Earning Strategies Overview
Learn about all ways to earn returns through stablecoins, understand how to assess risks and returns, and choose the earning strategy that best suits you.
Overview
Stablecoins can not only serve as a store of value and medium of exchange, but can also generate returns through various methods. This guide will comprehensively introduce stablecoin earning methods to help you make informed investment decisions.
Earning Method Categories
Stablecoin earning methods are mainly divided into two categories:
1. DeFi (Decentralized Finance) Returns
Characteristics:
- ✅ Decentralized, no need to trust centralized institutions
- ✅ Usually higher yields (5-20%+)
- ✅ High transparency, verifiable on-chain
- ⚠️ Requires some technical knowledge
- ⚠️ Smart contract risks exist
- ⚠️ May have impermanent loss
Main Methods:
- Liquidity Provision
- Lending
- Yield Farming
- Staking
2. CeFi (Centralized Finance) Returns
Characteristics:
- ✅ Simple operation, beginner-friendly
- ✅ Relatively stable yields (3-10%)
- ✅ Customer support available
- ⚠️ Need to trust centralized platforms
- ⚠️ Platform risks exist
- ⚠️ May require KYC
Main Methods:
- Demand deposits
- Time deposits
- Wealth management products
- Lending services
Detailed Explanation of Main Earning Methods
1. Liquidity Provision
Principle:
- Provide liquidity on DEX (Decentralized Exchange)
- Receive trading fee share
- May receive liquidity mining rewards
Yield Rate:
- Usually 5-30% annual yield
- Depends on trading volume and liquidity pool size
Risks:
- Impermanent Loss
- Smart contract risk
- Liquidity risk
Suitable For:
- Familiar with DeFi operations
- Can bear certain risks
- Have sufficient funds
Representative Platforms:
- Uniswap
- Curve
- PancakeSwap
2. Lending
Principle:
- Deposit stablecoins into lending protocols
- Lend to other users
- Earn interest returns
Yield Rate:
- Usually 3-15% annual yield
- Depends on market demand and protocol parameters
Risks:
- Smart contract risk
- Liquidation risk (if used as collateral)
- Protocol risk
Suitable For:
- Want stable returns
- Don't need frequent operations
- Can accept lower yields
Representative Platforms:
- Aave
- Compound
- MakerDAO
3. Yield Farming
Principle:
- Provide liquidity to get LP tokens
- Stake LP tokens in yield farms
- Receive additional token rewards
Yield Rate:
- Usually 10-50%+ annual yield
- May include multiple token rewards
Risks:
- Reward token price volatility
- Impermanent loss
- Smart contract risk
- Project risk
Suitable For:
- Pursue high returns
- Can bear high risks
- Familiar with DeFi ecosystem
Representative Platforms:
- Yearn Finance
- Convex Finance
- Beefy Finance
4. CeFi Demand Deposits
Principle:
- Deposit stablecoins into centralized platforms
- Platforms use for lending or investment
- Earn fixed or floating interest
Yield Rate:
- Usually 3-8% annual yield
- Relatively stable yield
Risks:
- Platform risk (rug pull, hacked)
- Regulatory risk
- Liquidity risk (some platforms)
Suitable For:
- Beginner users
- Pursue stable returns
- Don't want frequent operations
Representative Platforms:
- Binance
- Coinbase
- Kraken
- OKX
- Bybit
- Nexo
- Crypto.com
5. CeFi Time Deposits
Principle:
- Lock stablecoins for a certain period
- Earn higher fixed interest rates
- Longer terms = higher rates
Yield Rate:
- Usually 5-12% annual yield
- Higher than demand deposits
Risks:
- Platform risk
- Liquidity risk (cannot withdraw during lock period)
- Regulatory risk
Suitable For:
- Have idle funds
- Don't need short-term liquidity
- Pursue stable returns
Representative Platforms:
- Binance
- OKX
- Bybit
- Kraken
- Nexo
- Crypto.com
6. Stablecoin Staking
Principle:
- Stake stablecoins to specific protocols
- Support protocol operations
- Receive staking rewards
Yield Rate:
- Usually 5-15% annual yield
- Depends on protocol mechanism
Risks:
- Protocol risk
- Smart contract risk
- Token price risk
Suitable For:
- Believe in specific protocols
- Willing to hold long-term
- Can bear protocol risks
Representative Platforms:
- Anchor Protocol (failed)
- Lido
- Rocket Pool
Yield Rate Comparison
| Earning Method | Annual Yield | Risk Level | Liquidity | Technical Barrier |
|---|---|---|---|---|
| CeFi Demand | 3-8% | Medium | High | Low |
| CeFi Time | 5-12% | Medium | Low | Low |
| DeFi Lending | 3-15% | Medium-High | High | Medium |
| Liquidity Provision | 5-30% | High | Medium | Medium-High |
| Yield Farming | 10-50%+ | Very High | Medium | High |
| Stablecoin Staking | 5-15% | High | Low | Medium |
Risk Assessment
Risk Types
1. Platform Risk
- Platform rug pull
- Platform hacked
- Platform shut down by regulators
2. Smart Contract Risk
- Code vulnerabilities
- Hacked
- Upgrade failure
3. Market Risk
- Stablecoin depegging
- Liquidity dried up
- Market panic
