Ethereum’s staking mechanism allows validators to earn a yield on Ether to secure the blockchain. This has created a secondary market for platforms to create staking pools or products where delegators who hold ETH can also earn a yield. This guide will explain how to earn interest on Ethereum and the best platforms to utilize.
KEY TAKEAWAYS
➤ Ethereum holders can earn passive income through staking, liquidity pools, or lending, with varying interest rates and risk levels.
➤ Platforms like Nexo, Crypto.com, Binance, and Compound offer competitive Ethereum interest rates ranging from 2% to 7%.
➤ While staking is generally safer, lending and liquidity pools involve risks like counterparty failure and impermanent loss.
➤ Users should thoroughly research platforms, assess risks, and avoid investing more than they can afford to lose when earning interest on Ethereum.
Top platforms to get the best interest rate on Ethereum
Having Ethereum in your portfolio comes with many benefits, one of which is earning passive income. There are multiple options to pick from. Let’s have a closer look at these.
Nexo is a popular online platform that allows you to earn interest by depositing your Ethereum on its platform. This is a leading centralized crypto lending platform started in 2018. Founded by TechCrunch founder Michael Arrington, Nexo allows users to earn up to 14% APY on crypto investments. It is based in Switzerland and it has its native token called NEXO.
You can earn 7% APY on your Ethereum deposits on Nexo. The network, however, offers a better interest rate for NEXO holders. To be eligible for this offer, the platform makes it compulsory for users to hold a certain minimum of NEXO tokens. Your earnings start immediately after the deposit, with no guarantee. You earn in Ethereum, with a daily payout interval. It offers compounded interest rates as well.
Nexo allows users to create two types of interest accounts. They include fixed and flex accounts. You only get to lock your tokens if you create a fixed interest account. The duration usually lasts for one month or three months. While you have locked your tokens, you won’t be able to withdraw your funds. However, in a flex account, there are no commitments; you can withdraw your Ethereum anytime.
2. Crypto.com
Crypto.com is a top-rated platform that offers users interest in their holdings. Based in Hong Kong, Crypto.com was founded in 2016. It has a native token, Cronos, which allows its holders to take advantage of discounts and booster rewards.
Crypto.com allows you to earn up to 5.5% APY on your deposited Ethereum. Below is what you earn by depositing your ETH. Private members can earn an additional 2% on all crypto deposits.
Crypto.com allows you to withdraw your money anytime or lock your funds for one or three-month staking intervals. In addition, it features a flexible account, Where you can withdraw your deposit at any time. It also has a portable calculator that determines the maximum balance of assets and staking to get your preferred interest. Some of its other features includes swaps, a crypto card, and derivatives trading.
3. Binance
Binance is among the largest crypto exchanges, and with its Binance Earn feature, you can earn Ethereum from your deposits. It’s a centralized exchange that was started in 2017 by Changpeng Zhao, also known as “CZ.”
Binance offers a tiered earning rate system. This works by providing several rates of APY depending on the Ethereum being deposited. You get 3% APY from the first the Staking option. The Simple Earn option uses a flexible term but offers less than Staking. Dual Investment offers the greatest return but requires a lockup period.
Binance’s earning features offers flexible and fixed terms. Binance also offers Principal Protected products as part of its staking options through Binance Earn. These products allow users to earn rewards on their crypto while providing protection for the principal investment. Principal protection means that the same number of tokens you deposit will be returned to you along with yields paid out in the same kind of token.
4. Compound
Compound is a decentralized lending protocol that allows users to earn interest on their holdings through lending. Founded by Robert Leshner in 2018, the platform deposits your funds in a liquidity pool that users can borrow funds from. The application is boostrapped by the governance token, COMP.
Compound has two versions. V2 offers a 0.03% APY on your Ethereum holdings. V3 offers a 2% interest rate. However, earning starts once you have made a deposit, and it has no guarantee. The payout is done very fast at every 15 secs. It features compounded interest as well.
Compound has no Lock-up; you can withdraw anytime. The platform also has community governance, which allows you to vote on proposals. You can vote yourself or delegate your vote to a third-party. Compound also has extensions, which are add-ons that enhance the user-experience.
