Friends!!
I'll be the first to admit that I've largely sat on the sidelines during all the DeFi craziness that's gone on in the last several months.
I'm a simple man. I stack my sats, I throw a few darts on some altcoins, and I call it a portfolio.
You can view my crypto portfolio in its entirety by clicking the photo above!
But just because I don't personally go wild on deep-cut altcoins doesn't mean that I don't want to fill my brain (and hopefully yours) with as much knowledge as possible in the wild west outskirts of the crypto space. After all, there's undoubtedly big gains to be made for those who are willing to venture into the depths of what most call "advanced" crypto.
That's why I'm so glad that my boy Hashoshi (the most underrated crypto YouTuber, hands down) recently brought up the following questions on his channel:
What's the difference between yield farming and crypto staking...or are they the same thing?
Let's dive into this oft-asked question using a mix of Hashoshi's great explanation, as well as some additional resources from the interwebs.
What is Yield Farming?
In DeFi yield farming, you're contributing your crypto as collateral inside a cryptocurrency's lending ecosystem. Since your crypto contribution is helping build that liquidity pool, you're rewarded with fees from the crypto project.
I'd explain this to a 1st grader as: You're lending your Legos back to the Lego HQ, so they can continue creating new types of Lego blocks, and give you extra Legos as a reward for sharing.
Yield Farming tends to earn users more yield than staking, since the risk is higher. You're investing into projects that are relatively small in marketcap, experience, and trustworthiness in the space, so they pay you big bucks for taking that leap of faith for them.
What is Staking?
Staking is a means by which you can participate in a network governmance, which makes you a core part of the cryptocurrency's most fundamental functions. Most of the time, stakers are the driving force that creates the actual blocks that form the blockchain for Proof of Stake (PoS) coins.
Since there's a clearer function for how this capital is used, the rewards for investors are lower, but as you could assume, this comes with an additional amount of safety compared to yield farming.
So...what's the difference between yield farming and staking?
In a nutshell, both staking and yield farming 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.
The difference is, investing money into yield farming is a much more vague endeavor, since you're simply providing liquidity to the protocol to be lent out to other people. Staking on the other hand, has a much clearer goal in mind, such as being part of a conglomerate of block-builders that construct the blockchain itself.
You can watch Hashoshi's full video here:
I hope that helped clear this question up for some folks out there!
Big shoutout to Hashoshi for laying the foundation for this post, I absolutely recommend that you go subscribe to his YouTube channel if you haven't already.
Also, if I've made any mistakes in my research above, please don't hesitate to call me out. I've learned a lot from comment sections in the past, and am always open to taking pointers from the smart folks of Publish0x :)
-Ben
Twitter:
![ACtC-3eJfBZd2Y2YmqAA0AFRI2x0T6e1My7QseUAfBYC_ihYYRMyJhSRzmldDZwnHjmqILM8LaFUTaIbJdKL9kXP2Aw1eQVSpVwAbBzCQ6VNwmhrsHJHw4z7Pwu2ILQtwh0D3mpAMq8xjBsz_KS9hvFNCPMdpA=w1200-h300-no?authuser=0]()
Instagram:
![ACtC-3eKErPpauMJ-iv-cSgeuhSnGn6UgDAVebG4Ix3llCpqENVrTII83AyMgLodXui1-eWvfE8yR3_-9MMyquEjrhkVjdvaUXMpiqhU38qn9-wMcMlOZfTOULHHK0_qmlnx4yLnXBRNg0HtJ9bUP2_I-c5Ijw=w1200-h300-no?authuser=0]()
Website:
![ACtC-3czbjOC_kg1joISJGgavsFn_eG3cKkPFdG08KwJjnVFmdSzIIjeHdKFYKO2mbfd1ZkSBgjctES6Bn1CO7Eegiw0vZ29xUjfF0ZxsRmSoF_riDSvWFVRf8wAdp4Uu8fsuW7yRn3wqt2xKg6-5nmyCd3nxg=w1200-h300-no?authuser=0]()
