<p dir="ltr">Staking and lending are two methods for earning passive income from crypto assets, with returns as high as 20% APY or higher depending on the asset and staking platform. However, each has its own set of dangers and rewards.</p><h2>All about crypto lending</h2><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/Nm0QmwdIP1IcWWZ1iPBbs1BfPJUbr72Ji1zMCThtRO4fy35lUfC0RyCDBdglGw5DmCnkr0EukNp9CjLmZIYc-QZREYNn131UcfdS5TWZWI9vmX6VXczglcqXUQ_vGyZ_fTzHrRFEMufkOl5E5J4" alt="Idle money for DeFi lending and staking - What you need to know" title="Idle money for DeFi lending and staking - What you need to know" width="624" height="355"></p><h3>What is lending crypto?</h3><p dir="ltr">The process of lending crypto or fiat currency to borrowers on an exchange or peer-to-peer (P2P) network, who subsequently secure loans with their own crypto assets, is known as crypto lending. It provides a solution for both investors who want to earn returns on their crypto holdings and borrowers who need cash.</p><p dir="ltr">Crypto lending has two components: investing in a crypto-backed loan and borrowing against your crypto assets:</p><ul><li><p dir="ltr">Investing to generate revenue. This option allows you to lend out crypto or fiat currency in exchange for interest, comparable to a high-yield savings account. You can accomplish this by opening a crypto savings account or direct lending funds to an individual on a peer-to-peer lending platform.</p></li><li><p dir="ltr">Borrowing to meet financial obligations. This option allows you to borrow against your cryptocurrency via a crypto-backed loan that pays out in fiat or stablecoin. There is no need for a credit check, and most loans are approved the same day your crypto collateral is received.</p></li></ul><p dir="ltr">The standard crypto lending cycle is as follows: lenders deposit fiat or crypto into a crypto lending platform account, which the platform then lends out for borrowing and investing purposes. Borrowers use cryptocurrency as collateral for loans and pay interest to lenders.</p><h3>What Is DeFi Lending?</h3><p dir="ltr"><a href="https://www.builder.news/crypto-insights/general-knowledge-about-defi-1yU8n" alt="General knowledge about Decentralized Finance" title="General knowledge about Decentralized Finance" target="_blank" rel="" class="">Decentralized finance (DeFi)</a> lending is a platform that does not have a central administration and instead provides lending and borrowing services that are managed by smart contracts. DeFi loans are instantaneous, and decentralized apps (dApps) enable customers to connect a digital wallet, deposit collateral, and retrieve funds quickly. DeFi lending allows users to deposit cryptocurrency via a digital wallet and begin earning interest immediately, with interest often rising on a minute-by-minute basis. Most DeFi lending platforms demand loans to be overcollateralized by depositing 110% (or more) of the loan amount. The distinction between DeFi and centralized platforms is that the collateral submitted earns interest even when not tied to a loan.</p><h3>How crypto lending works</h3><p dir="ltr">Lending is the process of depositing assets on a cryptocurrency exchange in order to earn yields on those assets, which are then loaned out to borrowers who use their own crypto assets as security. It's similar to placing money into a typical bank savings account, but your crypto assets aren't FDIC-insured.</p><p dir="ltr">Here's how to make money using cryptocurrency lending:</p><ul><li><p dir="ltr">Lending in exchange: To begin earning yields, deposit cash, stablecoin, or cryptocurrency into your exchange deposit account. Yields vary depending on the type of asset deposited, and you can usually withdraw your funds at any time unless you have a fixed-term deposit account.</p></li><li><p dir="ltr">Peer-to-peer lending: Lenders and borrowers set their own rates and terms on a P2P network, with loans backed by smart contracts. In most cases, you must wait until the loan term is through before receiving your investment return.</p></li></ul><p dir="ltr">Crypto lending, like staking, has hazards. Without FDIC insurance, you must rely on the platform to keep your assets safe or on borrowers to repay their loans on time. There may also be time limits on withdrawing funds from an earned account, with some exchanges keeping your funds for several working days.