Most people will say that the growth of the crypto market is good. But it also prevents regular investors from buying dips and making immediate profits. As a result, people are looking at passive earnings rather than active cryptocurrency trading. Yield farming and staking are the two most popular options.
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Each method has its own way to make crypto work, but which is best for the average investor? Today, we intend to completely resolve the debate on yield farming and staking.
Look at each passive investment strategy individually and make a final comparison. Are you ready to step back from high-risk active trading? Let’s begin!
What is Yield Agriculture?
Yield farming is a common way to increase crypto holdings through lending. The name comes from the concept of using coins to grow them as a result. But how does the process work?
It’s all DeFi (Distributed Finance) platform. These projects require a large amount of cryptocurrency to trade, lend, borrow, and use for action on the blockchain. However, no one has enough real money or coins to generate money from the air.
Therefore, DeFi offers high interest rates in exchange for your coins. For example, you can lend coins at interest rates of up to 12% on the following platforms: AQRU.. Coins are collected in what is called a liquidity pool and used for lending, borrowing and trading.
Automatic Market Market (AMM) These pools are required to provide automated trading. Simply put, investors “rent” tokens to the pool. This allows AMM to facilitate further transactions. This will increase the volume of coins traded and increase their value.
But how can farmers with yields know how much they are renting? DeFis issues Liquidity Provider (LP) tokens, which are unique identity cards that track how much an investor has contributed.
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Benefits of Yield Agricultural Cryptocurrency
Yield Farming Crypto allows users to increase their investment while at the same time having a positive effect on the overall condition of the coin. When funds are added to the liquidity pool, interest rates can rise even when demand is high. So, with both coins currently popular, yield farming DAI or ETH could be a good move.
This passive investment method allows investors to profit from rewards, transaction fees, interest and price increases. And compared to mining, harvest farming requires no initial investment of any kind other than the cryptos already in your wallet.
What is staking?
Compared to yield farming, cryptocurrency staking has a more “technical” purpose. Instead of increasing liquidity and providing lending services, we support the blockchain itself.
In particular, staking is used to validate transactions on the network that use the Proof of Stake (PoS) mechanism. Proof of Work (PoW) blockchain consumes much more energy and requires raw computing power to create new blocks. This power is needed to solve complex mathematical problems in order to get a chance to get rewarded.
PoS relies on completely different principles. Individual users become “verifiers” and set up nodes on their stakes. When the sender requests a transaction, a node that randomly validates the block is selected and the node owner receives a reward.
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In this way, cryptocurrency trading does not harm the environment. At the same time, private investors do not have to invest in expensive equipment or pay high electricity bills.
This mitigation factor is often mentioned in the discussion of yield agriculture and staking, but there is another problem. Setting up a PoS system requires a little more work. However, write-proof (PoB) or third-party sources can help verify ownership and evenly distribute rewards.
From that point on, the blockchain network has the potential to grow further. The more stackers you have, the safer your blockchain will be. Staking guarantees integrity, which increases exponentially with each new stake added to the system.
If an investor chooses a network that is still growing, they can track the growth of the network and hold the growing coins to passively invest in cryptocurrencies. So this is two approaches.
Benefits of staking cryptocurrencies
First and foremost, staking can interest your tokens. Apps like AQRU Rewards Investor get the tokens you want to bet on. Currently, new AQRU members can earn a bonus of 10 USDT by joining the network. USDT and other stable coins come at an annual interest rate of 12%, while BTC and ETH earn 7% for investors. AQRU Is affiliated with learning wallet provider Fireblocks and accepts both crypto and fiat currencies.
Apart from financial benefits, staking also protects the environment. As mentioned in the previous section, staking avoids the problems that plague the PoW consensus mechanism. Therefore, anyone can be an investor and don’t have to think about the price of electricity or state-of-the-art computer hardware.
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How to know when staking is a good idea
Instead of dealing with banks and governments, crypto staking includes a DeFi platform. By using smart contracts, these platforms aim to facilitate financial transactions on both business and individual platforms.
Each DeFi is built on a specific blockchain network and uses specific standards. These two factors affect interoperability and DApp building capabilities. However, not all platforms are suitable for staking.
New investors often confuse this, but the best way to find a good opportunity is to look at:
1. Coin liquidity. If you provide crypto for staking purposes, the best scenario is to get rewarded within minutes. Of course, this only applies to the most traded coins. But that doesn’t mean you have to wait a few days or weeks. Instead, choose coins that are frequent or rising.
2. Is the reward worth it? Staking is dangerous. You are funding an unknown platform with the promise of getting something in return. If so, make sure it’s worth the reward. Check out our competitors and ask other investors about their experience.
3. Make sure it is diversified. Do you own only one company? of course not. The same is true for staking. If you are considering investing responsibly, bet multiple cryptos and settle on only the best available platform.
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What is good: staking or yield farming?
It is always difficult to compare two investment strategies. In the yield farming and staking debate, investors always want to get the value of their money. Of course, this has different meanings for different people. One investor can find staking better, the other may not.
To keep things simple, I decided to compare the two strategies in a series of categories. That way, you can observe their best and worst characteristics and make decisions.
Is staking better than yield farming?
From a risk perspective, staking is often a much safer option. Yield farming is often a feature of new DeFis, so “rug pulls” and other types of scams are frequent. To make matters worse, many investors don’t even know how to read smart contracts correctly.
Staking, on the other hand, is a much better option for beginners. PoS networks are difficult to hack and require no capital investment. Of course, both yield farming and staking can suffer from coin devaluation, which is common in all crypto-related efforts.
Profitability is another story. With early investor involvement, some harvest farming strategies can have impressive results. However, early involvement does not mean that the project will be successful.
Staking, on the other hand, does not offer immediate returns, but does not rely on initial entries. Cryptographic transactions always require coins to validate the transaction, so stakes are always directed towards longevity.
How about transaction fees? Yield agriculture is often a trap in this regard. Beginners are disappointed when they want to switch to another liquidity pool. As an investor you are free to want and LP definitely suffers from “Walled Garden” Syndrome. Transaction fees can also be high.
Staking does not include solving gas bills or math problems. Maintenance and upfront costs are also minimized.Therefore, it can be said Staking is suitable for beginners and small investors..
Yield Agriculture vs Staking: Summary
Both staking and yield farming have their own advantages and disadvantages. Yield agriculture is dangerous, but it offers short-term benefits. On the other hand, staking is much more suitable for beginners. Easy to understand and does not require a large initial investment. In addition, coin staking is always required to create new nodes on the blockchain.
If you want to get a 10USDT bonus by betting crypto and creating an account, join AQRU and invest like a pro!
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The Content above is not an editorial and BCCL disclaims all warranties, express or implied in connection therewith, and does not warrant, warrant, or necessarily warrant the Content.