Refers to a digital currency, secured with cryptography to enable trusted transactions. Blockchain is the underlying technology, functioning as a ‘ledger’ or record of transactions made.
Hundreds of currencies are in circulation, such as Bitcoin, Ether, Monero, KRYZA Network, KRYZA Exchange, KRYZAswap etc. Each is designed by one or more brilliant individuals, usually meant to run as a decentralised system so that no single entity can control it.
Cryptocurrency units are usually generated on the basis of an algorithm announced to everyone in advance, by ‘miners’ using powerful computers. Having expended a lot of time and electricity on ‘mining’, these miners can hold on to the units or sell to others.
$KRS does not have a maximum supply. The circulating supply is managed through built-in burning and regular burning events.
Yield farming is a method of generating cryptocurrency from your crypto holdings. It has drawn analogies to farming because it’s an innovative way to “grow your own cryptocurrency.” The process involves lending crypto assets for interest to DeFi platforms, who lock them up in a liquidity pool, essentially a smart contract for holding funds.
The funds locked in the liquidity pool provide liquidity to a DeFi protocol, where they’re used to facilitate trading, lending and borrowing. By providing liquidity, the platform earns fees that are paid out to investors according to their share of the liquidity pool. Yield farming is also known as liquidity mining.
Liquidity pools are essential for AMMs, or automated market makers. AMMs offer permissionless and automated trading using liquidity pools instead of a traditional system of sellers and buyers. Liquidity provider tokens, or LP tokens, are issued to liquidity providers to track their individual contributions to the liquidity pool.
For example, if a trader wants to exchange Ethereum (ETH) for Dai (DAI), they pay a fee. This fee is paid to the liquidity providers in proportion to the amount of liquidity they add to the pool. The more capital provided to the liquidity pool, the higher the rewards.
As a yield farmer, you might lend digital assets such as Dai through a DApp, such as Compound (COMP), which then lends coins to borrowers. Interest rates change depending on how high demand is. The interest earned accrues daily, and you get paid in new COMP coins, which can also appreciate in value. Compound (COMP) and Aave (AAVE) are a couple of the most popular DeFi protocols for yield farming which have helped popularize this section of the DeFi market.
Instead of just having your cryptocurrency stored in a wallet, you can effectively earn more crypto by yield farming. Yield farmers can earn from transaction fees, token rewards, interest, and price appreciation. Yield farming is also an inexpensive alternative to mining — since you don’t have to purchase expensive mining equipment or pay for electricity.
More sophisticated yield farming strategies can be executed using smart contracts, or by depositing a few different tokens onto a crypto platform. A yield farming protocol typically focuses on maximizing returns, while at the same time taking liquidity and security into consideration.
DeFi stands for decentralized finance, which is an umbrella term for financial applications using blockchain networks to obviate the use of intermediaries in transactions.
For example, if you take out a bank loan now, the bank acts as an intermediary by issuing a loan. DeFi aims to remove the need to rely on such an intermediary through the use of smart contracts, which are essentially computer code that executes based on predetermined conditions. The overall goal is to reduce costs and transaction fees associated with financial products like lending, borrowing and saving.
When it comes to staking, there are a few extra measures investors should take into account, as they’re engaging in DeFi. These include:
Considering the security of the DeFi platform
Evaluating the liquidity of staking tokens
Looking into whether or not rewards are inflationary
Diversifying into other staking projects and platforms
For investors with a shorter time horizon and are stuck in deciding between yield farming vs. staking, both strategies have their own unique benefits.
Staking allows investors to generate rewards immediately during transaction validation. As a result, it can be a good short-term investment which reaps steady profits. For example, a staking strategy can be used for mining a PoS coin like Cardano ADA. Staking ADA offers no additional risk beyond owning Cardano.
However, the expected return and risk may be lower than with an active yield farming strategy.
On the other hand, if you need liquidity for a short-term strategy, yield farming doesn’t require a lockup of funds. You can try to generate high returns on platforms offering a high APY. As with any investment strategy, execution matters — and a bit of luck helps, too.
You can also use yield farming and staking as longer-term strategies to earn more income from crypto.
