Within the crypto space, it’s pretty regular to come across several discourses on which blockchain platforms will be promising and reliable. However, in the past few years, none have been more satisfying than the news and updates surrounding the Ethereum blockchain. After Bitcoin, Ethereum (ETH) is the largest cryptocurrency by market cap, and many people are wondering where to get the best Ethereum interest rates?
Though the network is often compared to Bitcoin, Ethereum significantly improves, allowing users to build their own decentralized applications. Besides the diverse functionalities, it’s also an excellent way of earning passive income. It offers various methods to earn an interest or yield, including staking, lending and yield farming.
This guide will fill you in on the recent updates on Ethereum, how to earn interest on its token ETH, and the best network to utilize.
In this guide:
Ethereum 2.0 transition
Over the past few years, the growth of the Ethereum network has been nothing short of amazing. Ethereum is inarguably one of the best performing cryptocurrencies of the last decade, moving from an ICO price of $0.3 in 2014 to about $3000 today and $4875 at its current all-time high.
Recently, the Ethereum blockchain reportedly had about 97% increase in its rate of active DAapp projects, accounting for about 1.2million increase.
However, with all these blooming updates, the network has been known to suffer from scalability and high transaction fees. Like Bitcoin, Ethereum uses Proof-of-Work consensus algorithm to attain consensus, which is processing-power-intensive and inefficient.
To start tackling that problem, Ethereum 2.0 aims to transition its blockchain to an improved Proof-of-Stake (PoS) system. The PoS working principle revolves around recording block transactions within the network and prioritizing the selection chances of the node’s owner. In addition, it features a way of validating data into a distributed ledger while balancing its security. This mechanism makes it possible to effectively minimize the inefficiencies within the network, leading to optimal throughput for the entire network. Furthermore, as each node must stake its own token to participate, it would prevent the network from any form of attack.
Benefits of the network upgrade
Ethereum 2.0, also called Serenity, will bring speed, efficiency, and scalability to the Ethereum network so that it can process multiple transactions at a much lesser time.
- Scalability: It is an essential feature a blockchain network should have. It helps improve full network performance without compromising the efficiency of the platform. Ethereum 2.0 introduces this, and it will have shard chains that can handle up to 100,000 transactions per second. Meanwhile, Ethereum currently handles 30 transactions per second. Shard chains improve scalability and speed by handling transactions in parallel chains rather than consecutive ones.
- Low fees: Tackling the problem of high gas fees, sharding will speed up the transaction process within the entire network by splitting the whole process into smaller chains, known as “shards.” It is also expected to reduce gas fees by removing all the complexities of running a node by minimizing the hardware requirements.
- Security: Another main objective behind the upgrade is to improve the overall safety of the Ethereum network. Unlike other PoS networks that feature a few sets of validators, Ethereum 2.0 will have many sets of validators, with at least 16,384 validators. This will improve decentralization and make it less prone to data breaches or attacks.
Passive income methods with Ethereum 2.0
One of the exciting things about Ethereum 2.0 is the various avenues it provides for earning a passive income. Whether you want to connect to DeFi apps — DApps — via decentralized Web3.0 protocols or standard web platforms, many ETH holders will benefit from earning interest on ethereum.
Staking
Staking is a process that revolves around locking up your crypto assets to facilitate a blockchain network and validate transactions. Validating these transactions allow you to earn interest on your ethereum.
Platforms using PoS mechanism to attain security depend on users to stake their tokens into special smart contracts. They prevent attacks by ensuring that no one has tried to manipulate the network. Validators who try to act malevolently are penalized by forfeiting a fraction of their locked tokens.
Staking is a solid means of earning interest on your Ethereum, as an investor. Some platforms provide high-interest rates for staking. For example, with Ethereum, locking in your ETH into the Ethereum 2.0 smart contract will earn you more ETH for contributing to the consensus mechanism.
Regarding Ethereum 2.0, you are required to deposit your tokens for an extended period. While the least staking requirement for Ethereum is 32ETH, a wide range of platforms provides more convenient staking opportunities via liquidity pool protocol. Therefore, they allow you to stake lesser funds.
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 volatile that it notably 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 more in the pool, the lower the rewards.
Lending
Here is another great way of earning interest from Ethereum. Lending is built on the idea of paying users an Annual Percentage Yield for depositing their assets into a network. The lent tokens are used by borrowers who provide interest, a percentage of which is used to reward lenders.
Many Ethereum-supported platforms offer users the opportunity to earn APY from their tokens. Compound finance, for example, offers about 2.19% for lending USDC. In addition, lending has been tagged as less risky because lending and borrowing are done algorithmically on a set of codes. As a result, you can always withdraw your locked-in assets at any time.
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.
Top 7 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. In addition, locking your ethereum on platforms offering interest can double your yields. There are multiple options to pick from; however, there are certain features to consider before deciding which one to go for.
Some of these features include; interest rates, reliability, network security and how long the platform has been in existence.
