Staking and yield farming. How to grow your crypto funds?

Staking or yield farming? How are they different, and which one to choose for crypto investments?

DeFi passive income strategies are slowly migrating into the crypto market. The popularity of some of these passive income strategies has exploded to the point that they’re outpacing people’s interest in simply holding crypto assets for a rainy day. With the development of new tools in recent years, DeFi offers unique opportunities to generate a passive income that allows users to use existing crypto assets to earn more.

Today’s read will compare yield farming vs. staking to determine the passive income strategy to choose.

What is yield farming?

Yield farming establishes a passive income that allows for growing your assets by temporarily lending them via a DeFi platform. These assets are locked up in smart contracts, and users get paid while allowing their assets to be used for lending, borrowing, and enhancing liquidity. But it’s not enough to know how to yield farm to harness the power of these yield opportunities. You need to know the market and research each opportunity since the crypto world is highly volatile.

Sounds familiar? Yield farming is similar to traditional banking. It’s like depositing money in a bank account for a particular period, and the bank can use your money and pay you back a percentage of the interest received from borrowers.

Unlike traditional banks, DeFi platforms offer higher yields (interest rates). As a yield farmer, you can earn attractive annual percentage yields (APYs). Some platforms even offer triple-digit APYs. Is there any bank that can offer higher interest rates?

Pros explained

• Easy start

To become a yield farmer, you need to have crypto assets and a wallet.

• Higher interest rates

DeFi platforms offer attractive returns on investment. There is a chance to earn returns of over 100% APY.

Cons explained

• Impairment loss

Crypto assets are high-risk and volatile. A cryptocurrency may go down in price while assets are locked in a yield farm, causing impairment loss (or devaluation of your assets).

• Scams and fraud

Like any financial product, you can get trapped in fraudulent schemes set by bad actors looking to steal your funds.

• Tax reporting

Tax reporting is a complex procedure, even for typical assets. Crypto assets and yield farming make matters even more complicated.

Yield farming presents an opportunity to grow your idle crypto assets, not just from an increase in value. The idea of earning triple-digit returns can be enticing. Nevertheless, you should be aware of all the risks and fully understand the basics of yield farming.

What is staking?

Staking came long before yield farming, and before staking, there was mining. So, staking is another way to capitalize on holding certain cryptocurrencies.

But not all cryptocurrencies allow for staking. Currently, only a few blockchains support a consensus mechanism called Proof of Stake. It’s the way blockchain verifies and secures all transactions without any centralized entity.

If you decide to stake, your crypto will become a part of the verification process. But only selected participants can add a new block in exchange for a reward. The network chooses users based on their stake and an asset’s locked period length. This way, the most invested users can receive the highest rewards. But, if a transaction in a new block is considered invalid, the network may burn a part of the stake (slashing event).

Pros explained

• High returns

With staking, you can achieve higher returns depending on the cryptocurrency you’re staking and the amount.

• No equipment

Unlike mining, you don’t need to invest much money into your computational power.

Cons explained

• Impairment loss

Crypto value isn’t stable. Your assets can plummet in price and make staking less profitable.

• Lock-up periods

Within a lock-up period, you can’t access your crypto assets.

• Slashing events

If a block you’ve verified is formed with fraudulent or invalid transactions, the network can burn a certain amount of your staked coins, leading to monetary loss.

To stake or not? There is no unified answer. Staking is a passive income strategy that makes your idle crypto assets work for you. But it isn’t risk-free.

How to make your crypto grow with TheStandard.io?

We are about to launch an Initial Bonding Curve Offering (IBCO). It’s like an Initial Coin Offering (ICO), but IBCOs solve many problems like lack of liquidity and the arbitrary pricing of initial tokens.

With TheStandard.io and IBCO, you can purchase sEURO at a discounted price starting at 80 cents. With every sEURO purchased, the discount will decrease. In the next stage, The Standard will reward people by offering high yields for investing in liquidity bonds. The yield depends on the bond maturity (one week to a year). The longer your bond is, the more you will receive.

Compared to other platforms, TheStandard.io works with sEURO, which is pegged to the Euro and backed by real assets like gold, silver, Bitcoin, and Ethereum.

In the next stage, crypto holders can stake TST (TheStandard DAO’s governance token) and receive rewards paid out in sEURO. Unlike other staking platforms, The Standard allows users to pull out TSTs anytime.