Yield Farming vs Staking: How Are They Different?

Yield farming

Yield farming is a consequence of DeFi actions to make participants earn tokens while using the crypto project’s DeFi applications. Each and every time a new project emerges, it has become imperative that it offers brand new tokens or rewards to be earned by incoming users. And as more and more join in, the demand begins to increase that essentially makes the project and its token drive up in value. In simpler terms, you contribute your crypto to the project via a liquidity pool and in return, you are rewarded with incentives. Since the risk is higher, so is the yield.

Staking

Staking takes you a notch further from farming by allowing you to participate in the project’s governance, have voting rights, certain influence over the project’s designs and processes, among others. By being a core member of the crypto project, you participate in creating the blockchain for the Proof-of-Stake coins (PoS). As the substantial amount of capital you inject into the network project is safe, clear, and specific, investor rewards are moderate and definitely lower than yield farming.

Yield farming vs. Staking

Yield farming and Staking can be over-generalized as an opportunity to invest your money into small-cap crypto projects that are willing to pay you for contributing capital into their ecosystem. Yield farming tends to earn users more yield than staking, since the risk is higher. Staking is a much more vague endeavor, since you’re simply providing liquidity to the protocol.

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