The cryptocurrency industry has offered developers and investors the opportunity to introduce new financial tools providing plentiful options to earn passive income. Simply holding crypto has offered patient investors the chance to make gains over the years. However, there are various other ways to increase crypto assets’ stacks, even in bear markets.
Other than staking, crypto savings accounts allow retail investors to accrue their funds by earning interest on the crypto assets they deposit on specific cryptocurrency platforms if they agree to lend out their coins or tokens. Crypto interest accounts are particularly appealing because they distribute much higher returns than traditional bank savings accounts, considering that the average interest rate applied by a crypto savings account can be up to 7.5%, against the average 0.06% of bank savings accounts.
Related: DeFi staking: A beginner’s guide to proof-of-stake (PoS) coins
The difference in rates between crypto and traditional savings accounts is somewhat significant but comes with higher risks associated with the service. We’ll find out here how to access crypto savings accounts, the crypto interest rates and deposit terms and the risks associated with this type of financial instrument.
What is a crypto savings account?
A crypto interest account is generally a DeFi platform’s service that lets you earn interest on digital assets you’ve deposited and agreed to lend out in exchange for a return. This service is similar to a bank savings account that will lend out your money to other customers or financial institutions for a certain amount of time and will give you interest for that service.
By definition, blockchain technology encourages users to become self-sovereign and independent from third parties. However, intermediate companies have become a necessary component of the industry providing crypto savings accounts to those who want to enjoy the benefits of the technology without making too much effort to learn complicated and burdensome processes.
Other than convenience, these companies will also hold some of the risks involved and ensure depositors are paid first if adverse events like insolvency occur. Some companies are backed by insurance and work with well-established custodians to protect their customers.
How does a crypto savings account work?
Once you deposit your crypto assets into a savings account, you start accruing interest from day one. Most of the popular cryptocurrencies can be…
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