Want to start earning interest? You can open an account with Voyager today!
The traditional lending market has been flipped on its head by blockchain technology. From decentralized, instant and anonymous loans on Aave to 9% yields on stablecoins from Voyager, you’re probably asking yourself, what’s the catch?
In short, these yields are made possible by long-term crypto holders who would rather pay high interest rates to get a loan than sell their crypto and pay capital gains tax.
Thanks to these early crypto adopters, your savings account is now obsolete. Learn how to earn high yield with no lockup period on your stable (and volatile) crypto assets with Voyager today.
What’s the Catch?
With interest rates hundreds or thousands of times greater than those offered by your traditional bank account, you’re probably wondering what’s the catch. Here are the 2 biggest risks.
The biggest risk when earning interest through Voyager is the same risk you expose yourself to holding money on any centralized exchange: a hack. Exchanges typically store their users’ funds in cold storage wallets, however, some of it is needed to be stored in hot wallets for liquidity. Digital assets held on cold wallets can’t be breached via the internet, so these funds are generally regarded as bullet-proof.
Luckily, Voyager is a publicly traded company with shareholders to keep happy. More than likely, Voyager is actively working to protect all funds to the highest degree. A hack is very unlikely, but it should always be considered when letting someone else have custody of your money.
Another risk of lending through Voyager is regulation. The government may decide tomorrow that crypto lending is a threat, and shut down all U.S.-based products. This wouldn’t mean a loss of funds, rather a loss of future yields that won’t be earned. Voyager Digital is located in the U.S, meaning it’s subject to U.S. regulation. This is typically an advantage, until it isn’t. For now, crypto lending is perfectly legal in the United States.
How To Earn Interest on Voyager
- Open a Voyager account.
Voyager is a popular, fee-free crypto exchange. Until recently, the platform was only accessible via a smartphone app. In August, however, Voyager launched a web3-based crypto exchange you can use on your computer.
Opening an account with Voyager is simple, but you’ll need to identify yourself because of Securities and Exchange Commission (SEC) regulations. You’ll need to input your Social Security number, ID card and other personal information to get access as a U.S customer.
Once you apply for an account, you’ll have to wait for identity verification to complete. After this is done, you can link a bank account and transfer funds to the exchange. - Purchase cryptocurrency.
Voyager offers yields on over 30 different cryptocurrencies. The interest rates vary by crypto, and the full list can be found here. Purchase your desired asset and maintain the minimum monthly balance to earn interest automatically.
The safest and most stable returns can be found with USDC, a token pegged to the U.S dollar. For each USD Coin minted on the blockchain, $1 is held in reserves, ensuring the value of each USDC token. - Maintain the minimum monthly balance.
So long as you are holding the required minimum balance, you’ll automatically earn interest on your position.
Interest is calculated based on average daily holdings and paid out in the interest-bearing asset you fund your account with by the 5th business day of the month.
That’s it! It’s really that simple to earn interest on your digital assets.
Interest Rates on Voyager
You can compare the interest rates for certain cryptocurrencies below. Since each digital asset has its own lending market, the interest rates on these cryptocurrencies will vary. The highest rates and most risk-averse interest bearing accounts are those that utilize stablecoins; in this case, USDC. However, if you're invested in any other cryptocurrencies for the long-term, then earning interest on your position is a must.
Don't Want Free Money?
According to the Voyager website, all Voyager users will be automatically enrolled in the Voyager Interest Program, but you can choose to opt-out by navigating to “Account” – “Crypto Interest” and selecting “I want to opt-out.”
A Decentralized Alternative
Decentralization is at the core of blockchain technology. Satoshi Nakamoto created Bitcoin, decentralized money, in response to the centralized corruption that led to the 2008 financial crisis. Since Bitcoin, many new decentralized financial products have been created using smart contracts, lending included.
Aave is the largest decentralized lending platform in the world. Based on the Ethereum blockchain, Aave is an app built using open source smart contracts. With a team of only a few dozen developers, the Aave protocol currently manages over $23 billion of digital assets.
Other users are able to collateralize their crypto assets and borrow this liquidity. The key difference is that Aave is non-custodial. In contrast to Voyager, whose team must be trusted with your money, Aave is a protocol, so trust need only be placed in the open-source code.
Interest rates are determined by the market on Aave, and stables such as Binance USD (BUSD) and Tether (USDT) currently have deposit rates of 28% and 16% respectively. Not only is Aave arguably more secure, it offers better yields on certain stablecoin assets.
Own Your Own Crypto
If you’re worried about your favorite exchange getting hacked, then taking custody over your funds is an investment worth making.
Cryptocurrency wallets are locations on the blockchain with a unique address. This unique address is called a public key, and has a corresponding private key needed to unlock it. Keeping your private key safe is of the utmost importance. Losing your private key means losing your funds. There are a handful of hardware and software devices dedicated to keeping your key safe, and usable. Here’s a breakdown of the best wallets.
Best hardware wallet: Ledger Nano X
Hardware wallets are physical devices that typically prevent your private key from ever touching the internet. This means you’ll need to have this device handy to authorize payments via Bluetooth or USB.
The Ledger Nano series is one of the most popular cryptocurrency wallets to date. The original Ledger Nano S, is only $59 and allows you to store a boatload of cryptocurrencies. You’ll have to connect it with your computer via USB in order to authorize payments.
The Ledger Nano X is the next generation of the Nano and has Bluetooth to help users make payments on the go. Additionally, it has enough storage to download 100 apps, whereas the Nano S is capped around 6. Apps let you access your private key, so if you have coins across many blockchains, you’ll want to opt for the Nano X.
Best software wallet: ZenGo
The ZenGo wallet is a great choice for cryptocurrency beginners who want a simple user interface and access to a decentralized lending protocol. ZenGo has partnered with Compound, a DeFi app similar to Aave, to give users the ability to earn interest directly from the mobile app. Yields on Compound through ZenGo are subpar to those currently available on Aave and Voyager.
The Long-Term Outlook on Digital Asset Lending
At the end of the day, these high interest rates are a result of supply and demand for cryptocurrency loans within the industry. While more traders want to leverage their positions or borrow cash against their appreciating digital assets, this may not be the case during a long-term bear market.
While 9% returns are incredible on an asset with close to zero risk, it’s likely that the APR received will go down as more investors become aware of opportunities like these within the crypto industry. For now, earning yields on both stablecoins and established cryptocurrencies can be extremely lucrative.