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Earn bitcoin with DeFi
Earn bitcoin with DeFi
Defi

Earn bitcoin with DeFi

By Marco Cavicchioli - 1 Oct 2020

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With yield farming, it is possible to achieve passive gains thanks to DeFi. But is it possible to obtain them also in bitcoin? 

In fact, yield farming does not pay in bitcoin, but in governance tokens of the protocols on which funds are locked to give liquidity to the exchanges. 

Therefore, yield farming doesn’t generate earnings in bitcoin. At most, like for example on Eidoo, it is possible to stake BTC, but the earnings are obtained in the governance token of the protocol (PNT, in the case of Eidoo). 

Bitcoin and other methods: how to earn with DeFi

However, in addition to staking, there are also other forms of profit made possible thanks to DeFi

One of these is lending funds in exchange for interest. 

The special thing about lending is that the earnings are obtained in the same token that is borrowed. In other words, usually by lending BTC it is possible to obtain earnings in bitcoin

In any case, lending and yield farming are two different things, and the returns are also very different. 

The returns from lending are in some ways similar to those that could be obtained by lending fiat currency, while those that can be obtained with yield farming are potentially higher, even if they vary a lot according to the price fluctuations of the tokens that are obtained as earnings. 

One of the major DeFi platforms that allow lending bitcoin and obtaining profit in BTC, is Compound, which can also be easily used through the Eidoo wallet for example. 

This is done with the cWBTC token, which allows WBTC to be lent to the Compound protocol via a simple swap. In exchange, the Compound provides cWBTC tokens that increase over time thanks to the interest payable by the borrower on the WBTC exchanged with cWBTC. 

These cWBTC tokens can then be reswapped back into WBTC tokens at any time, terminating the loan. 

WBTC is an ERC-20 token representing 1:1 bitcoin on the Ethereum blockchain, which is necessary for the use of Compound since this protocol is also based on this blockchain. 

Therefore it is possible to exchange bitcoin with WBTC, and then swap WBTC with cWBTC to borrow the WBTC obtained from the exchange with bitcoin, in order to immediately start earning interest on cWBTC. At any time it is possible to do the opposite operation, and get back the bitcoin, which will have increased in the meantime. 

It must be said, however, that sure, DeFi lending allows earning bitcoin, but with interest rates that can reasonably reach 10% per annum at most. Whereas yield farming, for example, promises much higher returns, although everything depends on the market value of the tokens that are obtained. 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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