. Local lead gen gives you more control and freedom over your investments. The business is also easier to scale. I've been in the lead gen biz since 2014. About a decade later, I'm still making consistent $50K from this business model.
