Yield Farming and Staking for Passive Income

Yield farming and staking have risen in popularity as the latest strategies in DeFi to harvest passive earnings. They are strategies that are geared towards the making of earnings with your cryptocurrency without the need to actually trade.

Yield farming -

Yield farming is the only means of earning passive income from the build-up of sufficient liquidity within DeFi protocols. Put a range of cryptocurrencies as collateral within liquidity pools on platforms like Uniswap, SushiSwap, or Curve to facilitate trading or lending. If such assets have been fed into these pools, users earn a much larger slice of the transaction fees and other token incentives. Usually, yield farmers jump from place to place to receive all of these things, often utilizing tools such as auto-compounding to earn even more.

Staking -

Staking is the more direct and less risky way to earn passive income. It locks cryptocurrencies from the users into a blockchain network, which uses a PoS (Proof of Stake) or DPoS (delegated proof-of-stake) consensus mechanism. Staking securities protect the network and make it functional so that rewards in terms of native tokens are handed to stakers. Staking opportunities are available at a number of platforms like Ethereum 2.0, Cardano, and Solana.

Benefits and Risks -

Both of these strategies provide catchy income sources, but they also have associated risks. On the one hand, yield farming may come across as impermanent loss and vulnerability in the smart contract, while in staking, there may be few possibilities to realize potential losses except that time lost in a long lock-up period can be recovered.

Participants in this yield farming or staking make money in a passive way with maximum exposure to the safety net of DeFi.

Thanks

---

src

~ Nesaty