The world is slowly moving away from the traditional financial system towards financial blockchain technology solutions like crypto staking and crypto savings accounts.
Sometimes past, almost every financial transaction had to involve an intermediary, especially banks. But blockchain technology has eliminated the need for intermediaries by bringing the smart contracts concept that resulted in lots of innovative solutions within the blockchain industry; the key among them being decentralised finance (DeFi).
Today there are myriad decentralized finance (DeFi) protocols that have been developed to offer similar services as those offered by most traditional financial institutions.
The growth of the DeFi industry has accelerated and there is a surge in the number of people participating in DeFi protocols. By December 31, 2020, the DeFi industry had grown to 13 billion from $700 million at the same time in 2019. In 2021, the growth has gathered more momentum and the industry is now worth more than $40 billion
One of the rapidly growing sectors within the DeFi industry is the crypto savings accounts that were forerun by the introduction of crypto staking. Most of the people participating in DeFi are choosing to open crypto staking and crypto savings accounts rather than just holding their cryptocurrencies waiting for the prices to rise.
DeFi protocols are taking up most of the services offered by traditional financial institutions like banks and insurance companies and people are starting to realize the advantages of investing in DeFi compared to investing in traditional financial institutions. It is only a matter of time before crypto staking replaces the traditional savings account.
Crypto savings vs. traditional savings accounts
Several crypto exchanges and other platforms offer dedicated crypto savings accounts that mimic traditional bank savings accounts but with higher annual percentage yields (APYs).
In traditional savings accounts, the APYs range from 0.1% to 0.6%. This means that you have to deposit huge amounts of funds to earn considerable interest through traditional savings. If you save $100,000 for one month (30 days) with a bank savings account that offers an APY of 0.6%, for example, you would earn $50 (0.6/100 X 1/12 X $1000) in one month. This is a considerably low income.
Crypto savings on the other hand have relatively higher APYs; mostly above 1%. For example, Binance, one of the crypto savings account providers, offers APYs ranging from 1.2% to over 40% depending on the terms (flexible terms, fixed terms, or high-risk products), the staked crypto asset, and the duration of a crypto asset is staked. If you navigated to Binance Locked staking and chose to stake DASH cryptocurrency for 30, the APY would be 7.39%.
How to start saving crypto in crypto savings accounts
Cryptocurrency savings accounts are designed to only hold crypto deposits including stablecoins, bitcoin (BTC), Ethereum (ETH) and other cryptocurrencies.
Therefore, you will be required to choose the cryptocurrency you want to deposit so that you can open a savings account specific to that cryptocurrency. If you choose to open a BTC savings account, for example, you will be saving bitcoins.
However, it is important to point out that some crypto savings account providers accept users to make deposits using fiat currencies, which are then converted to the cryptocurrency they have chosen to open a savings account on.
Best crypto savings accounts Providers
- Binance
- Linus
- Outlet Finance
- Gemini
- Coinbase
- Crypto.com
- YouHodler
- Hodlnaut
- Nexo
- Ledn
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