How to Earn Interest on Aave?
Aave is one of the most well-known names in the DeFi space and is a DeFi interest account provider. With over $9 billion locked in, Aave is the second most dominant DeFi protocol and offers interest accounts on various cryptocurrencies. Due to its popularity & success in the DeFi space, Aave's native AAVE token has seen huge demand among crypto users. Many Aave hodlers are long on Aave.
If you are one of the Aave hodlers, you can multiply your profits while hodling. All you need is an interest account, and you can earn interest up to 7.45% APY on your Aave deposits. Follow the steps below to begin earning interest on Aave:
- Sign up for an Interest Account
To sign up for an Aave interest account, you will have to visit an interest account provider's website. Go to their registration page and provide your name and email address there. After entering the details, click on the submit button.
- Verify Your Account
After completing the signup process, you will receive a verification email from the interest account provider. Click on the link given in the email to verify your email address. Now, you will have to complete a KYC process to activate your account.
For the KYC process, enter your personal details, add a government-issued identity card and upload a photo of yourself holding the same card. Now, click on the submit button. Within a few days, you will receive an email from the interest account provider regarding KYC approval.
If you choose a DeFi interest account provider, you won't have to sign up for an account and nor would you have to go through any KYC process. To earn interest from a DeFi interest account provider, you will need a wallet like Metamask & Trust Wallet. Connect your wallet with the DeFi platform and deposit the funds to your interest account on it. The interest accruals will begin automatically.
- Deposit Your Aave
Your account is ready to receive Aave deposits as soon as your KYC is approved. To deposit Aave, go to the page listing all the supported cryptocurrencies available for deposits. Click on the Aave option to receive a unique wallet address.
Copy the wallet address and paste it into the withdrawal page of the wallet from where you are withdrawing Aave. Now, enter the amount of Aave you wish to withdraw and click on the 'withdraw' button. You will receive Aave funds in your interest account soon.
- Start Earning Interest
Once you receive Aave in your account, you don't have to do anything else. The interest accrual process is automatic and will start within a few hours or after one day, depending upon the platform you choose. You can use BitCompare's Aave interest calculator to calculate your interest earnings.
Why Earn Interest on Aave?
Aave is a promising DeFi token, and there are no doubts about it. Hodling Aave has been very beneficial for many Aave users but earning interest on your Aave while hodling will prove even better. By keeping Aave in your wallet, you will only benefit from its price gain. But by earning interest on Aave, you are multiplying your profits. Also, the interest you earn on Aave is far better than what banks offer on fiat currencies.
- Easy Process
Earning interest on Aave is easy as it only requires you to complete a 3-step process. First, you must sign up for an interest account. Then, complete the KYC process. At last, deposit Aave to your interest account. You don't have to do anything else as the interest accruals will begin automatically.
- Low Risk
Earning interest on Aave is among the least riskier options in the crypto space today. There are risks, but the magnitude of it is lower than many other financial instruments offering similar interest rates. Lending cryptocurrencies & fiat currencies is the major source of income for interest account providers. As it involves lending, there are risks, but most interest account providers manage risk by making over-collateralization mandatory to borrow from them.
- Passive Income
Passive income is the best form of income, and by earning interest on Aave, you will begin earning passive income. Your interest accrual will continue even while you are asleep. So, deposit Aave into your interest account and see your wealth grow.
Where can I earn Interest on Aave?
There are limited options when it comes to interest account providers offering interest on Aave. Aave, the DeFi protocol behind the Aave token, is a DeFi interest account provider itself. But Aave is not interest on its native token Aave now. Currently, the best interest account provider offering Aave interest account is Celsius Network.
Celsius Network offers interest up to 7.45% APY on Aave. But to earn the highest interest rate, which the Celsius Network offers, you must meet a few criteria. First, you must agree to receive an interest payout in CEL tokens. It is Celsius Network's native token. But to receive interest payout in CEL tokens, you must be from a country other than the United States & its territories.
The US residents can only receive interest payout in the tokens that they deposit. It is known as in-kind rewards on Celsius. It means that a US-based user depositing Aave on Celsius Network will only receive interest income in Aave tokens. The current in-kind reward rate on Aave is 5.92%. Any international users that do not want to receive interest in CEL tokens will also receive only 5.92% interest on Aave.
Is it Risky Earning Interest on Aave?
Yes, it can be risky, but the degree of risk is comparatively lower in earning interest on Aave. Regardless, we must understand the risks involved. The interest that these platforms offer comes from the income that they earn by lending cryptocurrencies and fiat currencies.
As their main business is lending cryptocurrencies and fiat currencies, there is a risk. Most of them manage the risks by making over-collateralization mandatory for obtaining loans from them. Some platforms do not make over-collateralization mandatory for competitive reasons. They do so to stand out from their competition. It is also very likely that these players may offer the highest interest rates to their interest account holders. But the risk to your funds will be even higher here. After all, the crypto lending platforms also use their user funds for lending.
If their borrowers start defaulting on loans and the collateralized assets lose value, the platform will even fail to recoup the funds they loaned. It may result in the platform failing to meet its obligation to pay interest to its account holders. If the number of loan defaults becomes bigger, the platform can even go bankrupt. Once the platform goes bankrupt, they cannot refund the user funds.
Most of the interest account providers have insured their user funds today. But it may not be enough if the value of lost user funds is less than the insurance amount. Thus, you must research in-depth before choosing a platform. You can also read reviews on almost every major interest account provider on Bitcompare to know more about them.
What to Look for When Choosing a Platform?
It is very crucial to choose a safe and credible platform to earn interest on Aave. You must check a few criteria to ensure that the platform is a good choice to opt for. Both interest rate and the duration since the platform has been active are two of the most important criteria. Consider both of these factors equally important. Choosing a platform only because of high-interest rates can be counterproductive.
Next, you should check if the platform has any insurance for its user funds. It is crucial because if the platform loses its funds due to a hacking incident or if the platform goes bankrupt, the insurance company will pay the insurance amount to the platform. The funds then will be used to pay back the user funds.
Now, it's time to check the criteria that a platform has for earning the highest interest rates it offers. Many require its users to receive interest payout in the platform's native token to become eligible for earning the highest interest rates. Some make it mandatory to hold a part of their investment portfolio in the platform's native token. Few of them will even ask their users to meet both of these criteria to become eligible for earning the highest interest rates the platform offers.
You must also check if the crypto lending platform has any minimum deposit requirements. If it has, you will have to deposit equal to or more than the minimum amount requirement of the platform to begin earning interest. If you deposit less than the minimum amount, you cannot earn interest on your crypto funds. Some of them have no such requirements, but it also depends on the type of cryptocurrency you want to earn interest on.
Then there is the requirement to lock your funds for a specific duration. If a platform has such a requirement, you cannot access your funds during this period. Some interest account providers offer both types of accounts. If you don't want to lock your funds, you can sign up for an interest account having no lock-in period.