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Learning the top 10 ways to secure DeFi rewards is a great way to expand your portfolio. The DeFi movement is about empowering users to take control of their financial future. As such, these platforms transform users into the bank. Additionally, they provide a plethora of earning opportunities to the market. Here are the top 10 easy ways to secure DeFi rewards nowadays, in no particular order.
1. Staking
Staking has been a feature of the crypto market for many years. When it first entered service, this option was used to secure PoS (Proof-of-Stake) blockchains. At that time, users locked their tokens into a staking contract as part of the PoS validation process. Since then, staking has evolved into many forms.
Staking protocols can be characterized by a few key points. For one, traditional staking pools have preset lock-up periods and APYs. There are no surprises. As such, users can leverage staking calculators to see precisely what their rewards will be based on their level of participation. This strategy makes it easy to project future earnings.
Staking is one of the easiest and safest ways to secure DeFi rewards. The main things to consider are:
- What’s the amount of tokens you want to stake?
- How long will you stake your assets?
- What network and asset will you stake?
- Is the platform non-custodial?
Notably, the downside of staking protocols is that many networks don’t allow you to access staked funds until the lock-up completes. Consequently, you cannot make other investments with these funds during the process. For this reason, it’s best only to stake funds that you don’t need for other purposes or consider other options on this list.
2. Liquidity Pools
Liquidity pools are smart contracts enabling users to secure passive returns in exchange for liquidity. You deposit funds into a public smart contract to join a liquidity pool. Notably, the more tokens you deposit, the higher your rewards.
It’s common for liquidity pools to issue participants LP tokens. These digital assets represent the value of the assets you have in the pool. This strategy improves staking by enabling users to access their liquidity during the process. Notably, LP tokens get burnt once the assets are withdrawn.
Interestingly, Uniswap was the first DEX (Decentralized Exchange) to support liquidity pools. This move changed the game by enabling anyone to launch these pools to fund their startups. This open approach to accessing public funds paid off immensely. It propelled Uniswap into the spotlight and began a new era in DeFi capabilities.
To start a liquidity pool, a crypto user simply needs to seed the pool. This process requires you to deposit an equal value of a base cryptocurrency like Ethereum and your project’s token. Unlike CEXs, there are no additional requirements to launch the pool, which opens the door for more firms to secure funding and users to earn rewards.
3. Governance Rewards
The concept of community governance has taken flight in the DeFi market. Ever since the early days of decentralized networks, there have been questions surrounding how to best develop these networks fairly and transparently. The best solution to date has been to introduce a community governance system.
Community governance options enable users to stake their tokens to support proposals. They may also put forth upgrades to a vote. In this way, all governance token holders have their voices heard. Additionally, they secure rewards while helping to guide the project towards success.
This method of project management is more in line with the overall structure of the decentralized economy. Anyone can participate as long as they meet the governance token staking requirements. These reasons make community governance participation a win-win for all parties.
4. Airdrops
Airdrops are rewards that get deposited directly into your wallet on a particular date. They are usually used to hype up a new project or feature on a platform. Notably, there are lots of airdrops going on every month, as such, keeping informed on when can help you build up a healthy stash in no time.
Airdrops serve multiple roles. For one, they can help to evenly distribute tokens to the community. Additionally, they help build consumer confidence and demonstrate how smart contracts can automate token distribution tasks with ease. Notably, there are a variety of platforms that help you stay informed of upcoming airdrops.
5. AMM
Automated Market Makers help to streamline token exchanges in the DeFi market. Unlike their centralized counterparts, these exchanges don’t leverage an order book to determine the value of an asset. Instead, Oracles monitor price feeds to provide traders with timely pricing data. AMMs are very popular in the market due to their lower costs and added privacy.
Arbitrage trading is one of the best ways to leverage AMMs to drive returns. Arbitrage trading refers to buying and selling the same asset between exchanges. Every AMM has slight price variations. As such, monitoring these value changes can provide easy rewards when possible.
6. Synthetic Assets
Synthetic assets have been around for a while. However, many people remain unaware of what they are and their benefits. Synthetic assets can represent off-chain assets like stocks. For example, you could have a synthetic asset that tracks the value of another token or even an entire industry, such as the gold market.
Synthetic assets bring some significant advantages. For one, they provide exposure to markets without the need to hold the assets directly. Notably, synthetics can be set up to mimic the market movements of nearly any asset. Some synthetic assets represent equity, debt, commodities, stocks, and much more.
7. Wrapped Assets
Wrapped tokens are another unique asset type that has helped many traders secure rewards. A wrapped token is an asset that has been introduced from another network. Wrapping is most commonly used to bring Bitcoin into the Ethereum ecosystem.
There are many reasons why this benefits all aspects of the market. For one, it enables those holding Bitcoin to leverage advanced DeFi solutions to access low-risk passive income. Additionally, it adds liquidity to DeFi ecosystems, which adds stability.
Wrapped assets open the door for a more inclusive DeFi environment. They also help to improve interoperability and capital efficiency. These factors make wrapped assets a powerful tool for any DeFi user.
8. Farming Pools
Farming pools share many similarities with liquidity and staking pools, the main differences being that there is no lockup period and a varying APY. This structure means that yield farmers need to monitor and move funds between pools to improve ROIs. This added labor is what makes farming more advanced.
Farming is ideal for experienced DeFi users because it can offer higher yields and more access to your funding. The downside is that you must monitor your pool to ensure you’re getting the highest APY available. A better solution is to use a farming pool aggregator.
Farming pool aggregators scan a collection of pools to find the best options. When a higher-paying pool emerges, the aggregator automatically moves your funds to the highest-paying farming pools to improve ROIs. These advanced protocols have helped farming become much more profitable for users as of late.
9. P2P Lending
Peer-to-peer lending is a popular and somewhat controversial option. These protocols come in many forms, but all share the same concept: Empower users to secure rewards by lending their tokens to others.
P2P lending systems usually leverage a large lending pool where users deposit funds. These funds are offered to borrowers in a variety of ways. Some networks use an AMM-style exchange where lenders offer packages.
These options allow lenders to set their interest rates and payback times. Reversely, some protocols enable borrowers to set terms. This structure will list loan requests and terms that lenders can meet.
Notably, using liquidation protocols combined with over-collateralization enables these networks to remain solvent while lending volatile assets. Some networks even leverage the interest earned from the lending pool to offset any late or missed payments.
Recently, credit-based P2P lending protocols have entered service. These platforms have lower collateralization requirements because they use credit scores and usually focus on business lending.
10. Referrals
Referrals are one of the easiest ways to start earning free tokens. The DeFi community is always looking for new users. As such, there are a lot of platforms that offer referral rewards to users who help drive adoption.
Referrals can be secured by leveraging your social media to promote projects. The main point to consider is that you want only to promote quality platforms. This strategy ensures that your followers have faith in your recommendations.
Easy Ways to Secure DeFi Rewards
Now that you understand various ways to secure DeFi rewards, you can expand your portfolio to new heights. All of these options require minimal effort. As such, DeFi users continue to benefit from the creativity of the industry.
You can learn more about exciting blockchain projects here.
