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DeFi How to Find the Best Yields in Crypto Lending, and the Role...

How to Find the Best Yields in Crypto Lending, and the Role of DeFi

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  • Many crypto bulls believe blockchain and DeFi will replace traditional financial institutions.
  • Diogo Mónica, co-founder of Anchorage, sees a more complementary coexistence in the future.
  • He also shared the easiest way investors can find yield in crypto lending.
  • See more stories on Insider’s business page.

Many crypto bulls will speak in terms of revolution when talking about how blockchain and decentralized finance (DeFi) technology will change the financial world.

No more banks, no more centralized control — a complete shift to a democratized financial system where users can anonymously lend to one another using a system governed by a set of code.

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Diogo Mónica, co-founder of Anchorage, the first federally chartered crypto bank, doesn’t quite see it like that. Because Anchorage is federally chartered, it has to play by the same rules as traditional banks, which allows greater institutional trust in crypto products, Mónica said.

In an interview with Insider earlier this month, Mónica said he sees cryptocurrency and DeFi playing a more complementary role alongside traditional finance going forward. 

“It’s common to have the belief that crypto will somehow replace the traditional finance infrastructure. I don’t believe that at all,” Mónica said. “I believe that crypto is creating competition to the traditional market.”

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Mónica cited the longevity of traditional banks as a big reason why they’ll stick around. 

“Somehow finance is the only space where the same players that were market leaders 300 years ago are still here today. In fact, Alexander Hamilton was an

angel investor
in BNY Mellon. Three hundred years later you still have BNY Mellon,” he said. “JPMorgan was one of the first banks in the United States, 300 years later they’re still around.”

But he also said this is why competition is needed in the space, and that because crypto and DeFi offer some better financial instruments than traditional finance, the older institutions will be forced to upgrade their own. 

Signs that DeFi and traditional finance will coexist going forward are already starting to emerge. Banks are beginning to strategize on how to stay up to speed with crypto products, and some are incorporating crypto into their business models. In fact, 21% of banks have already made blockchain technology part of their business model, a group of Bank of America analysts found in February.

How to find the best yields in crypto lending

Mónica said there was a lot of “low hanging fruit” in crypto lending right now. Indeed, crypto holders can earn hefty yields lending a variety of digital tokens on a variety of platforms. Below are the annual percentage rates for lending a number of coins as of Tuesday afternoon, according to DeFi Rate. 

cypto lending yields chart



DeFi Rate


But one of the easiest ways to earn yield without doing the legwork yourself, Mónica said, is to use a yield farming protocol. These are instruments that automatically allocate capital where the best yield can be found on any given day.

“Maybe today the opportunity for Uniswap LP pools is the most exciting one that generates the most yield on a daily basis, and maybe tomorrow it’s actually Nexus Mutual, or whomever,” Mónica said. 

He continued: “And so what was created is this meta-layer that allows you to put capital on the meta-layer, and then that capital is actually automatically rebalanced and allocated across all these opportunities so that you as the investor wouldn’t have to track these all on your own and make individual decisions.”

Two examples of these protocols are Compound and WIFI.

Mónica said a simplified way to think about yield farming is as a stock market

robo-advisor
, which chooses stocks for investors automatically.

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