So far, platforms such as Celsius, Nexo, Crypto.com, and a few others listed below have proven reliable. However, it is important to note that there’s no fixed rate; each platform has its own criteria they follow. Let’s have a reader look at these.
Nexo
Nexo is a popular platform that allows you to earn interest by depositing your Ethereum on their platform. This is a leading centralized crypto lending platform started in 2018.
Founded by TechCrunch founder Michael Arrington, Nexo allows users to earn at least 5.90% APY on any investment. It is based in Switzerland, shielding it from the strict U.S. regulation on crypto lending platforms. It has its native Token named NEXO.
Fees:
Nexo charges near-zero fees. The platform doesn’t charge any form of withdrawal fee; you can withdraw your funds at any time. Nexo, however, charges a fee for transferring crypto assets from one exchange to another. And you can only withdraw a minimum of 0.01 ETH.
Ethereum Interest rate:
Currently, you can earn 6% APY on your ethereum deposits on Nexo. The network, however, offers an 8% APY interest rate for NEXO. To be eligible for this offer, the platform makes it compulsory for users to hold a minimum of 10% of their portfolio in NEXO tokens.
Your earnings start immediately after the deposit, with no guarantee. You earn in ethereum, with a payout interval of a day. It offers compounded interest rate.
Features
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.
Liquid
Liquid is a custodial exchange founded in 2017. Its Liquid earn feature allows users to earn up to 14.046% APY on their holdings.
Features:
One major feature of Liquid is that it allows you to earn while you trade, and trade while you earn.
Interest rate:
- The network currently provides 3.519% APY on ethereum.
- Weekly payout interval
- It offers compounded interest every minute
- You can deposit and withdraw funds any-time, with no minimum balance
Fees:
It’s completely free, and you can withdraw your deposit anytime. And unlike other DeFi protocols, it doesn’t charge any gas fee.
BlockFi
Blockfi is a centralized crypto exchange offering users access to the crypto market since 2018. Owned by Gemini, the platform aims to blur the sharp lines dividing traditional finance and blockchain technology. It features an easy way for users to earn passive crypto assets by allowing them to own what is called BlockFi Interest Account (BIA).
Fees:
BlockFi doesn’t charge any withdrawal fee; however, you have to wait for up to seven days to get your withdrawal request processed. It doesn’t charge monthly fees. No minimum deposits needed. The platform restricts users to one crypto withdrawal per month.
Features:
BlockFI has one unique feature that allows users to set up recurring trades. This will enable you to automatically buy crypto assets at your preferred interval. It can be daily, weekly, or monthly.
Interest rate:
BlockFi uses a tiered plan to earn its crypto asset. For ethereum, if you deposit ten ETH:
- 1.5 ETH would earn the rate of 4% APY.
- 3.5 ETH would earn the rate of 1.5%.
- The remaining 5 ETH would earn the rate of 0.25% APY.
Higher investments earn only minimal interests.
- Earning starts as soon as you make a deposit with no guarantee period.
- You earn ethereum as rewards
- Payout is done monthly
- Features compounded interest rate
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.
Fees:
The platform does not charge a deposit or withdrawal fee.
Interest rate:
Crypto.com allows you to earn up to 4% APY on your deposited ethereum. Below is what you earn by depositing your ETH:
Tier 1:
Less than $400 of ETH gives you 0.5% on a flexible deposit and 1.5% on locking your funds for one month. You earn 3% for locking your funds for three months.
Tier 2
$4000 worth of ethereum or more gives you 1% APY on a flexible account, 2% APY for locking your funds for one month, and 4% yield for locking it up for three months
Features:
Crypto.com allows you to withdraw your money anytime or lock your funds for one or three-month staking rules. 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.
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 offers up to 5.2% APY.
Features:
It offers both a fixed and flexible account.
Fees:
Binance does not charge fees for withdrawals from its interest account holders.
Interest rate:
Binance offers a tiered earning rate system. This works by providing several rates of APY depending on the ethereum being deposited. You get 2.4% APY from the first 0.2 ETH of your deposit, while you earn 0.1% APY on other ethereum amounts.
Compound
Compound is a decentralized lending protocol that allows users to interest their holdings. Founded by Robert Leshner in 2018, the platform deposits your funds in a savings account with a decentralized protocol.
Interest rate:
Compound offers 0.04% APY on your ethereum holdings. 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.
Fees:
No Lock-up; you can withdraw anytime.
Voyager
Voyager is a simple crypto-asset platform that provides retail that allows you to earn interest on your crypto assets. Your annual percentage yield is paid monthly.
Fees:
The platform charges zero fees on buying cryptocurrencies. Users are expected to hold crypto for at least a month.
Interest rate:
- You earn 3.75% annual interest on your ethereum holding.
- Payout is done monthly within the first week of the month.
Are these platforms safe in earning ethereum?
Ethereum is the largest altcoin, and its next upgrade — Ethereum 2.0, will support a wider range of DeFi services. 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 lose.
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