Top platforms to earn interest compared
| Platform | Platform | Availability | Interest rate |
|---|---|---|---|
| Nexo | Online trading platform | 150+ countries | 7% |
| Crypto.com | CEX | 100+ countries | 5.5% |
| Binance | CEX | 100+ countries | 3% |
| Compound | DEX | Global | 2% |
The top platforms for earning an interest rate for Ethereum were chosen using a variety of factors, most notably, reliability and prominence in the market. They were also selected based on availability, interest rates, and platform type.
Where does the Ethereum interest rate come from?
Different platforms have different methods for earning interest on ETH. While their individual strategies may be less transparent, they usually fall into one or more of three categories: staking, lending, or liquidity providing.
Staking
As stated previously, Ethereum is designed in a way that pays validators for validating transactions and proposing blocks, which secures the blockchain. In return, they earn ETH from what we call a coinbase. In the image below, you can see the staker revenue earned by validators in purple.
Staking is a process that revolves around locking up your crypto assets to facilitate a blockchain network and validate transactions. Validating these transactions allows you to earn interest on your Ethereum.
Additionally, validators also earn transaction fees. This really depends on their ability to build profitable blocks. For example, if traders send priority transaction fees to get their trades included in blocks to validators, that amounts to $1 million, that validator will have earned $1 million in fees to include those transactions in their block. Some exchanges may run their own validator nodes to generate an interest rate on Ethereum.
It is important to point out that all ETH emissions earned by validators are not equal. Some Ethereum validators earn a boost for better performance, which increases their rewards.
Liquidity pools
Liquidity pools are collections of crypto assets locked in a smart contract. Decentralized exchanges leverage liquidity pools to offer users trading, lending, and many more features. Liquidity providers are investors who deposit their assets into a pool to earn passive income.
Uniswap is a popular DEX utilizing the concept of liquidity pool to offer investors yields on their holdings.
It’s, however, essential to note that a liquidity pool isn’t totally certain. For example, the market price of one of the pooled tokens may be so volatile that it significantly fluctuates. When this happens, you can be exposed to risk and lose money via what is called impermanent loss.
You can harness the best-performing strategy by comparing data from various liquidity pools and analyzing their percentage rewards to increase your earnings. The best Ethereum interest rates will depend on the amount of capital deployed into each pool; the lower your share of the pool, the lower the rewards you receive.
Lending
Here is another great way of earning interest from Ethereum. Lending is built on the idea of paying users a yield for depositing their assets onto a platform. The lent tokens are used by borrowers who pay interest in fees, a percentage of which is used to reward lenders.
While traditional banks require guarantors and intermediaries before earning interest from your savings, this is not required to earn interest with Ethereum. DeFi simplifies the process of acquiring much higher interest on your holdings. It also allows you, as a lender, to contribute to the overall liquidity of the network.
How to pick a platform
There are certain features to consider before deciding which platform to go for. Some of these features include; interest rates, reliability, counterparty risk, and origin of the yield. We hinted at the last criterion, yield, in the previous section.
This is important because each method has a different risk profile. Staking is generally safer, as borrowing and lending carry default risk. Although, this conversation is more nuanced.
For instance, Gemini’s Earn program was not native and was facilitated by Genesis. When Genesis went bankrupt, Gemini could not repay its customers. This is counterparty risk. A decentralized platform can mitigate counterparty risk, but again, always remain cautious of where the yield comes from.
Are these platforms safe in earning Ethereum?
Ethereum is the largest altcoin and generates high yields. You should, however, understand that earning is not completely risk-free. You should prioritize earning interest on secure platforms.
Choosing any of the above platforms doesn’t exempt you from losing money. Risks are involved in locking up your funds into any interest-earning platform. To earn, you should ensure you do your research and do not risk more in cryptocurrency interest accounts than you can afford to lose.
Frequently asked questions
What is the interest rate on Ethereum?
Can I earn interest on Ethereum?
Where to earn the most interest on Ethereum?
What crypto has the highest interest rate?
Does Coinbase pay interest on Ethereum?
Uphold
Coinbase
eToro
eToro
eToro
eToro
Moonacy
Chain GPT
Disclaimer
In line with the Trust Project guidelines, the educational content on this website is offered in good faith and for general information purposes only. BeInCrypto prioritizes providing high-quality information, taking the time to research and create informative content for readers. While partners may reward the company with commissions for placements in articles, these commissions do not influence the unbiased, honest, and helpful content creation process. Any action taken by the reader based on this information is strictly at their own risk. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
