Can HODLer make "passive income" from DeFi?

Source: Decrypt

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In the words of Andreas Antonopoulos, a veteran of the cryptography industry, decentralized Finance (DeFi) allows Bitcoin HODLer to earn "passive income" on a cool, if risky, way.

To give you a better reading experience, let's start by giving you an overview:

1. In a recent live broadcast, Andreas Antonopoulos said encrypted users can earn "passive income" from their bitcoin holdings;

2. The best way to get passive income from bitcoin is to try lending BTC on some DeFi platforms, such as MakerDAO, Compound, etc.

3. With DeFi, bitcoin holders can convert their assets into other cryptocurrencies and earn interest by lending these cryptocurrencies;

DeFi may allow you to realize your ultimate dream in life, which is to make money effortlessly, but that dream is actually realized through cryptocurrency borrowing.

Andreas Antonopoulos is well known in the cryptocurrency industry, not only as a tech entrepreneur and author, but also as a staunch supporter of Bitcoin. Recently, Andreas Antonopoulos said in a live question-and-answer session that the best way for HODLer to earn "passive income" from Bitcoin is to enter the most fashionable segment of the encryption industry today: DeFi. Of course, Andreas Antonopoulos admits that there are risks to this approach.

DeFi is a new decentralized financial service created and run on Ethereum, revolutionizing traditional banking services by eliminating "intermediary needs" in traditional Banks. Basically, for those who do not have access to traditional bank lending financial services, their needs can be met on DeFi platform, easy to borrow and save money.

Andreas Antonopoulos argues that bitcoin holders can invest their money on DeFi, otherwise your bitcoin is nothing more than a dry lay. Bitcoin holders can then earn interest using the lending services on these DeFi platforms, and MakerDAO is probably the best of the many platforms on the market.

MakerDAO is currently the second largest DeFi platform in the market, with two platform tokens: MKR and Dai, which Andreas Antonopoulos calls "stable currency" because Dai is pegged to the DOLLAR and can be used for mortgages. Whenever money is lent on the MakerDAO, a corresponding Dai is created, a currency that allows encrypted users to borrow and repay the principal and interest, which can be exchanged for the collateral at an equivalent value.

From Bitcoin to Ethereum, what are the risks?

While "lying low" is the dream of most people, Andreas Antonopoulos also warns of the risks of HODLer trying to transfer Bitcoin to the Ethereum platform, saying:

"If you transfer the COINS to platform based on Ethernet fang, must pay attention to security issues, because the chain of COINS and etheric lane two blocks of security is not exactly the same, although the etheric fang has advantages and flexibility, but doesn't seem to be in safety investment in. This means that you may encounter a variety of new risks, such as gas prices suddenly rise, leading to other associated problems, all these things will cause you lose some, or all of the investment funds."

In fact, the encryption community has been concerned about the security of Ethereum for a long time. With such a complex system and various DeFi applications running on it, the attack surface is naturally very large. On the other hand, Ethereum 2.0 has so far been unable to be ready, with both the new PROOF of interest (PoS) consensus mechanism and the sharded solution for transaction expansion facing many challenges.

Not only that, Andreas Antonopoulos adds emphatically:

"There is no one can guarantee the etheric fang DeFi no Bug in intelligent contract, once appear problem, these bugs, how to interact with the underlying the etheric fang platform, and cause much negative consequences are unknown. That is to say, the currency HODLer if their choice to put money into DeFi platform on the risk, obviously than just hold the risk is much larger."

Of course, despite the risks, Andreas Antonopoulos credits the DeFi platform for playing a role in the encryption industry. Especially after many previous failed attempts and tests, DeFi may be the best way to "make money" from bitcoin assets right now:

1. From the perspective of industry role, Bitcoin seems to be playing more of a "reserve asset" role, while Ethereum's emerging DeFi (decentralized finance) ecosystem is the preferred platform for the cryptocurrency industry to generate credit and facilitate liquidity exchange;

2. From a fundamental value perspective, bitcoin, as the oldest cryptocurrency, does have more value than Ethereum, but the trends are more complementary than hostile.

3, from the Angle of tokens attribute, the currency is more like a "digital gold", while the etheric fang has less and less as a form of payment or value stored tokens, however a kind of support is based on intelligent decentralized network of goods contract, by maintaining financial operation system, Ethernet fang also in building a network to provide lending, or create a decentralized derivatives, or without the mediation mechanism of insurance contracts.

conclusion

If you have enough bitcoin and can afford to lose money on your investment, DeFi could be a good way to make money. If not, it's probably better for you in comparison to the boring and relatively low-risk HODLing method for joining a bit of Bitcoin and hoping that bitcoin might break the $10,000 mark this year.

This article is translated from:https://decrypt.co/34011/how-defi-earn-passive-income-with-bitcoin

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