First, let’s take a look at yield farming, which is basically reinvesting profits back into crypto to generate interest in the form of more crypto. While yield farming may not always offer an immediate return on investment (ROI), it doesn’t require you to lock up your money, as staking does.
Despite the lack of an immediate payout, yield farming has the potential to be fairly lucrative over the long term. Why? Because without a lockup, you can try to jump between platforms and tokens to find the best yield. You just need to trust the network and DApp you’re using. As such, yield farming could prove to be a great way to diversify your portfolio.
Staking can be a reliable source of returns over the long term as well, especially if you’re committed to HODLing and therefore plan to keep your coins for the long haul. Whether you decide to stake or yield farm over time may depend more on how actively you’d like to manage your investments. While staking returns could turn out to be less profitable, it trumps the yield farming vs. staking comparison because the associated long-term risks are fewer. This ultimately makes the returns more stable.
Curious about which is better suited for the average investor when deciding between yield farming vs. staking? Yield farming is very similar to staking because both require holding some amount of crypto assets to generate profits.
Some investors consider staking to be a part of yield farming. While the terms “yield farming” and “staking” are sometimes used interchangeably, there are distinct ways in which they differ. Here are the key differences.
When looking at yield farming vs. staking, staking is often the simpler strategy for earning passive income, because investors simply decide on the staking pool and then lock in their crypto. Yield farming, on the other hand, can require a bit of work — as investors choose which tokens to lend and on which platform, with the possibility of continuously switching platforms or tokens.
Providing liquidity as a yield farmer on a decentralized exchange (DEX) may require depositing a pair of coins in sufficient quantities. These can range from niche altcoins to high volume stablecoins. Rewards are then paid based on the amount of liquidity deposited. It often pays well to switch between yield farming pools constantly, though this also requires paying additional gas fees. As a result, yield farming can benefit more than staking from active management. This is how the top yield farmers go about achieving the highest possible returns.
Ultimately, yield farming is more complex than staking — but it may also yield higher returns if you have the time, wherewithal and know-how to manage it.
Yield farming is often practiced on newly created DeFi projects, which can be highly risky if “rug pulls” occur. This term refers to shady developers intentionally draining assets from liquidity pools.
Even smart contracts built by high-quality developers can have weaknesses or bugs, which is always a risk. According to a survey, 40% of yield farmers don’t know how to read smart contracts — and don’t understand the associated risks.
Staking can be done with minimal initial investment, which can make staking an attractive option for users who are new to DeFi. Rug pulls are also less likely on an established PoS network.
Volatility risk is common to both yield farming and staking. Yield farmers and stakers alike can lose money when tokens suddenly drop in value. Liquidation risk also occurs when your collateral is no longer enough to cover your investment.
While yield farming offers a better yield than staking, risk-averse investors might be more inclined to consider staking when weighing yield farming vs. staking strategies. The risks can be higher since transaction fees can add up and detract from returns. The risk of asset depreciation applies to both strategies: you can lose your money if the market turns unexpectedly bearish.
Yield farming exposes investors to impermanent loss due to fluctuations in prices from when the crypto was initially deposited. For example, if you deposit funds into a liquidity pool and then that crypto spikes in value, you would have been better off holding those tokens — rather than depositing them into the pool. You can also experience this loss if the crypto that you’re holding drops in value. Conversely, impermanent loss does not apply to staking.
Wherever there’s a risk, there can also be a reward. Just as jumping off the Eiffel Tower for that adrenaline rush might not be a good trade-off — at least, not without a parachute and a good lawyer — weighing risk and reward in financial investments is critical.
The main comparison for yield farming vs. staking is the passive income investors can gain from staying invested. The more returns received, the more that can be reinvested and grown. Albert Einstein once called compound interest the “eighth wonder of the world” because of the potential for outsized gains from this phenomenon.
A common measure of returns is annual percentage yield, or APY. Traditional staking on exchanges tends to have steadier APY returns when compared to yield farming. Typically, staking rewards are in the range of 5%–14%.
For example, yield farmers who get involved early with a new project or strategy can reap sizable profits. Returns can range from 1% to 1,000% APY, according to CoinGecko. However, these strategies bear higher risk.
