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Staking vs, Farming: How to Earn Market-Leading Yields

By Bolide | Bolide Finance Blog | 24 Jun 2022


FOMO (Fear Of Missing out).

That’s something that affects all of us at some time in life.

The crypto dream of making your fortune overnight and kicking back and sipping cocktails on the beach still holds strong among investors. In the first quarter of 2022 alone, 81 million people created unique bitcoin wallets on blockchain.

That’s a 72% increase in the last 12 months.

Most people missed the bitcoin gold rush, but the smart money nowadays among crypto investors is earning lucrative yields and a high-yielding passive income from something called staking and yield farming.

So, what exactly is staking and yield farming, and how can you get the best deals out there? These terms may sound confusing but sit tight, read on, and we’ll walk you through the two investment products and show you how to maximize the APY (Annual Percentage Yield) on your investment while minimizing your risks.

Let’s do it!

1. Staking: The Lowdown

 

Staking means holding cryptocurrency on a blockchain network, and users who stake their coins via the ‘Proof of Stake’ consensus mechanism get rewarded with more coins for helping keep the network secure. And you can stake either a fixed amount and become a validator or take part in liquidity or staking pools. The more coins are in the staking pool, the more rewards people earn.

Staking is similar to something called ‘mining’ but simpler in the sense that you don’t need complicated hardware to stake your crypto assets. Just deposit your coins in a staking wallet, an exchange, or invest via a yield aggregator to take part in staking reward programs. Why let your coins sit in your wallet earning zilch when you can earn a high-yield, regular passive income? Yep, it’s a no-brainer.

So, what exactly does staking involve?

Each liquidity or staking pool has different conditions, such as a fixed time frame and annual percentage yields or the predicted annual income for participation in that pool. But finding the best staking or liquidity pool is no easy task. There are a lot of providers out there and sifting through them to filter the best deals can be confusing and time-consuming, but you can simplify the process by using yield aggregators (see section 4).

Here’s a quick recap on some main staking concepts:

  • People who stake their crypto assets validate the blockchain transactions depending upon the number of cryptos they stake.
  • Staking involves a “consensus mechanism” called Proof of Stake, which is how all transactions are verified and secured without a bank or payment system in the middle.
  • You can earn tokens as rewards when taking part in the validation process or staking pool.
  • The more coins in the staking pool, the bigger the rewards.

2. Yield Farming: The Facts

Let’s get straight to the bottom line. Yield farming your crypto coins means providing liquidity to a decentralized finance protocol. In return, you’ll earn rewards on the tokens you invest.

You basically lend your assets to a DeFi platform, and the platform will use your coins to maintain liquidity while trading, lending, and borrowing. The platform earns fees for these transactions, and you, as an investor, get a share of the fees.

Sure, yield farming has a lot in common with staking, but it’s not just holding crypto assets. It’s also about taking advantage of lending and borrowing opportunities on decentralized exchanges (DEXs) and earning high APYs.

That’s pretty awesome, right? I mean, why let your coins sit idly in your wallet, earning nothing when you can be earning solid interest? And the best thing is you can invest your assets for as long as you want, ranging from a few days to several months, while earning fees daily.

As a result of their high yield rates (APY), yield farming pools are highly competitive, and it’s no wonder that yield farming is currently the most significant growth driver of the DeFi sector, expanding to highs of $200 billion in the first quarter of 2022.

Here’s a quick summary of the main benefits:

  • People earn interest when they invest or lend their coins in a decentralized app.
  • The APY can change based on the demand of the crypto asset.
  • Interest is earned daily and paid in the form of new crypto coins.
  • The value of these new coins can also increase, meaning the overall value of your invested asset goes up in price.
  • Yield farming is a sustainable and inexpensive way to earn better in crypto than mining, requiring special equipment.

3. Which Investment Strategy Is Right for You?

Both yield farming and staking can be great options for crypto investors, but filtering through the options and knowing how to find the best investment strategy can be overwhelming.

Know your risk tolerance and much you can afford to lose, and don’t go over this amount. Crypto yields are volatile, unregulated, and not insured by any government agency.

A key question to ask yourself: Passive or active investor?

Deciding whether to be a passive or active investor should be the first thing you think about before choosing an investment strategy. If you want a passive investment, like a savings account, then staking might be better for you. But if you want more control over your crypto assets with potentially higher returns, then yield farming may be right for you.

There are a couple of other things to keep in mind when weighing up the differences between staking and farming:

Staking offers increased APY (Annual Percentage Yields) but that means locking in your funds for prolonged periods. Yield farming, however, allows you instant access to your assets.

Fees are another thing you need to think over. Gas fees can eat into the capital of yield farmers who are free to switch between liquidity pools but have to pay transaction costs in the process. This can often offset any gains you stand to make by switching to another platform promising higher returns.

Stakers on a network don’t have to solve computationally difficult math problems to mine rewards, as they would in a Proof of Work (PoW) blockchain network, meaning the upfront costs of staking and maintenance can be lower.

Ultimately, before taking your first steps into crypto investing, make sure you check out the DeFi space as thoroughly as possible. The crypto world moves quickly, as you will need to before the rules of the game change.

4. Investing Made Easy: High Yield Farming Aggregators

Choosing a great investment strategy can be quick, straightforward, easy, and profitable. And there are some great new tools out there that can help you find the best APYs from both yield farming and staking.

The smart money nowadays is invested through DeFi high yield farming aggregators offering a one-stop automated investment strategy. The crypto market can move at breakneck speed, but AI-based yield farm aggregators are really ahead of the game in 2022. Simply deposit your assets into an index tracking portfolio that rebalances your assets across the DeFi spectrum, hunting down the best investment opportunities and giving you market-leading yields with instant access to your assets.

Earn interest at the speed of light with Bolide’s high yield aggregator.

  • Low risk, market-leading yields of up to 15% APY
  • Earn an extra 20% staking your BLID tokens and enjoy 11% APY on farming
  • Hands-off, passive automated investments using your stablecoins
  • Access your funds and profits instantly
  • Audited protocols

DeFi investing made easy. Why make life difficult when you don’t have to?

For more information on the best staking and yield farming opportunities and APYs, click here.

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