In a world of ultra-low interest rates, traditional interest-bearing investments like bonds lose interest to fixed-income investors looking to see their holdings grow safely and steadily. Compounding interest can significantly boost an investor’s portfolio over time, but decent interest rates are necessary.

A solution for investors are applications built on the Decentralized Finance (DeFi) space.

These include decentralized exchanges, payments platforms, derivatives trading platforms, and lending platforms. On these lending platforms users deposit funds they wish to lend, which are collected into a pool.

Not a lot is needed to earn interest on your funds on DeFi platforms, other than the funds themselves. DeFi platforms can be accessed as any other website can, but to deposit the funds a cryptocurrency wallet compatible with them is necessary.

Using Aave, the second-largest DeFi protocol with over $3.8 billion worth of assets locked in it as an example, let’s look at what we need to do to earn passive income with it.

First, we need to connect a wallet like MetaMask or Brave’s built-in crypto wallet to the protocol. Once we access Aave’s website, we need to enter the app to access its functions. We’re given the option of using the first or second version of Aave, and we’re going with the newer version. After accessing app.aave.com, we’re prompted to give our wallet access to the website so these can interact.

Now, we just need to click on the page of the coin we’re looking to deposit to earn interest: let’s say DAI. After choosing our amount and clicking deposit, our wallet will trigger a popup asking us to confirm the transaction. Pay attention to the gas fee. Once the transaction is complete, our funds are now on Aave.

Source: https://www.cryptocompare.com/email-updates/daily/2021/feb/05/