How to Earn Passive Income with DeFi: Pendle, USDe, Aave

The world of decentralised finance (DeFi) has grown exponentially in recent years. What started as an experimental segment of crypto is now a multi-billion-dollar ecosystem offering financial tools previously limited to traditional banks and institutions. Lending, borrowing, yield farming, and innovative synthetic assets are now accessible to anyone with a crypto wallet.

DeFi’s biggest appeal is its accessibility and innovation. With DeFi, you’re not relying on intermediaries – everything is governed by transparent smart contracts. .

Why DeFi Attracts Investors

Before diving into the specific projects, it’s important to understand why DeFi is so appealing to investors:

• Higher yields. Compared to traditional banking products, DeFi offers significantly higher returns on lending and staking.
  
  

• Financial innovation. New models like flash loans, permissionless lending, and tokenised real-world assets are unique to DeFi.
  
  

• Composability. DeFi projects integrate seamlessly with each other, creating an interconnected ecosystem of financial tools.
  
  

• Decentralisation. Users retain full control of their funds without needing approval from a central authority.
  
  

However, DeFi is not risk-free. Smart contract vulnerabilities, governance attacks, and market manipulation are common threats. Always consider security as a top priority alongside growth potential.

Projects to Consider for Investment

1. Pendle (PENDLE)

Pendle is a yield trading protocol built on blockchain technology that lets users split yield-bearing assets into two components: the principal token (which holds the base value) and the yield token (which captures future yield). This innovation creates a secondary market for yield, allowing investors to buy or sell yield exposure separately from the underlying asset—all transparently executed on the blockchain.

Why invest in Pendle?

  · Innovative yield market. Pendle unlocks new DeFi strategies by letting traders speculate purely on yield or lock in fixed yields for predictable income. Through blockchain-based smart contracts, these strategies are secure, transparent, and composable within the broader DeFi ecosystem.

  · Strong growth. In 2024, Pendle’s TVL (Total Value Locked) grew exponentially, exceeding $500 million as DeFi protocols integrated it for yield optimization—demonstrating increasing demand for blockchain-based yield instruments.

  · Cross-chain expansion. Pendle has expanded from Ethereum to other blockchain networks like Arbitrum, widening its user base and liquidity options while showcasing its adaptability across blockchain ecosystems.

For investors, Pendle represents a unique play on DeFi yield markets, offering a product few other protocols currently provide. As institutional DeFi adoption increases and blockchain technology becomes more deeply integrated into financial systems, yield trading is poised to become a cornerstone of on-chain investment strategies.

2. Ethena (USDe)

USDe is the decentralised stablecoin issued by Ethena, designed to maintain its peg to the US dollar through delta-neutral strategies involving Ethereum staking and futures markets. Unlike algorithmic stablecoins that collapsed in previous cycles, USDe is backed by real collateral and hedging.

Why invest in USDe?

• Resilient design. Ethena’s delta-neutral mechanism reduces risks of depeg events, maintaining stability during market volatility.
  
  

• Attractive yields. USDe offers sustainable yields through staking rewards and funding rate arbitrage, making it appealing for DeFi users seeking stable passive income.
  
  

• Strong backing and team. Ethena raised significant funding from top-tier investors, strengthening confidence in its long-term viability.
  
  

As demand for decentralised, censorship-resistant stablecoins grows, USDe positions itself as a safer alternative with both stability and yield – a rare combination in DeFi.

3. Aave (AAVE)

Aave is one of the leading decentralised lending protocols, allowing users to lend and borrow a wide range of cryptocurrencies without intermediaries. Users earn interest by supplying liquidity, while borrowers use their crypto as collateral for loans.

Why invest in Aave?

• Market leader. With billions in TVL, Aave is among the top DeFi protocols and is considered a cornerstone of decentralised lending.
  
  

• Continued innovation. Aave has launched Aave V3, introducing features like isolation mode, efficiency mode, and gas optimisations to improve capital efficiency and user experience.
  
  

• Multi-chain deployment. Aave operates on Ethereum, Polygon, Avalanche, and several other chains, expanding its reach and reducing user costs.
  
  

For investors, Aave remains a safe and proven option within DeFi lending, with a robust governance structure and active community ensuring long-term development.

Other DeFi Projects

Beyond Pendle, USDe, and Aave, several other DeFi protocols offer competitive passive income opportunities. Protocols like Convex Finance and Aura allow users to earn boosted yields by locking assets within the Curve or Balancer ecosystems.

Platforms such as GMX and Gains Network follow a real yield model, sharing protocol fees with users who stake their native tokens—tying rewards directly to trading volume. Meanwhile, EigenLayer introduces restaking mechanics, enabling ETH holders to secure new services and earn additional returns on their staked assets.

Some of these protocols are also moving toward integration with a payment gateway, creating a bridge between on-chain earnings and real-world usability. This evolution could allow users to directly spend DeFi-generated income, making the ecosystem more practical and accessible.

As always, while yields can be attractive, they come with smart contract and market risks. Thorough due diligence and strong risk management remain essential.

Security Considerations: The Hidden Risk in DeFi

While DeFi brings impressive returns and flexibility, it’s critical to remember that DeFi protocols remain prime targets for hackers. In 2024, over $2.2 billion was lost due to smart contract exploits, bridge attacks, and oracle manipulation.

Key security tips for DeFi investors:

• Check audits. Always ensure protocols are audited by reputable firms.
  
  

• Understand risks. Yield farming and leverage amplify returns but also losses.
  
  

• Use secure wallets. Non-custodial, self-hosted solutions like BitHide provide extra security by keeping private keys under your full control.
  
  

• Diversify. Don’t keep all funds in a single protocol or chain to mitigate systemic risks.
  

Conclusion

Decentralised finance continues to push the boundaries of what’s possible in crypto. Projects like Pendle, USDe, and Aave stand out in 2025 for their innovation, strong user growth, and ability to address real financial needs in a decentralised way.

However, always remember that opportunity comes with risk. Evaluate each project’s fundamentals, security measures, and team credibility before investing. By combining smart project selection with robust security practices, you can maximise your DeFi investment potential while keeping your assets safe.

For businesses and professional investors, integrating secure wallets like BitHide ensures operational funds remain protected while exploring DeFi’s next frontier.

*This article is not an investment advice. The content provided is for informational purposes only and reflects an overview of existing DeFi solutions. Always do your own research and consult with a financial advisor before making investment decisions.