</p><p><em><strong>&gt;&gt;&gt; Learn more:&nbsp;</strong></em><a href="https://www.builder.news/crypto-insights/7-best-defi-lending-platforms-in-2022" alt="7 best DeFi lending platforms in 2022" title="7 best DeFi lending platforms in 2022" target="_blank" rel="" class=""><em><strong>7 best DeFi lending platforms in 2022</strong></em></a></p><h3>Advantages and disadvantages of crypto loans</h3><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/5nGHzCll1AeTx3Fm690mY-q1HTtvoAI0lyJu2H9Fo9Cu_wH2U44EWb-7gU8s4uTzj11f0OofSuNNFnrmwAFy7oO1MBlPnvydgN6BNfWK_5TZhEOuVWLBFHdk3sHZ08Fv2Bt6hAoI40DUFfOhFhs" alt="Advantages and disadvantages of crypto loans" title="Advantages and disadvantages of crypto loans" width="624" height="401"></p><p dir="ltr">For years, crypto loans have been widely utilized tools in the DeFi market. However, despite their appeal, they have certain drawbacks. Before you decide to experiment with lending or borrowing, make sure to take a balanced view:</p><h4>Advantages of crypto lending</h4><p dir="ltr">Capital that is easily available. Anyone who can provide collateral or refund the funds in a fast loan is eligible for a crypto loan. This makes them easier to obtain than a regular financial institution loan, and there is no credit check required.</p><p dir="ltr">Loans are managed using smart contracts. A smart contract automates the entire lending and borrowing process, making it more efficient and scalable.</p><p dir="ltr">It is simple to generate passive money with little effort. HODLers can store their cryptocurrency in a vault and earn APY without having to manage the loan themselves.</p><h4>Disadvantages of crypto lending</h4><p dir="ltr">Depending on your collateral, you face a high risk of liquidation. Even with heavily collateralized loans, crypto prices can decrease unexpectedly, resulting in liquidation.</p><p dir="ltr">Smart contracts are vulnerable to cyber-attacks. Back-door exploits and poorly written programming can result in the loss of your lent funds or collateral.</p><p dir="ltr">Borrowing and lending can put your portfolio in danger. While diversifying your portfolio is a smart idea, doing so via loans introduces additional risks.</p><h2>Things you should know about crypto staking</h2><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/1GM4YcuTZ0DwK9qKdAC2dL4bUUz5q5nsopUmqzbc9Uhj0uj2ydXAOQz2qvtz05m1XR_xshXOpBspzMpN9Nr7GkFLbxNG76RStQnQUWey4q_PWoBUHbbQs-Z5-_h4bOcJX3T7LT1IjTuClpp2f6s" alt="Idle money for DeFi lending and staking - What you need to know" title="Idle money for DeFi lending and staking - What you need to know" width="624" height="353"></p><h3>What is staking?</h3><p dir="ltr">Staking is the process of depositing cryptocurrency into a network smart contract in exchange for tokens. These staked coins serve as collateral for a variety of services, ranging from confirming network transactions to providing financial collateral to minting new tokens. Staking works differently for each blockchain and dapp, as do the rewards for doing so.</p><p dir="ltr">Staking evolved as a component of a consensus method called proof of stake (PoS). Proof of stake allows stakeholders to validate blocks by depositing their tokens as collateral to ensure transaction honesty. If the validator submits fake transactions to the network, they will be penalized by missing out on block rewards or perhaps losing some of their staked tokens. Validators, on the other hand, get paid with newly minted tokens for doing the correct thing.</p><p dir="ltr">A validator's chance of verifying a block (and earning rewards) is often related to the number of tokens held in comparison to the total amount pledged across the network.</p><p dir="ltr">In contrast to proof-of-work (PoW) blockchains such as Bitcoin and Ethereum, miners add new blocks to the blockchain utilizing advanced computational techniques and high processing power via mining gear such as application-specific integrated circuits (ASICs) and graphics processing units (GPUs).</p><h3>What is DeFi staking</h3><p dir="ltr">Staking has been critical to the development of decentralized finance (DeFi), with many decentralized apps (dapps) requiring token staking in order to function. Because staking takes place at the dapp level, there is greater flexibility in how tokens are staked and incentives can be earned, as opposed to the more rigorous PoS procedure for securing the underlying blockchain.