Yield Farming vs. Staking: Which Passive Income Strategy Is Better?

As major cryptocurrencies have flirted with all-time highs this year, investors have looked toward passive income strategies as opposed to active trading. Sone example of such strategies include debating between the merits of yield farming vs. staking. Spurred in part by low interest rates in other markets, and in reaction to the risks of active trading, yield farming and staking are becoming more popular as ways to reward investors when they HODL their favorite tokens and coins.

Not satisfied with just storing their digital assets and hoping that the value will appreciate, investors have found ways to put their crypto to work. Of all the various ways of earning passive income on your crypto assets, yield farming and staking are taking center stage. Between the two strategies, which one will work best for you?

In this article, we’ll look at yield farming vs. staking in order to better understand how they work, their associated risks and benefits, and which strategy could better fit your goals.

What Is Yield Farming?

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.