FARMING AND STAKING OF CRYPTOCURRENCIES

WHAT IS YIELD FARMING

Yield farming is the act of staking or leasing cryptocurrency assets in order to produce significant returns or rewards in the form of extra cryptocurrency.

To further simplify it, yield farming encourages liquidity providers (LP) to stake or lock up their cryptocurrency assets in a liquidity pool that is governed smart contracts. These incentives may be given out in the governance token generated by interests from lenders, or a portion of transaction costs.

WHAT IS STAKING

On the other hand, Staking is the process of locking up cryptocurrency assets for a certain amount of time to maintain a blockchain’s operation. You gain extra cryptocurrency by staking your existing coin.

The proof of stake consensus technique is used by several blockchains. In this arrangement, network users “stake” a certain amount of cryptocurrencies in order to sustain the blockchain by confirming fresh transactions and creating new blocks.

Staking enables a blockchain to include only valid data and transactions. Participants agree to stake large amounts of crypto as an insurance policy in exchange for the chance to validate fresh transactions.

They risk losing all or part of their shareholding if they approve inaccurate or false data. However, they are rewarded with additional cryptocurrency if they confirm accurate, legal transactions and data.

SIMILARITIES AND DIFFERENCES

1. Both approaches involve locking away some amount of cryptocurrencies for a period of time. Crypto is locked for either a fixed period or is open for emergency withdrawals.

2. While Staking involves locking up your assets in order to take part and support the blockchain security of that network and earn rewards from validating transactions, Yield farming is limited to providing liquidity to DEX platforms to earn APR or API.
3. When you invest in a yield farm you earn either in the native token you are staking with or in a stable or another token, on the other hand when you stake you are part of a consensus that mints the native token as a reward for validating transactions.

YIELD FARMING AND STAKING PLATFORMS

There are platforms that supports both staking and yield farming, some platforms support just one of the two, here are some platforms that support these investment models.

Here are the top five yield farming platforms;

• AAVE
• COMPOUND
• CURVE FINANCE
• UNISWAP
• INSTA DAPP

Top 5 staking platforms;

• LIDO FINANCE
• KRAKEN
• GEMINI
• COINBASE
• BINANCE.US

RESEARCHING ON PROJECTS TO STAKE ON

Before investing in any crypto project, it is very vital to research thoroughly on the project to be sure that is sustainable and stands the test of time.

Some factors to consider include, market cap, Team behind the project, and their previous achievement as a part of other projects.

Platforms to carry out effective research include coinmarketcap and coingeko.

We did an exclusive interview with Jorian Emmanuel where he explained what staking and yield farming is, Link to the full video>>>> https://youtu.be/SNAboP_qSgc