Earn stablecoin interest in DeFi: A step by step guide

DeFi lending works differently from CeFi lending because, unlike in CeFi lending where transactions are handled by a central authority, DeFi uses smart contracts to provide autonomous lending pools to crypto investors. The whole process operates independently of a central authority and assets are held in a non-custodial manner in smart contracts, meaning they are under your control.

In this example, we will look at Compound (COMP) to demonstrate how you can earn interest in the DeFi lending markets. Compound is one of the largest and longest-serving crypto lending platforms in the DeFi space and it currently offers a competitive interest rate of 3.74% for DAI, 7.35% for TUSD, 3.39% for USDT, and 4.70% for USDC.

You can start earning on Compound by following these steps:

Open your Metamask wallet or any other Web 3.0 wallet. Navigate to your browser and enter the URL "compound.finance."

Click on the three horizontal lines at the top right corner and press the 'App' button.

Next, click on the 'Connect Wallet' button at the top right corner and choose your wallet from the options.

Click on the stablecoin on which you want to earn interest and press the 'Enable' button.

Put in the amount of crypto you want to lend, and complete the process by signing the lending transaction using your wallet.

Earning interest on stablecoins in the CeFi and DeFi lending markets carries risks. CeFi lenders could hold onto your funds if you fail to meet (sometimes newly introduced) AML/KYC requirements while DeFi lending protocols are prone to hacks. If you are looking to earn interest on digital assets, you will need to weigh out the potential returns with the risks involved in deploying capital in the crypto interest markets.

____Source:Adobe/megaflopp