</p><p dir="ltr">Uniswap users, for example, supply liquidity to the market by staking coins in exchange for liquidity provider tokens (LPT). The staked coins then form a pool of collateral from which users can trade in and out, eliminating the requirement for a counterparty on each trade. Depositors earn a percentage of the pool's trading fees in exchange for staking tokens, and their LPT effectively functions as an IOU coupon, allowing the holder to redeem their investment later on.</p><h3>How crypto staking works</h3><p dir="ltr">Staking is the process of depositing and locking up crypto assets for a fixed length of time in exchange for yields. Staking coins operates in the same way that putting money into a certificate of a deposit does (CD). Staking payouts, unlike CDs, are paid out throughout the staking time, but you can't touch your funds until the staking period is over.</p><p dir="ltr">Staking times can range from seven days to one year. On centralized finance (CeFi) platforms, which take custody of your money throughout the staking period, they offer yields of up to 20% APY or more.</p><p dir="ltr">Returns on decentralized finance (DeFi) platforms, which rely on smart contracts rather than a custodian, can be as high as 50% or higher. However, bigger returns come with much-increased risk.</p><p dir="ltr">Each blockchain has its own staking rules, but the rewards are fixed and distributed on a regular basis. The risk is that you will be unable to access your funds throughout the staking period. And if the staked asset loses value, it might completely negate any possible earnings from staking a currency that has lost value.</p><p dir="ltr">Staking assets with a blockchain PoS protocol, such as Tezos, is an example of on-chain staking. Tezos is an open-source blockchain protocol that operates using smart contacts. Off-chain staking allows you to make money on your idle account balances without having to participate in a PoS blockchain. Off-chain staking is only available on select exchanges, such as Kraken, and in specific jurisdictions.</p><p><em><strong>&gt;&gt;&gt; Read more:&nbsp;</strong></em><a href="https://www.builder.news/crypto-insights/6-best-crypto-staking-platforms-pGT6T" alt="6 best crypto staking platforms in 2022" title="6 best crypto staking platforms in 2022" target="_blank" rel="" class=""><em><strong>6 best crypto staking platforms in 2022</strong></em></a></p><h3>What are the pros and cons of staking crypto?</h3><p class="prosemirror-p-center"><img src="https://lh6.googleusercontent.com/K3HEzA7Xtxq7kg2_theZlBafnCnO9BdB2vyeOEPXG5dBkmw7Ry8weQP56KKVMZUw-wHR_rw6ik-oMeiANNB42M_hRvNh34xoI1ffWA2iSZXo0gNlW7fxTlnJSX0IYgVuK1CJFNXyfnTBUwNFMZA" alt="What are the pros and cons of staking crypto?" title="What are the pros and cons of staking crypto?" width="624" height="416"></p><h4>Benefits of staking crypto</h4><p dir="ltr">Here are some of the advantages of cryptocurrency staking:</p><ul><li><p dir="ltr">It's a simple way to earn income on a user's cryptocurrency investments.</p></li><li><p dir="ltr">Crypto staking does not require any equipment, unlike crypto mining.</p></li><li><p dir="ltr">Users are contributing to the blockchain's security and efficiency.</p></li><li><p dir="ltr">It is less harmful to the environment than crypto mining.</p></li></ul><p dir="ltr">The primary advantage of staking is that users earn more cryptocurrency, and interest rates can be very high. In rare circumstances, users may be able to earn more than 10% or 20% per year. It has the potential to be a highly rewarding way to invest money. And all users need is crypto that operates on the proof-of-stake mechanism.</p><p dir="ltr">Staking is another technique to support the blockchain of a cryptocurrency in which users have an investment. These cryptocurrencies rely on staking by holders to authenticate transactions and keep things running smoothly.</p><h4>Risks of staking crypto</h4><p dir="ltr">There are a few crypto hazards to be aware of:</p><ul><li><p dir="ltr">Cryptocurrency values are volatile and can fall dramatically. If the value of staked assets falls significantly, the loss may outweigh any interest users earn on them.</p></li><li><p dir="ltr">Staking may compel users to lock away their coins for a set period of time. During that time, users are unable to do anything with their staked assets, including selling them.</p></li><li><p dir="ltr">If users want to unstake their cryptocurrency, they may have to wait seven days or longer.</p></li></ul><p dir="ltr">The main danger of crypto staking is that the price will fall. Users should remember this when coming across coins with unusually high staking reward rates.