Is it reliable for Bitcoin HODLer to use DeFi to earn "passive income"?

This article comes fromDecrypto, original author: Mathew Di Salvo

Odaily Translator |

This article comes from

, original author: Mathew Di Salvo

Odaily Translator |

In the words of Andreas Antonopoulos, a "veteran" in the encryption industry, Bitcoin HODLers can earn "passive income" on decentralized finance (DeFi) platforms, and this trick is great. Although it is a bit risky, it can be done .

In order to let you have a better reading experience, before starting to read the full text, we first give a few content overviews:

1. In a recent live broadcast event, Andreas Antonopoulos stated that crypto users can obtain "passive income" through the bitcoin they hold;

2. The best way to use Bitcoin to obtain "passive income" is to try to lend BTC on some DeFi platforms, such as MakerDAO, Compound, etc.;

3. With the help of DeFi, Bitcoin holders can convert their assets into other cryptocurrencies and earn interest by lending these cryptocurrencies;

DeFi may allow you to realize the ultimate dream of life, namely: making money effortlessly, and this dream is actually realized through cryptocurrency lending.

DeFi is a new decentralized financial service created and run on Ethereum, which revolutionizes traditional banking services by eliminating the "need for intermediaries" in traditional banks. Basically, for those who cannot obtain traditional bank lending financial services, their needs can be met on the DeFi platform, and it is easy to borrow and save money.

Andreas Antonopoulos believes that Bitcoin holders can invest funds on the DeFi platform, otherwise your Bitcoin is equivalent to "lying dry" and has no effect. Bitcoin holders can then earn interest on lending services on these DeFi platforms, and of the many platforms on the market, MakerDAO is probably the best one.

Currently, MakerDAO is the second-largest DeFi platform on the market, with two platform tokens: MKR and Dai, which Andreas Antonopoulos calls a “stable coin” because Dai is pegged to the U.S. dollar and can be used for mortgages. As long as funds are lent on MakerDAO, the corresponding Dai will be created. This is the currency that allows encrypted users to borrow money and repay the principal and interest, and can be exchanged for equivalent value with collateral.

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From Bitcoin to Ethereum, what are the risks?

Although "earning money" is the dream of most people, Andreas Antonopoulos also issued a risk warning to those HODLers who try to transfer Bitcoin to the Ethereum platform. He said:

"If you transfer Bitcoin to an Ethereum-based platform, you must pay attention to security issues, because the security of the two blockchains of Bitcoin and Ethereum is not exactly the same. Although Ethereum has advantages and flexibility, but in The investment in security does not seem to be large. This means that you may encounter all kinds of new risks, such as sudden increase in gas price, which will cause other related problems, all of which will cause you to lose some, Even all the investment funds.”

In fact, the encryption community has always had concerns about the security of Ethereum. After all, with such a complex system and various DeFi applications running on it, the attack surface will naturally become large. On the other hand, Ethereum 2.0 is still not ready so far. Whether it is a new proof-of-stake (PoS) consensus mechanism or a sharding solution for transaction expansion, it faces many challenges.

Not only that, Andreas Antonopoulos also emphasized adding:"At present, no one can guarantee that there are no bugs in the Ethereum DeFi smart contract. Once a problem occurs, it is unknown how these bugs will interact with the underlying Ethereum platform and cause negative consequences. That is to say, Bitcoin HODLers If you choose to invest funds in the DeFi platform, the risk you take is obviously much greater than the risk of simply holding.”

Of course, despite a certain degree of risk, Andreas Antonopoulos still affirmed the role of DeFi platforms in the encryption industry. Especially after many previous failed attempts and tests, DeFi may currently be the best way to "earn money" from Bitcoin assets:1. From the perspective of industry roles,

Bitcoin seems to be playing more of a "reserve asset" role, while Ethereum's emerging "DeFi" (decentralized finance) ecosystem is the platform of choice for the cryptocurrency industry to generate credit and facilitate liquidity exchanges;3. From the perspective of token attributes

Summarize

, Bitcoin is more like "digital gold", and Ethereum has been increasingly regarded not as a payment or value storage token, but as a commodity that supports decentralized computing networks based on smart contracts. For the financial system, the Ethereum network is also building a set of intermediary-free mechanisms that provide loans, or create decentralized derivatives, or insurance contracts.