Earning passive income in 2020: why DeFi is better than banks

Published in
8 min readSep 22, 2020


To go to the movies in the USA in 1985, you needed $3.55 in your pocket. Today, you need $9.16. It’s not because of IMAX or extra-wide seating — the true reason lies in the fact that money loses its value, it inflates. Inflation balloons the price of products and services, cuts interest rates and eats into your savings. Find out why conventional bank deposits don’t bring you an actual yield, how decentralized finance and stablecoins can help beat inflation and start earning a real return.

Understanding inflation

In this blog post, we won’t go deep into economics, but let’s explore the basics so that you get an idea of how inflation works and how it affects traditional printed money as well as your assets.

Inflation happens when fiat currency loses real value over time — in other words, things get more expensive than they were a year or a few years ago. In fact, inflation is a completely natural phenomenon for any country and economy if it grows at a steady pace. In contrast to this, hyperinflation is when the value of fiat currency rapidly decreases in an extremely short period and is destructive to financial systems and eventually, to people’s assets.

What is behind growing inflation? First of all, the monetary policy of the central bank determines if and what increase there will be in the money supply, by injecting more cash into the market. Typically, they do it to boost liquidity, especially in times of recession or crisis. Inflation may also be caused by the international flow of capital when foreign investors pump up a particular currency.

The global inflation rate data provided by the International Monetary Fund. Due to the high level of uncertainty in current global economic conditions caused by the COVID-19 pandemic, the IMF projections for these indicators are provided only up to 2021.

How inflation eats into your savings

Let’s use an example to illustrate how inflation impacts your assets. Say you deposit $100 on your bank account with a 1% yearly interest rate. In 12 months, you’ll have $101 on your savings account. Seems like you have a $1 profit, right? You would have if there was no such thing as inflation.

If the yearly inflation rate is more than 1%, let’s say 3% (global rate for 2020), you need to have $103 just to break even and preserve the same buying power you started off with.

Nominally, in a year of saving money in a bank, you’ve got 1$ of interest, but in fact you didn’t earn anything — you lost $2 due to inflation. Your money’s purchasing power has declined.

Thus, if you want to make a real yield on deposits, you need to ensure that the interest rate offered by the bank beats inflation — the interest rate must be higher than the inflation rate. The problem is that most traditional banking institutions worldwide don’t offer such opportunities.

What traditional banks offer today

Interest rates, deposit options, withdrawal conditions and other terms drastically vary from country to country and from bank to bank. They largely depend on the economic situation, the strength of the national currency and the monetary course that central banks take.

To give you the broad picture, we’ll give a general overview of interest rates in the USA, Europe and Japan, as of July 2020.

  1. The USA. According to the Investopedia digest, the highest annual percentage yield (APY) at which an individual can deposit funds in the United States amounts to 1.30% and is offered by Affirm bank. Other top rates for saving accounts are as follows:
  • SmartyPig — 1.25% APY
  • Customers Bank — 1.25% APY
  • Citi — 1.20% APY
  • First Foundation Bank — 1.20% APY
  • SFGI Direct — 1.16% APY
  • CFG Bank — 1.16% APY
  • CIBC USA — 1.15% APY
  • Vio Bank — 1.11% APY

The inflation rate for 2020–2021 in the US is projected to be 0.62% and 2.24% respectively, but again, the forecast may change due to the global uncertainty caused by the coronavirus pandemic.

2. Europe. According to statistics, most European banks and institutions also offer very low interest rates on deposits. Here is the information on the nominal rates in several countries compared to the estimated inflation (the data was provided by the International Monetary Fund before the COVID-19 pandemic).

3. Japan. This country has quite an interesting and specific situation — negative interest rates. An experimental monetary measure was introduced by the Japanese government in 2016 to accelerate the growth of their economy, thereby encouraging the public to take money out of bank accounts and start borrowing, spending and investing.

As of July 10, the interest rate stayed at -0.15%. With negative rates, the Japanese monetary policy is literally aimed at highly discouraging people from saving money and by extension, receiving a passive income on it.

Beating inflation with DeFi

Naturally, none of us want to lose money, especially if the goal is not simply to store it in the bank, but to earn from it. As the 2008 crisis showed, governments are not always able to save economies from falling — and save people from losing their wealth.

Now on the edge of another global crisis, even the most powerful and stable economies in the world are starting to weaken. Businesses are closing, people are losing their jobs, and monetary systems are considering (if not already doing it) printing more banknotes to revive economies and support citizens. But there is always a side effect to such measures — inflation, which inevitably erodes people’s savings.

