We are continuing our crypto vocabulary series with the terms you must know to start making income in DeFi. You can make the most of your crypto — and internet bonds! — through various reward earning strategies with these platforms and instruments.
An acronym for decentralized exchange, a DEX is a peer-to-peer platform where users can trade cryptocurrencies among themselves without relying on a centralized provider. You can make income on a DEX by trading cryptocurrencies or becoming a liquidity provider.
Decentralized lending platforms allow anyone to lend and borrow crypto directly from each other, without the approval of a third party such as a bank or a broker. As a lender, you can provide loans in different cryptocurrencies to individuals and businesses and get an attractive APY.
A liquidity pool is a smart contract with locked-up tokens that ensures that there is enough liquidity for a specific cryptocurrency on a decentralized exchange. By letting traders use their liquidity, providers get passive income in trading fees — a % of each trade.
Staking is the process of locking up your funds to secure a proof-of-stake network. By staking your tokens for a certain amount of time — from days to years, depending on the blockchain — you become an integral part of a network and get rewards in return.
On most blockchains, you can choose to stake directly by becoming an active validating node, which requires a certain minimum of tokens, or delegate any amount you like to a staking provider.
Pioneered by Ankr StakeFi, liquid staking is an innovative model that makes your staked funds instantly available. Instead of waiting for the lock-up period to expire, you can trade, lend or become a liquidity provider with your assets, while still accumulating staking rewards. This is achieved through special tokens that represent your stake on the network. This feature allows you to maximize your return on investment with multiple layers of additional rewards.