How (and why) to earn compounding interest with crypto

How do you earn compounding interest with crypto (ie bitcoin or ether)?

Simply put, the way to earn compounding interest it to ensure your interest savings account does actually earn compounding interest. Do not assume that this is the case, as you might be earning out on large, long term interest gains.

Coin Interest Rate now lists compounding interest on each interest account platform listed on our site. If a platform/account offers it, we say so on the page. If not, we say it doesn't.

So, why is this important?

You don't have to have an MBA or a degree in finance to understand how compounding interest will help grow your assets. Compounding interest means that you earn additional interest on the base amount plus the interest you have earned over time.

Long story short, prefer platforms/interest accounts that are giving you compounding interest. Over the long haul, you'll really see the difference.

BTC interest, how to earn

Earning BTC interest, or yielding crypto on crypto. How is this possible?

You earn bitcoin interest by lending your bitcoin out. Depositing BTC into a secure platform, such as Celsius Network or Voyager, gives them access to lend out your bitcoin in the form of loans to their customers. They then charge those customers an interest rate, and share the returns with you. This is where the yield comes from.

The customers might be institutional or retail. The loans might be large or might be small. They might be used to purchase a large item, like a person loan. There's a million reasons why people or businesses take loans. All that matters is that you are rewarded for lending out your assets in interest, and platforms need your Bitcoin to be able to lend it out.

Lockup periods

Something to watch out for when using a lending platform to earn BTC interest, is the lockup or cool-down periods. In order to make profit from your deposited funds, the platform or service needs to give it to other customers under a loan term. Some platforms allow you to remove funds at any time, while others give you an improved interest rate for keeping funds in a wallet for longer periods of time (such as 1 or 2 months). This is a key difference between Celsius Network and Blockfi, for example.

BTC Interest Accounts act like Staking, but aren't

Earning interest is a lot like Staking. Staking is another method of generating yield, and is native to certain tokens. However, Bitcoin does not offer staking as part of it's protocol. ETH 2.0 will use staking to reward it's holders, without having to lend their ETH out.

Interest accounts bring staking like rewards to coins that otherwise do not support it natively.

Why interest is the killer app in crypto

The reason we created Coin Interest Rate is that we believe interest is the true killer app for crypto.

Set aside its amazing performance as a new asset class, or the price appreciation, or the revolutionary underlying technology. And even ignoring all the current use-cases, institutional adoption, and future potential that we can't even fathom today.

Interest is the killer app.

It's the killer app for HODLers, it's the killer app for new users coming from traditional finance. It's the killer app for institutions and family offices. Combine the other amazing qualities of crypto as an asset class, and it's easy to understand why.

And interest comes from an ever-expanding array of methods. Defi has hundreds of automated market makers, generating yield from smart contracts. Cefi has smart money managers working on behalf of clients to find yield. With new platforms and coins focused on this, it's easy to see this market will continue to expand and grow.

But, all of these services and methods lead to confusion and a large and growing competitive marketplace that can be difficult to stay on top of and get the most current interest rates. That's where we come in.

Incentives, awards, yield, whatever you want to call it. We believe interest is the killer app for cryptocurrencies, now and certainly in the future.

Our site is focused on building the tools and resources so you can find who has the best interest rates, so you can decide on what is the best service for you.

What is APY?

APY stands for Annual Percentage Yield and is the projected rate of return for holding/lending crypto assets in supported wallets. It is important to note that APY includes compounding interest.

The APY for crypto assets is variable and fluctuates based on supply and demand for each coin and varies on each service (or wallet). Market dynamics can impact APY rate changes, so APY isn't often a great determining factor over the entire course of a year, as it can change monthly, or even weekly, depending on the service.

Annual Percentage Yield (APY) takes into account compounding interest, but Annual Percentage Rate (APR) does not.

What crypto wallets support compounding interest?

Great question, and luckily the answer is many! Check our Coin Interest Rate rankings.