Nowadays, everyone knows how to make money from crypto assets by working “trade”, That is, buying and selling cryptocurrencies and taking advantage of price fluctuations.
But few people know that you give it Cryptocurrency You can earn even without moving a finger just by creating passive income when you have the amount.
There are two main ways to do this “Staking” and here “yield farming”Either way, it’s about banning a certain amount of cryptocurrencies that are paid an annual percentage of interest. (APY).
Despite their great similarities, which often leads to confusion between the two terms, mask And Yield cultivation Of cryptocurrencies are not the same, neither in terms of return nor as a physical transaction.
So let’s try to understand how to make passive income from possession Cryptocurrency As well as to clarify the difference between crop farming and crops. Remember that these two ways of earning are becoming more and more popular even among NFT.
Parallel between yield cultivation and betting Cryptocurrency Also offered by YouTube channel Shrimpy:
Cryptocurrency “betting” as the opposite of “mining”
Let’s start with “Staking”, to understand which one we should introduce a concept, not a single concept difference, one in between “Minig” and “Staking”. Another term that is very common in the crypto world is Cryptocurrency mining A term by which we refer to the process by which new tokens for a particular digital currency are created.
In fact, some cryptocurrencies are “created” using mining, for example i bitcoin, Because it relies on a transaction validation process called Proof of Work (PoW).
Without going into a lot of technical details about mining, Since here we want to deepen the concept of “staking”, it suffices to know that only and exclusively Proof-of-Work cryptocurrencies generate their new tokens using “mining”.
Since mining is an energy-intensive process, it is often called another blockchain transaction verification protocol proof of stakewhich, for example, will pass Ethereum by July, which is where “staking” comes in.
Point-of-sale cryptocurrency is not minted by “mining”, but with her “Staking”.
Because this protocol is not used for validation hardware Which consumes energy, but chooses validation nodes based on their amount Cryptocurrency This owns and “to forbid”.
How crypto staking works and how to bet your tokens
To understand what staking is, the simplest example is blockchain ethereum, Currently split in half and in transition, this will definitely move to proof-of-stake by July.
In order to become a transaction verification node on the Ethereum PoS Blockchain, a “stake” is required, i.e. to bind a minimum of 32 units of ETH cryptocurrency, The reward for this is precisely the new tokens created that allow the nodes to earn in an alternative way of mining.
However, amassing cryptocurrencies in order to become an authentication node requires a massive capital investment and if you think 1 Ethereum (ETH) is worth around $3000, however, there is “Staking pool” Which anyone can bet on even small amounts.
This means that on some platforms you can participate in a system group bettingstaking pools, where by blocking even a small amount of the original cryptocurrency, you receive a file annual interest, that is, the percentage of the amount withheld (APY). The rate of return on staking varies across staking pools based on the amount tied up as well as the length of time you block it.
Staking also increases the number of users participating in the network, making it more decentralized than ever and thus protected from any attacks. Hacker.
to provide services “Staking” of cryptocurrencies A large number of platforms including many popular and reliable Centralized Exchanges (CEX) such as Crypto.com.
Cultivation of cryptocurrency return: what it is and what platforms can be achieved
We leave the stake and get to “yield cultivation”, Another way to make money from cryptocurrency.
Yield cultivation is based on the fact that decentralized trading platforms (DEX), Uniswap For example, to allow only cryptocurrency exchange they need a certain liquid assets. Basically with “agricultural mining pools” the liquidity is “lented” to these platforms and in return you get an annual percentage calculated based on the amount invested and the duration of the block (APY). That is why agricultural crop mining complexes are also referred to as Wild West DeFi Finance.
They are the main ones who provide yield agriculture services DEX exchange In general, and precisely because of their characteristics, they seem to be more risky investments than simply “lose”, but where annual yields from growing crops are also higher.
Differences between “yielding farming” and “hoarding” cryptocurrency
If from a practical point of view mask thats it Yield cultivation Consist of linking a quantity of cryptocurrency, the two actions in the implementation have each other differences.
With staking, you simply block the cryptocurrency on the platform offering the service, i.e. it sticks to itself single origin.
Yield cultivation requires blocking instead two assets It operates on the same Blockchain, i.e., in addition to accumulating the amount in cryptocurrency, the same amount should also generally be blocked in stablecoins, i.e. certain digital currencies that are anchored as a secondary asset to a fiat currency such as dollars, or in a blockchain instrument token.
Explain the difference between “Staking” and “Farming” of cryptocurrencies with the example of PancakeSwap
Again, a practical example to understand how staking works physically and how crops are produced using cryptographic resources to analyze staking PieOne of the most popular DEX exchanges for Binance tokens.
We prefer to take PancakeSwap as an example for two reasons, first of all because it is the DEX exchange with the largest trading volume and secondly because it supports BEP-20 codethat is, those who work on the Binance Smart Chain Blockchain, which does not bear the so-called commission costs Gas fee up to Ethereum.
Top Pie In the “Earn Passive Income With Cryptocurrency” section, you will find two opportunities to create passive income with cryptocurrency cake. First of all, “drink pools”, i.e. storage pools in which a certain amount of CAKE cryptocurrency or other specified tokens is blocked, which always works on Binance, You will get an annual percentage return (APY) You always pay for the cake.
Another opportunity offered by PancakeSwap is “Farming”, here unlike “Staking” It will be necessary to ban two different types of cryptocurrencies.
This means that you will have to peg the same amount to the Euro, but in two different cryptocurrencies for example cake It is a token benefit for PancakeSwap and BNB It is the original cryptocurrency of the blockchain Smart Binance Series. Also in this case you will get an annual percentage of the invested amount as a bonus, but with greater risk and profit.
Passive Income With Cryptocurrencies: Better Bets or Cultivation?
So let’s move on to the big question: Better yield or spool cultivation To create passive income with cryptocurrency?
In general, the Agriculture always offers higher yield In percentage terms, remembering that the number to be blocked is double.
However, cultivation yields appear Bigger risk It is also related to the fact that this service is not provided by centralized platforms, but by exchanges DEX.
Even token farming operations are more physically complicated to perform precisely because the dual origin has to be constrained.
In conclusion, however, by relying on reliable platforms, farming is more profitable than just a purchase. of course it is mask Through platforms such as Crypto.com or Coinbase It offers a higher level of security and reliability.