For investors seeking liquidity when comparing yield farming vs. staking, the winning strategy is clear. Staking offers increased returns (or APY) when investors choose to lock in their funds for prolonged periods. Yield farming, however, doesn’t require investors to lock in their funds.
PoS tokens are inflationary assets, and any yield paid to stakers is made up of new token supply. By staking your tokens, you can at least receive rewards in line with inflation, proportional to the amount staked. If you miss out on staking, the value of your existing holdings decreases — from inflation.
For the unaware comparing yield farming vs. staking, gas fees can certainly be a significant concern for yield farmers who are free to switch between liquidity pools, but have to pay transaction fees in the process. Yield farmers need to factor in any switching costs, even if they spot a higher return on another platform.
Stakers on a network don’t have to solve computationally difficult math problems to mine rewards, as they would in a PoW blockchain network. Hence, the costs of staking upfront and maintenance are also lower.
Yield farming based on newer DeFi protocols may be more vulnerable to hackers, especially if there are glitches in a smart contract’s programming. Staking is generally more secure because stakers are participating in the underlying blockchain’s strict consensus method. Any attempt to trick the system may actually result in the perpetrators losing their staked funds.
If you’ve already transferred BNB into your BNB Smart Chain-enabled wallet but still have this error, you’re most likely not connected to BNB Smart Chain within your wallet. Check your wallet’s selected network and make sure you have BNB Smart Chain (BSC) selected.
Let’s look at a national currency like the rupee. It can be deposited in your name at a bank, or privately stuffed into a mattress at home far away from anyone’s eyes.
Similarly, a cryptocurrency can be held on your behalf by a company, usually in your wallet at a crypto exchange online. You could also hold it in without being affiliated to anybody, in a private cryptocurrency wallet.
As indicated by ‘currency’, they were originally intended to be used in the same way as rupees and dollars are, as a medium of payment between people for products and services purchased.
Consider store reward cards, an alternative physical payment method that is denominated in their own units, and not in national currency. Similarly, cryptocurrency with its own units was meant to enable easy digital transactions online, at lower costs than what conventional banks charged.
Overall, we hope this comparison for yield farming vs. staking has been useful for you. Staking and yield farming are still relatively new passive income strategies when compared to approaches used in other financial markets. At times, the terms are used interchangeably, and staking may even be considered a subset of yield farming. Both approaches to earning passive income rely on holding crypto assets to earn rewards, and each strategy allows investors to share in the value of the decentralized financial ecosystem.
Staking may be more of an intuitive concept to understand, whereas yield farming can require a bit of strategic maneuvering to reap higher profits. Both products offer rates of return that can be highly attractive. Deciding between yield farming and staking depends on your level of investor sophistication, and what’s right for your portfolio.
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Some cryptocurrencies like Bitcoin and Ether are designed to have a limited supply. By comparison, real-world currencies like the US Dollar do not have a hard limit on supply. When demand increases, the value of a supply-limited item is expected to increase.
That difference in supply, a high demand for crypto and new ways to profit from rising crypto, have led to a self-perpetuating cycle that drives up the exchange value of major cryptocurrencies.
Fundamentally, a seller sells their currency to gain cash and a buyer buys expecting to hold the currency until its value increases in dollar/rupee terms.
In mid-August 2021, the total market value of all cryptocurrency exceeded $2 trillion, with Bitcoin alone making up 44% of that. As the graph above shows, a currency can start small and reach very high – but with a number of bumps along the way.
People with a lot of faith in the future of cryptocurrencies subscribe to a ‘HODL’ mindset, meaning ‘hold on for dear life’ to the roller-coaster they expect to ride. They buy and do not intend to sell anytime soon, even claiming that the value of one Bitcoin could rise from $50,000 today to $288,000 in a few years.
Others choose the day trading route – buy a currency, target a profit percentage as low as 2% and sell as soon as that target is reached – sometimes within hours.
For beginners in the crypto market, experts advise investing only as much money as you’re willing to lose. The reason is, crypto trading marries the ‘irrational exuberance potential’ of a conventional stock market to the regulatory uncertainty of crypto.
Also, hackers have shown that anything financially valuable on the internet is a juicy target. However, crypto exchanges that hold user wallets try to stay safe by employing armies of security experts and paying ‘bug bounties’ to external consultants who identify vulnerabilities.