How it Works:
These Exchanges use DeFi (Decentralized Finance) which is a system hosted on a blockchain where smart contracts are used as a service without the need of financial institutions. BlockFi lends cryptocurrency, usually stable coins like Dai, to other users and charges them interest. The interest rate depends on the supply and demand for a specific currency. This is common for HOTBIT as well. These loans are known as smart contracts and this is why you can earn more interest in DeFi than a normal bank. Coinbase allows you to stake coins and earn interest on them which is different than HOTBIT and BlockFi but we will go over that later. All of these exchanges provide more functionality than just earning interest on your crypto, but that is what we will be going over today.
BlockFI:
BlockFi was founded in 2017 by Zac Prince and Flori Marquez. This exchange allows you to deposit, withdraw or transfer your crypto currency whenever you want. The major benefit to this is that you don't have to stake your crypto to earn interest on it. You just put it in the wallet, swap to what coin you want and just let it sit there and it earns passive income. Interest gets paid out on the first of every month and is estimated on your current balance and trade activity. The amount of interest you earn also depends on how much crypto you have, interestingly enough, the more you have the less interest you earn. This is called Accrued Interest and it will be in your wallet as Total Interest Paid on the first of every month. BlockFi Interest Rates: Linked here. The highest paying coins are stable coins like Dai and USDT at 8.25% APY. BlockFi is backed by Valar Ventures, Galaxy Digital, Fidelity, Akuna Capital, SoFi and Coinbase Ventures. They have offices in New York, New Jersey, Poland and Argentina. BlockFi's primary custodian is the New York State Department of Financial Services. If you're interested in BlockFi here is my referral link.
Pros Cons
High Interest Rates Withdrawal Limits
Can withdraw whenever you want Withdrawal Fees
High interest rates
Is BlockFi Safe:
BlockFi is a safe and legitimate exchange to store your crypto on. They allow for two factor authentication to help keep your crypto safe and secure. You can withdraw your assets at any point, just remember that you can make only one free withdrawal per month. The funds you deposit into BlockFi are held by the New York Department of Financial Services, which is highly regulated. The New York State Department of Financial Services is responsible for regulating financial services and products. Including insurance, banking and financial services and laws.
HOTBIT:
HOTBIT is an exchange that was founded in January 2018. They have partnered with well known crypto pools like F2pool, Spark Pool, Mytoken, Slow Mist and HashQuark. Not only are they partnered with some of the largest pools, but they are also partnered with CoinMarketCap, Staking Rewards, BUSD, DuckDAO, CoinGecko and many more. HOTBIT may not have the highest interest rates available, however they offer interest rates on more coins. This is an advantage if you believe the value of DOT for example is going to go up in the long run. You can hodl DOT in this exchange and earn interest on it, while you are waiting for it to fly off to the moon. HOTBIT is constantly introducing and listing digital currencies. This provides users with various types of transactional services in almost all digital currencies. HOTBIT also provides the users with more detailed graphs about current price, allowing you to see things such as RSI, MACD and candle sticks.
Pros Cons
Nice Interface No Fiat Payment Options
Can withdraw whenever you want Withdrawal Fees
More coins listed
Is HOTBIT Safe:
HOTBIT just like BlockFi allows you to set up two factor authentication, which helps keep your wallet secure. HOTBIT also provides users with 24/7 online customer support to help ensure quick and readily available support when you need them. They also abide by the multinodular structure which meets the requirements set by the IT surveillance structure from the Financial Industry. The system design combined with their multi-node and multimodular distribution deployment allows them to scale their capacity and provide better service for the customers.
Coinbase:
Coinbase is a widely know exchange. This is an American company that was founded in 2012 by Brian Armstrong and Fred Ehrsam. As of 2021 this is the largest cryptocurrency exchange. Coinbase pays out interest in different rates, depending on which coin you hold. DAI interest is paid out daily, USDC is paid out monthly, ALGO is paid out daily, ETH 2 is paid out daily, XZT is paid out every three days, and ATOM is paid out every seven days. DAI, USDC, and ALGO are paid out in interest. This means that they assets are not locked and you can trade, sell or convert whenever you want. However ATOM, ETH 2 and XZT are staking rewards. This means that those assets are held for a specific period of time before they can be traded, converted or sold.
Pros Cons
Largest Exchange Lower Interest Rates
User Friendly POS Locks in Assets
Is Coinbase Safe:
Coinbase offers two factor authentication just like all of the other exchanges, and with 68+ million customers, 100+ supported countries and USA-based global offices they are safe. Coinbase also carries crime insurance that protects a portion of you assets held across their storage systems. They do not cover any losses resulting from unauthorized access to your personal accounts due to a breach or loss of your credentials. Coinbase keeps your regular fiat money in one of three places. In custodial accounts at banks, invest the funds in liquid U.S. Treasuries or USD denominated money market funds in accordance with state money transmitter laws. If U.S. customers funds are being held as cash, their money is FDIC insured up to $250,000 per individual.
Which Exchange Should I Use:
If you plan on moving your money around more often I would recommend HOTBIT. They offer decent interest rates and have a more in-depth chart system for fast paced trading. They can show you information like buy and sell orders and have the best charts, indicators and customizability compared to these two other exchanges.
If you are going to make weekly trades, swing trades, or just want to dip your toes in DeFi and buy some crypto I would recommend Coinbase. They are the most widely known exchange, have good safety measures and continue to list new coins and only list trusted coins.
If you want to make the most interest and don't plan on moving around your money for the next 6-12 months I would recommend BlockFi. They have the highest interest rates when it comes to stable coins and will be the safest bet.
Why these Three Exchanges:
I wanted to go over these three exchanges because I stumbled across them. From other influencers who are heavily invested in the crypto market and have been mining and using DeFi for years. These three have lots of available public information and offices you can visit or call if there is an issue. I currently have some of my assets held up in BlockFi and Coinbase and haven't had any issues so far.
What is APY:
Annual Percentage Yeild (APY) is a representation of an interest rate based on a compounding period of one year. Compounding is the process where asset's earnings are reinvested to generate additional earnings overtime. This is calculated using exponential functions because earnings will be generated by both the initial principal and the accumulated earnings from preceding periods. Because of this compounding differs from linear growth, where only the initial principal earns interest each period. Formula: APY=(1+r/n)^n-1
Final Thoughts:
Weather you are mining crypto or just buying some to ride this bull run. It is worth looking into DeFi. These exchanges provide us with more interest than our average high interest savings account. Depending on how you invest, these assets could have a higher return then Index funds and Mutual Funds. Just like any other portfolio it is recommended to diversify your assets and crypto is just another way to do that. It has brought the middle class hope and a nice way to earn passive income. It has brought individuals ways to escape horrible situations from other countries and overall has made the world a better place in 2021.
