Andreas Antonopoulos: Use DeFi contracts to generate passive income from BTC
Andreas Antonopoulos, the Bitcoin educator, says that there are risks behind any current method of earning a stable income from Bitcoin personal property, but DeFi offers one of the few ways to do so without „giving your money away.
In a live Q&A on Antonopoulos‘ YouTube channel on June 27, he said that decentralized finance contracts (DeFi) were a way for Bitcoin owners (BTC) to generate passive income without giving up custody of their currencies. „Passive income“ refers to money earned through methods that require little or no effort.
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According to Antonopoulos, investors could turn their BTC into Ethereum (ETH) or a stablecoin like Dai (DAI), and then lend it out on a platform where the token can earn interest. However, he said that carrying out such operations on Ethereum-based platforms was „quite risky“ in terms of security, smart contracts with bugs, and the platform itself:
„Ethereum may have problems. It can have bugs. The consensus algorithm can have bugs. It can have gas price increases, which leads to other cascade problems. And all those things can cause you to lose some or all of your investment.“
Lending and borrowing crypto currencies can be a risky bet due to the high volatility of digital currencies, with a large number of loans backed by crypto currencies used for side trading. However, the volume of these loans reached USD 8 billion last year, and may continue to attract investors.
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Although Antonopoulos mentioned other methods of making investors‘ currencies work for them, almost every way to do so meant relying on a custody exchange. The Bitcoin educator said such investments carried the risk of theft or mismanagement.
Bitcoin holders, on the other hand, don’t earn dividends or interest on their investments – or anything else – until they finally decide to get paid. Antonopoulos says holders expect an appreciation, but „what goes up, may come down.
The Bitcoin educator says the same is true for cryptomoney day traders: „You can take your Bitcoin out and convert it, buy 1,000 altcoins, and watch them fall by 98%.