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What’s on offer
The simplest product is a token fixed deposit. Bitbns, a local crypto exchange founded in 2017, offers a Fixed Income Plan (FIP) where users can invest a certain amount of USDT (Tether) or Bitcoins for a fixed period and rate of return. The rate of return varies between 8% and 40% on an annual basis for holdings of 30-365 days. Another platform, ZebPay, allows investors to deposit their cryptocurrencies for seven, 30, 60 or 90 days. The return depends on the period that the investor has chosen. The returns, along with the principal, are deposited into the trading wallet at the end of the term of the deposit. ZebPay offers an annual yield of 1.30% for Bitcoin, 2% for Ethereum, 6.5% for Binance Coin and 7.5% for Polygon (Matic). Tether and Binance USD earn a higher rate of 9% and 8% respectively. ZebPay also has an open term deposit where you can transfer your crypto assets back to your trading wallet at any time. The returns are lower than the fixed deposit scheme and are deposited into your wallet daily.
Another crypto lending platform, Vauld, offers similar fixed deposits, where Bitcoin and Ethereum earn 6.70% and Matic 7.23%. Some tokens like CAKE and AXS earn up to 42% annual returns.
Cashaa, which claims to be the world’s first cryptocurrency financial institution with physical branches, has launched savings accounts alongside fixed deposit products. It allows users to store, buy, sell and earn interest without risking assets for unknown DeFi (decentralized finance) projects, the platform says. The cryptobank also has lock-free deposit accounts where one can earn up to 13% returns. The fixed deposit plan, which offers up to 24%, locks in funds for one-12 months. Bitcoin and Ethereum earn 8% interest. USDT gains 20%. The rate goes up by 4% if the investor chooses to earn interest in their token called CAS. They pay interest every day.
UniFarm, which guarantees APY up to 250%, is a crypto farming solution that offers various projects to investors. Users can stake any single token and receive multiple tokens as rewards, the platform says. For example, if there is a UniFarm pool of $ORO, $MATIC, $REEF, $CNTR and $FRONT tokens, you can stake any of them and start earning all the tokens as rewards. If the APY falls below what the platform has promised, it will introduce additional $ORO tokens after eight weeks of cultivation to pay the required APY. The average APY across projects is 40-50%, says Tarusha Mittal, COO and Co-Founder, UniFarm. “We offer a minimum guaranteed APY of 35% that can go up to 250%. But in a few cases (cohorts), the APY exceeds 1,700%,” she adds. Returns vary from project to project. UniFarm profits from the fixed development fee charged by each project entering the cohort. Others profit by lending to institutional players and staking the coins.
How it works
The platforms use staking algorithms and over-collateralized lending to generate high returns. Over-collateralization is the provision of collateral that is more than sufficient to cover potential losses in the event of default. For example, Vauld’s loans to its clients and institutional borrowers are overcollateralized by at least 150% and are typically repaid in 30 days. Collateral here refers to supported or accepted crypto coins.
Crypto staking is a strategy used by crypto platforms on behalf of their clients (lenders) to earn returns. This is a mechanism used by many cryptocurrencies to verify their transactions. Think of staking as the crypto equivalent of putting money into a high-yield savings account. When you deposit money into a savings account, the bank lends it to others. In return, you get a portion of the interest earned on lending. Likewise, when you stake your digital assets, you are locking up your coins to participate in managing the blockchain and maintaining its security. In return, you earn rewards calculated in percentage returns. The reward is in the form of additional cryptocurrency tokens you have staked and is credited to your wallet.
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