One of the popular ways of earning passive income in crypto is through staking. Staking allows your crypto to earn passive income on top of value appreciation, which is especially helpful whenever the crypto market is down. The number of proof of stake (POS) coins have drastically increased in the past few years and is becoming the majority consensus mechanism in crypto. Unfortunately, you can't stake some of the biggest crypto, such as Bitcoin, Ethereum, and Litecoin, which use the proof of work (POW). These coins do not offer rewards for holding on to your cryptos.
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If you are the type of person who wants to keep hold of your crypto in a hot wallet, then DeFi is the best place for you to earn interest. Some of the popular DeFi platforms you can use to gain interest from your crypto are AAVE & Compound. The advantage of using DeFi protocols is that no one can control your account, not even the government. This decentralization can also be a disadvantage, especially if you are careless with handling your crypto wallet. Several unscrupulous people lurk in DeFi projects putting up scam websites to steal your crypto. If you happen to enter one of these scam sites and your crypto gets stolen, you can do nothing since no central authority can freeze the stolen assets. Another disadvantage of using Defi is the gas fees you will incur. If you only have a small amount to invest, the gas fees will be absurdly high compared to your investment.
Crypto Lending through Centralized Finance
Several centralized crypto lending platforms have continually increased in the past few years. Some of the popular crypto lending platforms are Nexo, Blockfi & YouHodler. Governments regulate these institutions, unlike their decentralized counterparts, and users must submit to KYC. Based on my experience, getting approval for these requirements can be a bit of a hassle.
The advantage of using centralized finance is that they can assist users with their accounts, such as recovering stolen crypto. Since a company holds your cryptos, you have access to customer service and other facilities. Some of these platforms also offer insurance if there is a breach in their system. It is also cheaper to transact on these platforms since there are no exorbitant fees for each transaction you make.
The disadvantage of using centralized platforms is the risk of losing your crypto if the company goes bust. Crypto exchanges are vulnerable to hacking, and some have even closed down due to these hackings. Mt. Gox is a perfect example of a service that shut down after a hacking incident.
Advantages of Using Nexo
I use Nexo as my preferred crypto lending platform. I prefer Nexo over the Defi platforms for convenience, ease of use, and cheaper transaction cost. I don't have to pay gas fees whenever I make a transaction inside Nexo.
As of writing, Nexo currently supports 32 cryptocurrencies in their platform. They also offer one of the highest interest rates among other centralized lending platforms.
Nexo allows me to purchase crypto using my credit card or bank account, minimizing transaction costs. You will no longer need to transfer crypto into your crypto wallet from an exchange. The built-in exchange makes it easier to convert from one crypto into another.
Another way to earn passive income in Nexo is through their referral program. Nexo offers existing users $25 worth of bitcoin for every user they refer.
Nexo uses its native token, Nexo, to determine users' loyalty status/tier. The higher your status in the Nexo, the more benefits you get, such as higher interest rates from your investment and lower interest on your loans.
One of the unique features of Nexo is its zero percent loan, which is available for platinum users if you meet the requirements. The zero-percent loan is handy if you want to hold on to your crypto but need cash. Use their low-interest loans instead of selling your crypto.
How to Get the Most Out of Nexo
To take advantage of Nexo's features, try to achieve platinum status as soon as possible. Purchase Nexo tokens equivalent to 10%, which is the minimum for platinum, of your total crypto portfolio balance. Platinum status will enable you to earn at the highest interest rate.
Use the option to receive interest in Nexo tokens for an additional 2%. Once you receive the interest, you can always trade it if you prefer to hold your earnings to another crypto. The extra 2% will go a long way if you plan to hold on to your crypto for a long time.
Park your stable coins in Nexo instead of exchanges. If you have set aside stable coins in preparation for a market decline, parking your stable coins in Nexo will earn you up to 12%. The high interest from stable coins will make it worth waiting for the perfect time to buy crypto at a lower price.
I've been using Nexo for almost a year now and have yet to experience problems within their platform. If you are interested in opening a Nexo account and have questions about Nexo, leave me comments. I'll try to answer your questions based on my experience and to the best of my ability. If you finally decide to use Nexo and open an account, use the link https://nexo.io/ to receive $25 worth of bitcoins upon depositing $100 worth of crypto on the platform.
This post is not financial advice and is based on my experience using Nexo. I would advise you to do your research if you still have doubts about this platform