Let’s take a closer look at DeFi Staking and why it’s the next big wave of financial transformation in the crypto world.
What is DeFi Staking?
The term DeFi stands for Decentralized Finance. Unlike centralized finance (CeFi), which is our current monetary system (where money is held by banks or companies), DeFi allows anyone with internet access to lend, borrow and bank without an intermediary (like a bank) using smart contracts. a blockchain.
In its simplest form, DeFi staking involves locking your crypto assets such as crypto tokens or non-tradable tokens (NFTs) into a smart contract for a specified period (sometimes a month) in order to earn more of them. in return tokens, usually in the form of juicy APYs (Annual Percent Yield) on DeFi platforms. Think of it as the decentralized equivalent of putting your money in a stable bank account.
How does DeFi work?
To earn rewards with DeFi staking, users must deposit eligible (native) coins or tokens into a DeFi protocol such as PancakeSwap or ColonyLab. The staked tokens are then used to validate transactions on the blockchain (using the Proof-of-Stake mechanism). They act as a guarantee and ensure that a transaction block is error free. The interest you earn on your tokens is the reward for lending your tokens to the network or DeFi protocol to verify transactions.
In addition to the minimum deposit requirements of some blockchain networks, some platforms such as AirNFTs also impose a 30-day minimum lock-in period during which you cannot withdraw your tokens, or you will be penalized with a 10% penalty if you do so before. Meanwhile, you can get higher interest rates in exchange for putting your coins in the game longer.
DeFi staking allows you to earn interest on the cryptocurrency you own. It makes your cryptocurrency work for you by generating regular income without having to sell your tokens.
What are the benefits of staking?
The main advantages of DeFi staking are that it allows users to earn more crypto and the interest rates can be extremely generous.
- It is an easy way for users to earn passive income from their digital assets.
- It allows stakers to generate income from their staking platform.
- Staking is environmentally friendly as it uses proof of stake rather than proof of work where you need hardware and sufficient electricity to verify transactions.
- DeFi staking helps secure the network by providing liquidity from the community to the network.
What are the risks of staking crypto?
Like most things in crypto, DeFi staking carries its own risks. When you stake your coins or tokens, you give up ownership of them. If your stake platform is hacked or your coins or tokens are lost, you may not be able to get them back. Some staking platforms have insurance policies to protect users against such losses, but there are no guarantees.
What are the different types of DeFi Staking?
Staking involves locking digital assets into a smart contract in a Proof-of-Stake (PoS) network. These assets are then used to verify transactions and secure the blockchain protocol, allowing you to be rewarded with passive stake profits.
2. Liquidity mining
Liquidity mining involves moving crypto assets and tokens into a DeFi network to create liquidity pools. These pools are then used by Decentralized Exchanges (DEX) to enable decentralized trading known as Automated Market Maker (AMM).
Such a pool usually consists of two tokens forming two cryptocurrencies. Global trading on DEX exchanges relies on the availability of liquidity providers and pools that facilitate trading activities.
3. Yield farming
Yield farming is a very popular type of DeFi staking where different investors move tokens to a DeFi platform to create a stake pool. The idea is to offer their assets to a lending protocol or liquidity pool, and they receive passive income in the form of interest as well as a percentage of the income generated by their chosen platform. They can also easily redirect their assets to other pools and platforms to maximize their income.
DeFi staking has demonstrated to date that it has great potential to offer a viable alternative to traditional investments.
Interested in betting today? You can earn up to 200% APY by staking AIRT with AirNFTs, and you can also earn money by trading and trading NFTs on Binance Smart Chain (BSC), Fantom (FTM), and Polygon (MATIC).
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