Is Staking and Farming Always Profitable?
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Staking Pool and Yield Farming are two ways investors can earn passive income. This method is safe, has a relatively high profit, and minimises risk. The main difference is that crypto investors use their funds to support blockchain and help validate transactions and blocks they want to stake. In contrast, yield farming requires users to deposit their cryptocurrency on the DeFi platform.
The question is, will staking and farming always be profitable? Let’s break it down into profit, reward, security, risk, and time.
The first is about profit. Staking has a fixed reward and is expressed in APY. Meanwhile, yield farming is not as simple as staking, it needs a more planned investment strategy, but the rewards are relatively higher than staking.
Second, rewards. Staking rewards are incentives from the network given to validators that help the blockchain reach consensus and create new blocks. Meanwhile, the liquidity pool determines yield farming rewards and can fluctuate when the token price changes.
Third, security. Staking tokens have strict rules and are tied to blockchain consensus. Meanwhile, yield farming relies on the DeFi protocol and smart contracts.
Next, risk. Some risks arise due to farmers’ volatility of digital asset prices. Variable losses can also come up if they are locked in the liquidity pool and the ratio of tokens in the pool is not balanced. While in staking, there is no permanent loss.
Last but not least, time. Stakers must stake funds within a certain period, while yield farming is not.
Staking and farming offer many advantages and come with risk. One of the risks is the impermanent loss that we have discussed. (we can attach the Impermanent Loss thread below this tweet) . However, we can minimise the risk if we know. That’s the reason why there is SeaDEX Academy to share crypto knowledge.
So are you interested in getting passive income by staking and yield farming? If interested, SeaDEX just launched a staking and yield farming feature. You can become a staker and farmer. Stake and farm now! https://www.seadex.finance/