What Is APY?
APY is the abbreviation for the term “Annual Percentage Yield”. This term is used in DeFi when one decides to lock their crypto assets for a certain period of time in exchange for interest. Nonexistent just a few years ago, this new type of investment is becoming increasingly popular, and many platforms are starting to offer it to their users.
How to earn interest by placing your cryptos?
To earn interest by placing your cryptos, you need to go to a platform that allows it. Then, you need to choose the digital assets you wish to lock and look at the interest rate offered in return.
Generally, the longer the locking period, the higher the APY. Depending on the platforms, the locked cryptocurrencies can be held for the entire initially chosen period or withdrawn before their maturity, but you may have to pay a penalty or lose the interest you were entitled to.
Before wanting to use this kind of service, it is important to carefully analyze the situation in detail by comparing what this investment can yield compared to what you could potentially earn by using your cryptos in another way. If you are a beginner, it is not always easy to navigate, and do not hesitate to consult specialized forums on cryptos or read articles on the subject before diving into such an investment.
What can be considered a good annual percentage yield?
It is really difficult to say what can be considered a good APY. At first glance, one might be tempted to view all high yield rates as the best investments since, on paper, those are the ones that will allow us to earn the most money in the long run.
Unfortunately, the cryptocurrency industry and decentralized finance is still young and filled with scams, and an excessively high APY is often a sign of a scam. Investing your digital assets on a platform that promises you overly high returns is never a good idea. Indeed, the site can close overnight without warning, and all the money you would have invested will disappear with it.
The best thing to do to estimate a good yield rate is to consult the most popular platforms of the moment and compare the APYs they offer. Then, simply go to the one that offers the highest annual percentage yield on the digital currency you wish to lock for a certain period of time.
There you go, you now know the meaning of the term APY, and we hope you understand that it is not always wise to trust overly promising yields that are almost always scams. It is important to be wary of anything that seems too good, especially in the world of cryptos.
Once you have found a good DeFi platform to place your cryptos, then you just need to choose the amount you wish to invest and the duration for which your digital assets will be locked. Be sure to check the conditions related to this investment to avoid any unpleasant surprises later.
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L'équipe éditoriale de Cointribune unit ses voix pour s’exprimer sur des thématiques propres aux cryptomonnaies, à l'investissement, au métaverse et aux NFT, tout en s’efforçant de répondre au mieux à vos interrogations.
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.