Bitcoin educator Andreas Antonopoulos says at that place are risks behind whatever current method of earning steady income with one's Bitcoin holdings, but DeFi offers one of the few ways to do so without "giving your coin to other people."

In a livestream Q&A on Antonopoulos' YouTube channel on June 27, he said decentralized finance (DeFi) contracts were one way for Bitcoin (BTC) owners to generate passive income without relinquishing custody of their coins. "Passive income" refers to coin earned using methods that crave lilliputian-to-no endeavour.

According to Antonopoulos, investors could convert their BTC into Ethereum (ETH) or a stablecoin similar Dai (DAI), then lend information technology out on a platform where the token can earn interest. However, he said carrying out such trades on Ethereum-based platforms was "quite risky" in terms of security, smart contracts with bugs, and the platform itself:

"Ethereum may take problems. It may accept bugs. The consensus algorithm may have failures. You may have increases in the gas price, which leads to other cascade problems. And all of those things can cause you to lose some or all of your invested capital."

Lending and borrowing crypto can be a risky bet due to the loftier volatility of digital currencies, with a large number of crypto-backed loans used for margin trading. Nonetheless, the book of these loans reached $8 billion last year, and may continue to attract investors.

HODLing non the only way to earn

Though Antonopoulos mentioned other methods for getting investors' coins to work for them, nearly every way to exercise so meant relying on a custodial exchange. The Bitcoin educator said such investments carried the risk of theft or mismanagement.

Bitcoin HODLers, on the other hand, do non earn dividends or involvement on their investments — or annihilation — until they finally decide to cash out. Antonopoulos says HODLers hope for appreciation, just "what goes upwards, can come down."

The Bitcoin educator says the same is true for crypto day traders: "You can pull your Bitcoin out and convert it, buy 1,000 altcoins, and then sentinel them crash past 98%."

Antonopoulos not the simply DeFi advocate

Others in the crypto community have commented on creating passive income through DeFi lending. Cointelegraph reported in March that OKEx Director of Financial Markets Lennix Lai said: "The combination of cryptocurrency and DeFi creates an alternative way for users to earn passive involvement that was not possible before."

Ethereum 2.0's release subsequently this year may offer users the opportunity to earn passive income through staking pools.