What’s the best way to earn with Ethereum

Ethereum is one of the most popular and promising cryptocurrencies today. Although it is held by millions, very few people fully utilize the asset and use it to earn 2-10% per year, let’s find some ways to earn a high and relatively safe annualized rate of return (APR) ).

Ethereum is the “digital oil” of the cryptocurrency market. With its long history, active developer community, and large DeFi ecosystem, it will undoubtedly survive the next bear market. In addition, improvements such as mergers, private transactions, and Layer 2 Rollups have strengthened Ethereum’s position in the crypto market.

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Most Ethereum holders are probably underutilizing their ETH. In fact, investors have the opportunity to earn high passive returns on their Ethereum and earn more ETH, which will continue to appreciate in the future. Here are a few different approaches and the associated risks.

The most common way to earn stable returns on ETH is staking via liquid staking protocols or exchanges.

Until now, Ethereum’s blockchain has been secured by a consensus mechanism called proof-of-work, which means that many high-performance computers consume electricity and computing power competing to validate transactions and earn fees. This fall, Ethereum will switch to a new process called Proof of Stake, which is 99.97% more energy efficient than Proof of Work. Anyone holding ETH can stake their Ethereum to help secure this new network.

Most exchanges, such as Coinbase , Binance, and KuCoin , offer ETH staking services and charge a fee for convenience. For more advanced users, liquid staking with a DeFi protocol like Lido or Rocket Pool is a more flexible option, as users can deposit ETH and receive liquid staking ETH tokens (stETH or rETH) in return. The main risk of staking is that the custodian or protocol holding your ETH could act maliciously and cause users to lose some ETH, but this is extremely rare and has not happened so far. The yield on staking ETH is usually between 4-6%.

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Liquid collateral tokens provide more opportunities to increase investor returns. For example, the Index Coop protocol has an interest compounding ETH token that uses leverage to achieve a 2.5x return on equity for users.

In the world of DeFi, there are more possibilities to earn ETH. The easiest way is to deposit ETH into a lending platform like Aave or Compound . This provides the lowest yield of any of the methods mentioned in this article, around 1% or less, but the setup is simple, and as long as the crypto market doesn’t fall to almost worthless, this method has very little risk.

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Another option is to provide liquidity for cross-chain bridges or decentralized exchanges that bridge with Ethereum. For example, Hop Protocol is a decentralized cross-chain bridge that allows users to transfer funds between different chains, such as Polygon, Optimism, and Arbitrum. By supplying ETH on two different chains, liquidity providers can earn variable percentages depending on the bridging that occurs, with APRs that can sometimes be as high as 10% and others as low as 1%.

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For users who don’t want to spend their funds on bridges or keep all their funds on one chain, it is also possible to earn through a decentralized exchange. For example, Curve has a stETH-ETH trading pair with an annual interest rate of around 3%, while other exchanges use two different ETH bridge versions and pay handsome interest. The main risk for the ETH-ETH pair is that investors have to trust that the two separate bridges cannot be hacked, while stETH-ETH will have a slight impermanent loss, which will reduce profits slightly.

There are a few different ways to get relatively high yields on Ethereum. While some are simpler and more secure than others, each has its own advantages and disadvantages, and the best strategy is to take advantage of several different ETH yield opportunities to increase diversity and reduce risk. Before investing in any of these opportunities, every investor must do his own research and make sure he understands the risks and rewards of these strategies.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/whats-the-best-way-to-earn-with-ethereum/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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