Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
HODLing Bitcoin may pay off eventually, but it means oneās money isnāt working for them now, says Andreas Antonopoulos.
Bitcoin educator Andreas Antonopoulos says there are risks behind any current method of earning steady income with oneās Bitcoin holdings, but DeFi offers one of the few ways to do so without āgiving your money to other people.ā
In a livestream Q&A on Antonopoulosā YouTube channel on June 27, he said decentralized finance (DeFi) contracts were one way for Bitcoin (BTC) owners to generate passive income without relinquishing custody of their coins. āPassive incomeā refers to money earned using methods that require little-to-no effort.
According to Antonopoulos, investors could convert their BTC into Ethereum (ETH) or a stablecoin like Dai (DAI), then lend it out on a platform where the token can earn interest. However, he said carrying out such trades on Ethereum-based platforms was āquite riskyā in terms of security, smart contracts with bugs, and the platform itself:
āEthereum may have problems. It may have bugs. The consensus algorithm may have failures. You may have increases in the gas price, which leads to other cascade problems. And all of those things can cause you to lose some or all of your invested capital.ā
Lending and borrowing crypto can be a risky bet due to the high volatility of digital currencies, with a large number of crypto-backed loans used for margin trading. However, the volume of these loans reached $8 billion last year, and may continue to attract investors.
HODLing not the only way to earn
Though Antonopoulos mentioned other methods for getting investorsā coins to work for them, nearly every way to do so meant relying on a custodial exchange. The Bitcoin educator said such investments carried the risk of theft or mismanagement.
Bitcoin HODLers, on the other hand, do not earn dividends or interest on their investments ā or anything ā until they finally decide to cash out. Antonopoulos says HODLers hope for appreciation, but āwhat goes up, can come down.āĀ
The Bitcoin educator says the same is true for crypto day traders: āYou can pull your Bitcoin out and convert it, buy 1,000 altcoins, and then watch them crash by 98%.ā
Antonopoulos not the only DeFi advocate
Others in the crypto community have commented on creating passive income through DeFi lending. Cointelegraph reported in March that OKEx Director of Financial Markets Lennix Lai said: āThe combination of cryptocurrency and DeFi creates an alternative way for users to earn passive interest that was not possible before.āĀ
Ethereum 2.0ās release later this year may offer users the opportunity to earn passive income through staking pools.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.