Giving up faith in traditional banking systems, especially in the case of troubled economies, people start looking for alternative ways of earning on their assets. DeFi or decentralized finance is one of them.

DeFi refers to next-gen finance based on blockchain, cryptocurrency, and digital banking. Unlike fiat money controlled by central authorities, DeFi relies on a mathematical code, protocols, and complete transparency, putting users in the driving seat over their assets and wealth.

Actually, the father of cryptocurrency, Satoshi Nakamoto, even positioned Bitcoin as a way to combat fiat’s inflation. Since the number of Bitcoins is strictly limited (there are only 21 million of them), at a certain point, the demand for it will outgrow the supply. As a result, the Bitcoin price and its purchasing power theoretically will only increase.

Unlike Bitcoin, the world-second cryptocurrency, Ethereum, does not have an overall cap, which means it behaves similarly to conventional money and inflates over time; though the upcoming introduction of Ethereum 2.0 and the new consensus mechanism is believed to drop the cryptocurrency’s inflation rate by half.

You may say that volatility of cryptocurrencies makes them unsuitable for savings and deposits. Perhaps. So DeFi offers a much better option — allowing people to save and earn on stablecoins.

Stablecoins are cryptocurrencies that peg their market value to an external currency or asset. Through collateralization and buying-selling algorithmic mechanisms, they maintain their purchasing power and attain price stability with the lowest inflation and volatility possible. Stablecoins can be tied to fiat money (like the US dollar, the Euro and the Japanese Yen), commodities (like gold and platinum) or other cryptocurrencies (like Bitcoin and Ethereum).

The decentralized finance market is fair and open, so DeFi products and platforms offer appealing conditions and allow users to earn much higher interest than they would get with fiat deposits.

A few examples of DeFi platforms and the annual percentage yield they offer. Source: https://loanscan.io

Challenges of DeFi adoption

Have DeFi savings become mainstream already? Not yet. The biggest obstacle is regulation. Cryptocurrencies and decentralized finance exist in a completely new digital environment — they don’t need third-party governance, they are borderless, transparent and secure by their nature. While usual banks and institutions operate in the fully established infrastructure, DeFi is only just on its way to set one up.

It’s clear that DeFi is here to stay and now we see traditional financial bodies working together with the cryptocurrency industry to develop the right regulatory framework, licensing and forms of control. Once it’s introduced, DeFi applications, loans and savings accounts will likely gain worldwide traction.

QDAO DeFi to multiple your savings

QDAO DeFi platform is one of those leading, open finance products that already successfully operate in the market and give cryptocurrency owners the most favorable conditions ever. This European-based financial institution is licensed and works in full compliance with the necessary AML and KYC policies.

With QDAO DeFi, individuals can earn up to 10.37% annually, depending on the currency they choose. This is ten times more than traditional banks offer!

Interest rates for 6-month deposits at QDAO DeFi

How does it work? It’s as easy as ABC. All you need to earn on your assets is a cryptocurrency and an account on QDAO DeFi. You select a deposit option that most suits your needs and expectations — and voila, you can start enjoying secure, high-yield passive income without any fees.

One of the most exciting aspects of QDAO DeFi is that interest is accrued EVERY DAY. There are no lockups and you can withdraw funds whenever you wish.

The bottom line. Losing or earning, what will you choose?

Inflation is an economic phenomenon that eats into consumer purchasing power over time and accordingly, cuts into your savings. Now, amidst the new financial crash and governments’ attempts to revive economies with cash injections, the situation might get even more challenging. Fortunately, there are other avenues you can pursue to sustain and preserve your purchasing power and moreover, multiply your passive income. One such avenue is to save and earn with DeFi.

Decentralized finance is not just digital-first banking platforms where you can put cryptocurrency to work. They ensure price stability and safeguard your real, not nominal, income — you can earn a real yield and enjoy the highest interest rates that traditional banks simply won’t ever offer.

Perhaps, saving money with DeFi may still seem to be The Wild West, but don’t let the fear of innovation stop you. The nature of depositing remains unchanged — you put your money into a savings account and earn a yield. What makes DeFi stand out is transparency, strong security, and high rates. Will you stick to the old way, storing or even losing money? Or will you go ahead with DeFi and earn more? The choice is yours.

Want to be the first to hear QDAO DeFi news and updates? Visit our website and stay in touch with us on social media: Twitter, Facebook, Telegram, and LINE (for the Japanese-speaking community).




QDAO DeFi is a Swiss-based platform that offers a wide range of crypto investment opportunities.