How To Make Money in DeFi

How To Make Money in DeFi

If you like making money, you have to learn about DeFi. This page will show you real DeFi money-making opportunities (and their risks). You will get actionable examples & expert advice! And, I’ll give you more resources to keep learning.

*This doc is strictly educational and not financial advice.

General DeFi Risks (READ ME)

Every DeFi investment opportunity contains risk. Here are the most common:

  • hacks = people hacking the smart contract you are using and taking your money
  • high transaction fees = fees you pay the blockchain for doing your transaction
  • volatility = the price of the cryptocurrency could plunge.
    • returns = (token price) x (interest gained). Even if you are offered really high returns, the token price can drop a lot and wipe out any potential profit.
  • impermanent loss = when you earn less money from interest than you would from the price of your token going up (basically you would’ve made more money by buying & holding)
Important DeFi Vocab

APY (annual percentage yield) is the percentage return you get after one year on an investment

Token is digital currency. There are tokens for different applications & blockchains

*FYI, I’m going to use coin & token interchangeably

TVL represents the number of assets that are currently being staked in a specific protocol. Basically, the total amount of underlying supply that is being secured by a specific application by DeFi completely. Total value locked is a metric that is used to measure the overall health of the DeFi and yielding market.

Rug Pull is where crypto developers abandon a project and run away with investors’ funds, leaving them “rugged.”

How to make money

💳 Buying & Selling

🧑🏽‍🌾 Yield Farming

🏦 Staking

🤝 Lending

🚰 Providing Liquidity

🪂 Airdrops

💳 Buying & Selling

Explanation: You can buy and sell tokens (like a stock). Buy low and sell high, so simple isn’t it 😉

Risks: general DeFi risks. Since it’s so new, DeFi is way bigger ups & downs than the stock market. It is very common for tokens to go to zero. For normal people, it is best to invest in tokens (like $BTC & $ETH) that will be the most resilient to hard times (aka tokens with the most real-world utility).

Examples (5 yr increase): $BTC (1,000%), $ETH (575%), over 1700 tokens have gone to 0 😯

🧑🏽‍🌾 Yield Farming

Explanation: Yield farming basically means using DeFi to maximize returns. I am going to cover 3 methods - staking, lending, & providing liquidity.

Learn more about yield farming here.

🏦 Staking

Explanation: staking is when you commit your crypto assets (for a period of time) to support a blockchain network and confirm transactions in exchange for rewards. You can stake on any blockchain that uses Proof of Stake.

Risks: general DeFi risks. Since you lock up your assets, you’re less flexible to sell them when the price goes down. It typically takes a few days to un-stake your assets. FYI, blockchains with really high staking APY’s often have very volatile prices.

Examples: Solana (7%), Avalanche (11%), Polkadot (14%), Ethereum (11%)

Learn more about staking here.

🤝 Lending

Explanation: lending is when you put money into a smart contract that connects borrowers and lenders. Borrowers then put down collateral (sometimes) into the smart contract and borrow your money. If the borrower cannot repay the loan, the smart contract automatically gives you their collateral.

Risks: general DeFi risks.

Examples: Aave (2%-11%), Compound (2%-12%)

Learn more about lending here.

🚰 Providing Liquidity

Explanation: liquidity pools are a collection of funds locked in a smart contract. They are used to facilitate decentralized trading, lending, & exchanging. Providing liquidity supplies those pools with crypto assets. You earn fees on each transactions. The more money you provide, the more you earn.

Risks: general risks.

Examples: Uniswap (~3%), Curve (~3%), Balancer (~1.5%)

Learn more about providing liquidity here.

🪂 Airdrops

Explanation: airdrops are free rewards to encourage adoption & generate buzz of a project. You often get aidrops for using someone’s project.

Risks: some airdrops are malicious & can try to steal from you. To avoid those - never pay to get one, never share your private key, & avoid suspicious websites. Do your research on the company before accepting ANY airdrop!

Examples: ENS, Uniswap

Learn more about airdrops here.

👩‍💼 Expert Strategies

Learning from experts helps a lot when trying to figure out investing strategies. Here are example strategies and the actual portfolios of crypto’s wealthiest people!

As always, don’t blindly take one person’s advice and DYOR.

Investing strategies in general
Investing strategies in a bear market
Investing strategies with a small budget
17 Different Styles of Crypto Investing

📚 DeFi Resources

Want to learn more about DeFi investing? Here are some more resources!

How to survive crypto in the long-term (w/out getting lucky)
A 5 item checklist before investing in projects
My favorite DeFi education Twitters
My favorite DeFi newsletters

The Milk Road - 5 minute daily newsletter on everything crypto (my personal favorite)

DeFi Pulse - weekly trends on the best DeFi opportunities

DeFi Edge - the latest trends, learnings, and frameworks in 5 minutes a week.

WTFcrypto - breakdown of what's going on in crypto for complete beginners

📈 DeFi gains, made easy

Most people don’t have the time to become DeFi experts.

People simply want reliable DeFi returns. But DeFi is scary & hard to use.

We at Burst don’t think it should be this way.

DeFi doesn’t have to be difficult.

We are building an app to get you the best & safest DeFi gains! Sign up here.