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Despite the rapid rise of cryptocurrencies over the past two years, this asset class is considered speculative. The lack of regulation and high volatility associated with cryptocurrencies make it a viable investment for those with a high risk profile.
While it’s fairly easy to fundamentally evaluate stocks, investors should try to analyze the underlying utility of blockchain networks of digital assets.
For example, the main reason for Ethereum (CRYPTO:ETH) The dramatic rise since its launch in 2015 is the ability of its blockchain network to support smart contracts. Transactions for smart contracts are validated using the ETH token, increasing its demand over time.
Here, we’ll take a look at the best decentralized finance, or DeFi, apps that run on the Ethereum blockchain.
SushiSwap
A decentralized exchange, SushiSwap (CRYPO:SUSHI) offers a wide variety of passive income opportunities to users. You provide liquidity to a staking pool and earn rewards in the form of the SUSHI token, which is currently valued at a market capitalization of US$805 million. Additionally, if you do not wish to participate in the liquidity provisions of staking pools, you will still earn income in the form of protocol fees.
The total value locked on the Sushi is US$1.94 billion, which means the multiple of TVL to market cap is 2.40.
ShibaSwap
A decentralized exchange (DEX) that is part of the shiba inus (CRYPTO:SHIB), ShibaSwap was launched in July 2021. Exchange offers work similarly to other DEXs such as UniSwap, where you can trade tokens without the need for an intermediary. You can also participate in liquidity pools and stake your cryptocurrencies to earn passive income.
The ShibaSwap DEX also allows you to buy and sell non-fungible tokens, or NFTs. Its market capitalization is around US$133.4 million while the total value locked on ShibaSwap is US$207 million.
Convex finance
One of the most popular DeFi protocols in the world, Convex Finance offers the opportunity to earn trading fees without locking the CRV token. But users who wish to stake their CRV tokens will be rewarded in the form of trading fees as well as a share of boosted CRV.
The total value locked on Convex Finance is $8.7 billion, while the CVX token enjoys a market capitalization of $1.9 billion.
Aave
Another open source, non-custodial liquidity protocol where you can earn interest on deposits as well as borrow assets is Aave (CRYPTO:AAVE). With a market capitalization of US$2.08 billion, the AAVE token is the 54th largest cryptocurrency in the world.
Lenders can earn interest after depositing digital assets into liquidity pools. Borrowers use staked assets as collateral to “take out a flash loan” by taking advantage of this liquidity. Users holding the AAVE token will benefit from reduced platform fees. AAVE also serves as a governance token where token owners can contribute to protocol development.
The insane takeaway
Cryptocurrency staking platforms like the ones mentioned above allow users to create a passive income stream. However, you should also understand that the returns will be provided in the form of the staked token, the prices of which continue to remain volatile.
