How to Earn Interest on Crypto
You can earn interest on crypto through native staking, exchange staking, centralized lending, DeFi lending, or liquidity provision. None is risk-free. Returns depend on token prices, fees, demand, lockups, and platform or protocol performance. Always compare custody, liquidity, jurisdiction, and downside risk before committing funds.
Important: A quoted APR or APY is not guaranteed. You can earn rewards and still lose money because of token-price declines, fees, slashing, withdrawal restrictions, counterparty failure or smart-contract problems.
What Are the Most Popular Ways to Earn Interest with Crypto
There are three main ways in which you can easily earn interest on your crypto asset holdings and crypto investments:
Staking rewards through crypto protocol staking are probably the most stable and safe returns you can make.
Crypto lending platform staking is also fairly safe, but the interest paid is often less than through staking rewards.
DeFi will often have the highest annual percentage rate and annual percentage yield assuming you compound interest, but it is also the riskiest. Let’s break down each below.
Extended List of Crypto Interest Earning Methods
| Method | Return Source | Asset Control | Liquidity | Main Risks | Best For |
|---|---|---|---|---|---|
| Native staking | Protocol rewards | User or validator | Network-dependent | Slashing, downtime, token losses | Self-custody users |
| Exchange staking | Protocol rewards | Exchange | Flexible or locked | Custody, fees, withdrawals | Beginners |
| Liquid staking | Staking rewards | User holds a liquid token | Usually flexible | Depeg, smart-contract risk | Experienced users |
| Centralized lending | Borrower interest | Lending platform | Flexible or fixed | Insolvency, counterparty risk | Platform users |
| DeFi lending | Borrower interest | Smart contract | Protocol-dependent | Smart contracts, oracles | DeFi users |
| Liquidity provision | Trading fees and incentives | Smart contract | Pool-dependent | Impermanent loss, volatility | Advanced users |
Earning Interest with Crypto Staking
Crypto staking rewards allow you to earn interest on any proof of stake crypto asset. Examples of assets that you can stake are Ethereum (ETH), Cardano (ADA), Polygon (MATIC), Cosmos (ATOM), and Solana (SOL). The annual percentage rate (APR) for staking rewards is often higher than that of traditional savings accounts, and higher than most traditional financial institutions will offer. How much interest you earn depends on the amount of the asset you stake, and the interest rates for them. They tend to range from 3-10% depending on the cryptocurrency asset.
In order to participate in crypto staking, you can either do it yourself, or through a cryptocurrency exchange platform. You can deposit funds into your Coinbase account and then stake through their platform for the supported assets. They then pay interest to you based upon the amount you staked, while also taking a commission.
You can also stake though your own crypto wallets rather than using a cryptocurrency exchange. While it’s a slightly more technical process, you’ll likely earn a higher interest rate, while also having more control over your crypto holdings.
Earning Interest with Crypto Lending
Crypto lending can be done through dedicated crypto lending platforms such as AAVE, or through crypto exchanges such as Binance or KuCoin. With crypto lending, you earn an interest rate that depends on the demand for the asset that you are lending. Stable coins like USD Coin (USDC) tend to get you a higher return than something like Ethereum because they can be used in many different crypto markets.
These are sometimes referred to as a crypto interest account, or a crypto savings account on centralized exchanges. However, with the collapse of FTX Exchange, and services such as BlockFi, Celsius, and Voyager, all of which offered various crypto savings accounts and crypto interest accounts, many platforms are avoiding phrasing their “crypto saving account” in that way to avoid scaring off crypto investors. Instead it’s now often called “Earn” or something similar that references that you’re earning interest on crypto.
Crypto lending platforms will often let you earn interest on crypto for both supplying and borrowing. There may even be a positive APR for borrowing if an asset isn’t being borrowed enough as a way to incentivize crypto investors. Lending is available for a variety of crypto assets, with the interest rate varying depending on the asset, the lock up periods (if any), the minimum deposit (if any), and whether it is simple interest or compound interest. Crypto loans are also offered by some crypto exchanges as well.
In order to supply crypto to earn interest on your crypto holdings, you must have the supported coins or crypto tokens. If you don’t have the crypto tokens or coins supported by the platform, then you can either purchase crypto using fiat currency, or trade digital assets you already own for the supported coins.
Earning Interest on Your Crypto with DeFi
Earning interest on crypto through DeFi is the most risky way of earning interest on your holdings. You’re more exposed to various possibilities, such as a hack of the platform, impermanent loss, or crypto market manipulation. In order to earn interest on crypto with DeFi, you’re likely to be providing liquidity to a liquidity pool. This means providing two assets in equivalent dollar amounts.
For example, you can provide liquidity to an ETH/USDC pool, but you’ll need both USD Coin and Ethereum in order to do that. You can either trade some ETH or USDC, or vice versa in order to then provide liquidity. You then earn a proportional share of the trading fees generated by the pool. This is more complex than the other two options and requires more risk.
Is Earning Interest on Your Crypto Safe?
Yes, with each method having a different risk tolerance. Staking is the safest, whereas doing yield farming with DeFi is much riskier.
Is Staking Safer Than Lending?
Yes, staking is safer than lending. However, keep in mind when staking with a centralized exchange, that even if they have federal deposit insurance corporation (FDIC) coverage, that only applies to fiat currency held on the platform, and now your crypto account holdings. Whether you keep assets on a crypto exchange depends on your risk tolerance.
What Are Eligible Coins for Staking?
The coins that are eligible for staking directly to protocol are any that are proof of stake crypto assets. The coins and tokens eligible for staking through crypto exchanges depends on the platform.
Do Exchanges Provide Interest on Crypto?
Yes, some cryptocurrency exchange platforms allow you to earn interest on crypto. This includes both centralized and decentralized exchanges. They often offer competitive interest rates.
Is it Better to Just HODL?
Depending on the asset, yes it may be better to just HODL (Hold On For Dear Life) depending on your risk tolerance.
Bitcoin interest rates tend to be extremely low and often require you to loan it out (meaning you no longer hold key ownership), making it less lucrative. However, staking with proof of stake assets directly to their blockchain network is almost risk free. It also pays out high interest rates compared to that of a bank account, and the interest earned is often auto-compounded, increasing the overall earnings on you crypto assets.
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