With the expansion of the cryptocurrency industry, there are more and more opportunities to put idle digital assets to work. Passive income is an integral part of any solid investment strategy and has become foundational to many cryptocurrency investor portfolios. There are now a vast number of companies and applications that offer investment products.
BUSD is one of the most popular stablecoins on the market. Native to the Binance ecosystem and Binance Smart Chain, the BUSD coin was developed to offer a stable haven for cryptocurrency investment funds. Pegged 1:1 with the US dollar, it is a digital asset that can be locked within many financial products without the concern of market volatility.
In this guide, we will explore what applications and services can be used to grow BUSD holdings.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific
provider, service or offering. It is not a recommendation to trade.
Earn yield on BUSD
For those looking to earn yield on BUSD holdings, there are several platforms available. Thanks to the Binance Bridge, the BUSD token can be transferred between the Binance Smart Chain, Binance Chain and Ethereum blockchains. This interoperability means there is a wide array of financial-based applications for potential BUSD returns.
Earn yield on BUSD through the Binance exchange
Binance is one of the most exhaustive exchange platforms currently available in the market. It contains a range of financial products and can easily become a one-stop shop for all things trading, staking, lending and borrowing. It is also the native exchange for the BUSD token and provides token holders with many benefits.
To begin earning yield on BUSD, users will need to create an account on the Binance exchange. Once an account has been registered and created, a user can begin depositing BUSD and allocating funds to financial products.
Use our in-depth Binance guide to create your account. Once logged in, click on "Finance" and "Binance Earn". Search for BUSD products using the search bar. Select a product, transfer funds and start earning yield on BUSD holdings.
Pros
One-stop shop. Binance offers a wide array of financial products and BUSD works in the centre of its ecosystem.
Interoperability. By holding BUSD on the exchange, token holders can utilise the wider Binance ecosystem for further yield-earning opportunities.
Cons
Not your keys, not your coins. When depositing funds into the centralised Binance exchange, a user no longer holds the private keys to those assets. If there are issues with the platform, whether hacks or regulatory crackdowns, a user risks losing all crypto funds, even if only temporarily. For those interested in self-custody and remaining in control of digital assets, a DeFi application may be more suitable.
Only available to Binance. The BUSD token cannot be used on any other centralised exchange aside from Binance
Earn yield on BUSD on a lending service
Cryptocurrency expansion has led to an increase in new companies taking traditional financial principles and applying them to a new digital asset class. Catering to swathes of new cryptocurrency investors, many financial lending services offer enticing passive income opportunities.
Many offer users a familiar intuitive platform from which to deposit digital assets and generate passive returns. The majority of lending services take the value of BUSD and lend it to third-party individuals and organisations looking for investment. Any yield created by lending cryptocurrency funds are then passed back to those that have lent funds to the platform.
There are now several platforms that offer BUSD token holders the opportunity for passive returns, including:
Nexo. Managing one of the largest portfolios within the digital asset space, Nexo helps users to "unlock the power of their crypto". The feature-full platform offers users the opportunity to buy, earn, borrow, exchange, and buy goods and services using a crypto card. Yield-earning rates are higher when holding the native NEXO token. Use our in-depth Nexo guide to create your account and start earning yield.
Pros
High rates. Lending platforms are becoming more common in the cryptocurrency industry. With a large number of companies offering services, rates are high and competitive. Given their primary service is lending to third parties, rates tend to be higher than those on cryptocurrency exchange sites.
Low fees. With a focus on leveraging cryptocurrency funds to generate high profits, centralised lending platforms charge low fees for using their services.
Cons
Not your keys, not your coins. Like cryptocurrency exchanges, investors forgo custody of cryptocurrency funds when using centralised lending services.
Native tokens. Some lending platforms use a native token, increasing regulatory risks and locking certain benefits for token holders.
Earn yield on BUSD with DeFi
Decentralised finance (DeFi) has become a popular sector within the cryptocurrency industry. DeFi applications offer users access to traditional financial services but users remain in control of funds at all times. DeFi applications are usually run by a decentralised network rather than one entity.
Whether users stake, farm yield, lend or borrow, this unique marketplace has cemented its position within the cryptocurrency industry. On the majority of DeFi applications, a user can lend cryptocurrency funds to the application and become a liquidity provider. Those funds are then used by other investors. In return for lending funds, liquidity providers earn rewards.