4. Liquidity Risk
- Cannot withdraw in time
- Lock period restrictions
- Liquidity pool dried up
5. Impermanent Loss
- Token price changes
- Unique risk of liquidity provision
Risk Levels
Low Risk (Suitable for Conservative Investors):
- CeFi demand deposits (well-known platforms)
- Yield: 3-8%
- Risks: Platform risk, regulatory risk
Medium Risk (Suitable for Steady Investors):
- DeFi lending (audited protocols)
- CeFi time deposits
- Yield: 5-15%
- Risks: Smart contract risk, platform risk
High Risk (Suitable for Aggressive Investors):
- Liquidity provision
- Yield farming
- Yield: 10-50%+
- Risks: Impermanent loss, smart contract risk, project risk
How to Choose Earning Strategy
Based on Risk Tolerance
Conservative:
- Choose CeFi demand deposits
- Choose well-known, compliant platforms
- Diversify across multiple platforms
- Expected yield: 3-8%
Steady:
- Choose DeFi lending (audited)
- Choose CeFi time deposits
- Partially try liquidity provision
- Expected yield: 5-15%
Aggressive:
- Choose yield farming
- Choose high-yield liquidity pools
- Participate in new projects (with caution)
- Expected yield: 10-50%+
Based on Capital Size
Small Capital (<$1,000):
- Recommended: CeFi demand or DeFi lending
- Reason: Simple operation, controllable risk
- Note: Gas fees may account for high proportion
Medium Capital ($1,000-$10,000):
- Recommended: Combination strategy
- Part CeFi demand/time
- Part DeFi lending
- Small amount liquidity provision
Large Capital (>$10,000):
- Recommended: Diversified investment
- Multiple platforms and protocols
- Combination of multiple earning methods
- Consider using hardware wallet
Based on Time Investment
Limited Time:
- Recommended: CeFi demand/time
- Reason: Set once, no frequent operations needed
- Suitable: Office workers, beginners
Some Time:
- Recommended: DeFi lending + liquidity provision
- Reason: Need regular attention and adjustment
- Suitable: Users with some experience
Plenty of Time:
- Recommended: Yield farming + multiple strategies
- Reason: Need frequent operations and monitoring
- Suitable: Professional investors, DeFi enthusiasts
Best Practices
1. Diversify Investment
Don't put all funds in one platform:
- Diversify across multiple platforms
- Diversify across multiple earning methods
- Reduce single risk
Recommended Allocation:
- 50% CeFi (multiple platforms)
- 30% DeFi lending
- 20% Liquidity provision/yield farming
2. Start Small
Beginner Recommendations:
- Test with small amount first ($100-500)
- Familiarize with operation process
- Understand risks and returns
- Gradually increase investment
3. Continuous Learning
Stay Updated:
- Follow platform updates
- Understand market changes
- Learn new earning methods
- Adjust investment strategy
4. Risk Management
Set Stop Loss:
- Don't invest more than you can afford to lose
- Set maximum loss limit
- Regularly check investment status
Monitor Risks:
- Regularly check platform security
- Follow protocol audit reports
- Monitor market dynamics
5. Record and Track
Keep Records:
- Record all investments
- Track yield rates
- Calculate actual returns
- For tax filing
Common Misconceptions
Misconception 1: Higher Yield is Always Better
Fact:
- High returns usually come with high risks
- Need to assess risk-return ratio
- Don't blindly pursue high returns
Misconception 2: CeFi is Safer Than DeFi
Fact:
- CeFi has platform risks
- DeFi has smart contract risks
- Both have risks, need assessment
Misconception 3: Can Earn High Returns Risk-Free
Fact:
- All investments have risks
- No risk-free high returns exist
- Need to bear corresponding risks
Misconception 4: Put All Funds in One Platform
Fact:
- Diversify to reduce risks
- Don't over-concentrate
- Even the best platforms can have problems
Tax Considerations
Return Taxation
General:
- Stablecoin returns may be treated as interest income
- Need to pay income tax
- Regulations vary by country/region
Recommendations:
- Understand local tax regulations
- Keep all transaction records
- Consult tax professionals
- File and pay taxes on time
Summary
When choosing stablecoin earning strategies, consider:
- Risk Tolerance: Choose methods suitable for your risk preference
- Capital Size: Choose appropriate strategies based on capital size
- Time Investment: Choose operation complexity based on available time
- Technical Ability: Choose DeFi or CeFi based on technical ability
- Diversify Investment: Don't put all funds in one place
Remember: Returns and risks are proportional, high returns necessarily come with high risks. Choose strategies that suit you, don't blindly pursue high returns.
Next Steps:
- 🌐 DeFi Earning Methods - Deep dive into DeFi returns
- 🏦 CeFi Earning Methods - Deep dive into CeFi returns
- ⚖️ Earning Comparison and Selection - Compare different earning methods