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Interesting Takeaways of DeFi Staking

May 25, 2022

What is DeFi Staking?

DeFi staking refers to the locking of Crypto Tokens into a smart contract in exchange to turn a validator for a DeFi protocol and earn additional tokens as a reward. In simple words, it is a practice that enables the user to act as a validator for transactions and receive rewards for the staked assets on the DeFi platform.

With the dawn of crypto and Decentralized Finance (DeFi) Development Services, DeFi staking opened the gateway to earn additional profits from crypto assets.

What are the Types of DeFi Stakes?

Staking

Staking involves locking a defined amount of crypto assets to become a block validator in a proof of stake (PoS) Blockchain network. PoS relies on validators to validate the transactions and thus the validators should perform their duties meticulously or else there can be a risk of losing complete stake. In addition, the validators receive staking rewards for creating and validating blocks.

Yield Farming

Yield Farming is defined as the practice of moving numerous crypto assets to DeFi staking platforms and churn out maximum profit from them. The assets are available on a lending protocol or a liquidity pool to earn a passive income in the form of interest. Also, the users can earn a portion of their revenue generated by the Defi staking platform of their choice.

Liquidity Mining

Liquidity Mining is termed a subcategory of yield farming that comprises depositing crypto tokens or coins to liquidity pools. These pools play a vital role in Automated Market Maker, where trading is enabled without intermediaries. In general, a liquidity pool has two assets making up a trading pair. Here, the entire system relies on liquidity providers who ensure asset availability at the pools.

What are the Benefits of DeFi Staking?

DeFi Staking has a wide array of benefits for stakers, staking platforms, and Tokens/Protocols/Blockchain Networks.

Benefits of DeFi Staking for Stakers

  • A way to earn passive income
  • Staking with DeFi tokens will help you earn much higher rewards
  • DeFi tokens are protected with highly secure smart contracts

Benefits of DeFi Staking for Staking Platforms

  • Increased Liquidity
  • Earn revenue from stakers and networks

Benefits of DeFi Staking for Tokens/Protocols/Blockchain Networks

  • DeFi Staking offers to maintain liquidity
  • Energy consumption is low for validating blocks
  • offers dynamic token market capitalization

Wrap Up

Hopefully, the above article has enlightened you on DeFi Staking, Types of DeFi stakes, Proof of Stake, and Benefits of DeFi Staking. In case, you have any doubt feel free to contact us.

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