Although Ethereum is the main blockchain on which most DeFi currently takes place, there are some notable competitors. Binance launched a competing blockchain called the Binance Smart Chain (BSC) in an effort to create an alternative. BSC now also hosts a number of DeFi applications.
BSC is less decentralised than Ethereum but offers much lower transaction fees – an excellent choice for those looking to escape the high gas fees associated with Ethereum. Migration between the two blockchains can be completed using the Binance Bridge, which allows BUSD holders to utilise a wide range of DeFi applications. Popular applications include:
Venus Protocol. Built on the Binance Smart Chain, Venus Protocol is a decentralised money market that utilises smart contracts to offer lending and borrowing services. Transaction fees are low and instant. The protocol also issues a native stablecoin VAI for those that deposit cryptocurrency assets.
Aave.Aave is a decentralised lending and borrowing protocol that is automated by smart contracts. BUSD APY fluctuates based on user demands.
Curve Finance. Native to Ethereum, Curve Finance is a stablecoin-focused decentralised exchange (DEX). The platform utilises an automated market maker coupled with user-supplied liquidity to complete exchanges. By targeting stablecoins, such as BUSD, the platform offers minimal slippage and exceptionally low transaction fees.
Keep in mind that DeFi continues to be a very experimental ecosystem, which comes with a substantial number of risks. Rug pulls, centralisation attack vectors and faulty codes are everyday features for users when interacting with these protocols.
Pros
Stay in control of your funds. Using a DeFi application requires the use of a Web 3.0 digital wallet. The wallet acts as a bridge between cryptocurrency funds and a DeFi application. When connecting to a DeFi platform, a user always remains the custodian of their own funds.
Yield farming. Although some platforms require users to lock up funds, there is the opportunity to divert funds into multiple DeFi protocols in search of the best yield – otherwise known as yield farming. There are DeFi aggregators that automate this process.
Cons
High fees. Given most of DeFi is built on Ethereum, users may have to accommodate high gas fees when interacting with certain protocols. Gas fees will be correlated to the congestion experienced on the Ethereum blockchain.
Experimental. DeFi is still a young sector of the cryptocurrency industry. Many applications are still within the experimental phase. The risks of malfunction are higher when utilising young applications.
Impermanent loss. Impermanent loss refers to a potential loss caused by depositing your crypto into a liquidity position, rather than just leaving them in your wallet. It's a bit complex, so make sure to read our guide to learn more.
How much can I earn with BUSD?
Both CeFi and DeFi offer exciting opportunities for those looking to earn yield on their cryptocurrencies. It's important to note the pros and cons of each ecosystem in order to properly assess risks and rewards.
CeFi offers higher rates but users must renounce custody of their funds and go through KYC processes. For those that are more privacy/anonymity oriented, DeFi gives control back to individual investors but requires a wider appreciation of the risks involved.
Expected returns from lending BUSD tokens will depend on the platform and application chosen. APY rates can range from 1% to 2% all the way up to 14-15%. As BUSD remains pegged to the US dollar, unlike other cryptocurrencies, an investor does not have to worry about market volatility affecting BUSD's value.
Verdict
The cryptocurrency industry is brimming with passive income opportunities. For those that hold BUSD, Binance's answer to Ethereum-based stablecoins, there are many user-friendly and intuitive platforms that offer excellent yield-earning products.
An investor will need to make a decision as to whether a centralised cryptocurrency exchange, a lending service or a DeFi protocol is the right decision for them. All three offer unique advantages and disadvantages. Before committing funds, complete thorough research on the platform chosen and enjoy putting those idle BUSD assets to work.
Pros
Portfolio growth. By earning yield on idle BUSD assets, an investor has the opportunity to further grow a cryptocurrency portfolio.
Not correlated with the market. As BUSD is a stablecoin, there is no risk of market movement when locking tokens into a platform.
Cons
Counterparty risk. Many platforms lend out deposited funds to try and create a profit. However, this adds a counterparty risk to the process. Other users and organisations that utilise the funds might become insolvent and returns may be affected.
Experimental DeFi platforms. DeFi is still a young sector within the cryptocurrency industry. Many applications are still within an early development phase. Investors should only place funds into DeFi applications after understanding all of the risks involved.
Not your keys, not your coins. To utilise a centralised cryptocurrency exchange or lending platform, a user must relinquish control of cryptocurrency private keys. Trust must be placed in the service provider offering the investment product.
Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly
volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of
future performance. Consider your own circumstances, and obtain your own advice, before relying on this information.
You should also verify the nature of any product or service (including its legal status and relevant regulatory
requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
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