Binance, Founded by Changpeng Zhao in 2017, is the largest cryptocurrency exchange in the world. Since inception, its market share quickly grew outshining competitors and expanding rapidly. In todays market, Binance has grown to become more than just the place investors go to buy and sell crypto, with products such as BNB coin, Binance chain, and the Binance Smart Chain (BSC) Network.
Binance maintains its edge over competitors due to the range of unique services which are unmatched by competitors. One of these being, Binance Earn, offering a simple and secure way to utilise popular coins to earn a % return (yield) instead of letting coins sit idle in your wallet. One of the popular methods that investors earn a yield on their crypto investments is known as ‘Staking’.
What is DeFi Staking through Binance and how can it make me money?
DeFi, short for Decentralied Finance, is a method of providing financial services to investors through smart contracts, which are self-executing contracts whereby the terms of the agreement between the buyer and the seller are directly written into code. This code, and the agreements within them, exist across a distributed, decentralised blockchain network. Binance DeFi staking acts on behalf of users to participate in certain DeFi products which in turn, earns a % return. This return is then distributed back to users participating in staking, offering a secure way for investors to grow their investment. Binance actively audit and select only the best DeFi projects in the industry, and continue to monitor elected projects to ensure risks are reduced and the project is progressing as expected.
As an example, Binance is currently estimating APY of 13.33% on BNB coin staked for a duration of 120 days. And 10.12% for ETH over 120 days. A $10,000 investment staked could earn you $1000+ after 120 days whilst also benefiting from a potential increase in the asset price.
What are the risks involved with staking?
Like most forms of investment, staking comes with its own types of risk.
- Lock up period – When staking you are required to ‘lock up’ your coins for a period of time. Usually 30, 60 or 90 days, however it may vary. As a result of this, you cannot withdraw or move your coins during the staking period unless you are happy to forfeit any interest already accrued.
- Volatility – Cryptocurrency is known to be an incredibly volatile asset class. Whilst in the lock-up period, prices are likely to fluctuate higher and lower, during this period, you will be unable to sell your position.
- Fees – There are sometimes fees involved depending on the chosen staking platform.
Overall, it is evident that there are many advantages to staking your coins on Binance, however investors should be conscious as to what level of risk they’re happy to adopt, and if they are comfortable ‘locking up’ their investment for a defined period of time. Fortunately, due to Binance vetting, staking is relatively low risk, and offers a great way for investors to capitalise further on their existing portfolio.