May 1 • 5M

Episode 74 - Staking vs. Yield Farming

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Appears in this episode

Gautam Dhameja
Block Shots provides a basic understanding of the most important blockchain concepts in five minutes. Learn about blocks, transactions, consensus, finality, governance, etc. and many more fundamentals while having your morning coffee, commuting, or whenever you’ve got a moment.
Episode details

In this episode, we clarify what are Staking and Yield Farming, and how they are different from each other.

Staking — Generally related to Proof of Stake systems. The block rewards get distributed to the stakers. If the block producer don’t follow the rules, stakers risk losing the stake and the rewards.

Yield Farming — Generally related to DeFi. Users provide liquidity to pools and exchanges, and they get returns. These returns come from a share in the exchange fee, interest from loans, etc. 

In staking, you risk losing your stake if you or the block producer you are backing does something bad. In yield farming, there is no such risk. On the other hand, staking rewards are generated regularly while yield farming happens when users use liquidity pools.