How I Make A FULL TIME Passive Income With DeFi Yield Farming!

How I Make A Full-Time Passive Income With Decentralized Finance

6 min readJan 4, 2024

Leveraging blockchain technology for automated earnings

Passive income is the holy grail of personal finance. We all dream of kicking back while the money rolls in. But true passive income is rare. Most so-called “passive” income still requires work on your end. However, decentralized finance (DeFi) offers ways to earn that come far closer to pure passivity than anything else.

In this article, I’ll break down exactly how I went from $0 to over $2,000 per month in DeFi passive income. Keep reading to learn how blockchain technology can work for you.

We strongly recommend that you check out our guide on how to take advantage of AI in today’s passive income economy.

An Introduction to Decentralized Finance

DeFi refers to financial activities conducted on decentralized blockchain networks like Ethereum. This contrasts with traditional centralized finance where banks and other institutions control the system.

In DeFi, peer-to-peer protocols allow you to lend, borrow, trade, and more. Think of DeFi like an open financial system anyone can plug into.

Some key advantages of DeFi include:

Accessibility — Anyone can participate regardless of identity or location
Transparency — Transactions occur on public blockchains for all to see
Security — Decentralization makes hacking difficult
Efficiency — Disintermediation reduces costs and friction

Of course, DeFi comes with risks as well. Smart contract bugs can lead to exploits. Market volatility results in losses. Users must take responsibility for managing private keys.

However, the upsides make DeFi worth exploring, especially for earning passive income. Next, I’ll explain the strategies I leverage.

DeFi Strategy #1: Lending

Lending is one of the simplest DeFi passive income methods. You deposit crypto assets into a protocol which then lends them out at interest.

My favorites include Aave, Compound, and Celsius Network. Typical returns range from 2–8% APR.

Here’s how it works:

Deposit assets like ETH, stablecoins, or tokens into a lending protocol
Borrowers take out loans collateralized by your funds
You earn interest on your deposit, paid in additional crypto
Withdraw your assets plus interest anytime

Lending is hand-off once set up. Your coins work around the clock generating yield.

Risks include smart contract bugs and market crashes that affect collateral. So lend cautiously and stick to established protocols.

DeFi Strategy #2: Liquidity Pools

Liquidity pools allow for decentralized trading. Users called liquidity providers (LPs) fund pools with an equal value of two tokens. Traders then swap between the assets, paying fees to LPs.

Popular DeFi exchanges like Uniswap and Curve use liquidity pools. APYs can reach 20–100% but average 10–40% in my experience.

Here are the steps to providing liquidity:

Specify the two assets and amounts to deposit into a pool.
LP tokens representing your share of the pool are minted.
Traders swap between the assets. You earn fees on each trade proportional to your share.
Withdraw your original deposit plus accumulated fees whenever you want.

The constant trading generates solid yields. Be aware of impermanent loss which can reduce your deposit amounts. Also check the protocol’s security.

Overall though, liquidity pools offer some of the best opportunities to maximize DeFi earnings.

DeFi Strategy #3: Staking

Staking means locking up crypto assets in a wallet to participate in transaction validation on proof-of-stake blockchains. It serves a crucial role in securing networks like Ethereum.

Stakers earn crypto rewards similar to mining. The APY depends on factors like total staked and network fees. Returns range from ~5–15% for coins I stake like ETH, MATIC, and ALGO.

Here’s how to start earning staking rewards:

Select a PoS blockchain and acquire its native token.
Transfer assets to a compatible staking wallet.
Validate transactions by staking coins.
Accumulate rewards which go to your wallet.
Withdraw anytime or keep staked to compound earnings.

Staking takes your holdings and puts them to work. It’s like a high-yield crypto savings account. The assets remain under your control as well.

Maximizing Passive Income with DeFi

Now that you know the basics, let’s discuss how to optimize DeFi earnings. Keep these tips in mind:

Diversify across lending, liquidity pools, and staking. Spreading your funds mitigates risk.
Analyze projected returns and risks before investing. Higher yield means higher risk.
Start small and add more over time. Don’t put in more than you can afford to lose.
Reinvest rewards to compound earnings. This turbocharges passive income growth.
Claim profits occasionally. Compounding is great but don’t be afraid to take some off the table.
Monitor positions at least monthly. Adjust allocations if needed to improve returns or manage risk.
Learn continuously. DeFi changes fast. Keep up-to-date to take advantage of new opportunities.
Exercise security best practices. Use hardware wallets, back up phrases, enable 2FA, etc.

Follow this advice to grow your DeFi income prudently. Let your coins put in the work for you.

My Journey to $2,000+ in Monthly Passive Crypto Earnings

I first got into crypto in 2017 but didn’t look seriously at DeFi until 2020. After researching my options, here’s what I did:

Split my portfolio between BTC, ETH, stablecoins, and DeFi governance tokens.
Deposited stablecoins into Aave and Compound for a steady 8% APY.
Staked my ETH for ~6% rewards using Lido Finance.
Provided liquidity on Uniswap and Curve for 25–50% yields.
Claimed rewards weekly but compounded most back into the protocols.
Made small adjustments monthly based on performance.
Withdrew 10–20% quarterly for profit taking.

My earnings started small but ramped up quickly thanks to compounding. Within a year I was consistently netting over $2k per month in passive crypto income.

Obviously, I don’t completely sit back and relax. I do spend 5–10 hours per month monitoring and optimizing my portfolio.

But compared to active trading or a conventional job, it’s far closer to true passive income than anything else I’ve found.

DeFi Passive Income Isn’t Entirely Passive, But It’s Close

As discussed earlier, virtually no income stream is 100% passive, at least if you want to earn meaningful returns. DeFi is no exception.

Maintaining a hands-off DeFi portfolio takes more work than, say, collecting stock dividends or rental income. Ongoing tasks include:

Researching new protocols and opportunities
Analyzing potential investments
Executing transactions
Monitoring positions
Rebalancing occasionally
Managing security best practices

So expect to spend a few hours per month. Think of it like gardening — you need to water and prune to maximize the harvest.

But here’s the key point — the time investment is non-linear. Once your portfolio is up and running, you reap exponential returns relative to the effort you put in.

In Conclusion

Decentralized finance represents a seismic shift in how we interact with money and markets. It expands access, empowerment, and efficiency.

As the space matures, DeFi will reshape finance in incredibly positive ways. And passive income seekers can benefit tremendously.

I’ve shown you proven strategies to earn consistent cash flow from crypto. Lending, liquidity pools, and staking offer attractive returns.

Start small, learn continuously, reinvest to compound earnings, and one day you too could retire early from your DeFi portfolio.

The financial system should work for everyone. Decentralization brings us closer to that ideal by rewarding users directly for supporting valuable networks.

DeFi still has much room for growth. But already it’s clear blockchain technology can work hard so you don’t have to.

I hope you’ve found this guide helpful. Please leave any questions in the comments below. Happy earning!