With Coinbase you can earn interest on cryptocurrencies
With Coinbase you can earn interest on cryptocurrencies

Coinbase has announced that it will enable users to earn interest by lending cryptocurrency to a third-party decentralized funding platform called Compound.

Decentralized finance, or DeFi, has become one of the most popular use cases for blockchain technology and cryptocurrencies because it allows people to access crypto applications without the need for a central intermediary.

However, accessing the DeFi protocol may require high network fees and a somewhat complicated user experience. Coinbase is working hard to make DeFi more user-friendly and accessible.

The software is not currently available to US users because plans for similar functionality put the company in trouble with the US Securities and Exchange Commission.

Coinbase said that customers in more than 70 countries/regions will be able to lend DAI to borrowers through its app, a stable cryptocurrency pegged to the US dollar.

This process uses a protocol called Compound that programmatically collects money from lenders and collects interest on that money from borrowers.

The goal of the platform is to make the system more user-friendly. Compound loans typically involve receiving multiple tokens when depositing and paying transaction fees when depositing or withdrawing cryptocurrency.

Coinbase says it pays these fees to users. The plan is similar to that of Coinbase Lend, which the platform announced in June. But after the SEC threatened to sue it, it canceled it in September, saying the proceeds were on bonds.

Coinbase Earn Income Easily With DeFi

Lend allows users to earn interest on another stable cryptocurrency, the USDC. Despite the fact that users lend it directly to the management platform, and not to external agreements.

Coinbase also promises that any money you invest in the Lend program will get a 4% return. But the company does not provide such a guarantee for this new program.

It also warns users of potential losses and advises floating interest rates. According to data from Coinbase, the interest rate on the DAI fluctuated between 2.83% and 5.39% in October.

These high interest rates not only reflect the unique opportunity to receive global liquidity, but also the increased risks that DeFi can bring.

And Coinbase is a centralized exchange. However, its goal is to connect its users to the ever-evolving world of decentralized financial applications, a philosophy endorsed by the company's CEO.

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