</p><p dir="ltr">Many lesser crypto companies, for example, promise high returns to tempt investors, but their prices later plummet. If users want to add bitcoin to their portfolio but prefer less risk, they should consider cryptocurrency stocks.</p><p dir="ltr">Although the cryptocurrency users stake is theirs, users must unstake it before they can trade it again. To avoid unpleasant surprises, ask out if there is a minimum lockup time and how long the unstaking process takes.</p><h2>Which platform offers higher returns between staking and lending?</h2><p class="prosemirror-p-center"><img src="https://lh6.googleusercontent.com/A7qsfejufl3bAf47zw2kgNhWwaKLyvucZPizoA16rH7Gl0-FIzzDICvkUueYqbW5PX9AC-1ik7hwQv9K1aY6t5kYOkRAk8PJBRgZQrMEnlTC8Dw7YGSoe_BcpWwg-O8Gy0lKaPcECtaeLb6jakk" alt="Which platform offers higher returns between staking and lending?" title="Which platform offers higher returns between staking and lending?" width="624" height="375"></p><p dir="ltr">When users choose high-yield coins to invest in, they can make more than when they lend. Some platforms, for example, claim rewards of up to 20% or more for staking in specific coins. To obtain these higher rates, users must first purchase these higher-yielding coins and frequently agree to lengthier staking durations.</p><p dir="ltr">Users can often earn rates ranging from 1% to 12% with crypto lending, depending on the sort of crypto assets you deposit. To receive greater returns, users must deposit specific types of coins or fiat, with some platforms offering higher returns if users also purchase and store their native tokens in their wallets.</p><h2>Should users spend idle money on staking or saving?</h2><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/cVtXmM_n0F_9YLrVpQqBmbnPGjPtA36YsYVlu79wkZwTmJGE8bOvCNwzX8pcxHE7Hws8m9m_n48EP5U6Op_AVnHX3u47ijajC3YUKAMNg5ASGMkcjoooZB92A_EDF4hRWQ64Eyq8PciaPeSFJAA" alt="Should users spend idle money on staking or saving?" title="Should users spend idle money on staking or saving?" width="624" height="347"></p><p dir="ltr">Staking and lending are both extremely dangerous. However, putting your money in a crypto deposit account is undoubtedly "safer." Instead of staking in a moderately volatile coin like SNX to earn 18 percent — a coin that could lose value and wipe away user’s gains — users could hold a nonvolatile stablecoin in a deposit account that pays 9 percent on a regular basis.</p><p dir="ltr">The price of stablecoin does not vary, therefore users are generally assured to earn the specified yield on their deposit regardless of what happens in the crypto market. Alternatively, users might purchase a more established cryptocurrency, such as Bitcoin, and hold it in a yield-bearing account that pays 4% or 5% while expecting a price increase in the future.</p><p dir="ltr">However, regardless of where the user's assets are deposited, there is no FDIC insurance to protect their crypto from unforeseen losses. Users are giving a platform full custody of their assets and trusting it to keep them safe for them. This makes crypto lending and staking less secure than placing users’ money in a regular bank, so users should only deposit or stake what they are ready to lose.</p><h2>Bottom lines</h2><p dir="ltr">Staking and lending are both intriguing and innovative ways to generate passive income from your cryptocurrency holdings. Crypto staking is the proof-of-stake form of mining, and it entails dedicating some of a user's cryptocurrency to the blockchain for a specific length of time (typically 14 to 90 days) in exchange for a small amount of interest. Crypto lending entails allowing someone else to borrow a user's cryptocurrency using a site such as BlockFi or Celsius, which will share the interest with them. Because of the intense regulatory scrutiny, lending is inherently riskier.</p><p dir="ltr">High profits are usually coupled with high risk, whereas a smaller fraction of interest investment options is low risk. Whereas flexible saving options provide incentives on a daily basis but at a low rate of return, locked savings or staking often provide a higher rate of return once the "lock-up" period is completed. Therefore, do deep research carefully before using idle money before investing, lending, or staking.</p><div class="pr-block-special"><strong>Disclaimer:</strong><br>This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

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