Types of DeFi Strategies

Decentralized Finance (DeFi) offers a variety of ways to put your crypto to work. These strategies leverage blockchain technology to generate returns, often outpacing traditional financial options. Here’s a breakdown of the main types.

Lending Strategies

How it works: In DeFi lending, you supply your crypto (like ETH, USDC, or BTC) to a protocol such as Aave, Compound, or Maker, which then lends it out to borrowers. Smart contracts handle everything—no bank required. Borrowers pay interest, and you, as the lender, earn a portion of it.

What users earn: You get interest rates that can range from 1-20% APY, depending on the asset and demand. Stablecoins often offer steady returns, while volatile assets like ETH might pay more during high borrowing periods. Some platforms also reward you with governance tokens (e.g., COMP from Compound) as a bonus, which can boost your yield if their value rises.

For example, USDT Lending strategy on Venus: https://app.rivo.xyz/asset/0xfd5840cd36d94d7229439859c0112a4185bc0255

Staking Strategies

How it works: Staking involves locking up your crypto to support a blockchain’s operations, usually on Proof-of-Stake (PoS) networks like Ethereum. You delegate your tokens (e.g., ETH) to a validator node, which secures the network and processes transactions. Options include direct Ethereum staking, Liquid Staking Tokens (LSTs) like stETH from Lido (which let you stake while keeping your assets tradable), or Restaking (RST) strategies that amplify rewards by reusing staked assets elsewhere.

What users earn: Staking rewards typically range from 3-5% APY on Ethereum, with LSTs and RST adding flexibility or higher yields (sometimes 10%+), though with added risk from smart contract dependencies.

For example, ETH Restaking strategy by Ether.fi: https://app.rivo.xyz/asset/0xcd5fe23c85820f7b72d0926fc9b05b43e359b7ee

Liquidity Pools

How it works: Liquidity pools power decentralized exchanges (DEXs) like Uniswap or PancakesSwap. You provide a pair of tokens (e.g., ETH and USDC) to a pool, enabling others to swap between them. In return, you earn a cut of the trading fees.

What users earn: Fees usually range from 0.05% to 1% per trade, depending on the pool (e.g., 0.3% is common on Uniswap). Annualized returns can hit 5-50% or more. High-volume pools (like stablecoin pairs) offer lower but steadier gains.

For example, CVX-ETH liquidity pool on Convex: CVX-ETH Liquidity Pool: https://app.rivo.xyz/asset/0xb9548238d875fb4e12727b2750d8a0bdbc7171c7

Vaults

How it works: Vaults are automated investment tools, often called “yield optimizers,” offered by platforms like Yearn Finance or Beefy. You deposit crypto, and the vault’s smart contracts dynamically shift your funds across DeFi protocols (lending, staking, etc.) to chase the best returns. It’s hands-off—think of it as a robo-advisor for crypto.

What users earn: Returns vary widely (5-30% APY or higher) based on market conditions and the vault’s strategy. Vaults often compound profits automatically and charge a small fee, but they save you the hassle of manually managing complex DeFi plays.

For example, LBTC DeFi vault by Lombard: https://app.rivo.xyz/asset/0x5401b8620e5fb570064ca9114fd1e135fd77d57c

Indexes

How it works: DeFi indexes, like those from Reserve Protocol, bundle multiple cryptocurrencies into a single token. You invest in the index for diversified exposure, avoiding the need to pick individual winners. It’s similar to a stock market ETF but for crypto.

What users earn: Returns depend on the performance of the underlying assets—less about active yield and more about long-term growth. You might see 10-100%+ in a bull market, though losses are just as possible in a downturn. Some indexes also incorporate staking or farming to juice up returns.

For example, Base Yield Index by Reserve: https://app.rivo.xyz/asset/0x8f0987ddb485219c767770e2080e5cc01ddc772a

Each strategy has its trade-offs: lending and staking are simpler but lower-yield; pools and vaults offer higher rewards with more risk; indexes balance it out with diversification. Pick based on your goals—steady income or aggressive growth—and always factor in gas fees, smart contract risks, and market swings. DeFi is a toolbox; how you use it is up to you.