Best DeFi Platforms in 2024
You have probably been hearing a lot about the term “DeFi” lately. But what does it mean? DeFi stands for decentralized finance, and it is the next wave of transformation to hit the world of cryptocurrencies. Now, decentralized finance, or DeFi as we will refer to it in this article, allows for people to access both traditional investment and lending services without the need for a centralized entity – like a bank. Rather, it is now possible for individuals to “become the banker,” as it stands, and the top DeFi platforms will allow you to lend your idle digital assets in exchange for an attractive rate of interest.
Now, in this guide we will be comparing some of the top DeFi lending platforms that are available on the market today. Our focus will be on supported cryptocurrencies, interest rates, APRs, terms, customer service, and how user friendly these platforms are.
Start investing in DeFi tokens right now with ByBit!How Does DeFi Lending Work?
At its most simple definition, DeFi is a financial ecosystem based upon blockchain technology. It operates without the intervention of third parties and without central administration – hence the name “decentralized finance.” Rather, it makes use of a P2P network, establishing decentralized applications to enable people to connect and manage their individual assets regardless of their status and/or location. The goal of DeFi is to create an open-source, transparent and permissionless financial services environment.
Now, when it comes to lending, DeFi platforms offer clients cryptocurrency loans in a trustless manner (meaning that there are no intermediaries) and allow for users to enlist their cryptocurrencies on the platform for the purpose of lending. What this means is that an individual can take a loan directly on the decentralized platform through the process known as P2P lending.
Now, the lending protocol also allows the lender to earn interest. But when it comes to decentralized applications (known in the community as DApps), DeFi has the highest growth rate when it comes to lending and is the most prevalent contributor for locking down cryptocurrency assets.
How Do I Earn with DeFi Lending?
There is a vast potential when it comes to earning income passively through DeFi. Now, the simplest method for earning passive income through DeFi is to deposit your available cryptocurrency onto a platform or protocol that will pay you what is known as an annual percentage yield, or APY, for it. The best way to explain this is that it is a similar process as to how you might deposit money into a savings account and earn interest on it.
Now, you can deposit money onto a DeFi platform with a wide variety of cryptocurrencies, but you cannot do so with what is known as fiat – or traditional currency. Thus, your first step will be to purchase cryptocurrency with cash, through a process of fiat on-ramp. Now, it is also important to note that most DeFi platforms operate on the Ethereum blockchain, so Bitcoin (BTC) is not usually an accepted currency.
There are two methods that you can use to make money using DeFi lending. One of these is known as liquidity mining, or yield farming. One way to get involved is to stake or trade any rewards that you receive for depositing your cryptocurrency: this is usually the native token of the platform or protocol that you have chosen to deposit your currency in.
These native tokens are also known as governance tokens frequently grant the right to vote on changes to the platform or protocol, which makes them particularly valuable on what’s known as the secondary market. Now, with this you typically have two choices: stake these governance tokens with the issuing platform to earn further reward; or to trade them on an exchange. For example, you may make the choice to trade a token because you can do so for a stable cryptocurrency that you can earn further interest on.
The second option for earning passive DeFi income involves borrowing either a coin or token from a platform that you can put back into either the same platform or another to earn rewards. Listed below is an example to illustrate the process.
If you hold Bitcoin, you might first take, for instance, $1,000 of BTC and swap it for wBTC and deposit that into a DeFi platform to receive an APY of 0.5%. Now, this might be a small return, but by depositing the BTC, you can take out a decentralized loan – which might up to 75% of the value of your BTC ($750), for another coin that offers a higher return.
Once you have taken out the loan you can then deposit or lend it – whatever you decide. If you choose to do so, then you have unlocked a further 7% of the value of your BTC to earn further passive income. It is important to know that you also continue to reap the benefits from the capital growth of your original asset and the interest and governance tokens that you can then stake with the platform or trade further take part in further liquidity mining.
Pros and Cons
Although the process explained above can technically be carried on infinitely, which results in how complex the DeFi ecosystem can be. But this barely scratches the surface on what experienced DeFi users are capable of, where leverage and its derivatives can be utilized to give returns up to fifteen times. However, it is important to also note that these methods result in risks. For those participating in multi-layered liquidity mining, the risk can be quite high.
