The merit and demerit of decentralized finance also bring the limelight on the growing dominance of DeFi savings products.
People could also leverage DeFi for the effective management of their crypto savings.
Users could start earning interest on assets that they lock in lending protocols like Compound.
What is Defi (Decentralized Finance)
Decentralized finance (commonly referred to as DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum.
Searches for “crypto savings” have increased by 8900% over the past 2 years. And by 450% over the past year.
Crypto savings accounts let investors earn interest on deposited crypto assets, including stablecoins.
The current APY rate for Bitcoin savings accounts ranges from 1% to 10%, outperforming average high yield saving offers in US banks.
Although, unlike traditional savings accounts, crypto savings accounts are not FDIC insured.
We’re seeing a growing number of startups enter the crypto savings space, from lending platforms to wallet apps offering crypto rewards for their users.
Cake DeFi: Crypto savings accounts targeting non-technical users. The company plans to launch a mobile app this year (on top of their existing web app). The Singapore-based startup has raised $2.4M in funding to date.
Ledn: BTC and USDC savings accounts operating in more than 100 countries. The startup generates interest (up to 9.5%) from lending activities on the platform. The Toronto-based startup closed a $30M Series A funding round in May 2021.
Zipmex: Digital assets exchange with no minimum interest accounts. The company claims to provide $100 million insurance on custodial assets and offers interest payments daily. Zipmex’s total funding has reached $51.9M to date.
There are some major advantages of using DeFi, including cost, speed, and security. Anyone with an internet connection has access to blockchains and cryptocurrencies.
Users are able to make trades and move their assets whenever they want without having to wait on bank transfers or pay bank fees. DeFi is fast.