Your bank pays you a quarter percent. But some cryptos will pay you 6% or even way more for locking in funds for the “true-believers” in any particular decentralized finance (DeFi) protocol. If you’re not afraid of watching your token’s value fall 20% or more, then DeFi yield is your next crypto investment.
Yield paying DeFi cryptos are one of the main reasons why cryptocurrency investors have been diversifying from Bitcoin to the alt-coin universe, led by Ethereum. But for the past year, at least, it’s also been about Algorand, which I own, because it pays 6% yield. It’s not as safe as the Global X Super Dividend (DIV) ETF, which I also own. But Algorand and other tokens are – for investors – another way to capture yield in a diversified, crypto way.
Many of these DeFi protocols (think of them as fintech startups, in layman’s terms) are for investors that have a deep knowledge of cryptocurrency, the platforms they are operating on, and can lose most of their investment without losing sleep.
In short, there are many ways DeFi projects pay their investors yield, not just through ‘yield farming’.
A Quick Overview and Three Picks
DeFi is financial services running on public blockchains, primarily Ethereum. DeFi tokens earn interest, allow you to borrow, lend, buy insurance, or simply trade as a speculative crypto investment.
“Yield farming” is a reward scheme that’s taken hold in the DeFi crypto world over the last year. If you want to compare it to traditional investing, it’s like yield on a bond, or a dividend. It is arguably one of the main reasons investors who are not using Algorand, buy Algorand, among others.
Like a traditional dividend ...