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/ How to make money on DeFi?

How to make money on DeFi?

Published 28 March 2023
Reading time 4 minutes
How to earn on DeFi?


How to Earn Passive Income with DeFi: Best Strategies and Tips. Start passively earning now!

The cryptocurrency market has offered society many new options to make money and improve the economy. Bitcoin and altcoins, blockchain products, have diversified the financial system of traditional currencies. However, cryptocurrencies lacked some of the attributes of traditional finance – credit, deposits, and other passive income opportunities.

What is DeFi: Decentralized Alternative to Traditional Financial Instruments

DeFi is a financial instrument in the form of applications and services created on the blockchain. The execution of transactions within DeFi is provided by a set of smart contracts (a pre-specified condition for the execution of a certain action). This feature allows decentralized finance to act as an independent service, not tied to a central governing body.

Making money with DeFi is easy enough if you get into the essence of decentralized services and understand the technology of managing the financial flow in them. DeFi answers the questions: how to make money with smart contracts and how to get crypto passive income. Read more about DeFi meaning HERE.

What Are The Advantages Of DeFi Compared to other services in cryptocurrencies

Passive income sources DeFi have many positive qualities. It is these qualities that set decentralized finances apart on the market:


The very name Decentralized finance (DeFi) points to the most important advantage of this type of blockchain product. There is no centralized management structure for services and applications, and all processes are automated. It eliminates the need to maintain an operations department and eliminates human intervention in the money work processes.

Audit and transparency

Since DeFi services automatically enforce pre-defined transaction terms, it's critical to have a high level of accuracy in the execution of smart contracts. Most DeFi apps and services employ auditing of their smart contracts by expert companies. This reduces the likelihood of programming errors and increases user confidence.


DeFi services are highly adaptable to any activity. Thanks to smart contracts, it is possible to launch an exchange, a wallet, and banking services for cryptocurrencies. At the same time, there is no need to obtain permission from the regulator and a centralized control body.

There is no human factor in making money with DeFi

Automated smart contracts have minimized the need for human intervention in production processes. It reduced the number of technical errors and malicious use of the service.

DeFi's accessibility

DeFi services have made classic financial services like loans and deposits available only in cryptocurrencies. There's no need to go through lengthy procedures to get a loan from a bank. Or you can DeFi passive income by depositing cryptocurrency and getting a constant interest. H2 - How Does DeFi Passive Income Work: examples

Decentralized finance has offered plenty of additional money income options for cryptocurrency investors. Passive income crypto projects have become available to every investor, transparent and at high speed.

Deposit crypto in DeFi for an APY

The first and easiest way to make money and passive income in DeFi is to deposit cryptocurrencies. Investor in cryptocurrencies can deposit their tokens in the wallet of the decentralized finance service. It will earn interest at a predetermined rate. The amount of interest earned can vary depending on various conditions: the type of cryptocurrency in the deposit, the term of the deposit, and so on.

Cryptocurrency deposits are often also referred to as staking. In this case, the investor not only deposits cryptocurrencies for interest, but is also one of the elements supporting transactions in the blockchain.

Remuneration within deposits is most often paid in project tokens or stablecoins.

DeFi Lending

Make money with DeFi is possible thanks to the sought-after function of traditional finance. Lending in decentralized finance is a popular tool, as an investor in cryptocurrencies can access the necessary amount of money quickly within minutes. Typically, the lending process is secured by a pledge that the investor places in the DeFi service. This collateral allows the issuance of the required loan amount. If the investor cannot repay the loan, the collateral goes into the service's wallet and repays the loaned amount.

Yield farming or liquidity delivery

Another profitable investment strategy is Yield farming or liquidity delivery. Cryptocurrency investors provide their tokens for a fee to DeFi-protocol liquidity pools. In return, liquidity providers receive remuneration in the form of governance tokens. This is a popular means of attracting liquidity, especially in the operation of decentralized exchanges. DEX exchanges constantly need money free funds for fast exchange, and liquidity pools provide the speed and quality of this service.

The real risks in using DeFi

Many investment avenues carry a set of risks. Decentralized services are no exception. The main risk applies to all highly volatile assets – it's the risk of liquidity crisis and credit risk. In a period of intensive changes in cryptocurrency rates, used as collateral for the price of underlying services assets and blocked in smart contracts, there is a massive liquidation of transactions and deals, and the entire financial system may collapse. Neither DeFi full form nor common cryptocurrencies are immune from this. Even traditional fiat markets can show a sharp decline due to the crisis.

Currently, to mitigate these risks, DeFi-protocols are trying to provide loans with an excess amount of assets to reduce the pressure of a possible liquidity crisis.

Another risk is a security risk. A smart contract can be hacked because of a technical error in creation. The human factor cannot be ruled out completely. Fraudsters take advantage of this and steal assets. DeFi protocols can successfully combat this risk. There is a multi-step procedure of internal and external auditing to do this. Internal audits are conducted in-house by the team, while external audits use the services of auditing firms. The auditing process assesses whether smart contracts meet technical parameters and have no programming errors.

Blurred lines of responsibility and decentralization

Interestingly, decentralization can also bring negatives to the platforms. A specific body responsible for what happens in the ecosystem can help the project's development as a whole. The basic principle of DeFi passive income is based on decentralized management, assuming that all players in the ecosystem are interested in its development and economic benefit. But this does not always work. We are not only talking about blatantly malicious actions aimed at the collapse of the ecosystem. It can simply be the unwillingness of users to participate in the development of the service.

Therefore, decentralization can also be a negative because no one wants to make and implement strategic decisions necessary to remain competitive.

Basic Principles and tips for passive income crypto projects investment

Everyone is looking for an answer to how to generate passive income. DeFi is the answer. You can take out a loan and quickly double your capital, put it on deposit, or provide liquidity. There are many options, so it is worth taking advantage of extra money income opportunities in cryptocurrency.

The main principle that everyone should observe in DeFi is security. The developers and users need to worry about security. It is best to conduct constant internal and external audits of smart contracts. This reduces the risks to a minimum and confirms the service's transparency.

Security should also be a concern for users who earn passive income with crypto. It is not a one-way operation, but a team game. Users in decentralized finance are fully responsible for their actions. In case of a mistake, it will be impossible to go to the crypto-bank and say that the operation was performed incorrectly. That is why it is necessary to observe the rules of elementary digital security, to educate oneself in this sphere, to study new passive crypto income in DeFi.


How to make passive income in DeFi? It is necessary to use all the opportunities that are open to the user. Be a lender, place money funds on deposit, and as a source of liquidity. Cryptocurrencies are a very mobile and accessible asset. Use all the advantages together with EXEX exchange.

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EXEX LTD. Registered Number: 232147
Seychelles, Mahe, Victoria, Frances Rachel Street, Sound & Vision House, Suite 1