Earning BTC interest, or yielding crypto on crypto. How is this possible?
You earn bitcoin interest by lending your bitcoin out. Transferring BTC into a secure platform 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 personal loan. There are 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 a profit from the assets, 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).
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 its protocol. ETH 2.0 will use staking to reward its holders, without having to lend their ETH out or using defi apps.
Interest accounts bring staking-like rewards to coins that otherwise do not support it natively.