There are multiple threats that users face who hold assets across numerous platforms. These can include potential losses from what are known as flash loan hacks and the high transaction fees that can occur if the Ethereum network becomes congested. The resultant fees can eat into your returns substantially.
Something else that you need to be aware of is what is known as impermanent loss, which occurs when the price of your assets moves against you while it is deposited with a platform. This can be a huge issue for those trying to make income. Given that interest moves on a daily basis – decreasing more as users begin to pile in – there is the potential opportunity cost from having your cryptocurrency locked into a platform that underpays.
Top 6 DeFi Lending Platforms Comparison
When you take the time to invest in cryptocurrency and DeFi lending, you gain the opportunity to generate an attractive amount of interest off your digital coins and tokens. Now, this is only achievable by depositing your cryptocurrency into a DeFi lending platform. But there are several factors that you need to consider – including APYs, lock-up terms, security, and fees – before you select a platform.
To aid you in making the right and informed decision about a DeFi lending platform, we have compiled the following table for you to consult below.
| Platform Name | Typical Lock-Up Periods | Crypto Interest Rates (min-max) | Stable Coins Interest Rates (min-max) | Investor Risks (high/medium/low) | Rating (1-10) |
|---|---|---|---|---|---|
Various terms |
Over 100% |
19%+ |
Low |
8 |
|
Flexible – 3 months |
14.5% |
10% |
Low |
8 |
|
DeFi Swap |
30 days to 1 year |
75% |
TBC |
Low |
9 |
Aqru |
Flexible accounts – no limits |
7% |
12% |
Low |
9 |
YouHodler |
Flexible accounts – no limits |
6.8% |
12.3% |
Low |
8 |
Nexo |
Fixed and flexible |
36% |
17% |
Medium |
7 |
What is important to keep in mind when selecting a DeFi lending platform, is to understand that you have a full understanding of the platform’s terms and conditions. You should not only be looking at the lock-up terms, but also explore whether the APYs can change without notification. You need to also look at factors that surround the fees and limitations on the platform.
DeFi Lending Platforms Reviews
Binance
Binance as a platform is best known for its leading cryptocurrency exchange, offering more than a thousand markets to almost a hundred million clients around the world. It is considered one of the six top DeFi lending platforms that we will be reviewing as a part of this article.
Binance can also be used for its DeFi lending services, in addition to its cryptocurrency exchange. What you need to know is that it offers crypto interest accounts, which offer some of the best yields available on the market on both medium and low-cap coins. It is important to know that this is also the case with Binance’s liquidity provision tools.
If you’re interested in the high yields that are available on Binance, then you can purchase the respective currency directly on the exchange. The platform is home to over 600 coins.
Opening an account at Binance will take only minutes and, if your country of residence is eligible, you can deposit your funds with either a debit or credit card. The fees will vary depending on your country of residence, however. Crypto deposits are supported on Binance, if that is something you want to consider. Lastly, the Binance app is available for download on both iOS and Android, doubling as both an exchange and a wallet.
👍 Pros
• High yields on both medium and small-cap coins
• Flexible and locked terms offered
👎 Cons
• Headline interest rates often capped
• Yields can be somewhat misleading
• Yields can change at any time
Crypto.com
Crypto.com offers a range of different services, including a crypto exchange, interest-earning accounts, a DeFi wallet, loans, and credit cards, among other offerings. Crypto.com serves very much as a one-stop-shop for all things DeFi.
Now, when you are looking at Crypto.com’s lending services, there are dozens of different crypto assets that you can earn interest on. The APYs vary, depending greatly on the respective token, and the lock-up term that you select. There are the options of choosing between a flexible account or a term of one to three months.
With Crypto.com, it is important to note that the longer that you keep your tokens locked up, the more you will earn. You can also boost your interest rate by staking CRO, which is the digital currency at the heart of Crypto.com.
The top-tier rate on offer at Crypto.com is 14.5% per year. There are also, critically, no limits in place; this means that you can maximize your income generated by the platform’s lending tool. On the other end of the lending spectrum, you can also play the role of a borrower on Crypto.com.
For those who are interested in crypto exchange services, Crypto.com offers over 250 digital tokens on the platform. You pay a mere 0.4% per slide to buy or sell tokens, although those low rates are usually offered only when you are trading large volumes or staking CRO. All of Crypto.com’s services are available online or via the Crypto.com app.
