The summer of 2020 began with the explosion of new technologies in the cryptoverse – DeFi or decentralized finance! No KYC, no financial barrier to entering the financial space sparked the next financial revolution. But it was yield farming and stakes that made everything great in space.
As a result, the DeFi market, which started modestly with $1.5 billion in TVL, has grown to $105 billion in no time. If you have little or no knowledge of yield farming and staking, you’ve come to the right place. In this blog, we explain these concepts and their differences. In addition, you will also learn about platforms that support them.
What is yield farming?
Yield farming may sound more or less like staking, but it has an advantage. Yield farming gives you additional tokens in addition to the interest. So let’s say you have made loans to the ETH/DAI liquidity pool. As a liquidity provider, you get interested whenever someone uses tokens from the pool. At the same time, you also get the LP/Governance tokens that you can lock elsewhere for more returns. In a way, yield farming allows liquidity providers to earn liquidity with liquidity. Despite the token blocking, your liquidity remains in the form of an additional token. The concept of yield farming grew out of the Compound Protocol. It was the composite protocol that distributed comp tokens to liquidity providers.
What is staking?
Staking is the process of depositing your crypto to confirm transactions. The more transactions you confirm, the higher the confirmation reward. Staking works on blockchains that use the POS or Proof-of-Stake consensus mechanism.
Difference between yield farming and staking
Here’s an easy-to-view chart showing the difference between yield farming and staking:
| category | yield farming | Mark out |
| definition | To lock passive income crypto tokens | To lock crypto tokens to act as a validator |
| technology | Yield farming uses automated market making (AMM) | POS or Proof-of-Stake consensus mechanism |
| Reward | In the form of APYs for Token Locked | In the form of native tokens to validate blocks |
| risks | Risks in the form of impermanent loss, smart contract bug and blockchain composability | Validator risks like being off the network. Or liquidation risks for validating illegal transactions. |
Top-yield growing protocols
Warp.Finance
Users can lock Uniswap’s LP token for providing liquidity. In doing so, they will be exposed to additional liquidity on top of the 0.3% fees. There are also additional benefits for liquidity providers at Warp Finance. They receive WARP tokens that they can borrow for additional interest.
Badger DAO
Badger DAO takes Bitcoin yield farming to the next level. On Badger DAO, liquidity providers earn rebase tokens called SETT. With SETT pegged to BTC, the price of the token has skyrocketed. Those who received SETT as an LP token are preparing for the moonshots.
Top Staking Protocols
CoinDCX
On CoinDCX, you can earn up to 5% to 20% APY while staking your crypto. CoinDCX supports EOS, TRX, NEO, QTUM and XTZ.
binance
Binance is one of the best platforms for staking your cryptos. You can earn up to 105.32% APY with some of the selective tokens. For example when you use your AXIE. However, for other tokens, you can get into the 5% to 13% APY range.
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