Basic DeFi Strategies on Solana

Whether you're looking to earn passive income, trade assets, or diversify your fiat into digital assets, Solana's DeFi landscape provides opportunities for both beginners and experienced users alike. Now that you know your way around Solana's technology, ecosystem, and have a grip on what decentralized finance is all about, let’s consider the best strategies on how to participate. 

In this guide we'll explore some fundamental DeFi strategies that you can use to begin your trading journey.

The majority of people and organizations around the world that own crypto simply hold it as a speculative asset. For many, it’s the simplest way to participate. On longer-term timelines, this approach has historically proven to be effective in crypto and trading generally. Nowadays, you can buy crypto in many ways: directly from your wallet, on a decentralized exchange, or even with a credit card on many centralized exchanges. 

If you’re looking for an intro to this subject, make sure to read How to Buy and Trade Crypto.

Buying and holding is the first strategy that most newcomers to crypto should get comfortable with. Although it may seem simple, there are ways to optimize your strategy. The foremost of these is what’s called ‘DCA,’ or dollar cost averaging. The idea is that by splitting your investment up into smaller increments over time, your investment is less likely to suffer from volatility in either direction. Many exchanges have tools for you to schedule purchases, or to automate the process for you entirely. 

If you’re looking for more active participation in DeFi, a great place to start is by providing liquidity. Here’s how it works: Most Decentralized Exchanges (DEXs)  offer users the opportunity to contribute tokens to the platform — referred to as ‘providing liquidity’ — in exchange for a share of the platform’s trading fees and rewards. These are usually paid out in the form of that platform’s own token. 

Earning rewards from providing liquidity on Solana platforms is quite simple. On reputable protocols like Raydium or Kamino, you can deposit your assets into a liquidity pool to earn a portion of the generated trading revenues, as well as additional rewards through incentives programs commonly found in the space. 

Liquidity provision can generate passive returns, but be mindful of impermanent loss, especially in volatile markets. Impermanent loss occurs when the price ratio of paired assets changes, potentially resulting in fewer tokens than if you had simply held them.

If you're ready to learn more about providing liquidity and more advanced strategies like liquidity mining, you can explore our Intermediate Guide to DeFi. 

Staking is easy to do and a great way to earn passive income with your SOL tokens. Solana uses a Proof-of-Stake consensus mechanism, which means token holders can stake their SOL to help secure the network and earn rewards.

If you’re using Solflare or Phantom, the easiest way to start staking today is directly in your wallet or on dashboards like Step Finance. Staking SOL is a very straightforward process and takes only a few clicks. Staking is also generally considered lower risk compared to other DeFi strategies, but be aware that staked tokens have a cooldown period when unstaking, so it can take days or even weeks to receive your unstaked tokens back in your wallet. There are also a number of staking platforms and services that offer more advanced services like liquid staking. 

There’s a lot more you can learn about staking, so make sure to read our How to Stake SOL.

Solana lending platforms enable users to lend their crypto assets and earn interest, or to borrow against their existing holdings — all without the need for traditional financial institutions. A great way to get started with DeFi if you already hold crypto is as a lender on a DeFi lending and borrowing dApp. 

As a lender, many individuals earn up to 17% APY on stablecoins like Paypal USD and 10% on USDC by depositing them into a lending protocol. And because the loans are executed via smart contract, repayments are automated, which offers peace of mind to lenders. Top Solana lending platforms include MarginFi, Kamino, and Mango Markets, and all you need to get started is a Solana wallet with some SOL or stablecoins. Then you can connect to a lending platform and easily start earning interest. 

Lending and borrowing on Solana can be easy. Find out how in our guide to Lending and Borrowing on Solana.

While more serious DeFi strategies are certainly important, there's also room for some fun in the Solana ecosystem. One way to potentially earn or participate in a more lighthearted manner is with airdrops. 

Airdrops are free distributions of tokens often rewarded to early adopters or active users of a platform directly to their wallets.  Airdrops are a common way for projects to distribute tokens into circulation, reward loyal community members, create liquidity, and sometimes even used as an advertising method to attract new users. get more users. 

Over $4 billion in value was airdropped to wallets around the world In 2024 alone. Participating in various DeFi activities and staying active in the Solana ecosystem can increase your chances of receiving airdrops, and staying active on crypto twitter can give you insight on which projects might be getting ready to do an airdrop.

Learn everything you need to know about Airdrops in our guide to How Airdrops Work.

As always: the best strategy of all is safety!

As you explore DeFi and Solana, it’s essential that you maintain the following common sense steps:

1. Do your own research before participating in any DeFi activity
2. Start small and gradually increase your involvement as you gain experience
3. Stay informed about the latest developments in the Solana ecosystem
4. Practice good security habits to protect your assets
5. Never invest more than you can afford to lose