👍 Pros
• Earn up to 14.5% on crypto savings accounts
• Wide range of lock-up terms, including flexible withdrawals
• Excellent reputation
• Offers crypto exchange services and loans
• Spend your interest payments with the Crypto.com credit card
👎 Cons
• Higher APYs on Bitcoin are available elsewhere
• Need to stake CRO for the highest yields
DeFi Swap
Overall, DeFi Swap comes out on top as the best DeFi lending platform to consider that is available currently on the market. It is a new platform that offers a decentralized exchange that enables its users to both buy and sell digital currencies without the requirement of a third-party entity being present.
Additionally, DeFi Swap offers a wide variety of lending services which allow for you to generate income via an attractive APY on your idle tokens or coins. The platform offers crypto yield farming, which offers a variety of different interest rates depending on which token you are seeking to lend.
Perhaps most importantly, DeFi Swap allows for you to choose your preferred lock-up period. Thus, the longer that you are happy to keep your tokens locked away, the more interest you will eventually be paid.
You can also, via the second lending tool available on the platform, provide liquidity to the DeFi Swap exchange. By choosing that option, you earn a share of the trading fees that the platform collects. Both lending services are executed and maintained by transparent and immutable smart contracts – making them quite safe.
To note, the platform also supports MetaMask and WalletConnect – the latter of which allows you to use Trust Wallet. DeFi Swap is planning to launch an iOS and Android mobile app in the coming months, along with an NFT marketplace. So there is much to keep your eyes on when it comes to this growing platform.
👍 Pros
• Overall the best DeFi lending platform on the market
• High yields on offer
• One of the best DeFi apps on the market
• Supports both crypto yield farming and liquidity provision
• 100% decentralized, backed by smart contracts
• NFT marketplace and mobile app coming soon
• Backed by DeFi Coin, a top-rated growth crypto token
• High APY when holding DEFC, making it a leader among DeFi staking platforms
👎 Cons
• Not as well-established as other DeFi lending platforms
Aqru
Next up, we have Aqru, which is a top-rated DeFi lending platform that allows you to earn interest on your idle digital tokens and coins. You can open a crypto savings account on the platform, which allows you to earn interest on both Bitcoin and Ethereum deposits.
With Aqru, you earn an attractive APY by depositing a supported stablecoin. Important to note, as well, is that all the crypto interest accounts that are offered by Aqru come without lock-up terms. Meaning that you earn interest on your chosen account on a flexible basis, so you can make a withdrawal whenever you want to.
There is a lot of simplicity to Aqru, which makes it appealing to newcomers and beginners to DeFi lending. It also supports fiat currencies, making its appeal better to beginners.
However, you do need to note that there is a $20 feed levied on all crypto withdrawals – although there are no commissions deducted from interest earned at Aqru.
👍 Pros
• Earn 7% on Bitcoin and Ethereum deposits
• Stablecoin deposits earn 12%
• No lock-up periods or tier limits
• Low minimum balance
• Free fiat cash withdrawals
👎 Cons
• Relative newcomer to the industry
• $20 fee on crypto withdrawals
YouHodler
YouHodler is based in Switzerland, and possesses a particularly well-designed platform accentuated by great rates and an innovative approach.
On YouHodler, loans are simply and easy to understand – making them a good choice for newcomers to the game. The user can decide the payback terms, which range from 30 days up to a year. The loan-to-value (loan to collateral, in other words) ratio can range from between 50 to 90%, depending on the payback term – making it higher than most other platforms. YouHodler also supports loans that use the top 50 cryptocurrencies, meaning that there are plenty of options for collateral.
YouHodler is an excellent choice for investors who are seeking a high loan-to-value lender. It also has an easy-to-use interface with clearly defined terms, meaning that you will not be the receiver of a nasty surprise while lending using the platform.
👍 Pros
• 3-Factor authentication
• Variety of flexible lock-up terms
• Easy to use
• Transparent fee structure
👎 Cons
• Small user base (around 150,000 around the world)
Nexo
For those looking to generate interest from stablecoins, then Nexo is one of the best options for DeFi lending platforms. It offers an interest rate of up to 17% on UST tokens and other stablecoins, including Tether and True USD, pay out a slightly lower interest rate of 12%.
It is important to know that the highest interest rate on Nexo is paid on a conventional crypto token: by depositing Axie Infinity, you get paid a very attractive rate of 36%. But you need to know that these rates are based on earning your interest payments in NEXO, the digital currency that is native to the Nexo platform.
