Cryptocurrencies operate on blockchain networks—this is their defining feature. While centralized exchanges serve as the entry point for many crypto enthusiasts, they represent only about 5% of the broader ecosystem. The vast majority of cryptocurrencies and innovative financial opportunities exist on-chain. Sticking solely to exchanges means missing out on the most lucrative segments of the crypto space.
On-chain opportunities often offer superior yields. For example:
- Raydium, Solana’s leading decentralized exchange (DEX), currently offers over 50% APY for stablecoin liquidity pools.
- AAVE on Base Layer 2 provides double-digit USDC deposit rates, while Binance offers just 5.23% for the same asset.
On-chain investing is more complex and riskier, but it unlocks earlier access to high-potential projects and advanced financial instruments.
What Is On-Chain Investing?
On-chain investing refers to financial activities conducted directly on blockchain networks. To participate, you’ll need:
- A decentralized crypto wallet (e.g., MetaMask for EVM chains, Phantom for Solana).
- Funds transferred to your wallet (on-ramp via exchanges or peer-to-peer).
Core On-Chain Investment Strategies
| Strategy | Principle | Difficulty | Risk | Yield Potential |
|-------------------|---------------------------------------------------------------------------|-----------|-------|-----------------|
| Lending | Earn interest by depositing assets into lending protocols (e.g., Aave). | Low | Low | Low-Medium |
| Staking | Lock tokens to secure blockchains and earn rewards (e.g., ETH staking). | Low | Low | Varies by chain |
| Yield Farming | Provide liquidity to DEXs and earn trading fees + incentives. | Medium | High | High |
| Liquid Staking| Stake tokens to receive liquid staking tokens (e.g., stETH) for reuse. | Low | Medium| Staking + Extra |
| Restaking | Stake liquid staking tokens again for compounded rewards (e.g., EigenLayer). | Medium | High | Very High |
| Advanced Combos| Combine strategies (e.g., governance bribes, yield tokenization). | High | Very High | Highest |
Deep Dive: Top On-Chain Earning Methods
1. Staking (PoS Networks)
- How it works: Lock native tokens (e.g., SOL, DOT) to validate transactions and earn block rewards.
- APY Examples: Ethereum (~4%), Solana (~7%), Polkadot (~18%).
- Pros: Simple, supports network security.
- Cons: Lock-up periods (7–14 days).
👉 Learn how to stake ETH with Lido Finance
2. Lending Protocols
- Platforms like Aave and Compound let you deposit assets to earn interest or borrow against collateral.
- Tip: Newer protocols often offer temporary yield boosts.
3. Yield Farming
- Supply liquidity to DEXs (e.g., Uniswap, Raydium) to earn fees and token incentives.
- Risks: Impermanent loss, smart contract vulnerabilities.
4. Liquid Staking
- Protocols like Lido issue tradable staking derivatives (e.g., stETH), enabling users to stake while maintaining liquidity.
5. Restaking (EigenLayer)
- Stake liquid staking tokens (e.g., stETH) to secure other chains and earn additional rewards.
Essential Tools for On-Chain Investors
- DeFiLlama – Track TVL, protocols, and yield opportunities across chains.
- vFat Tools – Discover high-yield farming pools.
- DeBank – Monitor whale wallets and portfolio performance.
👉 Explore top DeFi tools for 2025
FAQs
Q: Is on-chain investing riskier than using exchanges?
A: Yes, due to smart contract risks and complexity, but rewards are often higher.
Q: How do I avoid impermanent loss in yield farming?
A: Stick to stablecoin pairs or use single-sided liquidity pools (e.g., DODO).
Q: What’s the best chain for beginners?
A: Ethereum (EVM) or Solana—both have robust ecosystems and user-friendly wallets.
Q: Can I stake Bitcoin?
A: Yes, via protocols like Babylon, though this is more advanced than PoS staking.
Final Thoughts
On-chain DeFi is where the most innovative and high-yield opportunities emerge. While centralized exchanges are convenient, the true potential of crypto lies in decentralized finance. As the ecosystem matures, tools and user experiences will continue improving—making on-chain investing accessible to everyone.
DeFi is the future. Start exploring today!
🚀 Ready to dive deeper? Click here for advanced DeFi strategies.