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Staking is the process by which users pledge to lock their crypto assets to secure a Proof-of-Stake blockchain network. Stakers set up individual nodes for validating transactions and adding new blocks to the blockchain network.
Users who lock their crypto funds into a staking pool earn staking rewards.
With the addition of each new block, users earn governance tokens and a percentage of the platform’s fees.
Yield farming is the process of providing liquidity to DeFi protocols such as liquidity pools and borrowing and lending services. It offers rewards in the form of interest, with a portion of transaction fees given to the yield farmer.
DeFi platforms like smart contract-enabled decentralized exchanges (DEXs) facilitate crypto trading through Automated Market Makers (AMMs). Liquidity providers can deposit funds into a liquidity pool and leverage AMMs to execute automated trading. In return, they get rewards like liquidity provider (LP) tokens. Yield farmers can also lend and borrow crypto funds from yield farming pools at often lucrative interest rates.
- Passive Income
- Volatility Risk