Want to earn passive income with your crypto? Staking and yield farming are two popular methods – but they come with different risks and rewards. Learn how they work and which might suit you.
Once you own crypto, you might want it to work for you – generating additional income. Staking and yield farming are two ways to put your assets to use, but they operate very differently.
Staking is native to Proof‑of‑Stake blockchains (like Ethereum, Solana). You lock your coins to help secure the network and earn rewards. Yield farming, on the other hand, involves lending or providing liquidity to DeFi protocols in exchange for fees and often extra tokens.
Lock your coins in a Proof‑of‑Stake network to validate transactions. Rewards are paid in the same coin. Examples: Ethereum (after merge), Cardano, Solana. Usually lower risk but lower returns.
Provide liquidity to DeFi protocols (like Uniswap, Aave). You earn trading fees and sometimes governance tokens. Returns can be high but come with impermanent loss and smart contract risk.
APY includes compounding, APR does not. Staking rewards are often quoted as APY; farming rewards may be APR plus token price appreciation.
When providing liquidity, if the price of your deposited tokens changes relative to each other, you may have less value than if you simply held them – that's impermanent loss.
Remember: Higher returns usually mean higher risk. Never invest more than you can afford to lose, and research protocols thoroughly.
Compare potential returns from staking and yield farming. Adjust the sliders to see how different factors affect your earnings – but remember, these are simplified estimates.
💡 Staking returns are more predictable; farming APYs can change rapidly and include impermanent loss risk. This is for illustration only.