Nexo also allows you to borrow funds. At Nexo, you can borrow up to $2 million in fiat or crypto. If you elect to deposit Bitcoin as a collateral, then you can access an LTV of 50% without credit checks. This means that Nexo loans are instantly approved – although other tokens require a much higher collateral rate.
👍 Pros
• Earn up to 17% on stablecoins
• Flexible accounts
👎 Cons
• Need to stake NEXO to get the maximum APY
• APYs randomly appear to change regularly
How Can I Use DeFi Lending: A Beginner’s Guide
To use an example to help clear up any questions you might have about how DeFi lending works, let us use Binance as an example to help illustrate the process.
You deposit approximately $1,000 worth of tokens onto the platform
At the time that you make this deposit, 1 token is worth $1 – for the sake of simplicity
You thus deposit a total of 1,000 tokens
You decide that you would like to be a long-term investor, so you opt for a year-long lock-up term, yielding an APY of over 100%.
Now, the outcome of the above is as follows:
After a year has passed, you receive back your principal deposit: a thousand tokens.
Now, you also receive your interest payment of, let us say, 100% -- so you earn a further 1000 tokens.
As a result of the above, you now are in possession of 2,000 tokens.
But you also need to take the time to consider the value of the token which you are lending out, which fluctuates on a second-by-second basis as per market forces.
When you originally made your deposit of 1,000 tokens, the token was worth $1.
When the year long term ended, the token was trading at $3 per individual token.
Now, you originally invested the equivalent of $1,000 – meaning that you made a profit of $4,250.
It is vitally important that you remember that the market value of the token you are lending out will end up having a direct impact on your APY – whether that is for good or bad, you will need to wait and see. As an example, if the value of your tokens increases, then you are multiplying your yield; but if the token depreciates in value, you get back less than what you originally invested, at least in terms of dollars.
Is DeFi Lending Risky?
There are several risk factors that you need to evaluate before you begin utilizing a DeFi lending platform. You will need to do quite a lot of research into the platform that you are considering using, as you will have to connect your crypto wallet to the platform and lend out your tokens.
If you make a mistake and do not use a reputable platform, then you face the risk of being scammed. Make sure that you do your own, independent research to determine the trustworthiness of any DeFi platform.
You will also want to consider lock-up terms, which is another risk to consider. While some platforms allow flexible withdrawal terms for all the support coins and accounts, others require that you lock your tokens up for a minimum period. Thus, you need to know that you cannot make a withdrawal during that time.
Lastly, you must take into consideration the fluctuations in the values of cryptocurrencies. Often, this can be volatile. Meaning that if the value of the token you are lending out depreciates by more than what you earn in interest, then you will be running at a loss.
Part of how you can mitigate these risks is by creating a diversified lending portfolio consisting of multiple cryptocurrencies. When it comes to reducing the risk of volatility, you might want to consider lending out stablecoin tokens.
Summary
The best DeFi lending platforms on the market give you an opportunity to generate attractive APYs on your idle crypto tokens. Those tokens will then be lent out to those who wish to borrow funds without going through a centralized entity. Now, that you have gotten an introduction to the DeFi lending process and various platforms, you can begin your DeFi lending journey.
FAQs
Can you lend DeFi coins?
You can lend out your crypto tokens on a platform like DeFi Swap. The platform itself is decentralized, meaning that all lending arrangements are facilitated by smart contracts.
How do loans work in DeFi?
For those who utilize a DeFi platform to take out a loan, then you need to be aware that there are no credit checks involved. Rather, you get an instantaneous loan by depositing cryptocurrency as a collateral. The LTV that you receive will depend on the token you deposited as collateral along with which DeFi lending platform you use.
What are the risks of lending DeFi?
There are risks associated with DeFi lending. You need to consider the risk involved with the platform itself, with how trusting you can be that it will fulfill its obligation of returning your investment with interest. But you also need to consider the risk associated with having your tokens locked up – if that is applicable to the platform.
What is a DeFi lending protocol?
Now, DeFi lending protocols allow for you to earn interest on digital assets. All you need to do is deposit your token of choice into the platform and, in certain cases, decide on which lock-up term you want to agree to.
Team that worked on the article
Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.
The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.
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Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
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